The Limitations of Financial Reporting on Innovation and Its Value-Relevance for the Investor's Decision-Making Process

This chapter aims to present some limitations of financial reporting on innovation with an impact on the investor's decision-making process. In order to do so, the authors show how accounting recognizes and measures innovation factors: the intangibles. Based on the literature, the authors discuss how the value relevance of financial reporting on innovation is conditioned by non-financial factors. The impacts of the adoption of IFRSs, the effect of the industry sectors and the effect of the individual characteristics of the different countries on the value relevance of the intangible assets are analyzed. The literature suggests a decrease in the value relevance of financial statements due to the manner in which intangibles are recognized and measured in accounting. However, financial reporting on innovation is value relevant to the investor's decision-making and is conditioned by non-financial factors. Value relevance differs among different industry sectors, between different countries and is conditioned by the accounting systems used in the preparation of the financial information.

Leadership and Organization Innovation Adoption

Innovation is a tool to ensure competitiveness. Firm survival is inexorably linked to its ability to reinvent itself, obviously apart from other circumstances. Organizational innovation and its adoption are key concepts that are rarely studied. Little is known about factors related to decisions to adopt innovations and how the likelihood of adoption of innovations can be increased. This chapter aims to answer the question: what are the determinants of the adoption of organizational innovation? In this sense, this chapter aims to identify some of the organizational factors which have the capacity to influence organizational innovation in a specific case study, an innovative Portuguese company. This chapter addresses the personal dimension of the leader as a driver of organizational innovation processes. This chapter finds that, in the case study, the culture of the company which itself is driven by the CEO is fundamental for innovation and the adoption of organizational innovations.

The Moderating Effect of Family Management on R&D Productivity in Privately Held Firms

The aim of this chapter is to analyze the moderating effect of family management on the relationship between R&D inputs and R&D outcomes, that is, R&D productivity. Using a longitudinal sample of 337 Spanish privately held manufacturing firms, the results show that in general terms, although family managed firms invest less in R&D than their non-family managed counterparts, they reinforce the conversion of R&D inputs into R&D outcomes. Moreover, the findings reveal that the strengthening effect of family management on R&D productivity is contingent upon the level of R&D expenditures. Thus, this chapter contributes to shedding some light into the debate regarding innovation management in privately held family firms.

Characterization of Companies Based on Willingness to Innovate and Competitiveness

Companies, as agents of innovation systems, play a fundamental role in the innovative activity of economies. Nevertheless, the existence of barriers to innovation is becoming a low willingness to innovate by companies despite being an important element of competitiveness. These two perceptions are fundamental when deciding to innovate. It also influences the perception of government intervention to encourage innovation. The objective of this study is to analyze the characteristics of Extremaduran companies based on perceptions they have about these two variables: willingness to innovate and assessing innovation as an essential element of competitiveness. Data come from an ad hoc questionnaire focused mainly on variables related to innovation. Obtained results show four profiles of companies based on these characteristics and these results permit to connect them to perceived obstacles to innovation and demanded public policies. The characterization of the companies may be useful for public policies design to stimulate innovation.

Perceptions of Entrepreneurial Ecosystem in Tourism Sector

Tourism is a strategic sector for the Portuguese economic and social development in general, and for Setúbal municipality in particular. Consequently, the existence of an effective ecosystem that promotes competitive business is crucial for the region. This chapter considers how the entrepreneurial ecosystem concerning tourism sector is perceived and operates in this Portuguese municipality. The authors chose a case study research strategy, in addition to documental analysis, through which we selected 45 stakeholders to participate as a focus group, related to the entrepreneurial activity in tourism in the municipality. The evidence shows that Setúbal municipality has relevant ecosystem elements, which are determinant for the development of the tourism entrepreneurial activity in this region. However, it is not functioning systemically in a way that can generate more effective results in the entrepreneurial activity. This result is also related with the fact that tourism activity in the region is in an initial phase and it is expected that, with its continuous development, the entrepreneurial ecosystem will also grow and become stronger, being able to create more synergies that will support new businesses.

Entrepreneurial Orientation of Family Business

Family businesses are considered as an important source of economic development and growth in that they create added value by providing new products, processes and technologies. Family businesses, where family values and perspectives dominate, have begun to experience problems in adapting to such a structure in the global economy, where the rate of change has increased, and the competition is intense. In the process of restructuring, entrepreneurial orientation is vital for these businesses. From this point of view, the aim of this chapter is to define family business, to explain their characteristics and to show the two perspectives on the entrepreneurial orientation of family businesses. The concept of “family entrepreneurship” and “transgenerational entrepreneurship” is also mentioned in the chapter. In relation to what is told in the chapter, how a conservative structure has been opened to the market by its third generation, a family business in Turkey that is going through its third generation and the innovations brought about by the new generation compose the case study.

The Entrepreneurial Orientation

The purpose of this chapter is to analyze the opportunities for entrepreneurship, the behavior of the entrepreneurial orientation, and the orientation towards the market that is developed in the SME, and the effects which exert in the innovation and the profitability in the field of SMEs. The research is based on a sample of 1012 commercial, services, and industrial enterprises in the Northwest region of Mexico. The data collection was carried out during the period from September to December 2016, through a self-directed survey to the manager. The relations estimates have been tested through the Structural Equation System (Hervas-Oliver, Sempere-Ripoll, and Boronat-Moll) based on the variance with the PLS technique, supported by the software SmartPLS version 3.2.6. The results demonstrate that entrepreneurial orientation has a significant influence on innovation activities and on the profitability of SMEs. Also, the innovation has a significant positive influence on the profitability. In addition, market orientation shows significant and negative effects on the profitability of SMEs. For these types of companies, it is important that they focus their efforts on customers, the market and the main competitors. This investigation contributes to the development of the literature on entrepreneurial behavior and dynamic capabilities.

Managing Customer Credit to Reduce the Company's Risk and Overdue Credits

Most companies give credit to customers when selling products or providing services. It has advantages as more customers may be willing to negotiate with the company, but it increases the company's risk. Therefore, the company must analyze the pros and cons of giving credit. This chapter summarizes all information needed for a company to establish credit policy for each customer or group of customers. First, credit risk and customers' credit risk are explained to call the attention to the need to manage it. Then it shows how a company can manage credit to maximize its value and reduce its risk. The inputs needed to determine a customer credit policy are explained. Credit risk models are presented. And finally, a recovery method to collect overdue credits is presented. This chapter aims the help the company to solve liquidity and solvency problems and to stablish long-term relationships with customers.

Internationalization and Risks

This chapter focuses on the risks associated with globalization and on the risk management techniques that may be used to mitigate them. Therefore, the main objective of the research was to demonstrate how a Portuguese company in the sector of the ship-chandler, with an activity focused on international customers, is exposed to the risks of internationalization and how it operates to mitigate such risks. Consequently, the research methodology used was the case study. It was observed that even though the company was subjected to country, credit, and foreign exchange risk, which had an impact on the functioning and activity results, it did not apply any risk-management technique. For that reason, a model for the management of these risks has been proposed in order to mitigate their impact on activity and improve and streamline future operations and financial results.

Does Theory Really Fit Real Life Situations?

This chapter analyzes the strategic international formulation of a SME technological service-based firm to perceive the internationalization theory that best suits the company throughout its history. The literature review of the most studied internationalization patterns—Uppsala Model, Born Globals, Born Again Globals, and Born Regionals—allowed comparison of the main characteristics of each theory vis-à-vis the firm's internationalization. A synthesis table summarizes the main characteristics of the internationalization process of each model and presents a clearer view of the particularities of each. Analysis of the primary data and interviews provided by the company's CEO made it possible to compare the internationalization process adopted by the company with those characteristics, facilitating the process of identifying the strategy followed. The present case study took into account the theoretical model with the greatest similarity of characteristics with the path followed by the firm, as well as its learning and future plans.