Business groups are an organizational model in which collections of legally independent firms bounded together with formal and informal ties use collaborative arrangements to enhance their collective welfare. Among the different varieties of business groups, diversified business groups that exhibit unrelated product diversification under central control, and often containing chains of publicly listed firms, are the most-studied type in the management literature. The reason is that they challenge two traditionally held assumptions. First, broad and especially unrelated diversification have a negative impact on performance, and thus business groups should focus on a narrow scope of related businesses. Second, such diversification is only sustainable in emerging economies in which market and institutional underdevelopment are more common and where business groups can provide a solution to such imperfections. However, a historical perspective indicates that diversified business groups are a long-lived organizational model and are present in emerging and advanced economies, illustrating how business groups adapt to different market and institutional settings. This evolutionary approach also highlights the importance of going beyond diversification when studying business groups and redirecting studies toward the evolution of the group structure, their internal administrative mechanisms, and other strategic actions beyond diversification such as internationalization.
Article
Business Groups as an Organizational Model
Asli M. Colpan and Alvaro Cuervo-Cazurra
Article
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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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.
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Leader–Member Exchange: A Commentary on Long-Term Staying Power and Future Research Directions
Terri A. Scandura and Kim Gower
In 1975, the phrase “vertical dyad linkage” (VDL) was introduced to begin examining the quality of the roles between the leaders and direct reports, and it was soon discovered that the linkages ranged between high quality and low quality. That linkage progressed into “leader–member exchange” (LMX) in 1982. In essence, research reached a point where it found a continuum of the quality of the relationship between the two members. High-quality relationships put the employees into the leader’s “ingroup,” while low-quality relationships left employees on the outside looking in. It followed that those in the ingroup would have some say in the decision-making, would have easier access to the leader, and would garner more respect and “liking.”
Researchers have used the LMX-7 to examine how the quality of superior/subordinate relationships affects individual, interpersonal, and organization factors like job satisfaction, communication motives, and organizational identification (as did the original LMX scale). Although the LMX-7 remains one of the most prominent psychometric measures of LMX, researchers still debate whether the construct should be considered unidimensional or multidimensional.
While the intricacies of LMX-7 versus LMX have been argued, and with teams becoming more of an organizational resource, team–member exchange (TMX) was found to be a supported extension of LMX. While at this point TMX is lacking in the volume and pace of research, due to the difficulties of measurement among a group of people who might have a variety of leaders during the process, the existing research has produced some results that are extremely relevant, now and in the future. Examples of what has been found when the team exchange relationship is high include reduced stress, increased psychological empowerment, increased creativity, increased team performance, increased individual performance, increased organizational citizenship behaviors, increased organizational commitment, and increased job satisfaction, just to name a few.
In sum, the investigation into LMX provides a history of the field of LMX and its many iterations and the role it plays in leadership studies. This research includes LMX antecedents, consequences, moderators, mediators, and outcomes, as any field in which over 4,500 papers have been published needs an effective way to highlight the progress and pathways.
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The Liability of Foreignness
Jesper Edman
The liability of foreignness—or LOF—is the additional cost that multinational enterprise (MNE) subsidiaries face relative to local competitors in foreign markets. The LOF arises in the form of unfamiliarity costs, relational costs, and discrimination costs in host country markets. Because these costs are unique to foreign firms, the LOF constitutes a difference in both kind and degree that distinguishes the MNE from other organizations. LOF has been addressed from a wide array of theoretical perspectives, including internalization theory, institutional theory, the resource-based view, network theory, cross cultural management, and organizational identity. The antecedents of LOF can be found in inter-country distance and dissimilarity, country-specific institutional arrangements, as well as firm-level experiences. Scholars have traced the implications of LOF to many of the critical attributes of the MNE, including internationalization patterns and country selection, entry mode choice, subsidiary performance and survival, localization strategies, and the development of firm-specific advantages. As such, the LOF constitutes one of the foundational assumptions of the international business domain..
Several research gaps and controversies remain in the LOF literature. LOF is often used as a catch-all term for the MNE’s disadvantages and costs in general, rather than the extraordinary costs faced by foreign-owned subsidiaries. Although numerous works invoke LOFs in their overall framing and theoretical argumentation, few studies explain the mechanisms behind the extraordinary costs facing subsidiaries. Empirical measurement of LOFs is rare, with many works using inter-country distance and institutional voids as proxies for LOF. Conceptually, LOF is often confounded with proximate but nonetheless distinct constructs, including the liability of newness, the liability of origin, and the liability of emergingness. A critical issue for extant and future work is to clarify the scope, boundary conditions, and operationalizations of LOF.
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Qualitative Comparative Analysis in Business and Management Research
Johannes Meuer and Peer C. Fiss
During the last decade, qualitative comparative analysis (QCA) has become an increasingly popular research approach in the management and business literature. As an approach, QCA consists of both a set of analytical techniques and a conceptual perspective, and the origins of QCA as an analytical technique lie outside the management and business literature. In the 1980s, Charles Ragin, a sociologist and political scientist, developed a systematic, comparative methodology as an alternative to qualitative, case-oriented approaches and to quantitative, variable-oriented approaches. Whereas the analytical technique of QCA was developed outside the management literature, the conceptual perspective underlying QCA has a long history in the management literature, in particular in the form of contingency and configurational theory that have played an important role in management theories since the late 1960s.
Until the 2000s, management researchers only sporadically used QCA as an analytical technique. Between 2007 and 2008, a series of seminal articles in leading management journals laid the conceptual, methodological, and empirical foundations for QCA as a promising research approach in business and management. These articles led to a “first” wave of QCA research in management. During the first wave—occurring between approximately 2008 and 2014—researchers successfully published QCA-based studies in leading management journals and triggered important methodological debates, ultimately leading to a revival of the configurational perspective in the management literature.
Following the first wave, a “second” wave—between 2014 and 2018—saw a rapid increase in QCA publications across several subfields in management research, the development of methodological applications of QCA, and an expansion of scholarly debates around the nature, opportunities, and future of QCA as a research approach. The second wave of QCA research in business and management concluded with researchers’ taking stock of the plethora of empirical studies using QCA for identifying best practice guidelines and advocating for the rise of a “neo-configurational” perspective, a perspective drawing on set-theoretic logic, causal complexity, and counterfactual analysis.
Nowadays, QCA is an established approach in some research areas (e.g., organization theory, strategic management) and is diffusing into several adjacent areas (e.g., entrepreneurship, marketing, and accounting), a situation that promises new opportunities for advancing the analytical technique of QCA as well as configurational thinking and theorizing in the business and management literature. To advance the analytical foundations of QCA, researchers may, for example, advance robustness tests for QCA or focus on issues of endogeneity and omitted variables in QCA. To advance the conceptual foundations of QCA, researchers may, for example, clarify the links between configurational theory and related theoretical perspectives, such as systems theory or complexity theory, or develop theories on the temporal dynamics of configurations and configurational change. Ultimately, after a decade of growing use and interest in QCA and given the unique strengths of this approach for addressing questions relevant to management research, QCA will continue to influence research in business and management.
