Microfoundations of Small Business Tax Behaviour: A Capability Perspective

Small business tax behaviour has received surprisingly little attention. We argue that an organizational capability perspective using microfoundations will allow us to better understand the relationships between different drivers and the dynamics of small business tax behaviour. This study draws on in‐depth interviews with 42 small business owners who are matched with the firms’ factual tax compliance status. Using grounded theory, we build a framework that (a) identifies different microfoundations of small business capability to manage tax and (b) explains the dynamic nature of the relationship between organizational capability and compliance. Findings suggest that high capability does not necessarily translate into high tax compliance and this relationship is mediated by the owner‐managers’ perceptions of taxation as well changes in the economic and regulatory environment.     

Reading the Tea Leaves—Did Citigroup Risk Their Reputation During 2004–2005?Presented at ICAA's Second International Conference Globalization – The Good Corporation June 26–28, 2007 Baruch College,New York City

In this paper, we challenge the conventional wisdom that high‐quality news reports of questionable corporate business practices will stimulate various marketplace negative responses, which in turn, will pressure management to undertake actions designed to protect the organization's reputation. Analysis is confined to a relatively brief period of bad news relating to Citigroup, Inc. We conclude that while none of the expected negative marketplace responses are evident in widely available news sources, the CEO did exhibit significant concern and instituted a targeted reputation risk management program. In the absence of a concerned CEO, analysts should not, we suggest, expect a management team to respond with reputation‐enhancing corrective action solely as a reaction to negative publicity regarding questionable business practices.     

Institutional Predictors of and Complements to Industry Self‐regulation with Regard to Labor Practices

In recent years, there has been increasing managerial and academic attention given to a variety of mechanisms for companies to respond to stakeholder concerns about global business ethics. One area that merits further analysis is the role of industry‐level cooperation regarding issues in global business ethics such as labor practices. There are two main issues that we will address in this article: institutional pressures that predict when an industry will create a code of conduct and institutional complements for an industry‐level code of conduct to be “successful” with regard to responding to stakeholder concerns about international business operations. We offer a number of propositions—bringing together work from both the corporate social responsibility and (neo)institutional theory literatures—with regard to both predictors and complements of industry self‐regulation in reference to labor practices.     

Informality and Employment Relationships in Small Firms: Humour,Ambiguity and Straight‐talking

This paper presents in‐depth qualitative research on three small professional service firms whose owner‐managers sought to introduce greater degrees of formality in their firms’ working practices and employment relationships. We focus on humour as an ambiguous medium of informality, yet viewed by owner‐managers as a tool at their disposal. However, while early studies of humour in small and medium‐sized enterprises support such a functionalist view, our findings indicate its significant limitations. We argue that humour obscures but does not resolve disjunctive interests and it remains stubbornly ambiguous and resistant to attempts to functionalize it. Our findings contribute to studies of humour in small and medium‐sized enterprises by challenging its utility as a means of managerial control or employee resistance. They also contribute to studies of employment relationships by exploring humour's potentially disruptive influence within the formality–informality span, especially as small and medium‐sized enterprises seek greater degrees of formalization, with implications for how those relationships are conducted and (re)negotiated on an ongoing basis.     

Exploring the Impact of Social Axioms on Firm Reputation: A Stakeholder Perspective

This study proposes a model of how deeply held beliefs, known as ‘social axioms, moderate the interaction between reputation, its causes and consequences with stakeholders. It contributes to the stakeholder relational field of reputation theory by explaining why the same organizational stimuli lead to different individual stakeholder responses. The study provides a shift in reputation research from organizational‐level stimuli as the root causes of stakeholder responses to exploring the interaction between individual beliefs and organizational stimuli in determining reputational consequences. Building on a conceptual model that incorporates product/service quality and social responsibility as key reputational dimensions, the authors test empirically for moderating influences, in the form of social axioms, between reputation‐related antecedents and consequences, using component‐based structural equation modelling (n = 204). In several model paths, significant differences are found between responses of individuals identified as either high or low on social cynicism, fate control and religiosity. The results suggest that stakeholder responses to reputation‐related stimuli can be systematically predicted as a function of the interactions between the deeply held beliefs of individuals and these stimuli. The authors offer recommendations on how strategic reputation management can be approached within and across stakeholder groups at a time when firms grapple with effective management of diverse stakeholder expectations.     

The Primary Importance of Corporate Social Responsibility and Ethicality in Corporate Reputation: An Empirical Study

We examine three assumptions commonly held in the corporate reputation literature: (1) reputation ratings of owners and investors are generally representative of all stakeholders; (2) stakeholders will generally provide a higher reputation rating to firms that emphasize corporate social responsibility versus firms that do not; and (3) profitability is the primary criterion of importance to all stakeholders when rating a firm's reputation. Using an exploratory in‐class exercise, our findings suggest that: (1) there are significant differences among stakeholder groups in their reputation ratings; (2) firms that emphasize corporate social responsibility are not rated more highly across all stakeholder groups; and (3) for all stakeholder groups, the ethicality criterion explained more of the variance in firms' reputation ratings than the profitability criterion.     

Beyond the Matrix: Visual Methods for Qualitative Network Research

Network research remains dominated by approaches involving the analysis of numerical data stored in data matrices with the aim of identifying the effects of hidden social structures. While such research has advanced our understanding of social networks at the inter‐personal, inter‐unit and inter‐organizational level, repeated calls have been made for network research to attend to the situated meanings attached to both relationships and network structures. In this article, we advance a nascent literature on qualitative methods for social network analysis by drawing together developments in visual network research from across the social sciences. We introduce a typology of three visual methods for the collection of network data using network maps: participatory network mapping, network map interviews and visual network surveys. Drawing on three empirical examples from our research in the inter‐organizational domain, we demonstrate how these methods can be used for the collection of qualitative and quantitative relational data, and how they can be triangulated with other qualitative methods and social network analysis. We evaluate the merits and limitations of the methods presented and conclude that visual network research is a useful addition to existing methods for network research in business and management studies.     

Business Unusual: Corporate Responsibility in a 2.0 World*

The imperatives of a growing consensus on human‐induced causes of climate change, an increasing gap between rich and poor, and the misguided incentives in the economic, business, and financial models that dominated the last quarter of the twentieth century and first decade of the twenty‐first century along with the emergence of Web 2.0's transparency have highlighted the need for a new approach to capitalism. Looking around the world, we can witness the emergence of numerous new forms of enterprise that are part of a broader movement that we are calling change to a sustainable enterprise economy (SEE Change). This article details the broad outlines of the emerging shift, highlighting the new types of enterprise that constitute the SEE. First, we set the context in which business unusual is evolving, a context of “wicked problems”uncertainty, and sustainability problems. Then we provide an overview of new types of enterprises that are already emerging to cope with these changes, enterprises of the cloud (interlinked, web‐based enterprises that rely on the “cloud” of computers that store data such as social media, eBay, and Google). Next, we outline how such enterprises are permitting processes of dematerialization and “servicization” (the shift from product to services) to create new forms of enterprise that are less dependent on physical resources. From here, we explore what we term enterprise unusual, corporations that incorporate pro‐social goals into their very essence, for example, for‐benefit corporations, the B Corporation, and conscious capitalism companies, along with a few entities that are shaping their product development along the lines of biomimicry. All of this change, we argue, has created a blurring of sector boundaries evidenced in the rapid emergence of social enterprise, of which explore a variety of types, and what is being called the fourth sector, where business purpose and pro‐social activity are combined.     

Corporate Reputation: Do Board Characteristics Matter?

Our study draws on institutional and signalling theories to postulate relationships between board characteristics and corporate reputation. Based on a sample of 324 firms featured in Fortune's list of most admired corporations in the USA, our findings indicate that board characteristics significantly influence the assessment of firm reputation by the business community. Specifically, we found that firms with a greater proportion of outside directors and those with larger boards exhibited better reputation than those with smaller boards and a higher proportion of insiders. In addition, we observed an inverted‐U relationship between the average tenure of outside directors and corporate reputation. However, contrary to expectations, our findings indicate a negative association between independent leadership structure (i.e. absence of duality) and corporate reputation.     

Innovation in Small,Project‐Based Construction Firms*

Relevant literature is synthesized to provide a holistic picture of our current knowledge of innovation in small, project‐based firms, highlighting significant gaps in the broad areas of ‘focus and outcome’, ‘organizational capabilities’, ‘context’ and ‘process’. Research findings from fieldwork focused on the construction industry are offered to address these gaps. In particular, a consensus model is given of the organizational factors dynamically at play. It is shown that typically the innovations of small, project‐based firms are closely tied to their operational activities and are pushed forward by owners who utilize very scarce resources to make progress in the interstices of normal business. This leads to an emphasis on taking up established technologies through ‘learning on the job’. Growth per se is not an important target. The motivation to act is generally to get past a survival mode of operating and to achieve stability by satisfying clients. These characteristics contrast with large organizations, especially in terms of the role of the owner, the close focus on niche markets and the lack of slack resources to innovate in parallel with normal business. It is hoped that these results will be of interest to other sectors where small, project‐based firms operate.     

Seeing Is Believing: The Transitory Influence of Reputation Information on E‐Commerce Trust and Decision Making

This research examines the transitory influence of reputation information on consumer decision making regarding an e‐vendor. Using social judgment theory to explain how reputation information's effect on perceptions may be fleeting, we specifically examined how user trusting beliefs related to an e‐vendor change after a simple exposure to the Web site. A total of 369 college students participated in an experiment that found that reputation information was initially strongly related to trusting beliefs regarding the e‐vendor, but a brief nonpurchase‐related exposure to the e‐vendor's Web site—that is, direct experience—reduced reputation's effects significantly. This research provides insights into why reputation information may be more important in certain circumstances than in others and enhances our understanding of how consumer decision making is affected by different purchasing contexts. This research also has implications on the design and use of trust‐building technologies.     

A Matter of Reputation and Pride: Associations between Perceived External Reputation,Pride in Membership,Job Satisfaction and Turnover Intentions

This study investigates how job satisfaction and turnover intentions are related to external reputation as perceived by employees and their pride in membership. Based on a cross‐sectional survey including 439 employees, it also provides insights into external reputation as a possible source of collective pride. Study results indicate that, in agreement with social identity theory, outsiders' views of the organization are closely associated with employees' pride in organizational membership as well as job satisfaction. Both pride and job satisfaction mediate the relationship between perceived external reputation and turnover intentions. Hence, a favourable reputation matters in managing turnover intentions and is closely related to employee pride and satisfaction. Tenure of employees is positively associated with pride while intensive customer contact is negatively related to perceived external reputation and pride. Implications pinpoint the need for alignment of reputation management and human resources management. Furthermore, managers need to focus on new staff and employees with frequent customer contact and should implement pride‐building strategies according to the tenure of employees and intensity of customer contact.     

A NOTE ON THE USE OF SELECTED NONFINANCIAL RATIO VARIABLES TO PREDICT SMALL-BUSINESS LOAN PERFORMANCE*

Small business loan applications have not been evaluated successfully by traditional methods. This paper explores the possibility of using three types of nonfinancial ratio variables (owner, firm, and loan characteristics) to predict whether a small business will pay off or default its loan. The owner and loan variables were better predictors of loan success than the firm variables.     

Discourses about Righting the Business ← → Society Relationship

This article engages the question—what is the right business‐society relationship? We consider three perspectives that seek to address the relationship: corporate social responsibility (CSR), social entrepreneurship (SE), and conscious capitalism (CC). We take a macroapproach considering how commentary about these approaches establishes a direction for corporate practice and its relationship to key stakeholder groups. We argue that these perspectives are ‘D'iscourses that provide arguments for and articulations about the direction of corporate practice and the business‐society relationship. To organize our review of each perspective, and focus our critique, for each we highlight (a) drivers and influencers, (b) core assumptions and defining features, and (c) approaches and exemplars. Although distinct, all emphasize effective business practices as key to meeting social needs. CSR suggests legitimizing business practice; SE relocates business practices; and CC seeks to reimagine/rehabilitate business for social good. Ultimately, we conclude that these Discourses lack a clear communicative focus in terms of decision making within these organizations. We attend to this and other implications, and offer avenues for further research.     

The Role of Automatic Stabilizers in the U.S. Business Cycle

Most countries have automatic rules in their tax‐and‐transfer systems that are partly intended to stabilize economic fluctuations. This paper measures their effect on the dynamics of the business cycle. We put forward a model that merges the standard incomplete‐markets model of consumption and inequality with the new Keynesian model of nominal rigidities and business cycles, and that includes most of the main potential stabilizers in the U.S. data and the theoretical channels by which they may work. We find that the conventional argument that stabilizing disposable income will stabilize aggregate demand plays a negligible role in the dynamics of the business cycle, whereas tax‐and‐transfer programs that affect inequality and social insurance can have a larger effect on aggregate volatility. However, as currently designed, the set of stabilizers in place in the United States has had little effect on the volatility of aggregate output fluctuations or on their welfare costs despite stabilizing aggregate consumption. The stabilizers have a more important role when monetary policy is constrained by the zero lower bound, and they affect welfare significantly through the provision of social insurance.     

Quality Management in Multi‐Level Supply Chains with Outsourced Manufacturing

Outsourcing stretches supply chains longer with added contract manufacturers responsible for the manufacturing of parts and final products. Should a firm change its quality management approach as its supply chain becomes longer with outsourced manufacturing? This paper studies a brand owner's optimal choice between two commonly used quality management approaches: an inspection‐based approach and an external failure‐based approach, in two supply chains – a dyadic supply chain and a multi‐level supply chain where the brand owner outsources manufacturing to an independent contract manufacturer. Our study finds that the brand owner's optimal choice between the two quality management approaches could be opposite in the two supply chains. Specifically, we show that if agency costs exist between the contract manufacturer and the brand owner, the brand owner may prefer an inspection‐based approach in the multi‐level supply chain in contrast to preferring an external failure‐based approach in the dyadic supply chain. In particular, inspections can be effective for the brand owner to limit the manufacturer's profit by excluding defective finished products and components, which in turn reduce agency costs in the multi‐level supply chain. Hence, the efficiency of an inspection‐based approach relative to an external failure‐based approach can be higher in the multi‐level supply chain as compared to the dyadic one. Our findings suggest that firms should adjust to changes in supply chain structures and re‐evaluate the efficiencies of different quality management approaches accordingly.     

Zum Einfluss der Inhaberführung auf die Betriebsrat-Geschäftsführer-Beziehung – Eine theoretische und empirische Analyse in mittelständischen Unternehmen

This paper examines the quality of the relationship between business managements and works councils in small and medium-sized enterprises and strives for answering the question, which factors determine the quality. As ownership is an important determining factor of the establishment of works councils in small and medium-sized businesses, especially the impact of ownership on this relationship has been investigated. Agency theory and stewardship theory give hints that the owner management can have different impacts on this relationship. In order to test these contradictory hypotheses we have estimated a Heckman selection model to investigate which factors determine the quality of the relationship between business managements and works councils. Our results based on data generated from a survey in small and medium-sized enterprises conducted by the IfM Bonn in the years 2005 and 2006 indicate that ownership has a negative influence on the establishment of works councils, but a positive one on the quality of the relationship between business management and works council. Thus, the hypotheses predicting the existence of stewardship behaviour among owners and the existence of agency behaviour among managers can be confirmed.     

How to Win “Spend” and Influence Partners: Lessons in Behavioral Operations from the Outsourcing Game

The Outsourcing Game is a role‐play simulation that has been deployed in industry and academic training courses worldwide. It incorporates the concepts of hidden actions, hidden information, and misaligned incentives, and conveys messages about power, trust, and reputation. The game depicts the adventures of Acme, the brand owner of a product manufactured by an outsourced supply chain. Through a series of negotiations, Acme attempts to influence its partners (two suppliers and two service providers) by distributing its procurement “spend.” These partners, in turn, sway each other via side payments. To simulate the non‐linear shifts in power that occur as outsourcing increases, we represent decision‐making by a voting scheme with uneven vote allocations. This paper analyzes a database of game results to reveal behavioral factors that can undermine conspicuous win–win process improvements. For instance, preferences can be sensitive to the sequence in which the alternatives are encountered; decision‐makers might value not only their own rewards, but also fairness in the allocation of total gains; and effectiveness of negotiation tactics will vary with community norms of acceptable behavior. Along the way we extend the political economics literature about power in block‐based voting by proposing a heuristic approach for incorporating voter preferences.     

The Social Dimensions of Business Excellence

In an era of dynamic markets, globalisation, telecommunication and volatile stock markets, the board of directors of listed companies have grown familiar with the pressure of shareholders. Nowadays CEO's discus corporate responsible behaviour and sustainability more often. They feel the pressure of external stakeholders. They are aware of the increasing vulnerability of their corporate reputation, an increasing number of financial institutions start demanding social and environmental criteria — and it is more and more difficult to attract new talented people and at the same time, keeping existing employees satisfied. These developments make companies aware of the social dimensions of their organisation, their corporate identity, their role within society and their duty towards future generations.The business environment is beginning to accept that prosperity, profitability and shareholder value alone do not represent the value of the company. The companies’ ability to grow and to improve continuously is also determined by its social competences, ethical responsibility and environmental contributions. This shift of focus leads to a reorientation of the concept of business excellence. At first, quality management focused on the quality improvement of products and services, later on the processes providing these products. Quality was renamed into business excellence when corporations oriented themselves on the quality of the organisation and the chain (or network or hub) in which it operates. With the present challenges at hand, companies are beginning to focus on the quality of society while taking care of their core businesses, an objective that transcends and includes the former quality orientations.This article first introduces the European Business Excellence Model (EFQM model), which have facilitated the transformation toward an integral management approach, including openings to corporate social responsibility (CSR). We will than elaborate on the cultural context of companies engaged in CSR and social responsible investing (SRI) activities. We will end this article with an overview of CSR activities, structured according the EFQM model.     

The Impact of Revenue‐Maximizing Priority Pricing on Customer Delay Costs

Speed is an increasingly important determinant of which suppliers will be given customers' business and is defined as the time between when an order is placed by the customer and when the product is delivered, or as the amount of time customers must wait before they receive their desired service. In either case, the speed a customer experiences can be enhanced by giving priority to that particular customer. Such a prioritization scheme will necessarily reduce the speed experienced by lower‐priority customers, but this can lead to a better outcome when different customers place different values on speed. We model a single resource (e.g., a manufacturer) that processes jobs from customers who have heterogeneous waiting costs. We analyze the price that maximizes priority revenue for the resource owner (i.e., supplier, manufacturer) under different assumptions regarding customer behavior. We discover that a revenue‐maximizing supplier facing self‐interested customers (i.e., those that independently minimize their own expected costs) charges a price that also minimizes the expected total delay costs across all customers and that this outcome does not result when customers coordinate to submit priority orders at a level that seeks to minimize their aggregate costs of priority fees and delays. Thus, the customers are better off collectively (as is the supplier) when the supplier and customers act independently in their own best interests. Finally, as the number of priority classes increases, both the priority revenues and the overall customer delay costs improve, but at a decreasing rate.