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Article

Asli M. Colpan and Alvaro Cuervo-Cazurra

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

Immigrant entrepreneurs are different, and they are everywhere. They can be unambiguously distinguished from entrepreneurs without a migration background. They operate under distinct conditions and respond to unique opportunities and challenges. They have specific motivational, economic, and social resources at their disposal, for example, ethnic solidarity and international networks. Their knowledge of languages and cultures, as well as the high pressure to integrate themselves into a new society, can be factors that stimulate entrepreneurship and innovation. It is hard to find countries with no immigrant entrepreneurs. In many places like the United States, Canada, or South East Asia, they play a substantial economic role. The ubiquity, dynamism, and significance of immigrant entrepreneurs has led to a spate of research projects since the 1990s, especially by economic sociologists and ethnologists, but also by management scholars and historians. On the basis of their work, the article distinguishes six different ideal types of immigrant entrepreneurs, even though these categories are neither clear-cut nor mutually exclusive. Necessity entrepreneurs react to blocked careers in other areas and often set up small, precarious businesses, out of which in exceptional cases more viable companies emerge. Diaspora merchants are part of commercial networks of people with the same ethnic background who live in foreign countries and trade with each other. Transnational entrepreneurs are not necessarily part of networks and do not always engage in mercantile activities. This category also encompasses individual actors and industrial activities. They are characterized by the ability to mobilize resources in several countries and facilitate activities between different countries. Middleman minorities stand between the majority society and third parties, often minorities. They fill niches that are left by indigenous businesses, which consider these areas as unattractive. Entrepreneurs in ethnic enclave economies live and work with their co-ethnics in neighborhoods defined by their group. Their main function is to cater to their own communities, often with ethnic products such as food or publications from their countries of origin. Refugee entrepreneurs leave their home country involuntarily, often driven out by violence and expropriation. In most cases their emigration is unprepared. Starting conditions in the country of destination are unfavorable. Conversely, the pressure for social integration is pronounced and can act as an impulse for self-employment. There are, however, cases in which refugees are consciously patronized or even summoned by the governments of the receiving countries, turning them into a highly privileged group.

Article

Theoretical developments in economics, alongside evidence that state-owned enterprises were often inefficient and unresponsive to consumers, led to a substantial program of privatizations from the 1980s. Privatization can take a number of forms, from the outright sale of state-owned assets to private investors to forms of public-private partnership, such as contracting out and franchising of public services. Privatization was promoted in both developed and developing countries, and large-scale privatizations occurred in Europe, Latin America, China, and the former communist economies of Central and Eastern Europe, in particular. Privatization revenues rose substantially from the late 1980s internationally. Taking the years 1988 to 2016, revenues from sales are estimated to have been around $3,634bn. In terms of main sectors of the economy affected, privatizations have particularly occurred in telecommunications, transport and logistics (mainly railways, airlines, and airports), other utility businesses (especially energy companies), and finance. Numerous empirical studies suggest that the performance of the privatized businesses and services has been mixed. While privatization has led to some impressive economic gains, in a number of countries, wider governance issues relating to political and legal systems have led to disappointing outcomes. Privatization has not always led to the removal of state interference in the management of businesses and services. Corruption and cronyism have blighted a number of privatizations. State sell-offs have led to income and wealth redistribution with gainers and losers from the process. Some privatizations have led to spectacular capital gains for investors. The impact of privatization on employment and working conditions remains unclear. There are a number of issues that deserve further investigation, namely the consequences of privatization for technological change and innovation, competition policy, and income and wealth distribution. A further subject for investigation is how the effective and efficient management of state-owned enterprises can be best achieved. The boundary between the private and public sectors remains fluid, with a number of enterprises returning to state ownership as political and economic conditions change.

Article

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.

Article

Increasing levels of cultural diversity requires a system of higher education structured to facilitate intercultural learning and develop individuals who are prepared to work in a culturally diverse environment, and can make decisions and manage people cognizant of cultural differences. Three main approaches to facilitate intercultural learning in the classroom have emerged: transfer of cultural knowledge, cultural experiences, and reflection on experience. Each of these approaches has a role to play at different stages of intercultural development. Three stages of intercultural development are proposed: (1) Monocultural stage, referring to a stage in which individuals are unaware of cultural differences; (2) Cross-cultural stage, in which individuals recognize and understand cultural differences but lack behavioral skills to deal with them; and (3) Intercultural stage, in which individuals can draw on a repertoire of behaviors to influence and shape intercultural interactions in ways that facilitate understanding and create opportunities for cooperation. Reflection on experience is proposed to be particularly useful to support the development of intercultural competence. Reflection is a thinking process focusing on examining a thought, event, or situation to make it more comprehensible and to learn from it. A four-step reflection process is proposed: (1) Describe experience; (2) Reflect on experience; (3) Learn from experience; and (4) Apply learning. Suggestions on using reflection in the classroom are proposed.

Article

Niels Viggo Haueter

The function of reinsurance is to absorb the risks of the direct insurance industry. This has two main purposes: (i) reinsurance capital allows direct insurers to write more business, and (ii) it protects them against balance sheet fluctuations caused by large and unexpected losses. The reinsurance market is served by a relatively small group of some 200 professional reinsurers. However, throughout history a variety of alternative forms appeared that could be used to distribute risks beyond one insurer. Co-insurance, for example, was one of the main forms of secondary risk spread in the marine community for centuries. It dominated the London market and was, to a large degree, responsible for the late and restricted development of reinsurance companies in Anglo-Saxon markets. The emergence of ever-larger risks in the 20th century forced the industry to focus increasingly on dealing with large losses and capping the maximum exposures of insurers. This made the business more financial, a trend which received a new boost with the advent of insurance-linked securities (ILSs) in the 1990s. Since then, the market for alternative risk transfer (ART) has grown, not least with the advent of new investors such as different investment funds that provide alternative risk capital. However, towards the 2020s, professional reinsurers started gaining ground again after a series of large natural catastrophes and with the continuous rise of Asian economies. Since the 2010s, growth opportunities for reinsurance are sought mostly in emerging markets and by making more risks insurable. Emerging market growth, however, is challenging and the gap between insured and insurable economic losses is still widening. Since the turn of the millennium, the industry has invested in finding solutions to close this so-called protection gap. Professional reinsurers are also seeking to develop new markets by making emerging risks such as cybercrime insurable. Yet such dynamic risks are fundamentally different from older static risks. Solutions are sought in applying methods that already made natural catastrophes insurable, modelling techniques, and ART products.

Article

Pierre-Yves Donzé

The Swiss watch industry has enjoyed uncontested domination of the global market for more than two decades. Despite high costs and high wages, Switzerland is the home of most of the largest companies in this industry. Scholars in business history, economics, management studies, and other social sciences focused on four major issues to explain such success. The first is product innovation, which has been viewed as one of the key determinants of competitiveness in the watch industry. Considerable attention has been focused on the development of electronic watches during the 1970s, as well as the emergence of new players in Japan and Hong Kong. Yet the rebirth of mechanical watches during the early 1990s as luxury accessories also can be characterized as a product innovation (in this case, linked to marketing strategy rather than pure technological innovation). Second, brand management has been a key instrument in changing the identity of Swiss watches, repositioning them as a luxury business. Various strategies have been adopted since the early 1990s to add value to brands by using culture as a marketing resource. Third, the evolution of the industry’s structure emphasizes a deep transformation during the 1980s, characterized by a shift from classical industrial districts to multinational enterprises. Concentration in Switzerland, as well as the relocation abroad of some production units through foreign direct investment (FDI) and independent suppliers, have enabled Swiss watch companies to control manufacturing costs and regain competitiveness against Japanese firms.Fourth, studying the institutional framework of the Swiss watch industry helps to explain why this activity was not fully relocated abroad, unlike most sectors in low-tech industries. The cartel that was in force from the 1920s to the early 1960s, and then the Swiss Made law of 1971, are two major institutions that shaped the watch industry.

Article

Niels Viggo Haueter

Reinsurance is perceived to have a stabilizing effect on the direct insurance industry and thereby on the economy overall. Yet, research into how exactly reinsurance impacts various areas is scarce. Traditionally, studying the impact of reinsurance used to be in the domain of actuaries; since the 1960s, they have tried to assess how different contract elements can provide what came to be called “optimal reinsurance.” In the 2010s, such research was intensified in developing countries with the aim to deploy reinsurance to support economic growth and security. Interest in reinsurance increased when the industry became more visible in the 1990s as the impact of natural catastrophes started being linked to a changing climate. Reinsurers emerged as spokespeople for climate-related issues, and the industry took a lead role in arguing in favor of implementing measures to reduce environmental deterioration. Reinsurers, it was argued, have a vested interest in managing the impact of natural catastrophes. This triggered discussions about the role of reinsurance overall and about how to assess its impact. In the wake of the financial crisis of 2007 and 2008, interest in reinsurance again surged, this time due to perceived systemic impacts.

Article

When it was developed in 1977, the Uppsala internationalization process model (Uppsala model for short) had three basic premises: process ontology, behavioral assumptions, and the presence of uncertainty. Multinational business enterprises (MBEs), among all actors, were in their infancy, and their future could not be known. Later on, the model was extended to cover the evolution of the MBEs, with factors such as internationalization, globalization, and the development of characteristics prompting changes and making them possible. Likewise, the knowledge concept was substituted for by capabilities, operational and dynamic, fitting well the other concepts of the model. The neoclassical view of the firm as an independent unit on the market is considered unrealistic. Instead, firms, MBEs, and small and medium enterprises are seen as embedded in networks with other cooperating and competing actors. The mechanisms of the 2017 version, though, are the same as in the original version. Hopefully, the latest version can be used as a tool within the scope of the “theory of the firm” research and as a platform for more studies on causal mechanisms, later to be applied in normative conclusions. It follows that static cross-sectional statistical methods are not fully satisfactory. Application of dynamic analytical methods requires investment in longitudinal data collection, which is costly, and has to be performed by institutions rather than individuals. A dream is that the Uppsala model can be used as a stepping stone in the construction of realistic macro-level studies of the economy.