Corruption remains a way of life for many cultures and subcultures, an ethos that is often consistent with the goal of corporate profit maximization. Corruption may yield benefits at the personal or individual firm level, but at the societal level corruption is detrimental to aggregate growth, individual effort, and faith in institutions. Corruption, as defined by the Oxford English Dictionary, is dishonest or fraudulent conduct by those in power, typically involving bribery. Corruption exists on a continuum that can range from rampant to minimal. Rampant corruption exists when entire organizations willingly and knowingly promote actions that are injurious to workers, consumers, or society as a whole. Egregious examples include knowingly producing and selling harmful products or ignoring conditions that impair the health and safety of workers. At the other extreme, minimal corruption can include petty violations such as stealing a small amount of office supplies for personal use.
Moral, ethical, and legal guides have evolved over time in efforts to ameliorate the most obvious and egregious forms of corruption. These guides are supported by perspectives of philosophy such as utilitarianism, deontology, virtue ethics, intuition, and ethical relativism. Each of these perspectives represent an important and qualitatively different lens in which to assess ethical behavior. While some philosophical viewpoints emphasize the categorical nature of right or wrong action, others emphasize context, net benefits of actions, or individual virtue reflected in individual actions, and perspectives that are systematically reviewed. Philosophical influences are viewed as highly relevant to an understanding of modern-day corruption. Business ethics is also influenced by various competitive and complementary models that compete for influence. While the market model of business ethics has long endured, alternative perspectives of business ethics such as the stakeholder model of corporate social responsibility and the sustainability model have recently arisen in popular discourse and are explored. These alternative models seek to replace or supplement the market model and advocate for a greater recognition of environmental responsibilities as well as responsibilities to a broad array of stakeholders in society such as workers and consumers. Alternative models move beyond the narrow perspective of profit maximization and consider ethical implications of business decisions in terms of their effects on others in society as well as future generations. Various philosophical perspectives of ethics are examined, as well as how these perspectives can be applied to attain a more complete understanding of the concept of corruption.
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Corruption and Business Ethics
Steven G. Koven and Abby Perez
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Cultural Entrepreneurship: Four Domains of Inquiry
Jean-François Soublière and Christi Lockwood
Cultural entrepreneurship research investigates the many cultural means and processes by which innovative courses of action come to fruition. Although commercial and technological concerns clearly matter, this area of research draws much-needed attention to the meaning-making activities that underpin entrepreneurship, innovation, and change. For instance, entrepreneurs tell stories that convey how their endeavors came to be and what they could accomplish. Innovators challenge the boundaries of familiar market categories and bring forward products that customers may not yet be equipped to understand. Creators develop novel experiences that challenge established conventions in surprising ways. In all these situations, entrepreneurial actors must harness their cultural context to convey the value of their endeavors to targeted others, including both external audiences and other related actors. In turn, these targeted others also draw on their cultural context to ascribe value to endeavors and decide whether to confer their attention and support.
Expanding beyond more traditional views of entrepreneurship, which focus on the creation or exploitation of profitable opportunities, cultural entrepreneurship scholars recognize that entrepreneurial action is always embedded in its cultural context. This context provides a rich pool of cultural resources—that is, values, beliefs, practices, vocabularies, identities, logics, symbols, and practices—that entrepreneurial actors assemble, combine, or develop to bring innovative courses of action to fruition. These innovative courses of action are not limited to economic or technological pursuits but encompass a wider range of entrepreneurial possibilities, including the creation of new products and services as well as efforts to foster strategic change, advance social innovations, or tackle grand challenges, for instance.
Cultural entrepreneurship has developed into a vibrant area of research, examining a variety of outcomes at different levels of analysis. Four distinct domains of inquiry can be gleaned from this. Two of the domains speak to the interplay between entrepreneurial actors—be they individuals, organizations, or broader collectives—and their external audiences. The first domain, entrepreneurship and innovation, uncovers the cultural processes by which entrepreneurial actors win the backing of external audiences, such as potential investors, market analysts, or customers. The second domain, market mediation and activism, draws attention to the active influence that external audiences have on the innovative courses of action that actors pursue, and how they do so. The last two domains speak to the interplay between focal actors and other related actors. The third domain, market creation and strategy, focuses on how actors shape the collective boundaries of given market categories, and what other related actors do within these boundaries. Finally, the fourth domain, intrapreneurship and organizational change, examines how actors account for what other related actors do too, and how they develop their organizational capacity to innovate and create innovative courses of action. Despite their different emphases, these four domains are united by a common interest in understanding how entrepreneurial actors bring innovative courses of action to fruition and the broader meaning systems in which such efforts are embedded.
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De-Internationalization: The Other Side of Internationalization
Gabriel R. G. Benito
Companies rightly regard internationalization decisions as strategic; they are long-term, require and bind up resources, and have important implications for companies’ performance. But internationalization is inherently demanding and risky, changes are likely to happen, and there is no guarantee of a positive outcome. The notion of de-internationalization captures the other side of internationalization: actions that reduce a company’s engagement in or exposure to international or border-crossing activities. One important dimension of de-internationalization is its extent, which ranges from a total withdrawal from international operations to partial retractions, such as exiting from a particular market, and minor adjustments, such as downscaling activities. Another key dimension is the volition aspect of de-internationalization, which distinguishes between de-internationalization decisions that are principally taken by the companies themselves, and those that have been imposed upon the companies by other actors, such as host-country authorities. There are three main types of de-internationalization: reductions in trade volume, market withdrawals, and divestments. Extant research, while limited, has tended to take either a behavioral perspective or an economics perspective. The latter takes a choice (or decision) perspective on de-internationalization, while the former emphasizes the process aspects of such actions. De-internationalization does not need to be the end of the road for companies’ foreign involvement. There is mounting evidence that de-internationalization can be temporary, with companies re-entering foreign markets after a time-out period, often by implementing better suited approaches when retrying.
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Design Thinking in Business and Management: Research History, Themes, and Opportunities
Jarryd Daymond and Eric Knight
Design thinking is a human-centered, innovation-focused problem-solving approach that employs various tools and methods for creative purposes. It is a dynamic process and often prioritizes the needs and experiences of people while considering both technical and economic aspects of a solution. The prominence of design thinking in practice has seen its use move beyond product development teams to take a more central role in shaping how organizations approach problems, develop strategies, build capabilities, and drive cultural change. It is common for organizations to employ executives with a specific focus on design, and traditionally “nondesign” organizations increasingly build, buy, or borrow design capabilities. The utility of design thinking stretches beyond organizational outcomes, with educators and employers recognizing that understanding and proficiency in design thinking is a valuable and transferrable skill. A rich scholarly tradition in design sciences and engineering underpins design thinking. These traditions provide the foundational understandings of problem definition and need-finding, information gathering and analysis, and creative expression and ideation, from which design thinking gained prominence. Although not often acknowledged in contemporary scholarship, design thinking research builds on these traditions and offers unique perspectives on the practice of design thinking and its theoretical underpinnings: The cognitive perspective focuses on how unique ways of thinking shape the practice of design thinking; the instrumental perspective attends to how design thinking is done, including the methods or tools used in design thinking; and the organizational-level perspective concerns the implementation of design thinking in organizations and its influence on organizational culture and capabilities. While the various research traditions preceding design thinking are receiving greater attention in contemporary research, rich insights from these established fields offer deep theoretical knowledge to develop several promising research areas. These avenues for future research include how design thinking can inform the redevelopment of services and customer experiences, tackle societal challenges, and build capabilities to benefit communities and society more generally.
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Digital Platform Innovation and Opportunities
Tammy L. Madsen
Multi-sided digital platform (MSDP) business models have enabled the reorganization of industries and are fundamentally changing the way firms innovate and grow. Fueled by advances in digital technology, digital platform firms such as Apple, Alibaba, Amazon, Google, Tencent, and ByteDance have gained prominence around the globe. MSDPs create value by facilitating interconnections of products, services, or systems generated by a variety of external actors, thereby enabling them to interact in ways that otherwise might be elusive. Theoretical and empirical work on digital platforms also has accelerated in recent decades. Scholars have explored a variety of topics such as platform competition, network effects and their implications, platforms and corporate scope (i.e., vertical integration into complementary offerings), platform types, complementor heterogeneity, and platform governance and ecosystem orchestration. Much of the empirical literature directs attention to the economics of platforms at the exclusion of analyzing how differences in strategic objectives and choices contribute to unique MSDP positions within an ecosystem.
Heterogeneity in strategic objectives contributes to variation in platform scope, governance practices, and potential externalities and thus influences the strategic and organizational benefits accruing to participating actors and the platform itself. It follows that analyzing platforms from a strategic view can help to identify innovations in MSDPs and their governance.
In one novel MSDP model, the co-innovation platform, the primary strategic objective is accelerating innovation and ecosystem growth by enabling collaboration among a wide array of diverse external actors. Aligned with a focus on the quality of collaborations, one of a co-innovation MSDP’s distinguishing value creation features is its hands-on approach to the formation and execution of co-innovation partnerships. This hands-on approach relies on different governance choices and yields a different mix of strategic and organizational benefits for partners and the platform relative to the hands-off approach employed by most MSDPs. Many opportunities exist for advancing theory and empirical work on the implications of platform heterogeneity.
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Dynamic Managerial Capabilities
Véronique Ambrosini and Gulsun Altintas
Dynamic managerial capabilities are a form of dynamic capabilities. They are concerned with the role of managers in refreshing and transforming the resource base of the firm so that it maintains and develops its competitive advantage and performance. To do so, managers must develop entrepreneurial activities. These activities consist of sensing and seizing opportunities and transforming the resource base. While most studies focus on the role of top managers and CEOs, entrepreneurial activities can occur throughout the organization. Mid- and lower-level managers can also sense opportunities emanating from the market. Managerial human capital, managerial social capital, and managerial cognition are the three main antecedents to dynamic managerial capabilities.
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Sustainability Innovation: Drivers, Capabilities, Strategies, and Performance
Devashish Pujari and Anna Sadovnikova
Though concern for environmental issues dates back to the 1960s, research and practice in the field of sustainability innovation gained significant attention from academia, practitioners, and NGOs in the early 1990s, and has evolved rapidly to become mainstream. Organizations are changing their business practices so as to become more sustainable, in response to pressure from internal and external stakeholders. Sustainability innovation broadly relates to the creation of products, processes, technologies, capabilities, or even whole business models that require fewer resources to produce and consume, and also support the environment and communities, while simultaneously providing value to consumers and being financially rewarding for businesses. Sustainability innovation is a way of thinking about how to sustain a firm’s growth while sustainably managing depleting natural resources like raw materials, water, and energy, as well as preventing pollution and unethical business practices wherever the firm operates.
Sustainability innovation represents a very diverse and dynamic area of scholarship contributing to a wide range of disciplines, including but not limited to general management, strategy, marketing, supply chain and operations management, accounting, and financial disciplines. As addressing sustainability is a complex undertaking, sustainability innovation strategies can be varied in nature and scope depending upon the firm’s capabilities. They may range from incremental green product introductions to radical innovations leading to changes in the way business is conducted while balancing all three pillars of sustainability—economic, environmental, and social outcomes. Sustainability innovation strategies often require deep structural transformations in organizations, supply chains, industry networks, and communities. Such transformations can be hard to implement and are sometimes resisted by those affected. Importantly, as sustainability concerns continue to increase globally, innovation provides a significant approach to managing the human, social, and economic dimensions of this profound society-wide transformation. Therefore, a thorough assessment of the current state of thinking in sustainability innovation research is a necessary starting point from which to improve society’s ability to achieve triple bottom line for current and future generations.
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The Evolution of the Entrepreneurial Orientation (EO) Construct: Dominant Research Questions and Conversational Shifts
Patrick Kreiser, Jeffrey G. Covin, Matthew J. Fox, Ignacio Godinez Puebla, and Shawn Enriques
Entrepreneurial orientation (EO) has become a central construct in the management and entrepreneurship literature over the past several decades. Specific questions and associated themes have dominated EO research over the years, with the research itself exhibiting a number of conversational shifts prompted by the publication of seminal articles. The period 1973–1982 is the EO Construct Pre-emergence Era. During this time, scholars began to allude to the possibility that firms themselves—rather than only individuals—could act in entrepreneurial manners. What constitutes an entrepreneurial firm, wherein entrepreneurship might be seen as a central attribute of the firm, was yet to be clearly specified.
The period 1983–1995 is the EO Construct Introduction and Legitimization Era. This era was prompted by the publication of an article by Danny Miller in which he introduced EO as a unidimensional construct composed of three overlapping dimensions: risk taking, innovativeness, and proactiveness. Dominant research questions of the era include: How is entrepreneurship manifested as an attribute of firms, independent of firm size and age? and What do entrepreneurial firms have in common?
The period 1996–2010 was the EO Construct Critical Examination and Debate Era. This era was launched by an article by Tom Lumpkin and Greg Dess in which they observed that two additional dimensions to EO might be considered—namely, competitive aggressiveness and autonomy—and that EO might, alternatively, be represented by a firm’s profile across these five dimensions. Common research questions of the era include: How can entrepreneurial firms be different? Does EO look the same in different institutional and environmental contexts? Are there attributes that must be present in order to label a firm “entrepreneurial”? Is there a most appropriate way to conceive of EO’s dimensionality? and Does EO predict firm performance?
The period 2011–2022 is the EO Construct Expansion and Specialization Era. This era began with the publication of an article by Jeff Covin and Tom Lumpkin in which they recognized differences between proposed conceptualizations of EO and suggested that future research explore both dominant EO conceptualizations, that is, the unidimensional and the multidimensional conceptualization of the construct. Research questions of the era include: Is it appropriate to consider different constructs using the label EO? What are the various forms and indicators of EO? How can EO be measured using nontraditional methods? Should the EO construct be extended to other levels of analysis? What are the antecedents to EO? and What are some of the non-performance-based outcomes of EO?
As scholars addressed the prominent research questions of the day, intellectual building blocks have been established and promising domains of future research have been recognized. In general, the observed knowledge expansion that began with an emphasis on EO’s meaning and measurement now includes, for example, greater emphasis on EO’s nomological network, forms and manifestations, antecedents and outcomes, and applicable contexts and theories.
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Executive Severance Agreements: Making Sense of an Emerging, Yet Fragmented, Research Field
Felice B. Klein, Kevin McSweeney, Cynthia E. Devers, Gerry McNamara, and Spenser Blosser
Scholars have devoted significant attention to understanding the determinants and consequences of executive compensation. Yet, one form of compensation, executive severance agreements, has flown under the radar. Severance agreements specify the expected payments and benefits promised executives, upon voluntary or involuntary termination. Although these agreements are popular among executives, critics continually question their worth. Yet severance agreements potentially offer three important (but less readily recognized) strategic benefits. First, severance agreements are viewed as a means of mitigating the potential risks associated with job changes; thus, they can serve as a recruitment tool to attract top executive talent. Second, because severance agreements guarantee executives previously specified compensation in the event of termination, they can help limit the downside risk naturally risk-averse executives face, facilitating executive-shareholder interest alignment. Third, severance agreements can aid in firm exit, as executives and directors are likely to be more open to termination, in the presence of adequate protection against the downside.
Severance agreements can contain provisions for ten possible termination events. Three events refer to change in control (CIC), which occurs under a change in ownership. These are (1) CIC without termination, (2) CIC with termination without cause, and (3) CIC with termination for cause. Cause is generally defined by events such as felony, fraud, embezzlement, neglect of duties, or violation of noncompete provisions. Additional events include (4) voluntary retirement, (5) resignation without good reason, (6) voluntary termination for good reason, (7) involuntary termination without cause, (8) involuntary termination with cause, (9) death, and (10) disability. Voluntary retirement and resignation without good reason occurs when CEOs either retire or leave under their own volition, and voluntary termination with good reason occurs in response to changes in employment terms (e.g., relocation of headquarters). Involuntary termination refers to termination due to any reason not listed above and is often triggered by unsatisfactory performance.
Although some prior work has addressed the antecedents, consequences, and moderators of severance, the findings from this literature remain unclear, as many of the results are mixed. Future severance scholars have the opportunity to further clarify these relationships by addressing how severance agreements can help firms attract, align the interests of, and facilitate the exit of executives.
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Experiments in Organization and Management Research
Alex Bitektine, Jeff Lucas, Oliver Schilke, and Brad Aeon
Experiments randomly assign actors (e.g., people, groups, and organizations) to different conditions and assess the effects on a dependent variable. Random assignment allows for the control of extraneous factors and the isolation of causal effects, making experiments especially valuable for testing theorized processes. Although experiments have long remained underused in organizational theory and management research, the popularity of experimental methods has seen rapid growth in the 21st century.
Gatekeepers sometimes criticize experiments for lacking generalizability, citing their artificial settings or non-representative samples. To address this criticism, a distinction is drawn between an applied research logic and a fundamental research logic. In an applied research logic, experimentalists design a study with the goal of generalizing findings to specific settings or populations. In a fundamental research logic, by contrast, experimentalists seek to design studies relevant to a theory or a fundamental mechanism rather than to specific contexts. Accordingly, the issue of generalizability does not so much boil down to whether an experiment is generalizable, but rather whether the research design matches the research logic of the study. If the goal is to test theory (i.e., a fundamental research logic), then asking the question of whether the experiment generalizes to certain settings and populations is largely irrelevant.
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External Corporate Governance Mechanisms: Linking Forces to Behaviors
G. Tyge Payne and Curt Moore
Corporate governance research has a long and varied history, having evolved from a broad number of scholarly disciplines, including sociology, law, finance, and management. Across these various disciplines, it is maintained that governance is essential to corporate success, as it provides strategic and ethical guidance to the company. While research has largely focused on internal mechanisms through which governance is enacted (such as ownership arrangements, board structures, managerial rewards and incentives, etc.), external forces and mechanisms are increasingly important to modern businesses. External corporate governance mechanisms emanate from outside the organization and support forces that promote governance structures, processes, and practices by top executives and board directors. Institutions, industries, markets, networks, and strong individual external stakeholders all work to influence corporate governance decisions and behaviors both directly and indirectly. The external forces induce mechanisms that influence desirable behaviors or intervene when internal mechanisms are compromised or ineffective.
Recent literature on external governance mechanisms can help scholars and practitioners develop a better understanding of this important area of inquiry, and future research should consider three broad suggestions to move the field forward: differentiating between forces and mechanisms; recognizing unique stakeholders, boundaries, and levels of analysis; and improving empirical designs to better recognize and understand what factors matter in instituting governance adjustments and behavior changes.
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External Enablers of Entrepreneurship
Per Davidsson, Jan Recker, and Frederik von Briel
“External enabler” (EE) denotes nontrivial changes to the business environment—such as new technology, regulatory change, demographic and sociocultural trends, macroeconomic swings, and changes to the natural environment—that enable entrepreneurial pursuits. The EE framework was developed to increase knowledge accumulation in entrepreneurship and strategy research regarding the influence of environmental factors on entrepreneurial endeavors. The framework provides detailed structure and carefully defined terminology to describe, analyze, and explain the influence of changes in the business environment on entrepreneurial pursuits. EE characteristics specify the environmental changes’ range of impact in terms of spatial, sectoral, sociocultural, and temporal scope as well as the degree of suddenness and predictability of their onset. EE mechanisms specify the types of benefits individual ventures may derive from EEs. Among others, these include cost saving, resource provision, making possible new or improved products/services, and demand expansion. EE roles situate these (anticipated) mechanisms in entrepreneurial processes as triggering and/or shaping and/or outcome-enhancing. EE’s influence is conceived of as mediated by entrepreneurial agency that—in addition to agent characteristics—is contingent on the opacity (difficulty to identify) and agency-intensity (difficulty to exploit) of EE mechanisms, with the ensuing enablement being variously fortuitous or resulting from strategic deliberation.
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Familization of Lone-Founder Firms: Highlights from Asian Firms
Yijie Min, Yanlong Zhang, and Sun Hyun Park
Family firms can either be “born” or “made.” Although previous studies suggest that most of the family firms in the US context are “born,” family firms can be “made” by the founder’s decision to invite family members to the management. We conceptualize this process of family firm emergence as familization, during which lone-founders’ family influence increases as more family members are appointed to director and/or executive positions. Transition from lone-founder-control to family-control is often accompanied by significant changes in governance structure, strategic decisions, and firm performance. This work documents the pervasiveness and heterogeneity of the familization process and proposes an analytical framework covering four research areas associated with the phenomenon: the antecedents that motivate founders to choose the familization path, the familization process involving internal and external firm constituents, the consequences of familization decision, and the potential moderators of the familization impact. To better understand these theoretical perspectives, an explorative empirical investigation is conducted based on a sample of Chinese-listed firms that experienced familization. Familization cases in other Asian emerging economies were also discussed in comparison with the family firms in Western economies.
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For-Purpose Enterprises and Hybrid Organizational Forms: Implications for Governance and Strategy
Marco S. Giarratana and Martina Pasquini
A company’s social purpose has become a key factor that should be considered in organizational design and strategic decision-making. For-purpose enterprises are for-profit, financially self-sustained organizations that embed a social aim as one of their main objectives. Companies that simultaneously must envisage a double purpose, namely, social and competitive, face an even greater complexity, that is, a likely risk of internal logics’ tensions and structural drifts.
Scholars have proposed different theoretical and operative frameworks; on the one hand, they describe ad hoc business models to foster synergies between the social impact and economic and competitive-oriented actions. On the other hand, they also try to focus on an organization’s governance, suggesting incentive schemes and organizational designs that could smooth trade-offs and tensions, which could jeopardize a company’s viability. Following scholars have differentiated two clusters of studies: (a) instrumental–strategic–economic stream and (b) injunctive–social–behavioral.
The first approach perceives as critical the balance between social-oriented aims and profit with a viable business model. Under this perspective, the concept of synergies between the two aims is critical. Its mainstream framework is the stakeholder theory approach while recent approaches, rooted especially in marketing and strategic human capital studies, bring to the central stage how corporate social responsible actions develop social identity processes with focal stakeholders, which are responsible for reciprocity behaviors. These different perspectives, although complementary, could imply significant differences for the organization design, product strategy, and the role and power of the chief sustainability officer as well as allocation of resources and capabilities.
The second group of studies—injunctive–social–behavioral—is focused on understanding how to maintain active social aims under economic and competitive constrains. These works are particularly focused in investigating the intrinsic motivations of doing good and the type of tensions that could arise in organizations with a social mission. The works analyze the potential drifts, risks, and solutions that could mitigate tension and trade-offs. In this stream, the first line of work is related to social entrepreneurship, especially in developing countries, while the second is more focused on human-resource incentive schemes and organizational designs that preserve a company’s social goals under economic constrains.
Article
From Absorptive Capacity in International Business to Strategic Flexibility of Multinational Corporations
Carine Peeters
Both the absorptive capacity (AC) and international business (IB) literatures are interested in knowledge processes and learning in organizations. Although originating from different streams of research, AC and IB were thus meant to meet and reinforce each other.
Fundamentally, the role of AC in IB is to condition the performance outcome of firms’ internationalization efforts. Firms benefit from their IB activities conditional on being able to absorb new knowledge and learn. In other words, multinational corporations (MNCs) need to have the necessary AC to overcome their liabilities of foreignness and outsidership. Short of AC, the costs and challenges of entering foreign markets and operating across countries are likely to outweigh potential performance gains. Moreover, AC plays a role in the technological upgrade and economic development of nations, as it helps firms in emerging economies to benefit from spillovers of foreign direct investments by MNCs from more economically advanced economies. And national governments can play an important role to facilitate this effect by developing appropriate economic and innovation policies that support knowledge creation and learning.
Firms can also proactively develop AC. For instance, MNCs can nurture a broad knowledge base that can be leveraged in different contexts and opt for a decentralized structure with mechanisms that help subsidiaries access the knowledge base of the parent organization. They can also practice specific routines to identify and access relevant knowledge from their external environment, transfer that knowledge in their organization, and assimilate it in their own knowledge creation processes. Moreover, MNCs can adopt human resources management practices that help raise the capacity and motivation of their employees to acquire and exploit new knowledge.
Ultimately, the most important contribution of AC in IB might be to help MNCs develop the strategic flexibility that enables them to thrive in dynamic environments. High-AC MNCs may indeed be in a better position than other firms to (a) build diverse options to prepare for uncertain evolutions in the market, (b) access flexible resources to allocate to new courses of actions, and (c) redeploy resources across options over time. Unpacking the exact mechanisms as well as boundary conditions for the role of AC in building strategic flexibility offers ample opportunities for future research on a highly relevant topic for MNCs.
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From Instrumental Stakeholder Theory to Stakeholder Capitalism
André O. Laplume
Instrumental stakeholder theory posits that managing for stakeholders using justice-based approaches produces competitive advantage for firms. However, achieving the ideals of stakeholder management may be challenging, and for some firms, unrewarding. Yet, when firms fail to manage for stakeholders, they contribute to stakeholder marginalization, a condition in which stakeholders feel unfairly treated and begin to scan for alternative arrangements with other firms. Stakeholder marginalization creates opportunities for competitors, but especially for new entrants, to pursue stakeholder innovation. Stakeholder innovation involves the creation of a business model that caters to marginalized stakeholder groups in a new way, by improving perceived conditions for those stakeholders (e.g., customers, employees, suppliers, or communities). Stakeholder innovations can threaten incumbencies as their ecosystems bloom and technologies improve, and they can start to draw a greater variety of resources away from incumbent networks. Because it can help to explain and predict both incumbent and new entrant behaviors, stakeholder capitalism is a useful frame for theorizing in the disciplines of management and entrepreneurship.
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Frugal Innovation: Context, Theory, and Practice
Lukas Neumann and Oliver Gassmann
Frugal innovation as a concept was initially sparked by a groundbreaking article published in The Economist in 2010. In it, the conception and application of a handheld electrocardiogram (ECG), the Mac 400, specifically designed to serve the rural population in India, was introduced. Every aspect of this product and its ecosystem was designed to serve the customer at less than 25% of the original cost. Since this publication, a lively discussion around this concept has developed in academia as well as in the industry. As a term, “frugal innovation” refers to solutions (products or services), methods, or designs that focus on serving new customers in resource-constrained contexts at the bottom of the pyramid (BoP) and/or emerging and developing markets. This understanding has broadened somewhat as such innovations gain increasing attention and relevance throughout all customer segments across the globe. What remains consistent is that frugal innovation is based on a new type of value architecture that is specifically developed to serve customers’ needs in the respective context by utilizing as few resources as possible. This approach leads to many cases where frugal innovations are novel and disruptive to their market environment. Research shows that for firms, especially traditional “Western” ones, these innovations require significant changes in firms’ activities along the entire value chain.
Article
Global Strategy and Multinational Corporation Capabilities
Donald R. Lessard and D. Eleanor Westney
Strategy in a global setting involves competition in industries that extend across national boundaries and among firms with different national home bases that may tap into strategic resources in more than one location. The resources that the firm accesses from its home country provide it with international competitive advantage only if they are relevant in other markets, if the value they create is appropriable, and if they are transferable to those markets (RAT), These resources include tangible assets and factors of production, but, importantly, also the capabilities the firm develops. Similarly, the resources that it taps from other contexts provide it with further competitive advantage only if these resources are complementary to the firm’s existing resources, appropriable, and transferable to the locations where it can exploit them (CAT). These two sets of factors—RAT and CAT—provide a framework for international strategic decisions that emphasizes developing, acquiring, and transferring capabilities.
Article
Governance Through Ownership and Sustainable Corporate Governance
Marc Goergen
Sustainable corporate governance has been defined as corporate governance that ensures corporations are run in such a way that they are sustainable over the long term. Note that for corporations to be sustainable in the long run, they need to ensure the preservation, as well as possibly the enhancement, of their ecosystem. This not only includes establishing and maintaining good relations with their shareholders and stakeholders but also preserving their environment. Here, the term environment should be understood as taking on a broader meaning. Indeed, corporations preserving their environment should not be reduced to mere environmentalism but they should also operate in harmony with the broader economic and social system. Put differently, sustainable corporate governance should also ensure that corporations are run in such a way to avoid future crises, such as the Great Recession. This would require a move away from business models that focus on short-term shareholder value while endangering the survival of the corporation over the long term.
Whereas much of the existing literature suggests that corporations should merely maximize shareholder value and that a stakeholder approach will result in vague and often contradictory objectives for the management, long-term shareholder value creation is nevertheless compatible with the corporation looking after the interests of its immediate, as well as possibly more remote, stakeholders. Ultimately, sustainable business practices will not only benefit the corporation’s employees, customers, and the broader society but also its owners.
The key question that arises is whether there is a link between various types of owners and sustainable corporate governance. A number of related questions emerge. What different types of owners are there and how influential are they in putting their stamp on how their investee firms are managed? Attempting to answer these questions requires revisiting the premise of the principal-agent theory that owners are typically disinterested from engaging with their investee firms. The main critique of this premise is that, even within the Anglo-Saxon corporate governance system, firms tend to have block holders, and there exist activist shareholders. Further, since the 1980s there has been an emergence—as well as an increase in the prevalence—of activist shareholders. Are some types of owners or shareholders more likely to enhance and maintain sustainability than others?
A review of extant evidence on the effects of various types of shareholders on long-term financial and non-financial goals suggests the following. While some types of owners are found to promote and support sustainable corporate governance, the effect of other types is less clear or even negative. This difference in effects could be due to three reasons. First, context, including the national setting, is important. Second, some types of investors, such as sovereign wealth funds, show great diversity in their characteristics and objectives. Finally, the goalposts are shifting with an increasing number of investors embracing corporate social responsibility and environmental, social, and governance issues. Importantly, given the increasingly visible consequences of global warming and societal unrest caused by a worsening of wealth inequality, the transition to a more sustainable society should not merely be the responsibility of corporate owners. Others, including corporate executives and business schools, are key to achieving this transition.
Article
The Impact of Corporate Governance on Firms’ International Strategies
Gabriele Galli and Antonio Majocchi
The structure and characteristics of firms’ corporate governance influence the internationalization choices of companies, impacting different and heterogeneous features. The international business literature focuses on two fundamental characteristics of corporate governance: ownership and board of directors. The features of different shareholders and the level of ownership shares result in different global strategies and objectives for multinational companies. Considering the executive level, the characteristics of the different directors involved in the governance may influence investment choices and relations with different stakeholders in different countries. Corporate governance is therefore a fundamental dimension to be taken into account in international business research, with special reference to two particular types of companies: family- and state-owned firms. Ownership and the board of directors of these companies present specific corporate governance features and dynamics that expand the classical theory of internationalization. The focus on these two types of firms helps to understand and describe the current global context and the set of decisions and different policies that influence the different choices related to firms’ internationalization strategies.
