Vijay Kumar Kaul

Corporate Governance Index and Firm Performance: Empirical Evidence from India

Prior studies using an index of corporate governance to explore the relationship between corporate governance and firm performance have found a positive linkage between the two i.e. better governed firms exhibit better financial performance. Following the seminal work of Gompers, Ishii, and Metrick (2003) of creating a corporate governance index to study the relationship between corporate governance and firm performance, similar studies have been reported not only from developed markets like Germany, Canada, Hong Kong, Switzerland, and Australia, but also from emerging markets like Ukraine, Russia, Greece, Thailand, and India.In the present study, we investigate the relationship between corporate governance and firm performance in the Indian context by constructing a corporate governance index based on internal and external corporate governance mechanisms. Further, we use value-based performance measure - Economic Value Added (EVA), as the primary metrics to measure firm performance. Besides EVA, traditional measures such as Return on Networth, Return on Capital employed and Tobin’s Q have also been used to evaluate the linkage between corporate governance and firm performance. Using various econometric techniques, we conclude that there is a positive relationship exists between corporate governance based on the corporate governance index and firm performance, when the performance is measured in terms of the value-based performance tool – Economic Value Added (EVA). The relationship could not be validated for the traditional performance tools – RONW, ROCE or Tobin’s Q.

Knowledge Management and Innovation in Technology-Based Small and Medium Sized Enterprises

High-tech enterprises operate in a dynamic and complex environment. To be successful, these enterprises need to develop and build dynamic capabilities to respond to and shape changes in their environment. In other words, they require continuous improvement and innovation. For innovation, these enterprises need to focus on continuous learning to create, transfer and integrate knowledge. The paper aims at examining the process of knowledge creation, transfer and integration at small and medium sized enterprises operating in High-tech industries. Two different hypotheses are tested: one focusing on differentiating between three different categories of SMEs, namely, micro, small and medium enterprises and second differentiating between innovators and non-innovators. It is found that there are significant differences among the three categories of firms, namely micro, small and medium, in terms of objectives, managerial and learning processes, capabilities and performance. Similarly, innovators are also different from non-innovators in terms of knowledge management processes.

Corporate Governance Mechanisms and Firm Performance: A Study of Select Indian Firms

A number of studies have analysed the relationship between corporate governance mechanisms and firm performance but those have primarily been in the context of Western countries. In this paper, we examine the relationship between four corporate governance mechanisms such as: a) size of board; b) composition of board; c) board activity; d) CEO duality and firm performance with economic value added (EVA) as the primary performance measurement metric. Using data for NSE listed firms, we conclude, in particular, that the board size has a significantly positive association with firm performance.

Innovation, Low Carbon Development and Green Growth

The issues such as financial crisis, food crisis, water scarcity, energy crisis, and global warming are affecting both developed and developing countries. They is unanimity that the reason for these issues and crisis are over-exploitation of natural resources, excessive dependence on fossil fuel, illiteracy and governance problems, rapid industrialization, urbanization, globalization of finance, competitive race for export-led growth, and global warming and climate change. It has been realized that the solution to these problems are twofold: one, in ‘strengthening and improving institutional and governance system’ at the individual, country level; secondly, in cooperation and collaboration of leading countries of the world that possess resources, knowledge, and technology. All these solutions are being incorporated in the concept of Green Growth. The present paper aims at examining the role of innovation ecosystem framework to have low carbon development and green growth. The paper has been divided in five sections. The following section outlines the rise and fall of carbon civilization and its solution in terms of green growth or low carbon development. Section three discusses the ecosystem and innovation ecosystem. Section four discusses the examples of transformative innovations to have low carbon development. Finally, the concluding observations are presented.

Creating Value Through Social Entrepreneurship

Social entrepreneurs have emerged as powerful social change agents who are self-motivated to initiate a balance in social uncertainty and provide rescue through innovative solutions. They attach themselves with the social cause, initiate campaigns and work on sustainable solutions for the victims of social problems. This paper attempts to understand the need, characteristics and role of social entrepreneurs in the process of creating value by remedying social issue. An analysis of two leading cases is attempted to accomplish this task. The analysis reveals that social entrepreneurs play a major role in social transformation to provide creative workable solution. Their contribution is complementary to the effort of the Governments, NGO’s, International institutions, etc. The possibility of collaborations or partnerships can be explored to modify and replicate solutions across the globe. The government also needs to address the need for specific legislation to erect an organisational structure and ensure regular audits.

India’s Diversity and Globalization: Unifying Forces and Innovation

Abstract India is a multilinguial, multireligious, and multi-caste country and has been a dominant player in the world system and part of the global economy for ages. Its civilizational past has been shaped and has evolved through a number of events, crises, people, and communities. It has not been an isolated country at any point of time, as there has been a continuous exchange of ideas, products, and people with other countries and civilizations. It therefore becomes essential to understand India in a global context to examine its problems and to seek solutions. There are two types of studies focusing on changes in society, its interlinkages with others, and global system: civilization studies and world-systems analysis. The scholars in the civilization studies have focused on identifying the existence of different civilizations in different geographical areas in the ancient period. Some have devoted more attention to the interrelations and mutual influences among civilizations in terms of culture and ideology, and their rise and decline through several stages. World-systems analysts, on the other hand, have developed a perspective to examine issues of capitalism, development, and world inequalities. The world economy is a system of interconnected national economies that bring together national financial power and states that struggle to move up the hierarchy of states in terms of power and wealth. Both these groups of studies have given insight to understand the existence and growth of countries in present forms. It therefore becomes imperative to look at the key findings of these studies to have better understanding of India’s socioeconomic and environmental problems. This article proposes that a good governance system can direct India’s diversity and socioeconomic challenges to develop an innovative society. Further, it attempts to examine the following questions: How has India evolved as a civilizational entity over a period of the last 2000 years? How has globalization influenced its evolution during the last few centuries? What are the unifying factors of India in terms of culture, constitutions, and social processes? What are the present and new challenges that have emerged during last 60–70 years? How is India, despite its diversity, meeting and solving such challenges? In view of growing trend of globalization, are the unifying forces still relevant or not?

India's Diversity: From Conflict to Innovation

India is known for its diversity that ranges over its natural environments and resources, rivers, lakes, seas, forests, agro-products and climates. As regards its people, India’s diversity ranges over their cultures and religions, their castes, languages, foods, dresses, arts and dances, musical traditions, across rural and urban regions, where the poor and rich live in harmony. There is an underlying linkage and interconnection among geographically, socially and economically diverse groups in India. This diversity has been recognized as the main strength of India. The most visible manifestation of this strength has been in the form of creative traditions such as music, dances, literary and philosophical traditions. India’s most vibrant constitutional democracy in itself reflects the strength of its diversity, and it also helps in managing this diversity. Whenever this diversity is not understood properly or is misinterpreted, there arise tensions, disputes or situations of conflict. However, the existence of India as a nation in its present form suggests some common cultural bonding, common identity and social mechanism that have helped it to resolve its tensions, disputes and conflicts, and these have also been pushing to shape and transform the Indian society.The paper argues that the Indian experience of diversity shows that the “conflict theory” explanation, which claims that proximity with diverse groups, leads to tension and discord cannot adequately account for the varying forms in which diversity manifests itself. On the contrary, it believes in a “contact theory” explanation which claims that more time spent with people of varied backgrounds leads to greater understanding and harmony between groups. It asserts that increasing diversity is not only inevitable but ultimately valuable and enriching. The paper moves a step further and asserts that a capable and visionary governance system can direct diversity in developing different perspective to seek solution to socio-economic challenges before the country. These different perspective and solution will provide innovative solutions that ultimately result in social and economic prosperity of people.

Global Financial System, Technological Revolution and Financial Crisis: Policy Implication for India

India has not participated in any industrial revolution. However, it has witnessed several crisis linked with finance and financial frauds. Whenever there is some new opportunities coming up as was the case in 1991’s opening up of Indian economy, and new technology excitement in 2000 etc., it leads to euphoria in the market and ends up in crisis. The paper aims to learn from the lesson of other countries in financial crisis linked with technological revolution. Using the learning from the previous discussion, it cautions that the new government in India in 2014 is opening up lot of new opportunities in infrastructures development and other sectors. This may in due course lead to financial instability if not monitored and controlled by the regulators effectively.

Creation of Shared Values by Indian Enterprises

All over the world economic activities are being increasingly organized by corporate entities, as governments are withdrawing from economic and welfare activities. Enterprises have become dominant players in all countries despite having variations in their institutional governance systems. The economic resources and technology owned and managed by these enterprises are massive. It is therefore expected that these enterprises should be encouraged and motivated to help mitigate the social and environmental problems of poverty, illiteracy, climate change, etc. By combining the creation of economic value and serving social needs, “shared value” is created. In comparison to corporate social responsibility programmes, shared values, as a concept, become an integral part of the successful corporate strategies of a large number of enterprises. This chapter aims to examine the role of Indian enterprises in creating shared values and meeting social responsibility in India. The chapter uses a content analysis technique to collect information from the latest annual reports, sustainability reports and business responsibility reports of selected companies listed on the Bombay Stock Exchange.

Competitive Innovative Clusters in India

The presence and competitiveness of industrial clusters has been recognized as a source of job growth, industrial productivity, innovation and regional competitiveness. This paper is an attempt to examine this issue and identify the measures to convert Indian clusters into globally competitive clusters. First, the paper discusses the clusters, their evolution, and the role of inter-firm collaboration. It is followed by a discussion on the determinants of innovation in clusters and presents two innovative clusters - Silicon Valley in USA and ICT cluster in Finland. Finally, the existence of clusters in India, case study of ICT cluster Bangalore and the role of government policy and institutions in supporting clusters in India is examined. The paper concludes with certain observations having policy implications.