The role of corporate controls and business-level strategy in business unit performance

2019 ◽  
Vol 12 (3) ◽  
pp. 364-381 ◽  
Author(s):  
Pouya Seifzadeh ◽  
W. Glenn Rowe
Keyword(s):  
Financial Performance ◽  
Market Performance ◽  
Ordinary Least Squares ◽  
Business Strategies ◽  
Control Mechanisms ◽  
Business Unit ◽  
Least Squares Regression ◽  
Content Type ◽  
Joint Project ◽  
Business Units

Purpose Corporate controls are mechanisms that corporations use to ensure that the processes and/or outcomes of their business units meet corporate expectations. Challenges in measurement of corporate controls have led many researchers to operationalize them as part of the more ambiguous corporate effects construct, instead of addressing them separately. The purpose of this paper is to examine the significance of “fit” between corporate control mechanisms and business unit strategy in performance of business units. Design/methodology/approach The authors use ordinary least squares regression analysis on data collected between 2010 and 2012 from surveys from managers of 142 Iranian corporations and 1,822 of their subsidiaries. The authors also use financial and market data collected by an IDRO division and accessed through partnership in a joint project. Findings The authors found that while the fit between business unit strategy and corporate controls has a significant effect on business unit financial performance, it does not have a similar effect on market performance. The findings demonstrate that when business unit managers perceive that they are subject to a balance of strategic and financial controls with a slightly greater emphasis on strategic controls, then business units have higher financial and market performance, although the difference in financial performance is not significant. Research limitations/implications The authors find that the misfit between corporate controls and business strategies in such cases could negatively affect the performance of the business unit. However, this research also contributes to a better understanding of the importance of strategic controls to the successful performance of business units. The findings show that while the fit between controls and strategy is most critical for achieving financial performance in business units that pursue product leadership, strategic controls play a more prominent role than financial controls in achieving higher financial or market share performance for all business units. Practical implications The findings of the propositions in this research would discourage corporations with tight financial control from engaging in acquisition of businesses considered to be product leaders in their relative product markets. Originality/value Past research focusing on the fit between corporate-level factors and business-level factors and their role on business performance are largely limited to conceptual work. The limited empirical studies completed in the past generally reduce control mechanisms to lack or absence of autonomy. This shortcoming has been mainly due to difficulties in measurement of control mechanisms. The empirical study overcomes these barriers and in doing so, reveals surprising findings related to the effectiveness of different control mechanisms.

Are smart manufacturing systems beneficial for all SMEs? Evidence from Korea

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Soojeen Jang ◽  
Yanghon Chung ◽  
Hosung Son
Keyword(s):  
Human Resources ◽  
Financial Performance ◽  
Manufacturing Systems ◽  
Contingency Theory ◽  
Ordinary Least Squares ◽  
Operational Efficiency ◽  
Smart Manufacturing ◽  
Least Squares Regression ◽  
Content Type ◽  
Smart Manufacturing Systems

PurposeThrough the resource-based view (RBV) and contingency theory, this study empirically investigates the impacts of smart manufacturing systems' maturity levels on the performance of small and medium-sized enterprises (SMEs). Moreover, it aims to examine how industry types (i.e. high- and low-tech industries) and human-resource factors (i.e. the proportion of production workers to total workers) as contingency factors influence the effects of smart manufacturing systems.Design/methodology/approachThe study conducted an empirical investigation of a sample of 163 Korean manufacturing SMEs. This study used an ordinary least squares regression to examine the impacts of the maturity levels of smart manufacturing systems on financial performance. Moreover, the impacts on operational efficiency were analysed using data envelopment analysis based on bootstrap methods and Tobit regression.FindingsThe RBV results indicate that the higher the maturity levels of smart manufacturing systems, the higher the financial performance and operational efficiency. Moreover, based on contingency theory, this study reveals that the effect of the maturity levels of smart manufacturing systems on financial performance and operational efficiency depends on firms' industry types and the proportion of production workers.Research limitations/implicationsThis study shows that the introduction of smart manufacturing systems can help SMEs achieve better financial performance and operational efficiency. However, their effectiveness is contingent on firms' industry types and the characteristics of their human resources.Practical implicationsSince the effects of the maturity levels of smart manufacturing systems on SME performance differ depending on their industries and the characteristics of human resources, managers need to consider them when introducing or investing in smart manufacturing systems.Originality/valueBased on the RBV and contingency theory, this is the first empirical study to examine the moderating effects of industry types and the proportion of production workers on the impacts of the maturity levels of smart manufacturing systems on the financial performance and operational efficiency of SMEs.

Intellectual capital: the missing link in the corporate social responsibility–financial performance relationship

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Niccolò Nirino ◽  
Alberto Ferraris ◽  
Nicola Miglietta ◽  
Anna Chiara Invernizzi
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Financial Performance ◽  
Intellectual Capital ◽  
Ordinary Least Squares ◽  
Mediating Effect ◽  
Least Squares Regression ◽  
Content Type ◽  
Csr Strategies ◽  
Corporate Social

PurposeThe purpose of this paper is to propose and empirically test intellectual capital (IC) as a mediator in the corporate social responsibility (CSR) and financial performance (FP) relationship.Design/methodology/approachThe empirical research was conducted on 345 European firms listed in the STOXX Europe 600 index. To evaluate the mediating effect of IC, we applied the four-step Baron and Kenny model, tested through an ordinary least squares regression analysis.FindingsThe findings highlighted a partial mediation of IC on the CSR–FP relationship, suggesting that the implementation of CSR strategies has a positive effect on the development of firms' IC, which in turn enhances firms' competitive advantage and superior long-term FPs.Originality/valueWe found a new mediator in the CSR–FP relationship and we contribute to a new line of research that aims to study environmental and sustainability aspects strictly interrelated with IC and performances (sustainable intellectual capital).

scholarly journals Tone disclosure and financial performance: evidence from Egypt

2018 ◽  
Vol 31 (1) ◽  
pp. 63-74 ◽  
Author(s):  
Doaa Aly ◽  
Sherif El-Halaby ◽  
Khaled Hussainey
Keyword(s):  
Financial Performance ◽  
Financial Reporting ◽  
Firm Growth ◽  
Positive Association ◽  
Ordinary Least Squares ◽  
Bad News ◽  
Good News ◽  
Annual Reports ◽  
Least Squares Regression ◽  
Content Type

Purpose This paper aims to examine the extent to which financial performance (FP) represents one of the main determinants for tone disclosure (TD) in Egyptian annual reports. The authors also measure the bidirectional relationship between TD and FP. Design/methodology/approach The manual content analysis is used to measure the levels of TD in annual reports for a sample of 105 firms listed on the Egyptian stock market. The sample covers a three-year period (2011-2013). Findings The descriptive analysis in this paper shows that Egyptian firms disclose more good news than bad news. Therefore, the net news disclosure, or net variances, between good/bad is positive. The empirical analysis shows a positive association between the narrative disclosure of good/bad news and FP based on return on assets. The authors also find a highly significant association between the auditor, profitability, leverage, firm growth and financial reporting of good/bad news information. Finally, the results of the ordinary least squares regression show that the causality between the two endogenous variables runs from FP to TD. Thus, TD is determined by FP. Originality/value This study offers a novel contribution to disclosure studies by being the first study to examine TD in one of the developing countries.

scholarly journals Changes in communication patterns when implementing lean

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jorge Colazo
Keyword(s):  
Communication Networks ◽  
Ordinary Least Squares ◽  
Communication Patterns ◽  
Point Of View ◽  
Analytical Models ◽  
Male Participant ◽  
Least Squares Regression ◽  
Content Type ◽  
Team Members ◽  
Business Units

PurposeThis paper explores the changes in communication patterns when companies implement lean, and how those changes relate to implementation success.Design/methodology/approachThis is a multiple-site case study involving four business units of a manufacturing company in South America, including two repeated measurement instances separating 24 months for approximately 600 direct workers and 65 supervisors. The analytical models include social network analysis measures and Ordinary Least Squares regression.FindingsWhen companies implement lean, (1) teams have a higher frequency of communication among members; (2) teams become more decentralized; (3) teams communicate more with supervisors and (4) supervisors communicate more amongst themselves and collaborate more. Also, (5) better performing teams change more pronouncedly.Research limitations/implicationsThe study contains data for four business units but within only one company, limiting the external validity of the conclusions. The sample was predominantly male. Participant attrition and other potential covariates not included in the study can be additional limitations.Practical implicationsLean implementations could be practically helped by managers by embracing and supporting the more intense communication patterns associated with lean success, and alternatively, they could proactively detect barriers in communication by measuring how these patterns change or fail to change and try to unlock communication by working on those barriers and supply communications infrastructure and opportunities for collaboration to try to boost the chances of success.Originality/valueThis is to our knowledge the first study measuring communication networks from the point of view of team members and low-level supervisors in lean implementations. This is also the first study showing that communication patterns change more rapidly in more successful teams, and also that communication pattern changes when implementing lean can be an indicator of success.

Effect of adaptive capability and entrepreneurial orientation on SBU performance: moderating role of success trap

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Uma Shankar Rangaswamy ◽  
Sanjay Chaudhary
Keyword(s):  
Entrepreneurial Orientation ◽  
Ordinary Least Squares ◽  
Least Squares Regression ◽  
It Services ◽  
Content Type ◽  
Business Units ◽  
Adaptive Capability ◽  
Improved Performance ◽  
Innovative Culture

Purpose While prior research has theorized the relevance of adaptive capability (AC) to firm performance, skepticism remains regarding boundary conditions of the AC – performance relationship. This study aims to attempt to understand the intervening effect of entrepreneurial orientation (EO) impacting strategic business unit (SBU) performance. The authors further explore the moderating influence of the success trap on the AC – EO relationship. Design/methodology/approach Data from a sample of 293 SBU heads in an Indian information technology (IT) firm is analyzed using ordinary least squares regression. The authors performed a mediation and moderation test on the data using the Hayes PROCESS SPSS macro. Specifically, this study used Model 4 and Model 7 of the PROCESS macro to test the mediation and moderated–mediation models. Findings The results reveal that EO positively mediates the relationship between AC and SBU performance and the success trap negatively moderates the AC – EO relationship. Research limitations/implications The paper refers to empirical research of strategic business units of an IT services firm in India. Further research in other cultures and industry settings is required to generalize the findings. Practical implications The findings suggest that to improve performance, managers in entrepreneurial software firms should develop an adaptive and innovative culture to avoid success traps. Originality/value The study establishes the crucial role of a firm’s AC as the driver of improved performance in a turbulent environment. This study complements the literature concerning the AC-performance relationship with the introduction of EO as mediating variable.

Better value chains: a matrix for competitive advantage

2014 ◽  
Vol 35 (5) ◽  
pp. 43-48 ◽  
Author(s):  
Conrad den Hertog
Keyword(s):  
Competitive Advantage ◽  
Value Chain ◽  
Business Strategy ◽  
Senior Management ◽  
Business Strategies ◽  
Value Chains ◽  
Future Research ◽  
Business Unit ◽  
Content Type ◽  
Business Units

Purpose – The purpose of this paper is to present a new and comprehensive business strategy matrix which can be used to create competitive advantage for the value chain of every business unit of any firm. Design/methodology/approach – This paper reviews the key findings of several well-known papers within the value chain literature and then adds several new conceptual insights to step by step create a logically developed, business strategy matrix featuring four strategy choices. Findings – This paper presents the four business strategy choices of competitive value chains, based on the business strategies of innovative quality, lean cost, agile delivery and attentive service. Research limitations/implications – A future research implication of this paper is to empirically test the financial benefits for producers of custom products, of applying agile delivery as a key business strategy. Practical implications – This paper provides the senior management of each business unit of any firm, with a clear guide to defining an optimal business strategy. Social implications – This paper is intended to advance the practice of business strategy by senior management, to enhance customer value across all business units. Originality/value – This paper expands upon existing business strategy models by providing a comprehensive business strategy matrix, which can be applied to all possible business units. It does this by building upon current best practice to demonstrate that next to innovative quality, lean cost and attentive service strategies, an agile delivery strategy is required in the case of custom products.

The impact of executives’ perceptions of environmental threats and organizational slack on innovation strategies

2016 ◽  
Vol 7 (2) ◽  
pp. 216-230 ◽  
Author(s):  
Chengyuan Wang ◽  
Biao Luo ◽  
Yong Liu ◽  
Zhengyun Wei
Keyword(s):  
Cognitive Theory ◽  
Environmental Changes ◽  
Ordinary Least Squares ◽  
Organizational Slack ◽  
Least Squares Regression ◽  
Content Type ◽  
Environmental Threats ◽  
Innovation Strategies ◽  
The Impact ◽  
The Relationship

Purpose The paper aims to study the relationship between executives’ perceptions of environmental threats and innovation strategies and investigate the moderating effect of contextual factor (i.e. organizational slack) on such relations. It proposes a dualistic relationship between executives’ perceptions of environmental threats and innovation strategies, in which different perceptions of environmental threats will lead to corresponding innovation strategies, and dyadic organizational slack can promote such processes. Design/methodology/approach The paper is based on a survey with 163 valid questionnaires, which were all completed by executives. Hierarchical ordinary least-squares regression analysis is used to test the hypotheses proposed in this paper. Findings The paper provides empirical insights about that executives tend to choose exploratory innovation when they perceive environmental changes as likely loss threats, yet adopt exploitative innovation when perceiving control-reducing threats. Furthermore, unabsorbed slack (e.g. financial redundancy) positively moderates both relationships, while absorbed slack (e.g. operational redundancy) merely positively influences the relationship between the perception of control-reducing threats and exploitative innovation. Originality/value The paper bridges the gap between organizational innovation and cognitive theory by proposing a dualistic relationship between executives’ perceptions of environmental threats and innovation strategies. The paper further enriches innovation studies by jointly considering both subjective and objective influence factors of innovation and argues that organizational slack can moderate such dualistic relationship.

Estimating defaults in organized security lending markets

2016 ◽  
Vol 24 (3) ◽  
pp. 343-362
Author(s):  
Latif Cem Osken ◽  
Ceylan Onay ◽  
Gözde Unal
Keyword(s):  
Credit Risk ◽  
Stock Returns ◽  
Stock Price ◽  
Price Volatility ◽  
Equity Market ◽  
Ordinary Least Squares ◽  
Least Squares Regression ◽  
Content Type ◽  
Central Counterparties ◽  
Risk Determinants

Purpose This paper aims to analyze the dynamics of the security lending process and lending markets to identify the market-wide variables reflecting the characteristics of the stock borrowed and to measure the credit risk arising from lending contracts. Design/methodology/approach Using the data provided by Istanbul Settlement and Custody Bank on the equity lending contracts of Securities Lending and Borrowing Market between 2010 and 2012 and the data provided by Borsa Istanbul on Equity Market transactions for the same timeframe, this paper analyzes whether stock price volatility, stock returns, return per unit amount of risk and relative liquidity of lending market and equity market affect the defaults of lending contracts by using both linear regression and ordinary least squares regression for robustness and proxying the concepts of relative liquidity, volatility and return constructs by more than variable to correlate findings. Findings The results illustrate a statistically significant relationship between volatility and the default state of the lending contracts but fail to establish a connection between default states and stock returns or relative liquidity of markets. Research limitations/implications With the increasing pressure for clearing security lending contracts in central counterparties, it is imperative for both central counterparties and regulators to be able to precisely measure the risk exposure due to security lending transactions. The results gained from a limited set of lending transactions merit further studies to identify non-borrower and non-systemic credit risk determinants. Originality/value This is the first study to analyze the non-borrower and non-systemic credit risk determinants in security lending markets.

Personality, risk tolerance and social network use: an exploratory study

2016 ◽  
Vol 42 (6) ◽  
pp. 536-552 ◽  
Author(s):  
Shaista Wasiuzzaman ◽  
Siavash Edalat
Keyword(s):  
Social Networks ◽  
Social Network ◽  
Online Social Networks ◽  
Financial Risk ◽  
Ordinary Least Squares ◽  
Risk Tolerance ◽  
Network Activity ◽  
Least Squares Regression ◽  
Content Type ◽  
Financial Risk Tolerance

Purpose – The vast amount of information available via online social networks (OSN) makes it a very good avenue for understanding human behavior. One of the human characteristics of interest to financial practitioners is an individual’s financial risk tolerance. The purpose of this paper is to look at the relationship between an individual’s OSN behavior and his/her financial risk tolerance. Design/methodology/approach – The study uses data collected from a sample of 220 university students and the backward variables selection ordinary least squares regression analysis technique to achieve its objective. Findings – The results of the study find that the frequency of logging on to social network sites indicates an individual who has higher financial risk tolerance. Additionally, the increasing use of social networks for social connection is found to be associated with lower financial risk tolerance. The results are mostly consistent when the sample is split based on prior financial knowledge. Originality/value – To the authors’ knowledge this is the first study which documents the possibility of understanding an individual’s financial risk tolerance via his/her social network activity. This provides investment/financial consultants with more avenues for gathering information in order to understand their current or potential clients hence providing better services.

Quality financial inclusion and its determinants in South Africa: evidence from survey data

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kudakwashe Joshua Chipunza ◽  
Ashenafi Fanta
Keyword(s):  
South Africa ◽  
Survey Data ◽  
Financial Services ◽  
Ordinary Least Squares ◽  
Financial Inclusion ◽  
Least Squares Regression ◽  
Content Type ◽  
Demographic Groups ◽  
Financial Products ◽  
Data Limitations

PurposeThe study measured quality financial inclusion, a more comprehensive measure of financial inclusion, and examined its determinants at a consumer level in South Africa.Design/methodology/approachThis study leveraged on FinScope 2015 survey data to compute a quality financial inclusion index using polychoric principal component analysis. Subsequently, a heteroscedasticity consistent ordinary least squares regression model was employed to assess determinants of quality financial inclusion.FindingsThe empirical findings indicated that gender, education, financial literacy, income, location and geographical proximity determine quality financial inclusion. These findings could inform policymakers and financial services providers on how quality financial inclusion can be promoted through tailoring financial products for various socio-demographic groups.Research limitations/implicationsDue to data limitations, the study was confined to South Africa and did not capture digital financial inclusion. Hence, future studies could replicate the study in Sub-Saharan Africa's context and compute an index that captures digital financial inclusion.Practical implicationsThese findings could inform policymakers and financial services providers on how quality financial inclusion can be promoted through tailoring financial products for various socio-demographic groups.Originality/valueThis study proposed a more comprehensive measure of quality financial inclusion from a demand-side perspective by accounting for important dimensions that include diversity, affordability, appropriateness and flexibility of financial products and services.

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