International Evidence on the Determinants of Organizational Ethical Vulnerability

This paper proposes a model to explain what makes organizations ethically vulnerable. Drawing upon legitimacy, institutional, agency and individual moral reasoning theories we consider three sets of explanatory factors and examine their association with organizational ethical vulnerability. The three sets comprise external institutional context, internal corporate governance mechanisms and organizational ethical infrastructure. We combine these three sets of factors and develop an analytical framework for classifying ethical issues and propose a new model of organizational ethical vulnerability. We test our model on a sample of 253 firms that were involved in ethical misconduct and compare them with a matched sample of the same number of firms from 28 different countries. The results suggest that weak regulatory environment and internal corporate governance, combined with profitability warnings or losses in the preceding year, increase organizational ethical vulnerability. We find counterintuitive evidence suggesting that firms’ involvement in bribery and corruption prevention training programmes is positively associated with the likelihood of ethical vulnerability. By synthesizing insights about individual and corporate behaviour from multiple theories, this study extends existing analytical literature on business ethics. Our findings have implications for firms’ external regulatory settings, corporate governance mechanisms and organizational ethical infrastructure.     

制度环境、公司治理对企业竞争优势的影响研究——基于中国上市公司的经验证据

如何通过外部制度和内部制度的安排延续企业的竞争优势,是制度变迁背景下中国企业面临的核心问题.本文以2002年-2005年的中国上市公司为样本,基于国内地区差距,实证分析了制度环境和公司治理时企业竞争优势的影响.回归结果发现,政府支持市场化程度、经济法律环境水平、股权集中度、股权竞争度、董事会独立性、专业委员会设置程度以及股东参与决策程度与企业竞争优势显著正相关.研究结果表明,好的制度环境与有效的公司治理能提高企业的竞争优势;企业持续竞争优势的源泉应包含以政府为主体的宏观层次的制度竞争和以企业为主体的微观层次的公司治理竞争.     

Manufacturing strategy: A study of machine tool companies in the UK

This paper describes findings from an empirical study carried out in a group of small to medium sized companies within the U.K. machine tool industry. Notions of manufacturing strategy are discussed and a contingency model of change within production systems is proposed. Based on the model, a research programme is described, the object of which was to determine why firms adopt particular production systems, under what conditions these are changed, and the criteria and procedures which are used. A focus for change is taken to be the make-or-buy decision. The results showed that the key criteria used by the firms in their evaluations were: capacity, utilization and process capability (technology). From the study, it is concluded that response to change was largely based upon operational considerations and that the firms lacked a framework for reviewing the strategic implications of their decisions. Hence, the need is argued for a methodology whereby firms can establish consistent functional strategies, with the plans and policies to achieve them.     

A cyclical view of the relationship between corporate governance and strategic management

The vast majority of research on the relationship between corporate governance and strategic management focuses on the impact of corporate governance on strategic management. In this article we propose a cyclical model, highlighting that strategic decisions can also affect corporate governance through shaping firm ownership structure. We discuss the impacts of strategic decisions on firm ownership structure and corporate governance in the contexts of publicly traded firms, private firms, and the privatization of state-owned enterprises. We hope that our cyclical model can promote researchers to develop a more complete view about the relationships between strategic management, ownership structure, and corporate governance.     

政府治理、产权偏好与资本投资

本文从投资机会和融资约束视角分析了地方政府治理水平影响企业投资行为的机制,认为地方政府通过提供高质量的公共治理水平,帮助企业获得更多的投资机会和融资渠道,扩大企业投资规模,提高投资效率。以我国2005-2007年间上市公司为研究样本,本文实证检验的结果表明,较高的地方政府治理水平会提高公司的资本投资规模;政府治理影响企业资本投资与投资机会的敏感度在民营企业中更为显著,政府治理对国有企业资本投资的影响随着实际控制人的行政级别提高而降低。进一步研究发现,政府治理能够降低企业的融资约束,提高企业投资效率。     

Paving the way for coopetition: drivers for work–life balance policy implementation

An extensive literature provides evidence that conflict between employees’ family and work duties is associated with stress and poor well-being, which have negative consequences for firms and their employees. This paper analyzes the role of two internal and two external drivers that encourage (or discourage) organizations to adopt and implement work–life balance policies. The role of external financial assistance and specific laws (external drivers), together with budgetary provision for work–life balance policies and managers’ perceptions regarding problems due to work–life conflict (internal drivers), are analyzed. Fuzzy-set qualitative comparative analysis is used to pursue the study’s research goals. Analysis of data on 132 SMEs suggests that financial issues (external financial assistance and/or a specific budget within the company) are key factors for the implementation or lack of implementation of work–life balance policies. Moreover, to implement these policies, managers need not necessarily perceive problems due to work–life conflict. Finally, work–life balance legislation seems not to play an explicit role in the relationships discussed herein. Consequences of these findings are discussed in the final section of the paper.     

Internal Infrastructural Impacts on RFID Perceptions and Commitment: Knowledge,Operational Procedures,and Information‐Processing Standards

For many firms, radio frequency identification (RFID) suggests not only a new alternative to existing tracking methods but also a means to a range of previously cost‐prohibitive internal control and supply chain coordination innovations. In any event, and even in light of possible external pressures to adopt, the full potential of RFID for an individual firm must ultimately be viewed in consideration with the infrastructural capabilities of that firm. Furthermore, because adoption decisions are fundamentally based on managerial perceptions, it is critical to consider how certain forms of infrastructure provide the necessary transparency into other infrastructural characteristics to augment such decisions. We use multisource survey data in this work to consider several elements that contribute to this infrastructure and subsequently to perceptions of RFID benefit and actual commitment to adoption. Results demonstrate that the complementary effects of these infrastructural capabilities significantly impact both perceptions of and commitments to RFID.     

What is Driving Corporate Environmentalism: Opportunity or Threat?

Environmental management systems (EMSs) can differ considerably in the mix of practices and the number of practices adopted by firms. This paper explores the various incentives motivating adoption of different types of practices by a sample of Standard & Poor's 500 firms and provides an explanation for why firms adopt practices selectively. Observable firm characteristics, proxies for the incentives faced by firms, are used to determine the types of firms more likely to adopt certain types of practices. We find that practices, such as having an internal environmental policy, corporate environmental standards and environmental auditing are motivated more strongly by regulatory pressures, while practices such as total quality environmental management and environmental reporting are motivated more strongly by the potential for gaining competitive advantage and improving relations with stakeholders.     

Political connections,gender diversity and compensation policy

In this paper we analyze the influence of corporate governance, specifically political connections and gender diversity, on board and managers’ remuneration in savings banks in Spain. We also analyze whether financial experience moderates the relation between political experience and board compensation. To the best of our knowledge, the effects of having politicians on remuneration levels of financial firm have not been studied. Connections are important in hiring decisions and in generating business so it is interesting to explore whether they are important when it comes to compensation policies. We use a panel data and financial and corporate governance information from 44 savings banks for the period 2004–2009. Our results show that the previous political activity of the chairperson positively influences board remuneration. Our study provides the first evidence for a link between political connection and compensation policy, showing that, in addition to the standard firm-level factors, political and financial experience are material determinants of economic significance in compensation policies. Specifically, we show that financial expertise may substitute for governance mechanisms that are lacking in firms with weak governance environments (e.g. saving banks with high politicization).     

Mandated RFID and Institutional Responses: Cases of Decentralized Business Units

Using a theory‐building approach based on case studies, this research explores the responses of four decentralized business units to institutional pressure to adopt Radiofrequency Identification (RFID) technology. The institutional pressure emanates from the Department of Defense, and the affected decentralized business units operate in a large defense contractor. Institutional theory explains how organizations respond to external pressures to adopt new procedures, policies, and technologies. The case studies show how business units vary in their response to the RFID mandate and how different internal dynamics manifest. The responses range from complying faithfully, primarily concerned with satisfying the external constituent, to completely ignoring the mandate and focusing on internal efficiency initiative utilizing RFID. A number of propositions are developed to better understand the organizational responses to exogenous pressure to implement RFID. The paper concludes by proposing future research directions and issues that must be considered further.     

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.     

Corporate governance and accountability in multinational enterprises: Concepts and agenda

The objective of this editorial article is twofold: (1) to develop a conceptual foundation that defines corporate governance and accountability in MNEs and (2) to present issues for future research on the ground of this conceptual foundation. Despite recent attention and greater efforts to understand MNE corporate governance and accountability using multiple disciplines, a cohesive and integrated foundation to define them and their interrelationships is still lacking. Even among submissions to this special issue, there is no one article that conceptualizes all of these issues. To fill this void, this article explains what constitutes corporate governance and accountability in an MNE; we address what elements the concepts entail, how they differ from domestic firms and in what ways governance and accountability are mutually facilitative. This article also discusses several major research issues that have strong implications for MNE governance and accountability design.     

Experimental evidence on external auditor reliance on the internal audit

With the revised version of ISA 610 (revised 2013), external auditors now face both requirements and guidance addressing their responsibilities when relying on the internal audit function (IAF). The reliance decision of an external auditor has important economic consequences and implications for the efficiency and effectiveness of the annual audit. Using an experimental design, we explore how German external auditors’ reliance decisions regarding the IAF are affected by varying levels of environmental factors, like client business risk, effectiveness of the internal control system, and quality of the corporate governance. Furthermore, the experiences of external auditors in collaborating with an IAF are taken into consideration. The results indicate main effects for each factor and a two-way interaction between the effectiveness of the internal control system and the quality of corporate governance. Specifically, a strong internal control system can compensate for weaknesses in corporate governance with respect to the confidence of external auditors in the IAF. Also, the type of audit procedure influences the willingness of auditors to rely on the IAF, and the inherent risk of the examined transaction strengthens the negative impact of client business risk on the reliance decision. Moreover, past experiences of external auditors with an IAF have a significant impact on their reliance decision. Overall, the findings suggest that organizations can foster internal–external auditor coordination by enhancing corporate governance effectiveness and strengthening the internal control system.

     

Strategy frames in coopetition: An examination of coopetition entry factors in high-tech firms

Collaboration with competitors offers unique advantages such as increasing market, innovation, and financial performance. However, the degree of coopetition adoption varies between firms, as does the ability to achieve intended outcomes. We address this variety through the lens of strategic frames, essential for understanding business environment interpretations that managers develop, interactions with other actors that they engage in, and the subsequent performance firms may achieve. We examine associations between external and internal coopetition factors as perceived by coopeting managers.To single out the coopetition factors seen by respondents as the most relevant and to evaluate their mutual associations, we apply traditional regression analyses on survey data collected from 352 high-technology firms in Poland. To fully embrace the causal complexity, we advance our regression-based insights by using a complementary necessary condition analysis (NCA) and bottleneck analysis.Our results suggest that coopeting managers place higher importance on customer-driven rather than on resource-driven coopetition factors when considered as sufficient leveraging factors. Still, the complementary NCA reveals internal resources as critical factors for the perception of external factors of coopetition. Finally, we identify external technological development as the most limiting bottleneck for the perception of most internal coopetition factors, highlighting coopetition as a technology-driven strategy.     

Agency costs of free cash flow,internal capital markets and unrelated diversification

This paper investigates whether free cash flow arguments or the internal capital market perspective better explains diversification decisions. Based on a unique panel of hand-collected data from listed and unlisted Italian firms for the 1980–2010 time period, the results of this study generally reveal the predominant role of the internal capital market arguments. The benefits of unrelated diversification, which include the avoidance of costly external financing, outweigh its costs, which involve opportunistic problems. Although the literature suggests two distinct forces concurrently affect diversification decisions, in the Italian context, financial benefits appear to be the prevailing motivation for unrelated diversification decisions. Furthermore, the internal capital market argument has a strong effect on decisions to engage in unrelated diversification, particularly with respect to firms that are sensitive to financial constraints.     

Inside the black box: incentive regulation and incentive channeling on energy markets

This paper aims to achieve more insight into the complex interplay between the “external” market regulations and “internal” regulations (corporate governance) of energy firms. In recent years, many countries have deregulated the incumbent energy monopolies and have introduced new modes of regulation. However, the new incentive schemes do not represent an unmitigated success story. A major problem seems to be the neoclassical framework that is used for the analysis of energy markets. Therefore, an important goal of this paper is to clarify the boundaries of neoclassical regulation theory. There are two restrictions that hamper the neoclassical analysis of energy markets. The first is the difficulty of overcoming the widely held “black box” view of firms. The second is the idea that agents always make rational choices. The paper proposes a kind of theoretical division of labor for understanding the effectiveness of regulatory schemes in energy markets. Neoclassical economics points out to the sources of market failure, and helps to identify where in particular on the supply chain one is likely to observe natural monopolies. Transaction cost economics explains appropriate governance of vertical relations along the supply chain. And organizational theories can elucidate what happens within firms: their response to regulation, competition, and relations with suppliers. A research agenda for the third component is proposed, drawing on insights from New Sociological Institutionalism and organizational behavior.     

Related party transactions and audit fees: the role of the internal audit function

Related party transactions (RPTs) are viewed as genuine transactions that rationally fulfil other economic demands of a company. However, RPTs can also be used to transfer wealth from minority shareholders to controlling shareholders. The existence of such transactions may deteriorate financial reporting quality, increase audit risk, and as a result increase audit fees. This study examines the relationship between RPTs and audit fees in Malaysia, where ownership is often concentrated within a controlling family and corporate governance mechanisms are poor. It also investigates the moderating effect of the internal audit function (IAF) on this relationship. We find that external auditors base their fees on the types of RPTs undertaken. Specifically, our results show that audit fees are higher for firms that undertake RPTs involving the sale and purchase of assets, goods, and services. We also document that external auditors rely on the IAF, and thus their fees are lower for firms that undertake RPTs and that have made a large investment in an IAF. Our study is the first to provide evidence that RPTs in Malaysian firms may be abused as a channel to facilitate tunnelling and that the IAF plays a vital role in controlling such transactions.     

The Decision of the Supply Chain Executive to Support or Impede Supply Chain Integration: A Multidisciplinary Behavioral Agency Perspective*

Applying the behavioral agency model developed by Wiseman and Gomez‐Mejia (1998) , this article analyzes human resource factors that induce supply chain executives (SCEs) to make decisions that foster or hinder supply chain integration. We examine two internal sources (compensation and employment risk) and one external source (environmental volatility) of risk bearing that can make SCEs more reluctant to make the decision to promote supply chain integration. We argue and empirically confirm the notion that an employment and compensation system that increases SCE risk bearing reduces the SCE's willingness to make risky decisions and thus discourages supply chain integration. We also reveal that this negative relationship becomes stronger under conditions of high environmental volatility. In addressing the “so what?” question, we found empirical support for the hypothesis that supply chain integration positively influences operational performance. Even though this decision has a positive value for the firm, we showed that SCEs discourage supply chain integration when they face higher risk bearing. Hypotheses are tested using a combination of primary survey data and archival measures in a sample of 133 Spanish firms.     

Communities, alliances, networks and knowledge in multinational firms: A micro-analytic framework

We develop a model of the micro-process of knowledge acquisition, dissemination, and application in the networks of alliances that have become important sources of external knowledge for multinational firms. Based on the concept of communities of practice as sources of highly tacit know-how, this model addresses the use of alliances with local partners to acquire tacit knowledge on a sub-unit level and to then share this knowledge throughout the firm via an internal network of community-level alliances. We suggest that the supposed advantage of multinational firms in accessing and reconstituting knowledge from widely spread sources is composed of multiple micro-processes at sub-unit levels, and therefore much more complex than usually presented.     

Regulatory intervention and the effect of changes in corporate governance on firm decisions and market reactions

This paper investigates whether Italian companies that cross-list in the United States between 1993 and 2005 show (1) a change in their internal policies as anticipated by the bonding hypothesis, (2) an increase in market value, or (3) an increase in the access to capital funds. We use the unique environment created by the 1998 Draghi reform which significantly improved the protection of Italian listed companies’ minority shareholders and we further examine the impact of legislated changes in corporate governance in Italy on the decision of Italian companies to cross-list in the United States. Our results indicate that following the Draghi reform (1) firms that cross-list in the United States modify their dividend and cash policies as anticipated by the bonding hypothesis. Contrary to prior research, (2) we do not find evidence that cross-listing serves to enhance shareholder value or (3) is used as a vehicle to more easily access capital funds either before or after the domestic corporate governance is improved. The results of this study provide evidence that country level legislative innovations intended to enhance a weak corporate governance system can be a valid and effective substitute to the bonding mechanism by providing an alternative signal of a firm’s quality.