“Entrepreneurial management” as a strategic choice in firm behavior : linking it with performance

Establishing the core principals of “entrepreneurial management” within an organization describes a certain strategic choice that affects a company in six dimensions, according to Stevenson (1983). Our aim is to empirically measure entrepreneurial management (it’s existence and degree) and to link this measured strategic choice (for or against) entrepreneurial management with firm performance. Our argument here is that companies that follow core principals of entrepreneurial management should outperform other more administrative firms in certain measures of strategic performance. This paper builds on an empirical investigation published by Brown, Davidson & Wiklund (2001), who have developed and tested a reliable measurement instrument for Stevenson’s definition of “entrepreneurial management” (Stevenson 1983, Stevenson & Jarillo 1990). In the first part of our paper we aim to replicate and to some extent improve this study. In the second part we link the measured degree of “entrepreneurial management” with firm performance. To our knowledge, even so Stevenson’s definition of entrepreneurial management is commonly acknowledged and Brown et al. (2001) developed a reliable instrument to empirically capture this behavioral approach to management, the construct of entrepreneurial management never before has been linked to firm performance in an empirical study. Since most papers on corporate entrepreneurship and firm performance are based on Covin & Slevin’s (1991) or Miller’s (1983) concept of entrepreneurial orientation, we contribute to the literature on corporate entrepreneurship in a novel way, given the fact that the entrepreneurial management dimensions measured in our study can theoretically and empirically be clearly distinguished from the construct of entrepreneurial orientation as defined by Covin & Selvin (1991).

Essays on firm behavior and firm performance

This dissertation comprises three individual chapters in an effort to examine different explanatory variables that affect firm performance. Chapter Two proposes an additional determinant of firm survival. Based on a detailed examination of firm survival in the British automobile industry between 1895 and 1970, we conclude that a firm's selection of submarket (defined by quality level) influenced survival. In contrast to findings for the US automobile industry, there is no evidence of first-mover advantage in the market as a whole. However, we do find evidence of first-mover advantage after conditioning on submarket choice. Chapter Three examines the effects of product line expansion on firm performance in terms of survival time. Based on a detailed examination of firm survival time in the British automobile industry between 1895 and 1970, we find that diversification exerts a positive effect on firm survival. Furthermore, our findings support the literature with respect to the impacts of submarket types, pre-entry experience, and timing of entry on firm survival time. Chapter Four examines corporate diversification in U.S. manufacturing and service firms. We develop measures of how related a firm's diverse activities are using input-output data and the NAILS classification to construct indexes of "vertical relatedness" and "complementarity". Strong relationships between these two measures are found. We utilize profitability and excess value as the measure for firm performance. Econometric analysis reveals that there is no relationship between the degree of relatedness of diversification and firm performance for the study period.

Macroeconomic policies, sector performance and firm response: the case of Chile's textile goods market

Includes bibliography

What Makes a Family Firm Innovative? CEO Risk-Taking Propensity and the Organizational Context of Family Firms

Investigating the new product portfolio innovativeness of family firms connects two important topics that have recently received considerable attention in innovation and family firm research. First, new product portfolio innovativeness has been identified as a critical determinant of firm performance. Second, research on family firms has focused on the questions of if and why family firms are more or less innovative than other organizational forms. Research investigating the innovativeness of family firms has often applied a risk-oriented perspective by identifying socioemotional wealth (SEW) as the main reference that determines firm behavior. Thus, prior research has mainly focused on the organizational context to predict innovation-related family firm behavior and neglected the impact of preferences and the behavior of the chief executive officer (CEO), which have both been shown to affect firm outcomes. Hence, this study aims to extend the previous research by introducing the CEO's disposition to organizational context variables to explain the new product portfolio innovativeness of small and medium-sized family firms. Specifically, this study explores how the organizational context (i.e., ownership by top management team [TMT] family members and generation in charge of the family firm) of family firms interacts with CEO risk-taking propensity to affect new product portfolio innovativeness. Using a sample of 114 German CEOs of small and medium-sized family firms operating in manufacturing industries, the results show that CEO risk-taking propensity has a positive effect on new product portfolio innovativeness. Moreover, the analyses show that the organizational context of family firms impacts the relationship between CEO risk-taking propensity and new product portfolio innovativeness. Specifically, the relationship between CEO risk-taking propensity and new product portfolio innovativeness is weaker if levels of ownership by TMT family members are high (high SEW). Additionally, the effect of CEO risk-taking propensity on new product portfolio innovativeness is stronger in family firms at earlier generational stages (high SEW). This result suggests that if SEW is a strong reference, family firm-specific characteristics can affect individual dispositions and, in turn, the behaviors of executives. Therefore, this study helps extend the knowledge on the determinants of new product portfolio innovativeness of family firms by considering an individual CEO preference and the organizational context variables of family firms simultaneously.

Diversified boundaries of the firm

We analyze diversification of boundaries of local firms in developing countries under the economic globalization. The globalization has an aspect of homogenization of the world economy, but also has another aspect of diversification through international economic activities. Focusing on boundary-level of the firm, this article shows that the diversification from a comparison with boundaries of foreign firms in developed countries is brought by a disadvantage of technology deficit and a home advantage as local firms.

Formation of supply chain collaboration and firm performance in the Thai automotive and electronics industries

This paper examines factors that encourage firms to go into supply chain collaborations (SCC) and relationships between SCC and supply chain performances (SCP), using a questionnaire survey on Thai automotive and electronics industries in 2012. OLS regression results show firms established supplier evaluation and audit system, system of rewards for high-performance supplier and long-term transactions with their supply chain partners under a competitive pressure are more closely cooperate with these partners on information sharing and decision synchronization. Instrumental variables regression indicates SCC arisen from competitive pressure, supplier evaluation and audit, a system of rewards for high-performance supplier and long-term relationship causally influence SCP such as on-time delivery, responsiveness to fast procurement, flexibility to customer need, and profit.

Firm-level impacts of natural disasters on production networks : evidence from a flood in Thailand

In this paper, we explore the firm-level impacts of flooding in Thailand in 2011, specifically those on the procurement patterns at Japanese affiliates in Thailand. Our findings are as follow. First, the damaged small firms are more likely to lower their local procurement share, particularly the share of procurement from other Japanese-owned firms in Thailand. Second, damaged young firms and damaged old firms are more likely to raise the shares of imports from Japan and China, respectively. Third, there are no impacts on imports from ASEAN and other countries. These findings are useful for uncovering how multinational firms adjust their production networks before and after natural disasters.

Financial fragility, trade credit and contagion effects during the crisis: a spatial econometric approach to firm-level data

The number of distressed manufacturing firms increased sharply during recessionary phase 2009-13. Financial indebtness traditionally plays a key role in assessing firm solvency but contagion effects that originate from the supply chain are usually neglected in literature. Firm interconnections, captured via the trade credit channel, represent a primary vehicle of individual shocks’ propagation, especially during an economic downturn, when liquidity tensions arise. A representative sample of 11,920 Italian manufacturing firms is considered to model a two-step econometric design, where chain reactions in terms of trade credit accumulation (i.e. default of payments to suppliers) are primarily analyzed by resorting to a spatial autoregressive approach (SAR). Spatial interactions are modeled based on a unique dataset of firm-to-firm transactions registered before the outbreak of the crisis. The second step in instead a binary outcome model where trade credit chains are considered together with data on the bank-firm relationship to assess determinants of distress likelihoods in 2009-13. Results show that outstanding trade debt is affected by the liquidity position of a firm and by positive spatial effects. Trade credit chain reactions are found to exert, in turn, a positive impact on distress likelihoods during the crisis. The latter effect is comparable in magnitude to the one exerted by individual financial rigidity, and stresses the importance to include complex interactions between firms in the analysis of the solvency behavior.

Family Firm Incumbent’s Attitude toward Intra-family Succession: Antecedents and Effects on Intentions

Research shows that intention for intra-family succession is an important determinant of family firm behavior. To provide a systematic analysis of the antecedents of such intention, we use the theory of planned behavior to model the incumbent leader’s attitude toward intra-family succession because that particular attitude is idiosyncratic to family firms. Empirical tests using a sample of 271 Italian incumbent leaders of family firms show that, as predicted by planned behavior theory, attitude and self-efficacy are significant predictors of intention. They show further that attitude is affected by the number of children, emotional attachment, and need for control.

Resource Curse or Destructive Creation: A Tale of Crony Capitalism in Transition

This paper explores the “resource curse” problem as a counter-example of creative performance and innovation by examining reliance on capital and physical resources, showing the gap between expectations and ex-post actual performance became clearer under conditions of economic turmoil. The analysis employs logistic regressions with dichotomous response and predictor variables, showing significant results.Several findings that have use for economic and business practice follow. First, in a transition period, a typical characteristic of successful firms was their reliance on either capital resources or physical asset endowments, whereas the innovation factor was not significant.Second, poor-performing enterprises exhibited evidence of over reliance on both capital and physical assets. Third, firms that relied on both types of resources tended to downplay creative performance. Fourth, reliance on capital/physical resources and adoption of “creative discipline/innovations” tend to be mutually exclusive. In fact, some evidence suggests that firms face more acute problem caused by the law of diminishing returns in troubled times. The Vietnamese corporate sector’s addiction to resources may contribute to economic deterioration, through a downward spiral of lower efficiency leading to consumption of more resources. The “innovation factor” has not been tapped as a source of economic growth. The absence of innovations and creativity has made the notion of “resource curse” become identical to “destructive creation” implemented by ex-ante resource-rich firms, and worsened the problem of resource misallocation in transition turmoil.

Reference groups and product line decisions: An experimental investigation of limited editions and product proliferation

Some luxury goods manufacturers offer limited editions of their products, whereas some others market multiple product lines. Researchers have found that reference groups shape consumer evaluations of these product categories. Yet little empirical research has examined how reference groups affect the product line decisions of firms. Indeed, in a field setting it is quite a challenge to isolate reference group effects from contextual effects and correlated effects. In this paper, we propose a parsimonious model that allows us to study how reference groups influence firm behavior and that lends itself to experimental analysis. With the aid of the model we investigate the behavior of consumers in a laboratory setting where we can focus on the reference group effects after controlling for the contextual and correlated effects. The experimental results show that in the presence of strong reference group effects, limited editions and multiple products can help improve firms' profits. Furthermore, the trends in the purchase decisions of our participants point to the possibility that they are capable of introspecting close to two steps of thinking at the outset of the game and then learning through reinforcement mechanisms. © 2010 INFORMS.

Effects of credit rating change on risk-taking

This thesis investigates whether there are changes in risk-taking behavior following an upgrade or downgrade in credit ratings. Research on effects of rating changes on capital markets is well-documented but the literature on how rating changes may affect firm behavior is sparse. Following, a downgrade in credit rating, managers may increase risk-taking to improve their overall performance or reduce risk-taking following upgrades to ensure that their performance is assessed more on the basis of what they may deem success in the form of an upgrade. Using a sample of firms trading in the U.S from 1994-2013, we find evidence of change in risk-taking behavior. We use cross-sectional regressions and matching using propensity scores and Barber and Lyon (1997) methodology to measure changes in risk-taking and we do find evidence of changes in managerial risk-taking behavior. Furthermore, we find that the direction of change (increase or decrease) in some cases is dependent on the type of measure rather than the type of rating change.

The impact of corporate social performance on financial risk and utility: a longitudinal analysis

This study focuses on the wealth-protective effects of socially responsible firm behavior by examining the association between corporate social performance (CSP) and financial risk for an extensive panel data sample of S&P 500 companies between the years 1992 and 2009. In addition, the link between CSP and investor utility is investigated. The main findings are that corporate social responsibility is negatively but weakly related to systematic firm risk and that corporate social irresponsibility is positively and strongly related to financial risk. The fact that both conventional and downside risk measures lead to the same conclusions adds convergent validity to the analysis. However, the risk-return trade-off appears to be such that no clear utility gain or loss can be realized by investing in firms characterized by different levels of social and environmental performance. Overall volatility conditions of the financial markets are shown to play a moderating role in the nature and strength of the CSP-risk relationship.

Enforcement in environmental law: an economic analysis of citizen suits

Previous to 1970, state and federal agencies held exclusive enforcement responsibilities over the violation of pollution control standards. However, recognizing that the government had neither the time nor resources to provide full enforcement, Congress created citizen suits. Citizen suits, first amended to the Clean Air Act in 1970, authorize citizens to act as private attorney generals and to sue polluters for violating the terms of their operating permits. Since that time, Congress has included citizen suits in 13 other federal statutes. The citizen suit phenomenon is sufficiently new that little is known about it. However, we do know that citizen suits have increased rapidly since the early 1980's. Between 1982 and 1986 the number of citizen suits jumped from 41 to 266. Obviously, they are becoming a widely used method of enforcing the environmental statutes. This paper will provide a detailed description, analysis and evaluation of citizen suits. It will begin with an introduction and will then move on to provide some historic and descriptive background on such issues as how citizen suit powers are delegated, what limitations are placed on the citizens, what parties are on each side of the suit, what citizens can enforce against, and the types of remedies available. The following section of the paper will provide an economic analysis of citizen suits. It will begin with a discussion of non-profit organizations, especially non-profit environmental organizations, detailing the economic factors which instigate their creation and activities. Three models will be developed to investigate the evolution and effects of citizen suits. The first model will provide an analysis of the demand for citizen suits from the point of view of a potential litigator showing how varying remedies, limitations and reimbursement procedures can effect both the level and types of activities undertaken. The second model shows how firm behavior could be expected to respond to citizen suits. Finally, a third model will look specifically at the issue of efficiency to determine whether the introduction of citizen enforcement leads to greater or lesser economic efficiency in pollution control. The database on which the analysis rests consists of 1205 cases compiled by the author. For the purposes of this project this list of citizen suit cases and their attributes were computerized and used to test a series of hypotheses derived from three original economic models. The database includes information regarding plaintiffs, defendants date notice and/or complaint was filed and statutes involved in the claim. The analysis focuses on six federal environmental statutes (Clean Water Act} Resource Conservation and Recovery Act, Comprehensive Environmental Response Compensation and Liability Act, Clean Air Act, Toxic Substances Control Act, and Safe Drinking Water Act) because the majority of citizen suits have occurred under these statutes.