The strategic role of financial slack on alliance formation

2017 ◽  
Vol 55 (2) ◽  
pp. 383-399 ◽  
Author(s):  
Lorenzo Bizzi
Keyword(s):  
Strategic Alliances ◽  
Cash Holdings ◽  
Alliance Formation ◽  
Financial Leverage ◽  
Data Set ◽  
Slack Resources ◽  
Content Type ◽  
Financial Slack ◽  
Alliance Partners

Purpose While previous research has developed unclear positions about the role of organizational resources on alliance formation, the purpose of this paper is to focus on financial slack resources to clarify the conditions that facilitate the formation of strategic alliances. Building on the behavioral theory of the firm, this paper theorizes that internal and external financial slack resources, measured as cash holdings and financial leverage, incentivize managers to form alliances, because they protect them against the risk of alliance failure. Design/methodology/approach Complete data were collected from 400 biotech public companies for the period from 2000 to 2015. The data set considered alliances among over 2,200 public and private companies. Hypothesis testing relied on generalized estimating equations. Findings Cash holdings positively impact alliance formation; financial leverage negatively impacts alliance formation; cash holdings and financial leverage interact in the prediction of alliance formation. Research limitations/implications While research in financial slack resources shows equivocal results, this study illustrates that they exercise a significant effect when it comes to the choice of forming strategic alliances. Limitations include the focus on multiple forms of alliances, possible restrictions in the external validity of the findings, and a lack of measurement of explanatory mechanisms. Practical implications Findings help managers understand the financial conditions in which they should choose to form or avoid alliances; findings help managers select alliance partners. Originality/value The study contributes by proposing a new outlook on alliances; identifying financial resources as alliance predictors when previous research focused on intangible resources; offering new insights into the often equivocal outcomes of financial slack; building an uncharted bridge between the finance and alliance literatures.

A substitute for poor institutions? Interorganizational affiliations in the alliance formation process

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Oliver Rossmannek ◽  
Olaf N. Rank
Keyword(s):  
Strategic Alliances ◽  
Formation Process ◽  
Institutional Development ◽  
Developed Countries ◽  
State Ownership ◽  
Less Developed Countries ◽  
Alliance Formation ◽  
Content Type ◽  
The Government ◽  
Alliance Partners

Purpose This study aims to investigate how the home country institutional development influences the alliance formation process. Design/methodology/approach A network of strategic alliances between 95 airlines over a 5-year period is analyzed with stochastic actor-oriented models [i.e. Simulation investigation for empirical network analysis (SIENA)]. Robustness analyses use a subsample of these airlines over a period of 10 years. Findings The results demonstrate that the membership in a firm group and a high share of state ownership are more beneficial for the number of alliances if the firm originates from a country with low institutional development. Practical implications Firms from less developed countries can use affiliations (e.g. to firm groups or the government) as signals to attract international alliance partners. Social implications Policymakers from less developed countries should support the development of (local) firm groups to stimulate interorganizational cooperation. Originality/value Firms form alliances based on two aspects: preferences for alliance partners and attractiveness to potential partners. Prior studies outlined that institutional development affects the preferences of firms for alliance partners. This study demonstrates how the institutional development influences the attractiveness to potential partners.

Market responsiveness: antecedents and the moderating role of external supply chain integration

2017 ◽  
Vol 32 (1) ◽  
pp. 30-45 ◽  
Author(s):  
Tuan Luu
Keyword(s):  
Supply Chain ◽  
Supply Chain Integration ◽  
Manufacturing Companies ◽  
Data Set ◽  
Content Type ◽  
Business Context ◽  
Market Responsiveness ◽  
Positive Effect ◽  
Ambidextrous Leadership

Purpose The interaction between opening and closing behaviors of ambidextrous leadership produces “change” force throughout the organization in proactive response to market forces. This research aims to assess the role of ambidextrous leadership in fostering entrepreneurial orientation (EO) and market responsiveness. The research also seeks an insight into how external supply chain integration moderates the positive effect of EO on market responsiveness. Design/methodology/approach Research data were collected from 327 meso-level managers and 517 subordinates from chemical manufacturing companies in the Vietnam business context. Findings Research findings shed light on the positive effect of ambidextrous leadership on EO, which in turn contributes to market responsiveness. The moderation role that external supply chain integration plays on the EO–market responsiveness linkage was also grounded on the data set. Originality/value Through the identification of the predictive roles of ambidextrous leadership and EO for market responsiveness, the current research indicates the convergence between leadership, EO and market responsiveness research streams.

Revisiting the concept of a competitive “cash advantage”

2015 ◽  
Vol 43 (4) ◽  
pp. 38-46 ◽  
Author(s):  
Joseph Calandro, Jr.
Keyword(s):  
Competitive Advantage ◽  
Corporate Strategy ◽  
Academic Research ◽  
Cash Holdings ◽  
Content Type ◽  
Cash Reserves ◽  
Changing Role ◽  
Viable Method ◽  
Practical Implications

Purpose – The purpose of this paper is to profile how ample cash holdings can serve as a competitive advantage by first mitigating the risk of becoming a forced seller during times of distress, and then positioning a firm to take strategic advantage of forced selling and other forms of distress-generated opportunities. Design/methodology/approach – The author reviews the changing role of cash over time in corporate strategy, and how inadequate cash has caused or contributed to corporate failures. Findings – The findings of this paper, which are supported by historical and contemporary examples, are that ample cash reserves can be a powerful source of comparative advantage. Practical implications – This article supports earlier work published in Strategy & Leadership that shows how Graham-and-Dodd-based analysis is a viable avenue of academic research and a viable method with which to assess and formulate corporate strategic initiatives such as mergers and acquisitions, share buy-backs, risk management and, in this case, the strategic uses of cash. Originality/value – This paper offers leaders and financial executives a practical explanation of how ample cash holdings can serve as a competitive advantage.

The effect of industry association on firm innovation in Chinese private ventures

2019 ◽  
Vol 57 (9) ◽  
pp. 2414-2435
Author(s):  
Wenge Zhang ◽  
Jun Li ◽  
Yiyuan Mai
Keyword(s):  
Moderating Effects ◽  
Firm Level ◽  
Firm Innovation ◽  
Data Set ◽  
Industry Association ◽  
Content Type ◽  
Emerging Industries ◽  
Practical Implications ◽  
Firm Learning

Purpose The purpose of this paper is to examine the relationship between industry association membership and firm innovation in Chinese private ventures. A secondary objective is to investigate potential moderating effects of firm learning practices and founder characteristics on the above relationship, and to draw out implications for policymakers and practitioners. Design/methodology/approach The paper utilizes data from a sample of 567 Chinese entrepreneurial firms operating in 9 designated emerging industries. Hierarchical regression models were employed to analyze the effect of industry association membership on firm innovation, and the potential moderating effects. A 2SLS procedure was adopted to control for potential endogeneity issue. Supplemental analyses were conducted to ensure the robustness of the findings. Findings The paper provides empirical insights about how industry association membership, along with firm learning practice and founder leadership, affect firm innovation in Chinese private ventures in emerging industries. It suggests that industry association membership positively affects firm innovation. Further, there is a three-way interaction effect of industry association membership, learning practice and founder power on innovation. Research limitations/implications Due to the design of the data set, there are some limitations. First, the study only considered whether a firm belongs to an industry association, but not the nature of such membership (length, firm status in the association, etc.). Second, the cross-sectional design may limit the power of the study to make casual implications about the tested relationships. Practical implications The paper provides important practical implications for policymakers and entrepreneurs in China. In general, the results suggest that private ventures pursuing innovation in emerging industries can benefit from industry associations, and entrepreneurs shall actively engage in firm-level and personal-level learning. For policymakers, the study suggests that to foster innovation in an emerging industry, special attention shall be paid to building necessary institutional support to develop and to strengthen the role of industry association in the industry. Originality/value This paper fulfills an important gap in the literature in that it is one of the first, which investigates the role of the industry association in firm innovation, especially in a non-western context. This paper provides new insights into the role of industry association and firm innovation in an under-researched developing economy context.

scholarly journals Credit composition and income inequality in Vietnam: an empirical analysis

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Le Quoc Hoi ◽  
Hương Lan Trần
Keyword(s):  
Income Inequality ◽  
Educational Level ◽  
Generalized Method Of Moments ◽  
Institutional Quality ◽  
Primary Data ◽  
Data Set ◽  
Content Type ◽  
Private Credit ◽  
The Impact

PurposeThis paper aims to examine the credit composition and income inequality reduction in Vietnam. In particular, the authors focus on the distinction between policy and commercial credits and investigate whether these two types of credit had adverse effects on income inequality. The authors also examine whether the impact of policy credit on income inequality is conditioned by the educational level and institutional quality.Design/methodology/approachThe authors use the primary data set, which contains a panel of 60 provinces collected from the General Statistics Office of Vietnam from 2002 to 2016. The authors employ the generalized method of moments to solve the endogenous problem.FindingsThe authors show that while commercial credit increases income inequality, policy credit contributes to reducing income inequality in Vietnam. In addition, we provide evidence that the institutional quality and educational level condition the impact of policy credit on income inequality. Based on the findings, the paper implies that it was not the size of the private credit but its composition that mattered in reducing income inequality, due to the asymmetric effects of different types of credit.Originality/valueThis is the first study that examines the links between the two components of credit and income inequality as well as constraints of the links. The authors argue that analyzing the separate effects of commercial and policy credits is more important for explaining the role of credit in income inequality than the size of total credit.

Does intellectual capital impact firms' capital structure? Exploring the role of firm risk and profitability

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
A. D'Amato
Keyword(s):  
Capital Structure ◽  
Intellectual Capital ◽  
Value Added ◽  
Firm Risk ◽  
Financial Leverage ◽  
Data Set ◽  
Content Type ◽  
Novel Approach ◽  
Firm Profitability ◽  
The Relationship

PurposeThe purpose of this paper is to analyze the relationship between intellectual capital and firm capital structure by exploring whether firm profitability and risk are drivers of this relationship.Design/methodology/approachBased on a comprehensive data set of Italian firms over the 2008–2017 period, this paper examines whether intellectual capital affects firm financial leverage. Moreover, it analyzes whether firm profitability and risk mediate the abovementioned relationship. Financial leverage is measured by the debt/equity ratio. Intellectual capital is measured via the value-added intellectual coefficient approach.FindingsThe findings show that firms with a high level of intellectual capital have lower financial leverage and are more profitable and riskier than firms with a low level of intellectual capital. Furthermore, this study finds that firm profitability and risk mediate the relationship between intellectual capital and financial leverage. Thus, the higher profitability and risk of intellectual capital-intensive firms help explain their lower financial leverage.Research limitations/implicationsThe findings have several implications. From a theoretical standpoint, the paper presents and tests a mediating model of the relationship between intellectual capital and financial leverage and its underlying processes. In terms of the more general managerial implications, the results provide managers with a clear interpretation of the relationship between intellectual capital and financial leverage and point to the need to strengthen the capital structure of intangible-intensive firms.Originality/valueThrough a mediation framework, this study provides empirical evidence on the relationship between intellectual capital and firm financial leverage by exploring the underlying mechanisms behind that relationship, which is a novel approach in the literature.

The impact of institutional factors on corporate mechanism of cash adjustment – New evidence from emerging Asia

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Santanu Das ◽  
Ashish Kumar ◽  
Asit Bhattacharyya
Keyword(s):  
Financial Development ◽  
Cash Holdings ◽  
Content Type ◽  
Adjustment Mechanism ◽  
Management Policies ◽  
New Evidence ◽  
Corporate Cash Holdings ◽  
Adjustment Dynamics ◽  
Country Specific

PurposeThe purpose of this study is to understand how the business environment of a country has an impact on cash management policies of the firms and also to investigate if there is any asymmetry in cash adjustment dynamics when a firm deviates from its long-term target of cash holdings.Design/methodology/approachUsing a sample of seven emerging Asian countries in the period 2001–2019, the authors investigate the role of country specific variables in the corporate cash holdings and their cash adjustment mechanism. They use the panel data regression method to estimate the results.FindingsThe authors find that the overall financial development of a country has a significant impact on corporate cash holdings and cash adjustment dynamics. When a firm has excess cash, the speed of adjustment towards the target is faster as compared to when it has deficit cash holdings. Further, when a firm holds excess cash, it adjusts towards the target using cash from investments; in case of deficit cash holdings, the adjustment happens via cash from financing activities.Practical implicationsThe results of the study are helpful to corporate managers as these are important references to them to understand and design cash management policies by considering factors that are measured at the country level. It also provides them a clearer understanding about the role of corporate board and information asymmetry in cash holdings.Originality/valueThis is the first study which examines the role of country-specific variables on corporate cash holdings and their adjustment mechanism of firms in emerging Asia. Further, the study extends the literature by providing new evidence that there is asymmetry in cash adjustment dynamics of firms after controlling for the overall financial development of a country.

scholarly journals Leverage and firm investment: the role of information asymmetry and growth

2019 ◽  
Vol 27 (1) ◽  
pp. 56-73 ◽  
Author(s):  
Albert Danso ◽  
Theophilus Lartey ◽  
Samuel Fosu ◽  
Samuel Owusu-Agyei ◽  
Moshfique Uddin
Keyword(s):  
Information Asymmetry ◽  
High Growth ◽  
Firm Investment ◽  
Financial Leverage ◽  
Content Type ◽  
Growth Firms ◽  
The Impact ◽  
The Relationship ◽  
Role Of Information

PurposeThis paper aims to demonstrate how financial leverage impacts firm investment and the extent to which this relationship is conditional on the level of information asymmetry as well as growth.Design/methodology/approachThe paper relies on data from 2,403 Indian firms during the period 1995-2014, generating a total of 19,544 firm-year observations. Analysis is conducted by using various panel econometric techniques.FindingsDrawing insights from agency theories, the paper uncovers that financial leverage is negatively and significantly related to firm investment. It is also observed that the impact of financial leverage on firm investment is significant for high information asymmetric firms. Finally, the paper shows that the relationship between leverage and firm investment is significant for low-growth firms. However, no significant relationship is found between leverage and investment for high-growth firms.Originality/valueThis paper provides fresh evidence on the leverage–investment nexus and, to the authors’ knowledge, it the first paper to examine the extent to which this leverage–investment relationship is driven by the level of information asymmetry.

R&D volatility and market value: the role of executive overconfidence

2019 ◽  
Vol 14 (2) ◽  
pp. 411-431
Author(s):  
Benlu Hai ◽  
Qingzhu Gao ◽  
Ximing Yin ◽  
Jin Chen
Keyword(s):  
Business Performance ◽  
Positive Impact ◽  
Market Value ◽  
Data Set ◽  
Content Type ◽  
Dynamic Perspective ◽  
Innovation Strategies ◽  
The Impact ◽  
The Relationship

Purpose Significant increase or decrease in research and development (R&D) expenditure may have an immense impact on market value. Based on the punctuated equilibrium theory, this paper aims to empirically analyze the impact of R&D volatilities on market value and the moderating effect of executive overconfidence. Design/methodology/approach The study uses the panel data set that covers 902 Shanghai and Shenzhen A-share manufacturing listed firms and multiple regression method to test the theoretical hypotheses. Findings The results show that both positive and negative R&D volatilities have a robust and significant positive impact on the market value. Further analysis shows that the executive overconfidence positively moderates the relationship between R&D volatilities and market value. Research limitations/implications In a rapidly changing and highly competitive environment, firms should recognize that the balance of innovation strategies will help to bring higher market value. Furthermore, firms could improve corporate governance to make the best of managerial characteristics, such as overconfidence, on the innovation decision-making process. Originality/value By pushing the static perspective to a dynamic perspective and empirically documenting the role of executive overconfidence, this study contributes to the literature on the relationship between R&D expenditure and market value, generating theoretical and practical insights for firms to improve innovation governance and innovation strategies to achieve better business performance.

scholarly journals Workforce education diversity, work organization and innovation propensity

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Alejandro Bello-Pintado ◽  
Carlos Bianchi
Keyword(s):  
Dynamic Capabilities ◽  
Context Effects ◽  
Evolutionary Economics ◽  
Work Organization ◽  
Capabilities Approach ◽  
Organizational Practices ◽  
Data Set ◽  
Content Type ◽  
Moderating Role

PurposeDiversity of people, knowledge and resources has been identified as a determinant of firms' growth. This paper focusses on innovation propensity as a critical dimension of firm's growth path, aiming to analyse the effects of the firm's horizontal educational diversity (HED) on the propensity to conduct different technological innovation activities (TIAs). In addition, considering the evidence showing that these effects are neither direct nor linear, the authors analyse the moderating role of the firm's organizational practices oriented to knowledge sharing (KS) on the association between HED and the adoption of TIAs.Design/methodology/approachFollowing the theoretical arguments of the resource-based view (RBV), the evolutionary economics and the dynamic capabilities approach and related empirical evidences, the authors proposed four hypotheses regarding the effect of HED on TIAs and the moderating role of work organization practices oriented to promote KS. Empirically, the authors calculated different HED diversity indexes capturing two basic dimensions: variety and balance. Hence, using instrumental variables and panel data techniques to control endogeneity biases, the authors tested the proposed hypotheses using a data set of Uruguayan manufacturing firms between 2004 and 2015.FindingsIn line with previous evidence, results showed idiosyncratic context effects. The authors found a robust, linear, positive and significant relationship between HED and TIAs, but the effect can only be consistently associated with the adoption of internal or external research and development (R&D) activities. Moreover, the moderating role of work organization practices oriented to promote KS is positive and significant when firms engage in TIAs. For technological innovations that only involve the acquisiton of technology (AT), a positive effect is also observed but always associated to organizational practices oriented to promote KS.Originality/valueThis paper revisits the analysis of workforce diversity for a relatively less explored context. This research contributes to the field by linking HED and work organization practices to understand firm's innovation propensity in a developing context. Moreover, while other studies have focussed only on top management or R&D team diversity, the authors have analysed the whole professional's workforce. It allows the authors to discuss the effects of diversity on innovation propensity in the light of the ongoing debate on the effects of innovation in employment.

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