Showing papers by "Copenhagen Business School published in 2005"

Inside the Family Firm: The Role of Families in Succession Decisions and Performance

Abstract: This paper uses a unique dataset from Denmark to investigate (1) the role of family characteristics in corporate decision making, and (2) the consequences of these decisions on firm performance. We focus on the decision to appoint either a family or an external chief executive officer (CEO). We show that a departing CEO’s family characteristics have a strong predictive power in explaining CEO succession decisions: family CEOs are more frequently selected the larger the size of the family, the higher the ratio of male children and when the departing CEOs had only had one spouse. We then analyze the impact of family successions on performance. We overcome endogeneity and omitted variables problems of previous papers in the literature by using the gender of a departing CEO’s first-born child as an instrumental variable (IV) for family successions. This is a plausible IV as male first-child family firms are more likely to pass on control to a family CEO than female first-child firms, but the gender of the first child is unlikely to affect firms’ performance. We find that family successions have a dramatic negative causal impact on firm performance: profitability on assets falls by at least 6 percentage points around CEO transitions. These estimates are significantly larger than those obtained using ordinary least squares. Finally, our findings demonstrate that professional non-family CEOs provide extremely valuable services to the organizations they work for.

Realized Variance and Market Microstructure Noise

Abstract: We study market microstructure noise in high-frequency data and analyze its implications for the realized variance (RV) under a general specification for the noise. We show that kernel-based estimators can unearth important characteristics of marketmicrostructure noise and that a simple kernel-based estimator dominates the RV for the estimation of integrated variance (IV). An empirical analysis of the Dow Jones Industrial Average stocks reveals that market microstructure noise is time-dependent and correlated with increments in the efficient price. This has important implications for volatility estimation based on high-frequency data. Finally, we apply cointegration techniques to decompose transaction prices and bid-ask quotes into an estimate of the efficient price and noise. This framework enables us to study the dynamic effects on transaction prices and quotes caused by changes in the efficient price.

Strategic organization: a field in search of micro-foundations:

Abstract: Organizations are made up of individuals, and there is no organization without individuals. There is nothing quite as elementary; yet this elementary truth seems to have been lost in the increasing focus on structure, routines, capabilities, culture, institutions and various other collective conceptualizations in much of recent strategic organization research. It is not overstating the matter too much to say that ‘organization’ has generally entered the field of strategy in the form of various aggregate concepts. This editorial essay is born out of a frustration on our part for the present lack of focus on individuals in much of strategic organization and the taken-forgranted status of ‘organization’. Specifically, the underlying argument of this essay is that individuals matter and that micro-foundations are needed for explanation in strategic organization. In fact, to fully explicate organizational anything – whether identity, learning, knowledge or capabilities – one must fundamentally begin with and understand the individuals that compose the whole, specifically their underlying nature, choices, abilities, propensities, heterogeneity, purposes, expectations and motivations. While using the term ‘organizational’ may serve as helpful shorthand for discussion purposes and for reduced-form empirical analysis, truly explaining (beyond correlations) the organization (e.g. existence, decline, capability or performance), or any collective for that matter, requires starting with the individual as the central actor. Our particular focus in this essay is on the organizational capabilities-based literature in strategic management. This focus serves as a specific example of a more general problem of lack of attention to individuals in strategic organization. (Wider implications could be explicated given more space.) As brief support for the fact that our discussion does have wider ramifications, we note that Selznick has also quite poignantly raised the need for micro-foundations on the part of institutional scholars (1996: 274). Whetten (2004) also highlights the fact that scholars are rarely explicit about what they mean by ‘organizational’. STRATEGIC ORGANIZATION Vol 3(4): 441–455 DOI: 10.1177/1476127005055796 Copyright ©2005 Sage Publications (London,Thousand Oaks, CA and New Delhi) http://soq.sagepub.com

Foreign Investment Strategies and Sub-national Institutions in Emerging Markets: Evidence from Vietnam*

Abstract: Foreign investors entering emerging markets have to take strategic decisions on where and how to set up operations. These decisions have to accommodate institutional conditions that vary not only between countries, but also within the host economy. We offer a theoretical framework to analyse how institutions in an emerging economy influence entry strategy decisions. On this basis, we analyse the determinants of two key aspects of entry strategy: location and entry mode in Vietnam. We find that sub-national institutional variables have a significant influence on both dimensions. The availability of scarce resources affects the location of FDI and the likelihood of Greenfield entry. Institutional pressures arising from incumbent state-owned firms and the domestic market orientation of the investor lead to a preference for joint venture entry.

Sensitive research topics: netnography revisited

Abstract: Purpose – This paper discusses how netnography can be applied in order to conduct covert research on sensitive research topics. An analysis of a Danish internet message board on cosmetic surgery illustrates suggestions concerning modifications of netnography guidelines.Design/methodology/approach – Owing to the relevance of studying sensitive research topics – in particular when access to informants is difficult – netnography has been applied in an analysis of cross consumer online‐communication about cosmetic surgery on a Danish internet message board. Methodological stages and procedures including entree, data collection, analysis and interpretation have been followed. In terms of research ethics and member checks, however, the suggested guidelines have been modified.Findings – Empirical findings verify that consumers use internet message boards in order to exchange information and advice about cosmetic surgery. Especially the opportunity to masquerade and to cover their identities allows them to expres...

*Alliance Capability as a Mediator Between Experience and Alliance Performance: An Empirical Investigation into the Alliance Capability Development Process

Abstract: This study centers around the way in which firms can enhance alliance performance through the development of alliance capabilities. Whereas most research has focused on inter-firm antecedents of alliance performance, research on intra-firm antecedents pointing to prior experience and internal mechanisms to foster knowledge transfer has only recently emerged. As little is known about how firms develop alliance capabilities, this study aims to uncover how differences in sources of alliance capability development explain performance heterogeneity. The data come from a detailed survey held among alliance managers and Vice-Presidents of 151 firms. The survey covers over 2600 alliances for the period 1997-2001. This study not only finds that alliance capabilities partially mediate between alliance experience and alliance performance, but also yields novel insights into the micro-level building blocks underlying the process of alliance capability development.

Enterprise resource planning systems, management control and the quest for integration

Abstract: This paper analyses how two companies pursued integration of management and control through enterprise resource planning (ERP) systems. We illustrate how the quest for integration is an unending process and it is produced concurrently and episodically. Integration is not only about ‘mere’ visibility and control at a distance. ERP systems do not define what integration is and how it is to be developed, but they incur a techno-logic that conditions how control can be performed through financial and non-financial representations because they distinguish between an accounting mode and a logistics mode. A primary lesson from our cases is that control cannot be studied apart from technology and context because one will never get to understand the underlying ‘infrastructure’—the meeting point of many technologies and many types of controls. ERP systems are particularly interesting for what they make impossible, and our cases illustrate how the two organizations in the quest for integration mobilized a number of ‘boundary objects’ to overcome systems-based ‘blind spots’ and ‘trading zones’. The paper points out that management control in an ERP-environment is not a property of the accounting function but a collective affair were local control issues in different parts of the organization are used to create notions of global management.

Logistics Innovation: A customer Value-Oriented Social Process

Abstract: This paper reports on a qualitative, grounded theory research project conducted in the United States, Sweden, and The United Kingdom designed to explore logistics innovation as perceived by leaders of logistics service provider firms and logistics business functions within product focused firms Analysis of 33 depth interviews conducted within seven organizations revealed activities that reflect multiple aspects of being innovative, including: (1) setting a stage for innovation; (2) identifying clues to shifts in what customers value; (3) negotiating, clarifying, and reflecting upon insights; and (4) managing inter-organizational learning

HRM practices and MNC knowledge transfer

Abstract: Purpose – The purpose of the paper is to determine and empirically examine the effect of human resource management (HRM) practices on knowledge transfer within multinational corporations.Design/methodology/approach – It is suggested that the employment of human resource practices, which affect absorptive capacity of knowledge receivers and support organizational learning environment, is positively related to the degree of knowledge transfer to the subsidiary. Moreover, the higher degree of knowledge transfer is expected when HRM practices are applied as an integrated system of interdependent practices. Hypotheses derived from these arguments are tested on the data from 92 subsidiaries of Danish multinational corporations (MNCs) located in 11 countries.Findings – Results of the analysis indicated the existence of two groups of HRM practices conducive to knowledge transfer. The simultaneous effect of the first group of HRM practices consisting of “staffing”, “training”, “promotion”, “compensation” and “appr...

Resources and transaction costs: how property rights economics furthers the resource‐based view

Abstract: Property rights economics furthers the resource-based view of strategic management in a number of ways. First, resources are conceptualized as being composed of multiple attributes for which property rights may be held. Second, a resource owner's ability to create, appropriate, and sustain value from resources depends on the property rights that he or she holds and on the transaction costs of exchanging, defining, and protecting them. While transaction costs are a major source of value dissipation, reducing such dissipation may create value. Implications for the RBV analysis of sustained competitive advantage are derived. Copyright © 2005 John Wiley & Sons, Ltd.

The challenge of public-private partnerships: Learning from international experience

Abstract: Contents: 1. Introduction 2. The Public-Private Interface: Surveying the History 3. The United Kingdom Private Finance Initiative: The Challenge of Allocating Risk 4. Getting the Contract Right 5. Political Issues of Public-Private Partnerships 6. Public-Private Partnerships as the Management of Co-Production: Strategic and Institutional Obstacles in a Difficult Marriage 7. Traditional Contracts as Partnerships: Effective Accountability in Social Services Contracts in the American States 8. United States: Human Services 9. North American Infrastructure P3s: Examples and Lessons Learned 10. The Private Finance Initiative or the Public Funding or Private Profit? 11. Learning from UK Private Finance Initiative Experience 12. Public-Private Partnerships in Social Services: The Example of the City of Stockholm 13. Public-Private Partnerships for Infrastructure in Denmark from Local to Global Partnering 14. German Public-Private Partnerships in Personal Social Services: New Directions in a Corporatist Environment 15. Using Public-Private Partnerships to Deliver Social Infrastructure: The Australian Experience 16. Public-Private Partnerships: The Australasian Experience with Physical Infrastructure 17. Public-Private Partnerships: A Policy for All Seasons? Index

Local players in global games : the strategic constitution of a multinational corporation

Abstract: 1. Introduction: Multinational Corporations as Lead Agents of Globalization? PART I: LOCAL PATHWAYS TO MUTLINATIONAL ENTERPRISE 2. Associating Local Strategies of Global Reach: Horsens, Lake Mills, Eastbourne, and APV PART II: A GLOBAL GAME ENACTED BY LOCAL PLAYERS 3. Horsens: Local Strategies on a Global Stage 4. Lake Mills: Self-Limiting Strategies of a Solidaristic Plant Community 6. Lygon Place: A Corporate Headquarters at War With Itself 7. Strategic Positions and Positional Strategies PART III: MANAGERIAL CHALLENGES AND HUMAN PROMISES OF GLOBALIZATION 8. Managing the Multinational: Administrative and Human Challenges 9. The Functions of the Executive Revisited: contributions, Inducements, and Constitutional Ordering 10. Pragmatic Solutions: From Procedural Justice to Learning by Monitoring 11. Creating a Multinational Public for the Corporation 12. Conclusion: Sideshadowing the Future of Globalization

A Realized Variance for the Whole Day Based on Intermittent High-Frequency Data

Abstract: We consider the problem of deriving an empirical measure of daily integrated variance (IV) in the situation where high-frequency price data are unavailable for part of the day. We study three estimators in this context and characterize the assumptions that justify their use. We show that the optimal combination of the realized variance and squared overnight return can be determined, despite the latent nature of IV, and we discuss this result in relation to the problem of combining forecasts. Finally, we apply our theoretical results and construct four years of daily volatility estimates for the 30 stocks of the Dow Jones Industrial Average.

Entrepreneurship and the Economic Theory of the Firm: Any Gains from Trade?

Abstract: Prepared for Rajshree Agarwal, Sharon A. Alvarez, and Olav Sorenson, eds., Handbook of Entrepreneurship: Disciplinary Perspectives (Kluwer, forthcoming)

Finding sources of brand value: Developing a stakeholder model of brand equity

Abstract: Discussion of brands and brand equity have, up until now, been almost solely concerned with consumer markets.1,2 A number of recent publications have, however, begun to seriously look at the application of the brand concept and that of brand equity to business-to-business (B2B) markets.3–6 These works reflect the growing consensus that the branding concept is not only useful, but also powerful, in examining and explaining relationships and value creation in all business relationships.

Factoring Information Into Returns

Abstract: We examine the potential profits of trading on a measure of private information (PIN) in a stock. A zero-investment portfolio which is size neutral, but long in high PIN stocks and short in low PIN stocks earns a significant abnormal return. The Fama-French and momentum factors do not explain this return. However, significant covariation in returns exists among high PIN stocks and among low PIN stocks, suggesting that PIN might proxy for an underlying factor. We create a PIN factor as the monthly return on the zero-investment portfolio above and show that it has some success in explaining returns to independent PIN-size portfolios.

Importation as innovation: transposing managerial practices across fields:

Abstract: This article examines transposition as a source of innovation. Transposition is the act of applying a practice from one social context to another.We trace how and why three individuals transposed the American practice of diversity management into Denmark in 2002. The analysis outlines how they came up with the idea to transpose diversity management to Denmark and what motivated them to do so. Based on our analysis, we propose an institutionalist account of innovation in which transposition across fields characterized by different dominant institutional logics plays a prominent role.We identify a number of facilitating conditions for such transposition to occur and we explain how it can subsequently lead to innovation.

The knowledge retrieval matrix: codification and personification as separate strategies

Abstract: Purpose – Proposes that multinational companies (MNCs) establish virtual communities of practice, i.e. intranet‐based collaborative forums, and thereby benefit from a combination of codification and personification strategies in order to solve knowledge retrieval problems for the knowledge worker.Design/methodology/approach – Based on an overview of the problems related to retrieval (i.e. individual decoding and interpretation of knowledge), a literature review on individual memory, databases, social capital and virtual communities of practice reveals a knowledge retrieval means matrix, paying respect to retrieval processes.Findings – Virtual communities of practice are suggested as a strategy for internationally‐operating corporations that cannot develop regular face‐to‐face contact between employees, but still need some degree of personification for efficient knowledge transfers.Research limitations/implications – Being a conceptual paper, quantitative/qualitative integration will enrich the debate furt...

Perspectives on consumer decision making: an integrated approach

Abstract: In the consumer behaviour literature several perspectives on consumer decision making have been considered, including the ‘value perspective’, the ‘information processing perspective’, the ‘emotional perspective’ and ‘cue utilisation theory’. In this paper, a framework which integrates several perspectives on consumer decision making and hypothesises possible links between several basic constructs is developed. The framework is tested by the use of two experimental designs. The results of this study support the complexity of consumer decision making with the following findings. First, consumers do not use their cognitive and affective skills independently, rather they affect each other. Secondly, the cognitive, evaluative constructs of quality and attitude had significant direct effects on buying intention in both experiments, whereas the affective construct of emotion had no significant effects on buying intention in both experiments. Thirdly, in both experiments price affected perceived quality, which in turn affected attitude, which in turn affected buying intention. At the same time, price had no direct effect on buying intention. Copyright © 2005 John Wiley & Sons, Ltd.

A Trade-based Analysis of Momentum

Abstract: This article uses transactions data for all NYSE/AMEX stocks in the period 1983-2002 to study how investors trade in Jegadeesh and Titman's (1993) momentum portfolios. Among small trades, there is an extremely sluggish reaction to the past returns. For instance, an initial small-trade buying pressure exists for loser stocks, and it gradually converts into an intense selling pressure over the following year. The results are consistent with initial underreaction followed by delayed reaction among small traders. Moreover, small-trade imbalances during the formation period significantly affect momentum returns, suggesting that underreaction among small traders contributes to the momentum effect. Large traders, by contrast, show no evidence of underreaction, and large-trade imbalances have little impact on subsequent returns. Overall, the results suggest that momentum could partly be driven by the behavior of small traders.

Consumer adoption of online grocery buying: a discriminant analysis

Abstract: Purpose – To empirically investigate whether consumers who have adopted online grocery buying perceive this way of shopping differently from other online consumers.Design/methodology/approach – The data presented in this study were collected from an online (web‐based) survey of US consumers using self‐administered questionnaires. Data from 784 US online consumers are analyzed.Findings – Multiple discriminant results suggest that online grocery shopping adopters attach higher compatibility, higher relative advantage, more positive social norms, and lower complexity to internet grocery shopping both compared with consumers who have never bought anything on the internet yet and also compared with consumers who have purchased goods/services on the internet but not groceries. The results also suggest that online grocery shopping adopters have higher household incomes than non‐adopters.Research limitations/implications – This research used a single respondent as a household representative. Since grocery buying ...

Dealing with the knowledge economy: Intellectual capital versus balanced scorecard

Abstract: Purpose – This paper compares balanced scorecard and intellectual capital and finds important differences between their theoretical underpinnings, which suggest that the breath of indicators will work differently in organisations.Design/methodology/approach – Analysing texts about balanced scorecard and intellectual capital, the paper discusses not the obvious similarities – that they are both integrated performance management systems – but four more aspects: strategy, organisation, management, and indicators. Comparing these four dimensions the paper discusses the differences arising from the very different theories of strategy that they presuppose: competitive advantage versus competency strategy.Findings – The paper suggests that the very different notions of strategy that underpin the balanced scorecard and the intellectual capital approach make such comprehensive performance management systems behave in very different ways – the difference between a tightly coupled and a loosely coupled system accoun...

CEO Portraits and the Authenticity Paradox

Abstract: Top executive and CEO portraits represent significant sites for the visual construction of corporate identity and image, but they also highlight what we call the authenticity paradox. At first glance such photographs may appear to convey an impression of the kind of authentic presence many consider crucial for establishing a strong corporate image. But a closer look at the constructed nature of both CEO identity and portrait photography lays bare the elusive nature of authenticity itself, as well as the way that CEO portraits can function also to expose the corporation's chronic lack of authenticity. We explore the authenticity paradox and its implications by means of an analysis of executive portraits taken by one prominent Danish photographer, Per Morten Abrahamsen. We also map out an agenda for the further exploration of CEO portraits and images as an important element in the social and symbolic construction of business leadership.

CEO Portraits and the Authenticity Paradox

Abstract: Top executive and CEO portraits represent significant sites for the visualconstruction of corporate identity and image, but they also highlight what we call theauthenticity paradox. At first glance such photographs may appear to convey animpression of the kind of authentic presence many consider crucial for establishing a strong corporate image. But a closer look at the constructed nature of both CEOidentity and portrait photography lays bare the elusive nature of authenticity itself,as well as the way that CEO portraits can function also to expose the corporation’schronic lack of authenticity. We explore the authenticity paradox and its implicationsby means of an analysis of executive portraits taken by one prominent Danishphotographer, Per Morten Abrahamsen. We also map out an agenda for the furtherexploration of CEO portraits and images as an important element in the social andsymbolic construction of business leadership. INTRODUCTION The more fragile our identity, the more we need to reinforce it. To show thatwe exist. To show that we can create something, in a photograph. (Beloff, 1985,p. 22). . . each time I am (or let myself be) photographed, I invariably suffer from asensation of inauthenticity. (Barthes, 1981, p. 13)We live in a society saturated with photographic images.Most of these are producedand disseminated by commercial organizations, and many seek to convey a visualimpression of commercial organizations themselves. Since no one has ever ‘seen’an organization or corporation, these latter images exemplify what Nicholas Mir-zoeff has called the ‘growing tendency to visualize things that are not in themselvesvisual’ (Mirzoeff, 1999, p. 5). Some argue that organizations are becoming morediffuse (Davis and McAdam, 2000) and consequently less susceptible to visual rep-

Performance Pay, Delegation and Multitasking under Uncertainty and Innovativeness: An Empirical Investigation

Abstract: It has been recently noted that the trade-off between risk and incentives that agency theory predicts turns out to be rather weak. We examine predictions from agency theory on the basis of data from a data set encompassing close to 1000 Danish firms. We find that the relation between performance pay and environmental uncertainty is indeed weak. We examine the relation between delegation and environmental uncertainty, and find that this relation is confirmed. We also examine the multi-tasking agency hypothesis that as risk increases, the flexibility of agents is restricted. We fail to find support for this hypothesis.