From Financial Misdemeanants to Recidivists: The Perspective of Social Networks

 Fenghua Bao, Yapu Zhao, Longwei Tian, and Yuan Li

ABSTRACT Acts of financial misconduct in business affect firms in many negative ways. Therefore, why do certain misdemeanants repeatedly commit these acts? We suggest that financial misdemeanants with different social networks will perceive the costs and benefits of committing financial frauds differently, thereby affecting the likelihood of committing financial frauds in the future. To be specific, we suggest that politically connected misdemeanants are less likely to recommit financial frauds, while misdemeanants at interlock network center are more likely to recommit financial frauds. In addition, we propose that misdemeanants are less likely to recommit financial frauds when their partners in the interlock network community are punished for financial frauds. To test our theory, we collected panel data from Chinese listed firms from 2005 to 2014 and employed event history analysis (EHA).

KEYWORDS financial misconduct recidivism, social networks, cost-benefit analysis, EHA

Coopetition and Firm Survival in a Cluster: Insights from the Population Ecology on the Yacht Industry in an Emerging Economy, 1957-2010 

Hsi-Mei Chung and Li-Hsuan Cheng

ABSTRACT Firms that are located in a cluster may confront cooperation and competition at the same time. The advantage of cooperation and the disadvantage of competition on a firm may need to examine the firm survival in a cluster as the cluster evolves. Employing the population ecology viewpoint, this study tries to address the coopetition issues in a cluster to examine the impact of coopetition on firm survival rate. Analyzing yacht industry data in Taiwan from 1957–2010, this study indicates that the founding rate of yacht firms will be positively related with the cluster size. Additionally, during the competition period, those firms located inside the cluster may have a higher dissolution rate than those firms outside the cluster, indicating the disadvantage of competition on the firm. Finally, this study finds that those firms located inside the cluster will be more likely to become larger and have capabilities to survive. The results in this study provide insights on addressing coopetition issues in a cluster.

KEYWORDS cluster, coopetition, population ecology, yacht industry

Liability of Middleness Revisited: The Advantages for Mid-sized Competitors in Renewable Natural Resource Industries 

Alfonso Cruz, Tomas Reyes, and Roberto Vassolo

ABSTRACT Size is an important antecedent of firm survival, and several studies theoretically sustain and empirically support a ‘liability of middleness’. Indeed, it is widely believed that companies should act strategically to either become large or remain small and occupy a niche position, because mid-sized firms face the strongest market selection pressures. This study challenges that logic in renewable natural resource industries. Measuring size as product-line scale and firm-level portfolio breadth, we argue that in industries characterized by cost competition, the lack of product differentiation, large capital investments, and sharp price oscillation, scale and breadth have a curvilinear effect on survival that favors mid-sized firms rather than penalizing them. An empirical analysis of the U.S. pulp and paper (P&P) industry over the period 1970–2000 strongly supports our arguments. This study is particularly relevant for emerging economies, in which natural resource industries represent an important portion of the total economic activity.

KEYWORDS    breadth, liability of middleness, natural resource industries, scale, size competition

Knowledge Management in Brazil: What Governance Mechanisms are Needed to Boost Innovation? 

Guillermo Antonio Dávila, Tatiana Andreeva, and Gregório Varvakis

ABSTRACT The need to innovate is relevant to many firms around the globe and is particularly pressing for those in emerging markets. They face global competition, are under-resourced, and suffer from weaker institutional support. It is suggested that to innovate successfully in this context, indigenous firms would benefit from focusing on managing their current knowledge base more efficiently. We know little about how knowledge management works outside developed economies and which knowledge governance mechanisms have more influence than others in the context of emerging economies. To address this gap, we explore how context may matter for the use of knowledge governance mechanisms and their effect on innovation performance in Brazilian firms. Using the survey data of 109 firms, structural equation modelling, and cluster analysis, our findings suggest that the joint application of knowledge-focused rewards, organizational design, and information and communication technologies that support knowledge processes is critical for boosting innovation performance. We discuss how the peculiarities of the Brazilian context may shape these findings. Our article contributes to the knowledge management and innovation literature by demonstrating that the joint effects of bundles of knowledge governance mechanisms and contextual variables should be explored in order to understand their impact on organizational outcomes.

KEYWORDS    Brazil, context, innovation, knowledge governance mechanisms, knowledge management

Parochialism and Implications for Chinese Firms’ Globalization 

Jing Betty Feng, Leigh Anne Liu, and Chunyan Jiang

ABSTRACT We explore the meaning of parochialism (xiao nong yi shi, 小农意识) to explain certain paradoxical Chinese managerial behaviors. We discuss how cultural, political, and economic traditions in China formed a salient context to cultivate parochialism. Qualitative data from Chinese and American managers reveal that the conceptual framework of parochialism includes a cognitive dimension of closed-mindedness, a behavioral dimension of self-protection, and a relational dimension of in-group focused social relationship. Parochialism hampers effective globalization of Chinese firms because it negatively impacts key facets of organizational culture: employee development, communication, customer orientation, social responsibility, strategic planning, and innovation. The study offers theoretical and practical implications for Chinese management research and the development of global competence.

KEYWORDS Chinese management theory, Chinese managerial culture, managerial cognition, parochialism

Mitigating Negative Spillovers from Categorization of Foreign-Listed Firms: The Role of Host-Country Independent Directors 

Eugene Kang and Asda Chintakananda

ABSTRACT  This study examines how cognitive categorization by host-country investors give rise to negative spillovers among host-country foreign-listed firms from the same home country when one of these foreign-listed firms discloses a financial reporting irregularity. This study further examines how attributes of host-country independent directors mitigate such negative spillover effects through signaling fulfilment of their fiduciary duties. Our results based on Chinese foreign-listed firms on the Singapore Stock Exchange from 2007-2014 reveal that host-country independent directors increasespillover effects among foreign-listed Chinese firms from financial reporting irregularities. However, such increase is attenuated when these directors signal fulfilment of their fiduciary duties through home-country, industry or task-related experiences, and the observed mitigating effect is stronger when they possess a combination of these experiences.

KEYWORDS cognitive categorization, corporate governance, director independence, foreign listing,negative spillover, signalling effects