Human capital and agency effects on CEO compensation of IPO biopharmaceutical firms and the market’s response

This paper examines the determinants of base pay and total incentive compensation packages of CEOs of biopharmaceutical firms that have recently gone public, and whether human capital and agency factors affect the market’s response to the initial public offering. We find that in terms of net proceeds, the IPO market appears to reward the firms that have founder-CEOs and CEOs with higher incentive compensation. CEOs with prior venture capital experience are associated with receiving higher incentive compensation, while CEOs with a greater ownership interest in the firm receive lower incentive compensation but higher salaries. CEOs of firms with a greater percentage of insiders are associated with lower salaries. The results should add to our understanding related to human capital and agency theories, as well as help firms and investors better understand and structure CEO compensation.     

‘Born-again global’ firms: An extension to the ‘born global’ phenomenon

Firm internationalisation has for long been regarded as an incremental process, wherein firms gravitate towards ‘psychologically close’ markets and increase commitment to international markets in a gradual, stepwise manner through a series of evolutionary ‘stages.’ However, much of the recent literature provides clear evidence of rapid and dedicated internationalisation by ‘born global’ firms. Typically, these are smaller entrepreneurial firms that internationalise from inception or begin shortly thereafter. Their main source of competitive advantage is often related to a more sophisticated knowledge base that they use to exploit the dynamics of an increasingly global market environment. This contribution posits that there is growing evidence of another phenomenon, that of the emergence of ‘born-again’ global firms. These are firms that have been well established in their domestic markets, with apparently no great motivation to internationalise, but which have suddenly embraced rapid and dedicated internationalisation. The underlying motivations and triggers leading to such a strategy are explored and illustrated through a number of case studies. Research and public policy implications of the ‘born-again’ global phenomenon are discussed.     

‘Strong Personalities’ and ‘Strong Institutions’ Mediated by a ‘Strong Third Force’: Thinking ‘Systems’ in Corruption Control

Corruption in public sector is a complex, ‘messy’ and ‘fuzzy’ phenomenon which involves calculus machinations between actors and constantly growing in sophistication. Consequently, an attempt to prevent, control or fight it requires systems thinking that ranges from public officials with integrity and personal ethics [strong personalities]; administrative rules and procedures as well as governments adopting, enforcing and monitoring appropriate systems [strong institutions]. This paper provides a systems approach to enhancing public sector ethics through ‘a corruption control tripod’ in preventing, controlling and combating corruption in all its forms. This framework discusses three overarching pillars and argues that adopting a reductionist approach in corruption control would yield futility; there is a need for synthesis so that each one would reinforce the other.     

Off the rivals’ radar in emerging market segments: Non-mutual rival recognition between new firms and incumbents

We examine the causes of non-mutual rival recognition—a situation in which new firms in emerging market segments recognize incumbents in pre-existing and potentially related market segments as rivals, but the incumbents do not recognize the new firms as rivals. Drawing upon the prototype theory, which makes use of cognitive representations or images in recognition processes, we argue that managers use rival prototypes in making sense of competitive environments. Specifically, we argue that non-mutual rival recognition occurs when new firms are not proximate to the incumbents' prototype of rivals because their organizational attributes, such as size and age, are highly distinct. It also occurs when it is difficult for incumbents, owing to their diversification into multiple product markets, or their strong identity as players in emerging market segments, to clearly assess new firms’ proximity to the prototype. Using the context of U.S. online retailers that went public between 1995 and 2001, we find support for our arguments.     

How do shareholders influence international firms’ environmental strategies? The differential impact of strategic and financial investors

Debates about the drivers of corporate environmental strategy as well as the influence of shareholders on environmental investments have grown exponentially in the last decade. This paper provides a novel perspective on the influence of investors on a firm's environmental strategy by theorizing how the shareholders' orientation may provide different resources for firms to outperform environmental institutional pressures, and further analyzing how foreign market exposure moderates this relationship. Our results, produced from a longitudinal sample of 2237 observations between 2007 and 2017 from 276 US firms in 11 industries, show that having a higher percentage of strategic shareholders positively drives firms' environmental proactivity. Meanwhile, having a higher percentage of financial shareholders is positively related to firms' environmental proactivity only at high levels of foreign market exposure, but is negatively related at low levels. Our results contribute to the ownership and environmental strategy literature by delimitating the different influences of strategic and financial investors on firms' environmental strategy and making a bridge between institutional and resource-based perspectives.     

Institutional support and firms’ entrepreneurial orientation in emerging economies

In recent years, many governments in emerging economies have used macro-level institutional support to boost entrepreneurship, but the actual impact of institutional support on firms’ entrepreneurial orientation (EO) remains unclear. To provide a holistic understanding of this impact, we examine the relationship between institutional support and three specific dimensions of EO—proactiveness, innovativeness, and risk-taking—and we explore how these relationships are contingent on firm ownership and the industry life cycle. A two-study, mixed-methods empirical design confirms our hypotheses. Specifically, Study 1 surveys 303 Chinese firms and finds that institutional support has a decreasingly positive relationship with proactiveness, an increasingly positive relationship with innovativeness, and a positive linear relationship with risk-taking; each of these three relationships is weaker for state-owned enterprises (SOEs) than for non-SOEs and for firms in fast-growing industries than for firms in slow-growing industries. Study 2 conducts a scenario-based experiment using6 133 MBA students, and its results again support the main effects hypotheses.     

The cassava starch industry in Vietnam: can small firms survive and prosper?

The paper focuses on the starch industry in Vietnam. That industry is mainly composed of small firms that adapted to rapid change over the past decade. There are also large firms and multinationals in the industry. Based on 1998 field survey data, an analysis of microefficiency and transaction costs suggests that small and medium firms can survive and prosper in the industry. A policy strategy that promotes small and medium firms increases rural incomes, important in a country that is still mainly rural and where the income gap between urban and rural areas is growing.     

The effects of board size and ‘busy’ directors on the market value of Italian companies

This paper presents evidence that corporate governance quality measured by (1) the board size and (2) the fraction of directors that serve on more corporate boards, influences the market value of firms. The analysis is based in Italy, a country that is characterized by family and concentrated ownership, low legal protection of investors and pyramidal firm structures. Our empirical results suggest that the level of ‘busy-ness’ of corporate directors as a measure of board effectiveness has a significant influence on firm’s market performance. By contrast, we find limited evidence that board size has a substantial impact on the market valuation, except in small and medium enterprises and in some specific industry sectors.

Does strategic corporate performance depend on corporate financial architecture? Empirical study of European,Russian and other emerging market’s firms

Performance of the firm depends on its structural dimensions: capital structure, ownership structure and corporate governance. Their interactions are known as corporate financial architecture according to S. Myers. In this paper we analyze financial architecture which is a mix of ownership structure, capital structure, control and board’s composition, and therefore, provides the given framework for improving corporate performance. We contribute to the literature by different attributes of our study. In contrast to most empirical papers on performance, we develop integrated rather than segmented approach combining the intrinsic components of corporate financial design in one research model. We introduce new variable to capture the structure of ownership for the purpose of performance analysis. Our third contribution is based on comparative analysis of the influence of financial architecture over corporate performance in rather different capital market environment: developed European and emerging (developing) capital market’s countries. We start with a classic empirical model of the impact of ownership structure, capital structure and other components of financial architecture on the corporate performance. Further we verify the validity of exogenous nature of key variables of the classic model when applying it to companies in developed and emerging market environment. Our results could have some important policy implications for the firms in normal economic environment as well as in the period of global economic crisis. We found that the higher proportion of related ownership which indicates investors with significant voting power and the board’s composition affect firm performance positively. The related shareholders and independent directors seem to add more value to firms while the impact of government ownership differs depending on the country. The emerging market’s sample versus the one from developed countries proves the stronger influence of corporate financial architecture over performance.     

Does family matter? Ownership,motives and firms’ environmental strategy

Extant research has primarily focused on the economic drivers and outcomes of corporate environmental performance. This trajectory oversimplifies the motives for environmental strategies across all firm types and particularly overlooks how firm ownership presents other motives for environmental strategies. In this study, we leverage institutional theory to examine how family motives, underpinned by family members' desire to gain or preserve family legitimacy and socio-emotional wealth, affect ISO 14001 certification. Using firm-level data, we find that family ownership has a positive effect on ISO 14001 certification. This effect is stronger for firms whose names include the family name and also for firms located closer to large cities. Our study contributes to nonmarket strategy literature by showing that family motives underpin firms’ environmental initiatives. It also contributes to institutional theory by delineating the levels of legitimacy that spur nonmarket strategy in family firms.     

CEO political liberalism,stakeholders, and firms’ support for LGBT employees

We argue that CEO political liberalism, or the extent to which CEOs are more liberal rather than conservative, affects firms’ support for LGBT employees. Specifically, compared to conservative CEOs, liberal CEOs will be more likely to support LGBT employees by implementing LGBT-friendly policies. We furthermore posit that the presence of certain internal and external stakeholders—including boards, top management teams, and employees, as well as transient institutional investors and LGBT advocacy organizations—alter the proposed effect. Results based on a sample of Fortune 500 firms support our arguments. Our findings contribute to the literatures on leadership, stakeholders, and workplace diversity.     

Market reactions to acquisition announcements: The importance of signaling ‘why’ and ‘where’

Acquisitions are risky events but not all acquisitions involve the same levels of risk. We suggest that the announced acquisition motive – the ‘why’ of the acquisition – is an important risk signal. We categorize acquisition motives and distinguish between acquisitions with ‘pure explore’ and ‘pure exploit’ motives. Recognizing that most acquisitions have multiple motives, we identify acquisitions with ‘ambidextrous’ motives – that is different combinations of explorative and exploitative motives – too. Then, building on recent contributions to signaling theory, we argue that the ‘why’ will matter more, if the ‘where’ pertains to a high-risk setting. We measure this using target-to-acquirer industry relatedness. We find that the market reacts more positively to pure acquisitions, aimed at exploration or exploitation, compared to ambidextrous acquisitions. We show that the market reacts more positively to ambidextrous acquisitions orientated towards exploitation than ambidextrous acquisitions orientated toward exploration. Finally, we find that relatedness moderates this relationship, in that the market is more willing to tolerate exploration in a related industry. Our core contribution is to the literatures on acquisition motives and ambidexterity. We provide new insights into the incidence of specific motives, the ways in which they are mixed, and the market's reaction to their announcement. In addition, we contribute to the emerging literature that takes on behavioral perspective of market reactions by showing that the ‘why’ and ‘where’ of an acquisition matter.     

Strategic alliances for corporate sustainability innovation: The ‘how’ and ‘when’ of learning processes

Mounting sustainability pressures challenge established firms to engage with sustainability innovations, which are often introduced by startups. Research on alliance learning has established the potential of learning from startups to advance corporate innovation. Here, scholars have outlined alliance learning processes and outcomes and have distinguished learning about and learning from alliance partners as two key learning types. The saliency of learning from the operational alliance process is stressed. To date, however, no study has investigated alliance learning processes and outcomes for sustainability innovations. This is despite the fact that sustainability research suggests learning processes in the sustainability context have a distinct nature. This study addresses this research gap by analyzing the sustainability-specific learning processes and outcomes of a large European meat producer and wholesaler with a turnover of $2.7bn in the fiscal year 2019/2020. The firm formed alliances with nine startups for sustainable plant, insect-based and cell-based protein solutions. Our analysis (1) identifies three distinct characteristics of sustainability-related alliance learning processes and outcomes, and (2) specifies the temporal occurrence and outcomes of learning types in alliance learning phases. In contrast to findings of prior research, our study reveals that learning about alliance partners is of key importance throughout the whole sustainability-oriented alliance learning process. In addition, the findings highlight that alliance learning outcomes may support an established firm's contribution to the sustainability transformation of mass markets.     

The Transfer of ‘International Best Practice’ in a Brazilian MNC: A Consideration of the Convergence and Contingency Perspectives

This study examines the transfer of a Brazilian MNC's HR model to its subsidiaries in the UK, Canada, Switzerland and Norway. It enquires where the model was sourced from, to what extent it bore a distinct Brazilian complexion, and whether it was adapted to meet the strictures of host institutional constraints and traditions. The paper uses these questions to address an important theoretical debate in the international business literature; that is, whether the pattern of diffusion of management practices within MNCs will lead to a convergence of practices across companies and countries à la the convergence perspective, or whether this is unlikely given the variety of social and political constraints limiting such a process as suggested by the contingency perspective. We find that the MNC imposed a unitary (US-sourced) model of HR ‘best practice’ on all of its subsidiaries. Thus our empirical findings support the convergence thesis. However, we argue that these outcomes are largely explained by relations of power and economic dependence; specifically, the co-existence of dominant-country (US) practices and a dominant sectoral firm operating in economically dependent regions. Where similar circumstances are replicated one might foresee convergence within sectors across countries, but otherwise pluralism and eclecticism between sectors and across countries might be the predominant pattern along the lines envisaged in the conceptualization of “converging divergences”.     

Business- and environment-related drivers of firms’ return on natural resources: A configurational approach

The sustainability challenges society faces call for firms to manage their use of natural resources wisely. Prior work on firm responses to sustainability challenges has largely focused on explaining and enhancing economic rather than environmental performance. We build on recent developments to extend resource dependence theory to include natural resources and seek to explain how business- and environment-related firm activities influence the use of natural resources. Using a configurational approach, we develop a conceptual model that explains the return on natural resources of firms based on four distinct sets of business- and environment-related comparative advantages. An illustrative application to the car-manufacturing sector demonstrates the practical applicability of our model and provides first insights into configurations we are likely to observe in practice. Our model and its application show that economic success is neither necessary nor sufficient to enhance a firm's return on natural resources.     

Network management and associated firms’ outcomes: multilevel analysis in the southern Brazilian context

This article seeks to provide theoretical and managerial insights with respect to the following questions: What is the effect of network management on the outcomes of associated firms? Do these effects on outcomes vary among small-firm networks (SFNs)? Do these outcomes vary among associated firms within the same SFN? Which management elements are most influential in the variation of these SFN outcomes? To answer these questions, this study adopts a multilevel analytical approach using SFNs in southern Brazil that benefit from the Cooperation Networks Program, a local public policy initiative that supports the formation, development, and consolidation of SFNs. The findings suggest that the outcomes provided by the networks differ between networks but are similar for firms in the same network. They also indicate that strategy and processes at the network level are related to firms’ outcomes. These findings show that the influence of structure on firms’ outcomes varies among networks and that the market segment is the only network-level variable that is significantly related to firms’ outcomes.     

Managerial incentive, organizational slack, and performance: empirical analysis of Japanese firms’ behavior

The main purpose of this study is to investigate how organizational slack is created and how it affects a firm’s performance. To address these questions, we construct three equations: managerial incentive function, organizational slack formation function and performance function, and we apply 3SLS simultaneously to these functions by using the data sets of 2,791 Japanese firms from the years 2001 and 2006. From the empirical analysis of these Japanese firms, we obtain the following results: a firm’s performance declines as organizational slack increases; organizational slack is affected by annual change rate of revenues but not by managerial incentive; managerial incentive decreases as a firm’s performance improves while it increases as the structure of corporate governance is strengthened.