Using the instrumental stakeholder theory lens, we examine how generic competitive strategies influence the link between stakeholder management (SM) and firm financial performance. We develop a ...framework that highlights the synergistic effects of a differentiation strategy on SM but also the trade-offs between a cost leadership strategy and SM in their consequences for financial performance. We test our theoretical mechanism further by distinguishing between primary and secondary stakeholders, who differ in their degree of firm specificity and instrumentality. We propose that for firms pursuing a low-cost competitive advantage, secondary SM intensifies the trade-offs between SM and financial performance when compared with primary SM, whereas both primary and secondary SM are likely to improve financial performance for differentiators. Empirical analyses using a panel data set of S&P 500 firms over a 15-year period (2005–2019) and a series of robustness tests support our predictions. Our findings highlight important boundary conditions for SM's impact on firms’ financial performance and highlight not only “when SM pays” but also “when SM may not pay.”
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NUK, OILJ, SAZU, UKNU, UL, UM, UPUK
It is now well-established that business groups (BGs)—an inimitable multifirm structure that enables legally distinct firms to take coordinated action—constitute a dominant organizational form in ...many economies around the world. The BG phenomenon has attracted sustained scholarly attention over the last three decades. Despite the shift in BG research toward BG heterogeneity and strategic performance outcomes, prior reviews and the last meta-analysis a decade ago focus narrowly on the question of whether BGs confer a financial performance advantage on affiliated firms. We provide a more extensive account of the BG effect and an in-depth review of the theoretical approaches used in prior work by focusing only on family-controlled business groups (FBGs)—the dominant type of BG. We make three contributions. First, we develop a parsimonious organizing framework to summarize extant FBG research in a nuanced way—specifying the relationships examined, theoretical explanations advanced, and empirical evidence adduced. This summary reveals that extant FBG theorizing is predominantly structurally focused. Second, we propose a reorientation of FBG research toward a microfoundations-based approach. We develop a scheme for theoretical “taking” and “giving” of relevant microfoundational frameworks from contiguous management subfields to systematically identify potential paths ahead for future FBG theorizing. Finally, we granularly discuss illustrative microfoundation-based frameworks, outlining how their application could both enrich and better integrate FBG research with contiguous management subfields such as entrepreneurship, family business, and strategy research. We thus consolidate our understanding of FBG research, identify gaps, and suggest promising pathways for future work.
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NUK, OILJ, SAZU, UKNU, UL, UM, UPUK
Since its independence in 1947, India has undertaken several different paths towards economic development and growth. These paths have evolved due to the unique internal political-economic context ...emanating from a history of colonization and the external pressures arising from global institutional and economic considerations. The need to accommodate domestic realities and external pressures led to the emergence of diverse organizational forms in India. Placing the contemporary organizational landscape within the historical political-economic context, we discuss the plurality of organizational forms that dominate the Indian economy, their evolution in the period after economic liberalization in 1991, and their attempts to catch-up and participate in global markets. Furthermore, using the four papers published in the special issue as a starting point, we discuss how the organizational landscape in India offers opportunities to contribute to practice and research, particularly in the domains of business groups, emerging market multinationals, and reverse innovation.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
To better understand whether the transition by Asian countries toward market economies mirrors the path taken in the West, we ask how embedded network ties between equity analysts and the chief ...executive officers (CEOs) of the firms that they follow in India influence the accuracy of analysts' earnings forecasts. We contrast traditional institutions of caste and regional language with contemporary institutions, such as universities, as the locus of such ties. We posit that CEOs from the postreform generation are more likely to transfer material private information via their school ties, while prereform-generation CEOs favor caste or language ties. Contrasting domestic business groups (BGs) with Western multinational corporations (MNCs) as organizational contexts, we argue that BGs legitimate the transfer of private information along particularistic ties, whereas MNCs mitigate such transfers. Our conceptual framework is supported by analyses that draw on a sample of 1,552 earnings forecasts issued between 2001 and 2010 by 296 equity analysts. Our findings suggest that the embeddedness perspective should be broadened to incorporate the influence of the larger historical social structures within which economic action is embedded, and to view BGs as carriers and repositories that blend modern management practices with particularistic behavioral patterns among top executives.
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BFBNIB, IZUM, KILJ, NMLJ, NUK, PILJ, PNG, SAZU, UL, UM, UPUK
While overseas acquisitions by emerging-economy firms are gaining increased attention from the business press, our understanding of whether and why this inorganic mode of international expansion ...creates value to acquirer firms is limited. We argue that international acquisitions facilitate internalization of tangible and intangible resources that are both difficult to trade through market transactions and take time to develop internally, thus constituting an important strategic lever of value creation for emerging-economy firms. Furthermore, the magnitude of value created will be higher when the target firms are located in advanced economic and institutional environments: country markets that carry the promise of higher quality of resources, and therefore, stronger complementarity to the existing capabilities of emergingeconomy firms. An event study of 425 cross-border acquisitions by Indian firms during 2000-2007 supports our predictions.
Overseas acquisitions as a mode of international expansion entail a high level of risk, especially for firms from emerging economies which face considerable liabilities of foreignness and newness in ...international markets. Building on the behavioral risk-taking perspective, we examine the role of ownership characteristics on the propensity of Indian firms to make foreign acquisitions. Empirical results from a sample of BSE 500 Indian firms during the 2002–2011 period show that after controlling for firm level resources and capabilities identified in the prior literature, international experience of firm CEOs, promoter shareholding, and ownership share of foreign institutional investors positively influence firms' acquisition propensities in foreign markets. Furthermore, our results show that the effects of these determinants on overseas acquisitions are stronger for stand-alone independent firms than for those affiliated to business groups.
Research Summary
In this article, we examine the influence of owner CEOs’ motivations and authority on strategic risk‐taking behavior of firms as reflected by their investments in foreign markets. We ...theorize that owner CEOs, aided by their strategic leadership, long‐term orientation, and less‐restricted decision‐making powers, will facilitate their firms’ strategic decisions that are exploratory in nature and, thus, are more risky. We further propose that the owner CEO effect is likely to differentially interact with performance aspirations and governance structures of firms in influencing internationalization. We test our predictions on a longitudinal panel dataset of 226 Indian manufacturing firms over the 10‐year period from 2002 to 2011 and find support for our hypotheses. We contribute to the emerging literature on microfoundations and behavioral strategy.
Managerial Summary
Given that a large number of firms around the world are characterized by concentrated ownership and owners who also assume CEO roles, we explore the influence of owner CEOs on firms’ strategic risk‐taking behavior. We propose that firms with owner CEOs, particularly founder owner CEOs, are likely to exhibit a higher degree of internationalization as compared to firms with professional CEOs. Further, we propose that the positive owner CEO effect is stronger when the firm performance is above its aspirations and also in stand‐alone firms when compared to firms affiliated to business groups. We test our predictions using a sample of 226 Indian manufacturing firms over the 10‐year period from 2002 to 2011 and find support for our predictions.
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BFBNIB, FZAB, GIS, IJS, IZUM, KILJ, NLZOH, NUK, OILJ, PILJ, SAZU, SBCE, SBMB, UL, UM, UPUK
We examine the role of internationally acquired knowledge and supra‐firm institutional infrastructure on developing firms' innovation orientation. Empirical results, based on a panel of 11,048 Indian ...manufacturing firms during the period 1990 to 2009, show that the macro‐ and micro‐institutional context in which firms are embedded condition the effect of global resource and product market participation on indigenous innovation efforts. In particular, technology imports (accumulative learning) have a stronger effect on inducing investments in innovation when the macro‐institutional development is weak and for firms that are affiliated to business groups. However, product market internationalization (assimilative learning) plays a more important role in facilitating innovation efforts as the institutional environment becomes stronger and for independent firms that do not possess the network advantages inherent in business groups.
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BFBNIB, FZAB, GIS, IJS, IZUM, KILJ, NLZOH, NUK, OILJ, PILJ, SAZU, SBCE, SBMB, UL, UM, UPUK
Prior research suggests that business groups (BGs) in developing economies have emerged as alternatives to poorly developed economic institutions in these countries. In this paper, we argue that this ...does not imply they are always substitutes. Specifically, we consider the case of capital markets, a key economic institution: while the absence of well-developed capital markets may indeed have stimulated the emergence of business groups, we propose that BG affiliation and the scrutiny that maturing capital markets impose on firms that participate actively in them nevertheless can play a complementary role in influencing a firm's performance. We find support for our predictions in a novel longitudinal data set of Indian firms that contain both listed and unlisted BG affiliated as well as unaffiliated firms.
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BFBNIB, FZAB, GIS, IJS, KILJ, NLZOH, NUK, OILJ, PNG, SBCE, SBMB, UL, UM, UPUK
Research Summary
Using a principal–principal agency theory lens, we examine corporate governance and compensation design in family‐owned businesses. We conceptualize how CEO pay and pay‐performance ...sensitivity is influenced by whether the CEO is a professional or drawn from the controlling family (family CEO). Data from a sample of 277 publicly listed Indian family firms during 2004–2013 support our argument that family CEOs get paid more than professional CEOs. This pattern is stronger in superior‐performing firms that are named after the controlling family (eponymous firms). Furthermore, family CEOs of superior‐performing firms have higher pay‐performance sensitivity compared to professional CEOs of other superior‐performing firms. Our findings reveal nuanced heterogeneity in nepotism in emerging economy family firms—CEO compensation is a mechanism for some controlling families to tunnel corporate resources.
Managerial Summary
We examine whether CEO compensation and its responsiveness to realized firm performance in Indian family firms in influenced by whether the CEO is a professional or drawn from the controlling family (family CEO). Data from a sample of 277 publicly listed Indian family firms during 2004–2013 suggests family CEOs get paid more than professional CEOs. This pattern is stronger in superior‐performing firms that are named after the controlling family (eponymous firms). Furthermore, family CEOs' high compensation is unaffected by poor firm performance and is disproportionately boosted by superior firm performance. These results suggest that poor corporate governance allows some family controlled Indian firms to use CEO compensation as a mechanism to tunnel corporate resources in ways that hurt minority shareholders.
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BFBNIB, FZAB, GIS, IJS, KILJ, NLZOH, NUK, OILJ, SBCE, SBMB, UL, UM, UPUK
