Corporate social responsibility (CSR) positively impacts relationships between firms and customers. Previous research construes this as an outcome of customers’ warm glow that results from supporting ...firms’ benevolence. The current research demonstrates that beyond warm glow, CSR positively impacts firms’ sales through mitigating their customers’ perceptions of purchase risk. We demonstrate this effect across three conditions in which customers’ perceived risk of purchase is heightened, using both secondary data and two lab experiments. Under conditions of greater purchase risk (i.e., recessions, a service context, and longer-term consumer commitments), CSR positively impacts both sales and customer purchase intentions to a greater extent than in conditions of lower purchase risk. In addition to measuring purchase risk as the mediating process behind these effects, we demonstrate that the effect of CSR on sales is stronger for those CSR activities that signal a stakeholder orientation.
Digital transformation and resultant business model innovation have fundamentally altered consumers’ expectations and behaviors, putting immense pressure on traditional firms, and disrupting numerous ...markets. Drawing on extant literature, we identify three stages of digital transformation: digitization, digitalization, and digital transformation. We identify and delineate growth strategies for digital firms as well as the assets and capabilities required in order to successfully transform digitally. We posit that digital transformation requires specific organizational structures and bears consequences for the metrics used to calibrate performance. Finally, we provide a research agenda to stimulate and guide future research on digital transformation.
Many firms use market share to set marketing goals and monitor performance. Recent meta-analytic research reveals the average economic impact of market share performance and identifies some factors ...affecting its value. However, empirical understanding of why any market share–profit relationship exists and varies is limited. The authors simultaneously examine the three primary theoretical mechanisms linking firm market share with profit. On average, they find that most of the variance in market share’s positive effect on firm profit is explained by market power and quality signaling, with little support for operating efficiency as a mechanism. They find a similar explanatory role of the three mechanisms in conditions where market share negatively predicts profit (for niche firms and those “buying” market share). Using these mechanism insights, the authors show that the value of market share differs in predictable ways between firms and across industries, providing new understanding of when managers may usefully set market share goals. The authors also provide new insights into how market share should be measured for goal setting and performance monitoring. They show that revenue market share is a predictor of firm profit while unit market share is not, and that relative measures of revenue market share can provide greater predictive power.
There is a growing body of evidence that customer satisfaction is predictive of firms’ future financial performance. However, studies of this relationship have been limited to competitive markets, ...and monopolistic markets have been largely ignored. This study explores the large and important utilities market and exploits its unique regulatory requirements that generate detailed and reliable operating and accounting data to examine the overall relationship between customer satisfaction and utility profit and establish the causal mechanisms involved. Using data from U.S. public utility firms, the authors show that even when customer satisfaction does not affect future revenues, it does positively predict future profitability by reducing utility firm operating costs. More specifically, they find that higher satisfaction reduces the costs of utility firm distribution, customer service, and sales and general administration expenses. These findings and additional post hoc evidence are consistent with the notion that customer satisfaction (1) generates efficiency-enhancing benefits for utility firms by lowering the direct and employee engagement costs of dealing with dissatisfied customers and (2) fosters greater trust and cooperation from customers. This study has important implications for both managers and regulators and provides important new insights for market-based asset theory and regulatory economic theory.
Despite significant research and progress in examining the effects of loyalty programs on consumer behavior and firm performance, the firm value implications of these programs are still unclear. The ...article investigates whether loyalty program introduction affects firm value, as measured by abnormal stock returns. The authors test the hypotheses empirically by conducting an event study of 260 announcements which cover 110 firms in the United States across different industries for 18 years from 2000 to 2017. Findings reveal that the introduction of loyalty programs, on average, positively influences firm value. The results of this study also reveal the existence of contingencies including synergies with complementary market-based assets and market conditions of lower uncertainty in determining the value of loyalty programs. The authors conclude that the value of loyalty programs is greater when the perceived risks of purchase are lower.
•New Product Pre-announcements (NPPAs) are issued by firms signaling the availability of a new product at a future date.•Retail and institutional investors have varying levels of knowledge and ...resources and differ in their response to an NPPA.•The differences involve investment horizons, risk taking and influence of external reports in buy decisions.•Retail investors are not ordinarily drawn to an NPPA and prefer riskier firms and shorter time horizons of investment.•Conversely, institutional investors do react to an NPPA and prefer lower-risk stocks.•Analyst reports for institutional investors and business media for retail investors may change such inherent preferences.•Institutional but not retail investors are instrumental in new product release following an NPPA.
Firms often use new product preannouncements (NPPAs) to attract investors and inform them about innovative offerings in the pipeline. We observe that the appeal of an NPPA differs for retail and institutional investors. Utilizing prospect theory, we argue that the two types of investors face unequal levels of uncertainty and are dissimilarly loss averse due to varying levels of knowledge and access to resources. This results in varying attitudes towards investment horizon, risk-taking, and preference for information sources. We find investor proclivity toward an NPPA depends on several factors, including the short-term abnormal return, the valence of coverage in media and analyst reports, the firm's risk profile, and the exploration emphasis of the firm. Moreover, we show that higher levels of institutional ownership ultimately contribute to new product success. The results hold implications for strategies that managers can employ to increase investor ownership within the firm to fund innovation.
With the signing of the Dodd-Frank Wall Street and Consumer Protection Act in 2011, and the accompanying Consumer Financial Protection Bureau, there is now a public database filled with US bank ...complaints and their resolution process. While the disclosure created ripples in the news media, research on the reaction to this disclosure by consumers, banks, and the stock market was scant. This paper examines how these multiple stakeholders reacted to the public disclosure of bank complaint data. Analyses indicate that more consumers complain and dispute a case post-data disclosure even though banks respond to complaints in a more timely fashion. The stock market reactions to the complaint data disclosure are positive in the short run, driven by the brand value and the extant internal governance mechanisms present in the financial firm.
Purpose
This paper aims to determine what the brand performance consequences of corporate social responsibility (CSR) activities would be during times of recession for well-known brands.
...Design/methodology/approach
Based on signaling theory, this paper investigates if CSR activities serve to signal higher brand value for consumers via perceptions of better quality and greater differentiation, specifically during recessions. This study incorporates a representative longitudinal sample of known US firms for the analyses, which is accomplished through generalized method of moments estimations.
Findings
The findings empirically demonstrate that CSR initiatives during recessions are actually associated with increased perceptions of brand value. More specifically, during recessions, CSR initiatives such as charitable contributions provide a signal to customers of higher brand quality.
Research limitations/implications
This study did not control for the costs of doing specific CSR activities that may be less visible to consumers.
Practical implications
While individual firms or managers may not be able to prevent recessions from happening, they can limit the negative impact of recessions on their performance by engaging in CSR activities (or refrain from cutting back) during these times.
Social implications
Because CSR initiatives during recessions result in more favorable consumer perceptions of the brand, engaging in CSR aligns both social and managerial interests, owing to the economic gains from CSR investments.
Originality/value
During times of recession, some critics indicate that CSR may be an unaffordable luxury. On the contrary, this research shows that managers may want to consider CSR activities as a means of increasing the value of their brands, especially during economic recessions.
Strategic orientation and firm risk Bhattacharya, Abhi; Misra, Shekhar; Sardashti, Hanieh
International journal of research in marketing,
12/2019, Letnik:
36, Številka:
4
Journal Article
Recenzirano
Odprti dostop
Entrepreneurial orientation (EO) and market orientation (MO) have received substantial conceptual and empirical attention in the marketing and management literature and both orientations have ...consistently been linked to stronger financial performance. Yet the way in which market-oriented firms seek to achieve superior rents is substantively different from that of entrepreneurially oriented firms which could lead to differential impacts of EO and MO on firm risk. In this study, the authors employ a text mining technique to assess firms' EO and MO and examine the impact of these two strategic orientations on shareholder risk outcomes. The results show that while EO increases idiosyncratic risk, MO decreases it. However, only EO decreases systematic risk. Overall, the results of this study demonstrate that a firm's decisions regarding strategic orientation should be examined in light of both likely risks and returns in order to make appropriate resource allocation decisions.
Purpose This research investigates the impact of strategic research and development (R&D) (one led by a firm’s innovation orientation) on stock market performance during the economic disruption ...caused by the 2016 demonetization of high-value currency notes in India. It shows how firms’ strategic focus on innovation and integrated R&D initiatives can help mitigate shareholders’ losses and protect market value during negative macroeconomic shocks. Design/methodology/approach We analyzed financial and administrative data from firms listed in the Bombay Stock Exchange (BSE) 500 index and used the Fama French market model with appropriate instruments accounting for possible endogeneity to identify the impact. To ensure the reliability of our findings, we conducted robustness checks with alternate event windows, estimation methods, and variable measurements. Findings Strategic R&D plays a crucial role in building resilience against macroeconomic shocks. It effectively mitigated shareholders’ losses in the immediate aftermath of the shock, with an elasticity of abnormal returns of 7.65% on day zero, 13.1% during the first five days and 10.5% after the first fortnight. We also find that firms that are business-to-business (B2B), as well as those that are older and less leveraged, are better able to combat such a shock. Research limitations/implications The study looked at one shock, namely demonetization. Future research is needed to demonstrate the generalizability of results during other macroeconomic shocks, like the COVID-19 pandemic. The study focuses on relatively near-term impacts, leaving the long-term value-creation effects of strategic R&D unexplored. Practical implications Innovation orientation acts as a structural enabler, allowing firms to make strategic R&D investments that mitigate losses during macroeconomic shocks. It explains that managers should avoid myopically managing R&D investments and align them with the firm’s innovation focus to enhance value creation. Social implications While the currency demonetization was widely considered to be detrimental for firms as an unannounced negative monetary shock, our research shows that firms with high levels of strategic R&D were successfully able to counteract such a shock. Originality/value This is the first study to examine the short-term loss mitigation impact of firms’ focus on innovation and strategic R&D. It emphasizes the role of innovation-focused strategies during economic crises.
PDF
