Ajai S. Gaur

International Diversification, Business Group Affiliation and Firm Performance: Empirical Evidence from India

We investigate the impact of business group affiliation on the relationship between international diversification and firm performance for emerging economy firms. We develop the theoretical arguments based on an integration of the literature on international diversification with the institutional theory perspective. We argue for a U-shaped relationship between international diversification and firm performance, and suggest that a firms affiliation to a business group moderates the relationship between international diversification and firm performance. Based on a sample of Indian firms, we find that firm performance is positively related to the degree of internationalization, while business group affiliation reduces the positive effect of internationalization on firm performance.

Business Group Affiliation, Firm Governance and Firm Performance: Evidence from China and India

This study seeks to understand how business group affiliation, within firm governance and external governance environment affect firm performance in emerging economies. We examine two aspects of within firm governance – ownership concentration and board independence. Using archival data on the top 500 Indian and Chinese firms from multiple data sources for 2007, we found that group affiliated firms performed worse than unaffiliated firms, and the negative relationship was stronger in the case of Indian firms than for Chinese firms. We also found that ownership concentration had a positive effect on firm performance, while board independence had a negative effect on firm performance. Further, we found that group affiliation – firm performance relationship in a given country context was moderated by ownership concentration. This study utilizes an integration of agency theory with an institutional perspective, providing a more comprehensive framework to analyze the CG problems, particularly in the emerging economy firms. Empirically, our findings support, as well as contradict, some of the conventional wisdom, and suggest useful avenues for future research. This study shows that reforms in general and CG reforms in particular are effective in emerging economies, which is an encouraging sign for policy makers. However, our research also suggests that it may be time for India and China to stop the encouragement for the empire building through group formation in the corporate world. For practioners, our findings suggest that firms need to balance the need for oversight with the need for advice, while selecting independent directors.

Antecedents of Shareholder Activism in Target Firms: Evidence from a Multi‐Country Study

This study seeks to understand target firm specific antecedents of shareholder activism, and how the causal relationships vary depending on the governance environments in a multi-country setting, comprising three common law countries (USA, UK and Australia) and three civil law countries (Japan, Germany & South Korea). Our findings suggest that the antecedents of shareholder activism vary by the motivation of the activist. We identify that activists target firms with two motives, (a) to improve the financial performance, and (b) to improve the social performance of the firm. With respect to the target firm level antecedents, we find that firm size is unrelated to financial activism, but positively related to social activism; ownership concentration is negatively related to both financial and social activism; and prior profitability is negatively related to financial activism, but positively related to social activism. Further, these relationships in the case of financial activism are generally stronger in common law legal systems, whereas those in the case of social activism are generally stronger in environments with a greater level of income inequality.

Market orientation and manufacturing performance of Indian SMEs

Purpose – This paper sets out to investigate the link between market orientation and manufacturing performance for small and medium enterprises in India.Design/methodology/approach – The paper collected the data for this research through intensive surveys of the CEOs or top managers of small and medium‐sized enterprises in India. The paper utilized scales, well established in literature, and revalidated them for the Indian context. It also utilized confirmatory factor analysis for scale validation, and hierarchical regression analysis for testing the hypotheses.Findings – This study found a positive link between two sub‐dimensions of market orientation – customer orientation and inter‐functional coordination – and manufacturing performance. Competitor orientation, however, did not have a positive impact on manufacturing performance. Further, the paper found that firm resources and competitive intensity moderate the relationship between some of the sub‐dimensions of market orientation and firm performance....

Environmental and Firm Level Influences on Inter‐Organizational Trust and SME Performance

We investigate the effects of focal firm knowledge intensity and uncertainty on inter‐organizational trust and subsequent performance of small and medium size enterprises (SMEs). We integrate the trust literature with transaction cost literature as both of these offer partial explanations of the dynamics of inter‐organizational trust in the context of an SME. We propose that knowledge intensity of the focal firm will have a positive relationship while uncertainty will have a negative relationship with inter‐organizational trust in an exchange relationship. Further, we propose a positive relationship between trust and SME performance, which will be contingent on the level of external and internal uncertainty faced by the focal firm. Empirical evidence, based on the survey data of 565 German SMEs, mostly supports our arguments.

The Timing of International Expansion: Information, Rivalry and Imitation Among Japanese Firms, 1980-2002

Sociological-based information theory and economics-based competitive rivalry theory operate as the dominant theories of interorganizational mimetic behaviour. Recent work has sought to integrate the ideas in these theories, or determine which has greater explanatory power. In this study, we juxtapose the concepts in these two theories, to illustrate the complementary nature of information-based and rivalry-based theories of mimetic behaviour. Specifically, we consider how the predictions of information-based theories are moderated by the home competitive context of the industry of a firm making an international expansion. Using a 1980 to 2002 sample of 4949 manufacturing plant entries made into 71 foreign countries by 783 publicly-listed Japanese manufacturing firms, we find that the competitive context in the home industry influences the propensity of a focal firm to imitate the actions of rival firms. Our results support our contention that the two theoretical approaches are complementary, with the complementarities extending from the limitations of each approach.

Internationalization of Emerging Market Firms: A Case for Theoretical Extension

Research on internationalization of emerging market firms (EMFs) has received an increasing attention in the international management field. A central argument in a majority of these studies is that the internationalization of EMFs is different from that of firms from developed economies, and existing internationalization theories are insufficient to fully explain this new phenomenon. We conduct a critical review of important studies on the internationalization of EMFs to address two related questions. First, is the internationalization of EMFs really a new phenomenon, never been witnessed in the past? Second, does it warrant new theoretical developments? Our review suggests that there are important variations in the internationalization strategies of EMFs and developed economy firms, within EMFs from different emerging economies, and during different time periods. A thorough understanding of motivations, paths, processes, and performances of EMFs does require new theoretical approaches that can take into account the unique aspects of EMFs.

Liability of Foreignness and Internationalisation of Emerging Market Firms

Liability of foreignness (LOF) is a well known concept in international business domain. At the core of LOF is the insight that firms face social and economic costs when they operate in foreign markets. Extant literature acknowledges that the ability of firms to overcome LOF in host locations vary, however, it does not discuss the possibility that the LOF itself could vary for different firms at the same location. We extend this literature by examining how a firm’s interaction with the host and home country environments affect the LOF that it faces in foreign markets? We argue that there are two sources of LOF – environmentally-derived LOF and firm-based LOF. The environmentally-derived LOF has its source in home and host country environments. Firm-based LOF, on the other hand, derives from firm-specific characteristics including ownership structure, firm-specific resources, learning, and network based linkages such as affiliation to a business group. Furthermore, we argue that both the environmentally-derived and firm-based LOF are different for emerging market firms as compared to developed market firms. We develop testable propositions about how environment-specific and firm-specific factors affect LOF and suggest directions for future research.

Methodological Advances in the Analysis of Bipartite Networks: An Illustration Using Board Interlocks in Indian Firms

Network-based research in the management field largely assumes one-mode (unipartite) networks, despite the widespread presence of two-mode (bipartite) networks. In empirical work, scholars usually project a bipartite network onto a unipartite network, ignoring issues related to the interdependence of ties and potential loss of information. Yet new advances in measures and methods related to bipartite networks in the fields of sociology, physics, and biology may make such tactics unnecessary. This article presents an overview of three research streams related to bipartite networks, namely, (a) refinements related to the projections of bipartite networks onto unipartite networks; (b) the extension of networks measures from unipartite networks to bipartite networks, with a focus on clustering coefficients; and (c) approaches unique to bipartite networks, such as nestedness. We apply these approaches and compare the findings of a traditional unipartite network analysis using both a simple example and a sample of 10,223 directors of 1,528 Indian firms in 2009.

Organizational Efficiency, Firm Capabilities, and Economic Organization of MNEs

We argue that multinational enterprises (MNEs) not only strive to minimize transaction costs but also attempt to maximize transaction values when interacting with local firms in foreign markets. We put forth our thesis regarding MNE governance structure, that it is contingent on the institutional environment of the host country and the characteristics of the transaction. Specifically, we suggest that MNEs’ choice of market, hierarchy or hybrid (joint ventures) form of governance, depends on the interplay between the costs and benefits of a transaction relationship. For high knowledge content products/services, MNEs choose hierarchy when the institutional environment is not well developed. As the institutional environment develops, hybrid replaces hierarchy. However, in a very strong institutional environment, hierarchy again turns out to be optimal for MNEs. For low or no knowledge content products/services, the presence of market is possible in a very advanced institutional environment.