Leslie E. Palich

Curvilinearity in the diversification-performance linkage : An examination of over three decades of research

While an extensive literature examines the diversification-performance relationship, little agreement exists concerning the nature of this relationship. Both theoretical and empirical disagreements abound. This study synthesizes findings from three decades of research to address major theoretical issues that remain open to debate. We derive three competing models from the literature and empirically assess these using meta-analytic data drawn from 55 previously published studies. The results of our tests indicate that moderate levels of diversification yield higher levels of performance than either limited or extensive diversification. Thus, we provide support for the curvilinear model; that is, performance increases as firms shift from single-business strategies to related diversification, but performance decreases as firms change from related diversification to unrelated diversification. The results also indicate major effects from variation in diversification and performance operationalizations. Copyright

Using Cognitive Theory to Explain Entrepreneurial Risk-Taking: Challenging Conventional Wisdom

Uses social cognition as a framework for differentiating entrepreneurial behavior, centering on the cognitive processes involved in what is commonly considered to be the entrepreneurs core trait: risk-taking behavior. Results of a risk propensity survey of 92 members of a business organization show that while entrepreneurs did not consider themselves more apt to take risks than others, they did perceive more strengths than weaknesses, more opportunities than threats, and more potential for improvement than for deterioration. Thus, entrepreneurs should not be characterized by their risk-taking behavior, but by their likelihood to cognitively assess business situations as positive opportunities. In other words, the research supports Weicks (1979) theory that, when it comes to entrepreneurs at least, believing is seeing. These results suggest that potential entrepreneurs may benefit by training in cognitive approaches to better assess risk-taking opportunities. A cognition-based classification system could also be created for firms to assess individuals potential entrepreneurial behavior. (CJC)

Economic Freedom and the Motivation to Engage in Entrepreneurial Action

Using institutional theory, the Heritage Foundation/Wall Street Journal 2003 Index of Economic Freedom, and the 2002 Global Entrepreneurship Monitor, we regress opportunity–motivated entrepreneurial activity (OME) and necessity–motivated entrepreneurial activity (NME) on 10 factors of economic freedom and gross domestic product (GDP) per capita for 37 nations. We find that both OME and NME are negatively associated with GDP per capita and positively associated with labor freedom, but that various other factors of economic freedom are uniquely related to either OME or NME. Specifically, we find that OME, but not NME, is positively associated with property rights, while NME, but not OME, is positively associated with fiscal freedom and monetary freedom. Thus, governmental restrictions of economic freedom appear to impact entrepreneurial activity differently depending on the particular freedom restricted by government and the entrepreneurs motive for engaging in entrepreneurial action.

Ethical Attitudes in Small Businesses and Large Corporations: Theory and Empirical Findings from a Tracking Study Spanning Three Decades

This study offers a theoretical framework of ethical behavior and a comparative analysis of ethical perceptions of managers of large, mostly publicly traded corporations (those with 1,000 or more employees) and the owners and managers of smaller companies (those with fewer than 100 employees) across 17 years. The primary research provides basic data on the changing standards of ethics as perceived by leaders of large and small businesses where the cultures frequently fall into sharp contrast. Our findings reveal the extent to which the message of business integrity is gaining or losing ground within large and small companies. It does this by means of respondents’ judgments of acceptable responses to 16 scenarios profiling common business situations with questionable ethical dimensions. Based on responses from over 5,000 managers and employees (from firms of all sizes) to our scenarios at three points in time (1985, 1993, 2001), we tested two research questions. First, for firms of all sizes, have business ethics improved or declined between the years 1985 and 2001? Second, comparing responses of large and small firm executives across the 1985–2001 time frame, is there a discernible difference in their ethical standards? Our results suggest that business leaders are making somewhat more ethical decisions in recent years. We also found that small business owner–managers offered less ethical responses to scenarios in 1993 but that no significant differences existed with large firm managers in 1985 and 2001. Implications of our findings are discussed.

Managing in the International Context: Testing Cultural Generality of Sources of Commitment to Multinational Enterprises

The globalization of American business has reactivated a longstanding debate over international exportability of American management theory and practice. This controversy prompted an investigation into factors binding foreign employees to an American multinational enterprise and the consistency of those effects across the firm’s culturally diverse subsidiaries. In a survey, 1,859 managers from 15 European and Canadian affiliates of a U.S. multinational firm described their organizational commitment and bases for that commitment-namely, job scope, role clarity, extrinsic rewards, and participative management. Applying structural equations modeling, we determined whether or not commitment sources similarly developed company attachment across offshore operations. The findings disclosed that these antecedents strongly predicted commitment but displayed no meaningful cultural moderation. Implications for etiology of employee loyalty to global corporations are discussed.

A Theory of Global Strategy and Firm Efficiencies: Considering the Effects of Cultural Diversity

The concept of “relatedness,” though common in the product diversification literature, has not yet been widely applied to theories of internationalization. Expanding internationally requires managerial adaptation due to differences between national cultures, but these dynamics have not been used to represent the cultural diversity that may hinder efforts to integrate and coordinate efforts as required by global strategies. Tempering popular perspectives that extol the benefits of diversity, the present theory posits that cultural diversity among international divisions of a global firm may actually impede efforts to merge activities and expertise between those units. Specifically, direct (market, production, technology) and indirect (knowledge-based) benefits are more difficult to exploit when cultural diversity makes activity sharing and expertise transfer less efficient. Parallel to established product relatedness theory, this thinking postulates that culturally related international firms will enjoy greater efficiencies than culturally diverse multinationals.

The Impact of Internationalization on the Diversification-Performance Relationship: A Replication and Extension of Prior Research

Abstract Most strategic management researchers defend related diversification as yielding superior performance vis-a-vis unrelated strategies. However, empirical results on this subject have sometimes been inconsistent with this position, prompting a search for moderating conditions. Based on a theory of international impediments to synergy formation, we attempted to replicate Bettis and Halls (1982) findings using a sample of predominantly domestic Fortune 500 firms. We divided these firms into two groups—product-related ( n = 23) and unrelated ( n = 47) corporations—and assessed group differences in performance (5-year average return on assets (ROA) spanning 1985–1989) and risk (the standard deviation of ROA over the same time frame). Parallel to Bettis and Hall, we found that differences in ROA were significant (F[1,69] = 4.99, p Bettis and Halls (1982) study, we tested a more inclusive model across a sample of firms, including multinationals. This expanded diversification–performance model was based on a sample including multinational firms from the Fortune 500, separating these again into product-related ( n = 78) and unrelated ( n = 83) concerns. After including control variables (firm size, debt, and global relatedness/unrelatedness) as covariates in the model, we used a multivariate analysis of variance (MANCOVA) test to look for differences in accounting (ROA and return on sales (ROS)) and market (market-to-book value) returns, and accounting (standard deviation of ROA and ROS) and market (systematic, unsystematic, and total) risk. In this test, group differences were not significant (multivariate F[8,146] = 1.654, ns), although size and debt emerged as significant covariates. Taken together, these findings support the international impediments theory, showing that although domestic product-related firms may outperform unrelated diversifiers, these differences do not seem to generalize to multinationals. Despite recent criticisms, our findings suggest that the relatedness synergy framework may yet apply, although only for domestic firms. We recognize the limitations of our study; however, the conclusions of this research are more important than ever, because American firms are internationalizing their operations at an increasing rate.

The Impact of Leader Power and Behavior on Leadership Perceptions A Lisrel Test of an Expanded Categorization Theory of Leadership Model

According to Lords categorization theory of leadership, people identify others as leaders or nonleaders based on the frequency and nature of displayed leader behaviors. Although this relationship has been empirically established, the impact of power attributions on leadership perceptions has not yet been studied. The present research employed LISREL to investigate the linkages of power and behavior to leadership impressions through cognitive schemata. Results indicated that leader behavior had direct effects on perceptions of leadership, whereas leader power did not. However, leader power did affect perceptions of leader behavior, in keeping with categorization theory. In addition, displayed leader behaviors contributed to the development of power perceptions. The practical implications of these findings are discussed at length.

East vs West: Strategic management perspectives from formal logic and the logic of contradiction

Abstract Strategy at the Leading Edge features short reports on conferences, new research and experiments by academics, organizations and consuitaricles for all those involved in strategy and strategic management. Contributions (two hard copies and a dick) should be sent to Martin Whitchill, City University Business School, Frobisher Cresent, Barbican Centre, London

Trade Trends in Transatlantica: A Profile of SMEs in the United States and Europe

Lester Lloyd-Reason and Leigh Sear bring together leading researchers and thinkers in this critical guide to the ongoing, worldwide research shaping the role played by SMEs within today’s global economy. The expert contributors contend that the past twenty years have seen an explosion in research into international SMEs, resulting in a considerable body of academic literature and thinking. This research, they argue, may merely serve to increase our lack of understanding in this area, and often results in myths and misconceptions upon which SME policies and support programmes have been developed and introduced.