Showing papers in "Strategic Management Journal in 2002"
TL;DR: In this paper, the authors developed and tested an alternative perspective: that formal contracts and relational governance function as complements, using data from a sample of information service exchanges, and found empirical support for this proposition of complementarity.
Abstract: Relational exchange arrangements supported by trust are commonly viewed as substitutes for complex contracts in interorganizational exchanges. Many argue that formal contracts actually undermine trust and thereby encourage the opportunistic behavior they are designed to discourage. In this paper, we develop and test an alternative perspective: that formal contracts and relational governance function as complements. Using data from a sample of information service exchanges, we find empirical support for this proposition of complementarity. Managers appear to couple their increasingly customized contracts with high levels of relational governance (and vice versa). Moreover, this interdependence underlies their ability to generate improvements in exchange performance. Our results concerning the determinants of these governance choices show their distinct origins, which further augments their complementarity in practice. Copyright © 2002 John Wiley & Sons, Ltd.
3,304 citations
TL;DR: This paper investigated the relationship between corporate reputation and the dynamics of financial performance using two complementary dynamic models and found that firms with relatively good reputations are better able to sustain superior profit outcomes over time.
Abstract: Good corporate reputations are critical because of their potential for value creation, but also because their intangible character makes replication by competing firms considerably more difficult. Existing empirical research confirms that there is a positive relationship between reputation and financial performance. This paper complements these findings by showing that firms with relatively good reputations are better able to sustain superior profit outcomes over time. In particular, we undertake an analysis of the relationship between corporate reputation and the dynamics of financial performance using two complementary dynamic models. We also decompose overall reputation into a component that is predicted by previous financial performance, and that which is ‘left over’, and find that each (orthogonal) element supports the persistence of above-average profits over time. Copyright © 2002 John Wiley & Sons, Ltd.
2,409 citations
TL;DR: This study examines how product innovation contributes to the renewal of the firm through its dynamic and reciprocal relation with the firm's competences through field research in five high-tech firms of varying age, size, and level of diversification.
Abstract: This study examines how product innovation contributes to the renewal of the firm through its dynamic and reciprocal relation with the firm's competences Field research in five high-tech firms of varying age, size, and level of diversification is combined with analysis of existing theory to develop the findings of the study Based on the notion that new products are created by linking competences relating to technologies and customers, a typology is derived that classifies new product projects based on whether a new product can draw on existing competences, or whether it requires competences the firm does not yet have Following organizational learning theory, these options are conceptualized as exploitation and exploration These organizational learning concepts are used to gain a dynamic and path-dependent view of product innovation and firm development, and to reveal the unique nature and challenges of different types of product innovation Copyright © 2002 John Wiley & Sons, Ltd
2,199 citations
TL;DR: In this article, the authors find that firms with greater experience and those that create a dedicated alliance function (with the intent of strategically coordinating alliance activity and capturing/disseminating alliance-related knowledge) realize greater success with alliances.
Abstract: This paper addresses two key questions: (1) what factors influence firms' ability to build alliance capability and enjoy greater alliance success, where firm-level alliance success is measured in two ways: (a) abnormal stock market gains following alliance announcements and (b) managerial assessments of long term alliance performance; and (2) are the two alternate ways of assessing alliance success correlated? We find that firms with greater alliance experience and, more importantly, those that create a dedicated alliance function (with the intent of strategically coordinating alliance activity and capturing/disseminating alliance-related knowledge) realize greater success with alliances. More specifically, firms with a dedicated alliance function achieve greater abnormal stock market gains (average of 1.35%) and report that 63 percent of alliances are successful whereas firms without an alliance function achieve much lower stock market gains (average of 0.18%) and only a 50 percent long-term success rate. We also find a positive correlation between stock market-based measures of alliance success and alliance success measured through managerial assessments. In addition to providing insights into the development of alliance capability among firms, this paper is one of the first to provide empirical support for the efficient markets argument by demonstrating that the initial stock market response to a key event positively correlates to the long-term performance and value of the event. Copyright © 2002 John Wiley & Sons, Ltd.
1,781 citations
TL;DR: Ghoshal and Nohria as mentioned in this paper proposed that each subsidiary maintains unique and idiosyncratic patterns of network linkages and consequently is differentially exposed to new knowledge, ideas and opportunities.
Abstract: A special feature of multinational firms (MNCs) is the notion that their sub-units (subsidiaries) are embedded in different local networks (Ghoshal and Bartlett, 1990; Ghoshal and Nohria, 1997; Fors-gren, Johanson, and Sharma, 2000). Each subsidiary maintains unique and idiosyncratic patterns of network linkages and consequently is differentially exposed to new knowledge, ideas and opportunities (McEvily and Zaheer, 1999). In fact, this differential exposure has been put forward as one of the basic competitive advantages of the multinational firm, because it increases the breadth and variety of its network resources (Malnight, 1996). It is also in line with recent trends in foreign direct investment theory, in which foreign investments are viewed as series of attempts to selectively tap knowledge linked to specific local business contexts (Cantwell, 1990; Almeida, 1996; Dunning, 1996).
1,162 citations
TL;DR: In this paper, the authors define social capital in terms of the information benefits available to a firm due to its strategic alliances and present a theory of social capital that conceptualizes it as a multidimensional construct.
Abstract: Defining social capital in terms of the information benefits available to a firm due to its strategic alliances we present a theory of social capital that conceptualizes it as a multidimensional construct. We draw from the literature to argue that social capital yields three distinctly different kinds of information benefits in the form of information volume, information diversity, and information richness. This extends current theoretical and empirical research by specifying and empirically demonstrating three interrelated yet distinct dimensions of social capital. Firms vary in their levels of social capital not just on their structural position in an alliance network but also in the dynamics that underlie alliance formation and maintenance. More importantly, the different dimensions of social capital theoretically provide differential benefits. We establish the construct validity of our proposed three-dimensional conceptualization of social capital using longitudinal data on the population of strategic alliances formed during the period 1980–94 by firms in the global steel industry. In addition, we establish predictive validity by demonstrating that the information dimensions have differential effects on firm performance, using firm nationality as a contingency. Copyright © 2002 John Wiley & Sons, Ltd.
1,043 citations
TL;DR: In this article, the authors investigate how the complexity, tacitness, and specificity of a firm's knowledge affect the persistence of its performance advantages. And they find that the complexity and tacitness of technological knowledge are useful for defending a firm major product improvements from imitation, but not for protecting its minor improvements.
Abstract: Resource-based theory maintains that intrinsic characteristics of resources and capabilities, such as their tacitness, complexity, and specificity, prevent imitation and thereby prolong exceptional performance. There is little direct evidence to verify these claims, yet a substantial literature encourages firms to formulate competitive strategies around resources with these attributes. Further, work outside the resource-based tradition suggests that these attributes can slow innovation, and it is not clear when this effect outweighs the benefits of inimitability. This paper seeks to clarify whether and how the complexity, tacitness, and specificity of a firm's knowledge affect the persistence of its performance advantages. We find that the complexity and tacitness of technological knowledge are useful for defending a firm's major product improvements from imitation, but not for protecting its minor improvements. The design specificity of technological knowledge delayed imitation of minor improvements in this study. Copyright © 2002 John Wiley & Sons, Ltd.
875 citations
TL;DR: Results show that a firm's focal acquisition performance positively relates to prior acquisitions that are a) not highly similar or dissimilar to the focal acquisition, b) associated with small losses and c) not too temporally close to or distant from the focal Acquisition.
Abstract: I use an organizational learning perspective to examine how the nature, performance and timing of a firm's acquisition experience helps it to learn how to select the right acquisition. I predict the performance of 214 acquisitions made by 120 firms in 6 industries between 1990 and 1995. Results show that a firm's focal acquisition performance positively relates to prior acquisitions that are a) not highly similar or dissimilar to the focal acquisition, b) associated with small losses and c) not too temporally close to or distant from the focal acquisition. Taken together, these results identify the broad conditions in which firms generate adaptive and timely inferences from acquisition experience. Copyright © 2002 John Wiley & Sons, Ltd.
780 citations
TL;DR: It is argued that the formation of centers of excellence is shaped by conditions in the subsidiary's local environment as well as by various aspects of the subsidiary’s relationship with other parts of the multinational firm.
Abstract: This paper seeks to understand the conditions under which ‘centers of excellence’ emerge in foreign subsidiaries of multinational firms. We define a center of excellence as an organizational unit that embodies a set of capabilities that has been explicitly recognized by the firm as an important source of value creation, with the intention that these capabilities be leveraged by and/or disseminated to other parts of the firm. Drawing on overlapping research in international business and strategic management, we argue that the formation of centers of excellence is shaped by conditions in the subsidiary's local environment as well as by various aspects of the subsidiary's relationship with other parts of the multinational firm. Based on a survey of 99 foreign units in Canada, our results highlight the fundamental role played by parent firm investment as well as the role of internal and external organizations in the development of subsidiary capabilities. Performance implications of the center of excellence phenomenon are also explored. Copyright © 2002 John Wiley & Sons, Ltd.
773 citations
TL;DR: This study examines how contract, cooperation, and performance are associated with one another within international joint ventures (IJVs) and finds that contract completeness and cooperation drive IJV performance both independently and interactively.
Abstract: This study examines how contract, cooperation, and performance are associated with one another within international joint ventures (IJVs). We argue that contract and cooperation are not substitutes but complements in relation to IJV performance. An IJV contract provides an institutional framework guiding the course of cooperation, while cooperation overcomes the adaptive limits of contracts. Our analysis of 293 IJVs in a dynamic market demonstrates that previous cooperation bolsters contractual adaptability, which in turn nurtures current cooperation between the same partners. We find that contract completeness and cooperation drive IJV performance both independently and interactively. When contracts are more complete, cooperation contributes more to performance. Contract and cooperation differ in their quadratic effects such that the contribution of contract completeness to performance declines as completeness increases but the contribution of cooperation remains linear. Copyright © 2002 John Wiley & Sons, Ltd.
753 citations
TL;DR: It is empirically demonstrated that competitive advantage in manufacturing (as measured by superior plant performance) results from proprietary processes and equipment which, in turn, is driven by external and internal learning.
Abstract: This paper examines manufacturing strategy from the perspective of the resource-based view of the firm. It explores the role of resources and capabilities in manufacturing plants that cannot be easily duplicated, and for which ready substitutes are not available. Such resources and capabilities are formed by employees' internal learning based on cross-training and suggestion systems, external learning from customers and suppliers, and proprietary processes and equipment developed by the firm. Based on data from 164 manufacturing plants, the paper empirically demonstrates that competitive advantage in manufacturing (as measured by superior plant performance) results from proprietary processes and equipment which, in turn, is driven by external and internal learning. The implication is that resources such as standard equipment and employees with generic skills obtainable in factor markets are not as effective in achieving high levels of plant performance, since they are freely available to competitors. The paper also demonstrates the important role of internal and external learning in developing resources that are imperfectly imitable and difficult to duplicate. Copyright © 2002 John Wiley & Sons, Ltd.
TL;DR: The article presents a formal model that examines how relationships among the preferences of different market segments lead to the emergence of different competitive regimes and results hold implications for understanding the dynamics of disruptive technologies and suggest new indicators for assessing disruptive threats.
Abstract: By identifying the possibility that technologies with inferior performance can displace established incumbents, the notion of disruptive technologies, pioneered by Christensen (1997), has had a profound effect on the way in which scholars and managers approach technology competition. While the phenomenon of disruptive technologies has been well documented, the underlying theoretical drivers of technology disruption are less well understood. This article identifies the demand conditions that enable disruptive dynamics. By examining how consumers evaluate technology and how this evaluation changes as performance improves, it offers new theoretical insight into the impact of the structure of the demand environment on competitive dynamics. Two new constructs—preference overlap and preference symmetry—are introduced to characterize the relationships among the preferences of different market segments. The article presents a formal model that examines how these relationships lead to the emergence of different competitive regimes. The model is analyzed using computer simulation. The theory and model results hold implications for understanding the dynamics of disruptive technologies and suggest new indicators for assessing disruptive threats. Copyright © 2002 John Wiley & Sons, Ltd.
TL;DR: Results show that internal human and technology-based manufacturing sources are positively associated with successful TC and formal and informal integration mechanisms also significantly moderate the relationships observed between capability sources and TC.
Abstract: In recent years, companies have increased their use of internal and external sources in pursuit of a competitive advantage through the effective and timely commercialization of new technology. Grounded in the resource-based view of the firm, this study examines the effect of a company's use of internal and external sources on multiple dimensions of successful technology commercialization (TC). The study also explores the moderating role of formal vs. informal integration mechanisms on these relationships. Applying a longitudinal design and data from 119 companies, the results show that internal human and technology-based manufacturing sources are positively associated with successful TC. Formal and informal integration mechanisms also significantly moderate the relationships observed between capability sources and TC. Copyright © 2002 John Wiley & Sons, Ltd.
TL;DR: This paper argued that the speed of internationalization, the spread of the geographical and product markets entered, and the irregularity of the expansion pattern negatively moderate a firm's increase in profitability resulting from international expansion.
Abstract: Many potential benefits of foreign expansion have been identified in the literature, yet empirical support that multinational firms perform better than domestic firms is mixed. This paper takes a longitudinal perspective and argues that how much a firm benefits from having foreign subsidiaries depends on its process of internationalization. We argue that a firm's capacity to absorb expansion is subject to constraints: some expansion patterns increase profitability less than others, owing to diseconomies of time compression. We hypothesize that the speed of internationalization, the spread of the geographical and product markets entered, and the irregularity of the expansion pattern negatively moderate a firm's increase in profitability resulting from international expansion. Model estimations based on panel data raised strong support for these predictions.
TL;DR: In this paper, the authors pointed out that Penrose's direct or intended contribution to resource-based thinking has been misinterpreted, and pointed out the need to provide useful strategy prescriptions for managers to create a sustainable stream of rents; rather, she tried to rigorously describe the processes through which firms grow.
Abstract: Edith Penrose's (1959) book, The Theory of the Growth of the Firm, is considered by many scholars in the strategy field to be the seminal work that provided the intellectual foundations for the modern, resource-based theory of the firm. However, the present paper suggests that Penrose's direct or intended contribution to resource-based thinking has been misinterpreted. Penrose never aimed to provide useful strategy prescriptions for managers to create a sustainable stream of rents; rather, she tried to rigorously describe the processes through which firms grow. In her theory, rents were generally assumed not to occur. If they arose this reflected an inefficient macro-level outcome of an otherwise efficient micro-level growth process. Nevertheless, her ideas have undoubtedly stimulated ‘good conversation’ within the strategy field in the spirit of Mahoney and Pandian (1992); their emerging use by some scholars as building blocks in models that show how sustainable competitive advantage and rents can be achieved is undeniable, although such use was never intended by Edith Penrose herself. Copyright © 2002 John Wiley & Sons, Ltd.
TL;DR: The authors make the case for a triangular alignment between the triumvirate of governance structure, transaction, and resource attributes and demonstrate how the identity and strategy of a particular firm influences how its resources interact with the transaction and how the firm chooses to govern it.
Abstract: In this paper, three points are argued. The first is that Ronald Coase, best known as the forefather of transaction cost theory, foresaw many of the critical questions that proponents of the resource-based view are concerned with today. The second is that resource-based theory plays a potentially much more critical role in economic theory and in explaining the institutional structure of production than even many resource-based scholars recognize. The last point is that a more complete understanding of the organization of economic activity requires a greater sensitivity to the interdependence of production and exchange relations. The arguments presented in this paper highlight important, but relatively ignored, elements in Coase's work that inform strategy research. More importantly, this paper makes the case for a triangular alignment between the triumvirate of governance structure, transaction, and resource attributes and demonstrates how the identity and strategy of a particular firm influences how its resources interact with the transaction and how the firm chooses to govern it. The general argument is then applied to the context of interfirm collaborative relations, where the key focus is broadened from just cost to also include skills/knowledge and the interdependence between cost and skills with respect to firm boundaries, both in terms of choice and nature. Such a broadening of focus enables us to additionally examine the transacting process as a productive endeavor, which underpins the co-evolution of the competencies of partner firms. Copyright © 2002 John Wiley & Sons, Ltd.
TL;DR: In this paper, the authors examined the link between top management team heterogeneity and firm performance and found that the effects of education, work experience, and tenure on performance depend upon the top management teams's strategic and social context.
Abstract: This research reexamines the link between top management team (TMT) heterogeneity and firm performance. Specifically, I theorize that the effects of education, work experience, and tenure on performance will depend upon the top management team's strategic and social context. In a test of such theorizing, I find that (1) the positive relationships between TMT educational, functional, and tenure heterogeneity and performance are contingent on complexity, as indicated by a firm's international strategy and, (2) such relationships are clearly stronger in short-tenured top management teams. The theory and results presented here provide impetus for future studies, as well as suggest to upper echelon researchers that they think more critically about the conditions under which demographic characteristics are most likely to influence organizational outcomes like performance. Copyright © 2002 John Wiley & Sons, Ltd.
TL;DR: A model of how firms acquire knowledge from their international joint venturing experience indicates that both overseeing effort and management involvement are significant channels of knowledge acquisition, implying that firms mainly learn through managing their key joint ventures.
Abstract: This paper proposes and tests a model of how firms acquire knowledge from their international joint venturing experience. Based on survey responses from 73 Singapore and 89 Hong Kong firms with respect to their joint ventures set up in China, the results indicate that both overseeing effort and management involvement are significant channels of knowledge acquisition. The former channel is more important for firms with a great deal of operational experience in China and for parents of older joint ventures. This finding indicates that firms improve their skills of knowledge acquisition through learning-by-doing. Moreover, the strategic importance of the venture concerned, instead of the learning intent of the parent, is the driving force behind the allocation of resources to the two channels. This implies that firms mainly learn through managing their key joint ventures. Since a venture that provides novel and fruitful learning experience may not, and need not, be an operation of great strategic importance, this finding suggests the existence of learning myopia. Copyright © 2002 John Wiley & Sons, Ltd.
TL;DR: In this article, the occurrence and determinants of post-formation governance changes in strategic alliances, including alterations in alliances' contracts, boards or oversight committees, and monitoring mechanisms, are investigated.
Abstract: This paper investigates the occurrence and determinants of post-formation governance changes in strategic alliances, including alterations in alliances' contracts, boards or oversight committees, and monitoring mechanisms. We examine alliances in the biotechnology industry and find that firms' unique alliance experience trajectories affect the likelihood of such ex post adjustments in these partnerships. Transactional features such as the alliance's scope, its division of labor, and the relevance of the collaboration to the parent firm also bear upon alliances' dynamics. We discuss the implications of these findings and how they complement prior research focusing on alliance design or termination at opposite ends of the alliance life cycle. Copyright © 2002 John Wiley & Sons, Ltd.
TL;DR: The MNC's international strategy is subsequently linked to the management of the two different entry modes by showing that differences in strategy are reflected in different headquarters—subsidiary relationships for acquisitions and greenfields.
Abstract: This paper adds an important explanatory variable to the well-established list of factors shown to influence the choice between foreign acquisitions and greenfield investments: the international strategy followed by the multinational company (MNC) in question. The MNC's international strategy is subsequently linked to the management of the two different entry modes by showing that differences in strategy are reflected in different headquarters—subsidiary relationships for acquisitions and greenfields. Some aspects of this relationship are also shown to change over time, a process that is mediated by the MNC's strategy. Copyright © 2002 John Wiley & Sons, Ltd.
TL;DR: An integrative conceptual model encompassing antecedents, contributing factors, and outcomes of modularity is formulated and tested on data from managers in U.S. and U.K. home appliance companies, indicating a positive relationship between modular product architectures and performance.
Abstract: Recent theorizing has proposed that modular product and process architectures are key enablers of strategic flexibility. We formulated an integrative conceptual model encompassing antecedents, contributing factors, and outcomes of modularity. We then tested this model on data from managers in U.S. and U.K. home appliance companies using structural equations modeling. The results indicate a positive relationship between modular product architectures and performance, with product model variety as a mediating variable. The results also highlight linkages between perceptions of market context and the use of modular products architectures, and between complementary organizational capabilities and firm performance. Copyright © 2002 John Wiley & Sons, Ltd.
TL;DR: In this article, the authors examine how the competencies and resources of one corporate actor in a network are transferred to another actor that uses them to enhance transactions with a third actor, a strategic process they dub "network transitivity".
Abstract: Building on social embeddedness theory, we examine how the competencies and resources of one corporate actor in a network are transferred to another actor that uses them to enhance transactions with a third actor—a strategic process we dub ‘network transitivity.’ Focusing on the properties of network transitivity in the context of small-firm corporate finance, we consider how embedded relations between a firm and its banks facilitate the firm's access to distinctive capabilities that enable it to strategically manage its trade-credit financing relationships. We apply theory and original case-study fieldwork to explore the types of resources and competencies available through bank–firm relationships and to derive hypotheses about how embedded bank–firm relationships affect the strategy of small- to medium-sized firms. Using a separate large-scale data set, we then test the generalizability of our hypotheses. Our qualitative analyses show that embedded bank–firm ties provide special governance arrangements that facilitate the firm's access to bank-centered informational and capital resources, which uniquely enhance the firm's ability to manage trade credit. Consistent with our arguments, our statistical analyses show that small- to medium-sized firms with embedded ties to their bankers were more likely to take lucrative early-payment trade discounts and avoid costly late-payment penalties than were similar firms that lacked embedded ties—suggesting that social embeddedness beneficially affects the financial performance of the firm. Copyright © 2002 John Wiley & Sons, Ltd.
TL;DR: Models that account for firm- and transaction-specific features indicate that neither outsourcing nor internalization per se result in superior performance; rather, a firm's technological performance is contingent upon the alignment between firms' governance decisions and the degree of contractual hazards.
Abstract: This paper investigates how firms' decisions to outsource or internalize production affect their technological performance. While several popular arguments and some anecdotal evidence suggest a direct association between outsourcing and technological performance, the effects of firms' governance decisions are likely to be contingent upon several specific attributes underlying a given exchange. This paper first demonstrates how standard performance models can improperly suggest a positive relationship between firms' outsourcing decisions and their technological performance. Models that account for firm- and transaction-specific features are then presented, which indicate that neither outsourcing nor internalization per se result in superior performance; rather, a firm's technological performance is contingent upon the alignment between firms' governance decisions and the degree of contractual hazards. Copyright © 2002 John Wiley & Sons, Ltd.
TL;DR: The relationship between management control systems (MCS) and the strategy process is a largely unexplored area of strategic management as mentioned in this paper, and the results of an in-depth, longitudinal case study of a major British-based organization operating within the increasingly globalized telecommunications industry are reported.
Abstract: The relationship between management control systems (MCS) and the strategy process is a largely unexplored area of strategic management. This paper reports the findings of an in-depth, longitudinal case study of a major British-based organization operating within the increasingly globalized telecommunications industry. Informed by Simons' (1991, 1994, 1995) theoretical model of the strategy process–MCS relationship, the study examines the nature and extent of this relationship at middle- and lower-management levels. Of particular interest were the effects that the design and use of three groups of MCS have on the development of new ideas and initiatives. Findings suggest that beliefs systems influence managers' initiation or ‘triggering’ decisions, the use of administrative controls affects the location of strategic initiatives and may lead to the polarization of roles, and simultaneous emphasis on a range of key performance indicators can create a bias towards one set of measures and against another. Copyright © 2002 John Wiley & Sons, Ltd.
TL;DR: In this article, the authors report the results of an empirical test of the liability of foreignness in the global banking industry, using Fitch-IBCA BankScope data for the period 1989-96.
Abstract: When a company operates outside of its home country, it may suffer a ‘liability of foreignness.’ Does this a priori theoretical expectation hold in the global banking industry? Banks increasingly compete outside of their home countries, and operating environments often differ sharply across countries, both in terms of financial markets and credit risk. In this paper, we report the results of an empirical test of the liability of foreignness in the global banking industry, using Fitch–IBCA BankScope data for the period 1989–96. Our findings strongly support the liability of foreignness hypothesis. Further, the data show some evidence that the X-efficiency of a foreign-owned bank is strongly influenced by the competitiveness of its home country and the host country in which it operates. Lastly, we find that in some environments U.S.-owned banks are more X-efficient than other foreign-owned banks in some environments, but less X-efficient in others. Copyright © 2002 John Wiley & Sons, Ltd.
TL;DR: In this paper, the authors investigated whether labor lawsuit judgments represent a liability for foreign subsidiaries operating in the United States (US) and found that foreign subsidiaries faced significantly more labor suit judgments in both federal and state jurisdictions.
Abstract: Most foreign direct investment (FDI) theories assume that foreign subsidiaries are at a disadvantage relative to domestic firms; that is, they suffer a liability of foreignness Following this reasoning, most FDI research has focused on advantages foreign investors must possess to overcome whatever disadvantages they face Research directly investigating the sources of foreign subsidiary disadvantages has been notably lacking, despite the fact that understanding disadvantages could uncover ways to reduce exposure to these liabilities of foreignness and improve management of FDI This study focuses on whether labor lawsuit judgments represent a liability for foreign subsidiaries operating in the United States (US) Specifically, I tested whether 486 British, German, and Japanese subsidiaries operating in the US had more labor lawsuits brought to judgment than a matched sample of US-owned firms Results indicate that foreign subsidiaries faced significantly more labor lawsuit judgments in both federal and state jurisdictions I also investigated several variables hypothesized to be associated with a reduction in labor lawsuit judgments facing foreign subsidiaries Foreign subsidiaries who used American top officers or whose parent firms had more US operations faced fewer lawsuits, while foreign subsidiaries using human resource professionals actually faced more labor lawsuit judgments Implications of these findings and avenues for future research are discussed Copyright © 2002 John Wiley & Sons, Ltd
TL;DR: In this article, the authors compare the pre-lawsuit profile of 209 violators to a sample of matched control firms between 1994 and 1998, and find that the likelihood of becoming a lawsuit defendant increases with board size, with the fraction of directors in industrial firms, and with fraction of inside ownership, and decreases with the number of directorships held by outside directors.
Abstract: Each year, hundreds of firms are prosecuted for violating environmental laws and hundreds of millions of dollars in penalties are assessed. At the same time, a much larger number of firms escape the various costs associated with litigation by adhering to the provisions of the same laws and regulations. It is not a priori apparent why this dichotomy exists. In this paper we draw on corporate governance and stakeholder theories to empirically investigate environmental lawsuits. Specifically, we compare the pre-lawsuit profile of 209 violators to a sample of matched control firms between 1994 and 1998. We find that the likelihood of becoming a lawsuit defendant increases with board size, with the fraction of directors in industrial firms, and with the fraction of inside ownership, and decreases with the number of directorships held by outside directors. These findings are robust to alternative dependent variable specifications. Together, our results suggest that managers, researchers, and policy-makers need to direct their attention to the corporate board as the core decision-making unit forming corporate environmental policies. Copyright © 2002 John Wiley & Sons, Ltd.
TL;DR: It is suggested that firm performance may benefit due to agency and group behavioral issues when top management team member pay is aligned—alignment is defined as the degree to which TMT member pay reflects shareholder interests and key political and strategic contingencies within the firm.
Abstract: In this research we discuss the relationship between CEO and top management team (TMT) member compensation, and explore the implications of TMT pay for firm performance Specifically, we suggest that firm performance may benefit due to agency and group behavioral issues when top management team member pay is aligned—alignment is defined as the degree to which TMT member pay reflects (1) shareholder interests and (2) key political and strategic contingencies within the firm In support of our theorizing, we found CEO pay to be related to TMT pay; TMT compensation, in turn, predicted performance (ie, return on assets and Tobin's q) when aligned with shareholder interests and internal contingencies Moreover, the effect of CEO pay on future firm performance was dependent on top team pay Copyright © 2002 John Wiley & Sons, Ltd
TL;DR: It is argued that executives' power and previous experience directly affects ex ante choice of nonexecutive directors and their ownership interests in the firm and may be used by IPO teams strategically to reduce the extent of underpricing.
Abstract: (Using a sample of 251 IPOs in the United Kingdom, this paper examines interlinks between executive and nonexecutive characteristics, share ownership, and short-term performance measured in terms of share oXer 'underpricing. ' It argues that executives' power and previous experience directly aXect ex ante choice of nonexecutive directors and their ownership interests in thefirm. These endogenously developed governance factors may be used by IPO teams strategically to reduce the extent of underpricing. However, there is a selective response of investors to diffierent board characteristics and share ownership structure. Copyright (C) 2002 John Wiley & Sons, Ltd.
TL;DR: This article explored the conditions under which acquirers earn abnormal returns by examining the role of the respective resource contribution of the target and the acquirer and found that value creation does not ensure value capture.
Abstract: In this study, we explore the conditions under which acquirers earn abnormal returns. We provide an empirical test of Barney and Chatterjee's arguments by examining the role of the respective resource contribution of the target and the acquirer. Combining an event study with a survey of postacquisition resource transfer on a sample of 101 horizontal acquisitions, we find that acquirers do not earn abnormal returns when they only receive resources from the target. In this case, it is likely that multiple bidders, which could have equally captured these resources, competed away all the abnormal returns from the successful bidder. In contrast, we find that acquirers can expect to earn abnormal returns when they transfer their own resources to the target. Overall, we find that value creation does not ensure value capture for the acquirer. Copyright © 2002 John Wiley & Sons, Ltd.