Donald J. Schepker

The Many Futures of Contracts Moving Beyond Structure and Safeguarding to Coordination and Adaptation

In this article, we review the literature on interfirm contracting in an effort to synthesize existing research and direct future scholarship. While transaction cost economics (TCE) is the most prominent perspective informing the “optimal governance” and “safeguarding” function of contracts, our review indicates other perspectives are necessary to understand how contracts are structured: relational capabilities (i.e., building cooperation, creating trust), firm capabilities, relational contracts, and the real option value of a contract. Our review also indicates that contract research is moving away from a narrow focus on contract structure and its safeguarding function toward a broader focus that also highlights adaptation and coordination. We end by noting the following research gaps: consequences of contracting, specifically outcome assessment; strategic options, decision rights, and the evolution of dynamic capabilities; contextual constraints of relational capabilities; contextual constraints of contracting capabilities; complements, substitutes, and bundles; and contract structure and social process.

Managerial Discretion An Empirical Review and Focus on Future Research Directions

Scholars have long been interested in when and to what degree managers are able to exert control over their organizations. In this review, we examine managerial discretion, or the latitude of action available to managers. Since its introduction, scholars have attempted to explain when managers will have discretion, what discretion means for organizational outcomes, and how discretion may differentially influence organizational outcomes when it enables or constrains leaders. Our review indicates that while a significant number of studies have examined discretion, few have attempted to validate the prescriptions of the managerial discretion construct. Furthermore, studies to date have primarily focused on the industry task environment as a measure of discretion, with less attention focused on the manager’s characteristics and the internal organization. We then assess construct validity and the measurement of managerial discretion, offering recommendations to future researchers for improving the operationalization of this construct. Finally, we consider how discretion forces may interact as either complements or substitutes and how such interactions may have both organizational- and individual-level consequences.

Complementary or Substitutive Effects? Corporate Governance Mechanisms and Poison Pill Repeal:

A significant amount of research has examined firms’ decisions to adopt poison pills; however, firms today are increasingly repealing or allowing poison pills to expire. Based on agency theory, the authors examine competing perspectives of governance mechanisms as having complementary or substitutive effects within the context of poison pill repeal. They test whether firms repeal poison pills when governance is strong (complementary effects) or allow for other governance mechanisms to compensate for potential agency costs associated with poison pill renewal (substitutive effects). Using a sample of 288 firms who made decisions to terminate or renew poison pills, the authors find that firms with CEO duality, fewer directors nominated by the CEO, and higher levels of outside director ownership and pressure-resistant institutional shareholdings are more likely to repeal poison pills. A curvilinear relationship between managerial ownership and poison pill repeal is also found. The results provide greater support for the notion that firms use governance mechanisms as complements rather than substitutes.

Interpreting Equivocal Signals Market Reaction to Specific-Purpose Poison Pill Adoption

Signaling theory suggests that firms send signals to stakeholders to reduce information asymmetry. Research, however, has rarely examined how investors interpret signals that are equivocal. We suggest that sensemaking serves as an important process by which investors interpret firm signals, and salient contextual cues influence the sensemaking process. We examine an equivocal signal, the adoption of a poison pill, as a means of examining investor interpretation of the signal and the role of contextual cues in influencing interpretation. Using a sample of 578 poison pill adoptions and controlling for self-selection, we find that investors react negatively to poison pills adopted to protect net operating losses (NOL poison pills) but positively to poison pills adopted when the firm is in receipt of a takeover offer (in-play poison pills). Assessing the role of contextual cues, our results suggest that CEO duality, the proportion of inside directors on the firm’s board, the firm’s R&D investments, and industry concentration also condition investor response to specific-purpose poison pill adoption. Our study contributes to research on signaling theory, sensemaking, and corporate governance by examining how investors interpret a firm’s equivocal governance decisions.

Chief Executive Cognition, Turnaround Strategy and Turnaround Attempts of Declining Firms

ABSTRACT This paper develops an interpretative model of turnaround management that describes how both the attention and attribution patterns of CEOs in declining firms influence the odds of successful turnaround attempts. This model is then tested on a sample of US-based, publicly traded single business firms that experienced significant performance declines between 1987 and 2005. The results show the odds of turnaround attempt success increased when firm CEOs paid more attention to issues external to the organizations and when the causes of decline were attributed to factors perceived as more controllable by the firm. In addition, while the amount of strategic change launched by declining firms during turnaround attempts had a positive association with the chances of successful turnaround, the effect of increased strategic change increased when CEOs attributed the causes of decline to stable sources.

Changing of the Guard: Shifting the Conversation Surrounding CEO Turnover

The importance of CEO turnover for organizations is well established. Indeed, CEO turnover is inevitable in organizations and can have a significant impact on firm outcomes. Given its importance, r...

Board Processes and CEO Succession Planning

CEO succession is one of the most important transitions in any firm’s life cycle. However, despite substantive ramifications for the actors and the firm, and the potentially competing interests tha...