Investigating the Joint Effects of Strategy, Environment and Control Structure on Performance

The purpose of this study is to investigate the effects of misfit between competitive environment, business strategy and control structure on performance. We argue that the misfit between competitive environment, business strategy and control structure has significant negative implications on shareholder value creation associated with firms’ Joint Venture formation. Based on data of publicly-traded US manufacturing firms that announce a joint venture formation, we found that firms that have perfect fit are valued higher than those with both strategy and structural misfits and also those with structural misfit. Contradictory results were found when comparing firms with perfect fit with those that have strategy misfit. Further analyses indicate that all those strategy misfit firms operate in high entry barriers, where firms can compete effectively using either innovation or cost efficiency strategy due to the fact that they possess resources that are difficult to be imitated by their competitors.    

Investigating the Joint Effects of Strategy, Environment and Control Structure on Performance

Abstract: The purpose of this study is to investigate the effects of misfit between competitive environment, business strategy and control structure on performance. We argue that the misfit between competitive environment, business strategy and control structure has significant negative implications on shareholder value creation associated with firms Joint Venture formation. Based on data of publicly-traded US manufacturing firms that announce a joint venture formation, we found that firms that have perfect fit are valued higher than those with both strategy and structural misfits and also those with structural misfit. Contradictory results were found when comparing firms with perfect fit with those that have strategy misfit. Further analyses indicate that all those strategy misfit firms operate in high entry barriers, where firms can compete effectively using either innovation or cost efficiency strategy due to the fact that they possess resources that are difficult to be imitated by their competitors. Abstrak: Penelitian ini bertujuan untuk menganalisis pengaruh dari ketidaksesuaian (misfit) antara lingkungan kompetitif, strategi bisnis dan struktur pengendalian terhadap kinerja perusahaan. Hipotesis yang diuji adalah ketidaksesuaian (misfit) antara lingkungan kompetitif, strategi bisnis dan struktur pengendalian berdampak negatif terhadap penciptaan nilai bagi pemegang saham yang berasosiasi dengan bentuk joint venture perusahaan. Berdasarkan data dari perusahaan manufaktur di AS yang mengumumkan joint venture, ditemukan bahwa perusahaan yang mempunyai kesesuaian sempurna (perfect fit) memiliki nilai yang lebih tinggi dibanding dengan yang memiliki ketidaksesuaian (misfit) strategi dan ketidaksesuaian (misfit) struktural serta yang memiliki ketidaksesuaian (misfit) struktural saja. Penelitian ini juga menemukan hasil yang bertentangan jika perusahaan dengan kesesuaian sempurna dibandingkan dengan ketidaksesuaian (misfit) strategi saja. Analisis lebih lanjut mengindikasikan perusahaan dengan ketidaksesuaian strategi beroperasi di lingkungan dengan entry barriers tinggi, yaitu kondisi pada saat perusahaan dapat berkompetisi secara efektif menggunakan strategi inovasi ataupun efisiensi biaya. Hal ini disebabkan perusahaan-perusahaan tersebut memiliki sumber daya yang sulit untuk ditiru oleh pesaing mereka

Performance Implications of Environment-Strategy-Governance Misfit

This study examines the impacts of matching competitive environment, business strategy, and corporate governance structure on firm performance. We predict that in a dynamic environment, firms pursuing a product differentiation strategy will perform better than firms pursuing a strategy of cost leadership, but the performance differential is affected by the level of board independence and managerial share ownership. In a stable environment, we predict that firms pursuing a strategy of cost leadership will perform better than firms pursuing a product differentiation strategy, and the performance differential is affected by the level of board independence and managerial share ownership. Overall, the results are consistent with the predictions of this study. Board independence and managerial ownership affect the performance differential between product differentiators and cost leaders in a dynamic environment. In a stable environment, however, the results are not statistically significant

Social and Environmental Reporting and Auditing in Indonesia: Maintaining Organizational Legitimacy?

The purpose of this study is to examine social and environmental reporting and auditing practices by companies in Indonesia. Consistent with our prediction, we found that social and environmental reporting and auditing are undertaken by management for strategic reasons, rather than on the basis of any perceived responsibilities. The results indicate that reporting and auditing social and environmental activities increases following threats to the company’s legitimacy and ongoing survival. The results also support our prediction that social and environmental reports vary across companies. This study calls for mandatory reporting and auditing of social and environmental activities through regulations and reinforcements. This mandatory requirement is particularly needed for companies with activities that are considered socially and environmentally sensitive. Furthermore, this study reveals that the social and environmental reporting and auditing are performed by organizations other than accounting profession. We propose that accountants should partake in these activities given the expertise that they could usefully bring to these areas

Investigating the Impacts of Customer Satisfaction on Firm Performance

The purpose of this study is to investigate the impact of customer satisfaction on firm performance. We argue that a firm’s financial performance will be positively affected by its ability to satisfy its customers. By satisfying its customers, a firm increases its ability to acquire new customers, retain existing customers, and increase customer profitability. Based on sample of firms listed on the Indonesian Stock Exchange, we hypothesize and find that customer satisfaction is positively and significantly related to firm performance in terms of return on assets and market value of equity. These findings are consistent with the view that customer satisfaction is a leading indicator of financial performance

INVESTIGATING THE IMPACTS OF CUSTOMER SATISFACTION ON FIRM PERFORMANCE*

The purpose of this study is to investigate the impact of customer satisfaction on firm performance. We argue that a firms financial performance will be positively affected by its ability to satisfy its customers. By satisfying its customers, a firm increases its ability to acquire new customers, retain existing customers, and increase customer profitability. Based on sample of firms listed on the Indonesian Stock Exchange, we hypothesize and find that customer satisfaction is positively and significantly related to firm performance in terms of return on assets and market value of equity. These findings are consistent with the view that customer satisfaction is a leading indicator of financial performance

The effect of misalignment of CEO risk tolerance and corporate governance structures on firm performance

To explore the link between corporate governance and performance, we examine whether the misalignment of CEO risk tolerance (based on an index constructed from personal traits) and governance structures affects company performance. Utilizing the IBM Watson Personality Insights service to analyze verbal communication by the most senior executives of large US companies to obtain their fundamental Big Five personality traits, our study proposes two hypotheses: First, CEO risk tolerance and corporate governance structures are associated, and second, misalignment of these structures with risk tolerance negatively affects financial performance. We use a large sample of over 8,000 firm-year observations and a two-stage contingency approach suggested by Ittner and Larcker (2001) to test our hypotheses. Our findings are consistent with our misalignment–CEO risk tolerance predictions and support upper echelons theory in the corporate governance setting

Does Engaging in Global Market Orientation Strategy Affect HEIs’ Performance? The Mediating Roles of Intellectual Capital Readiness and Open Innovation

This study aims to examine the effect of global market orientation strategy on the performance of Indonesian Higher Education Institutions. Furthermore, it investigates whether this relationship is mediated by intellectual capital readiness and open innovation. This is a quantitative study employing a multi-mediation research model conceptualizing the relationship among the five constructs. This study employs a resource-based view to explain the relationships among constructs and partial least squares-structural equation modeling to test the hypotheses studied. A sample of 119 schools/faculties, derived from the 50 best state and private institutions in Indonesia and based on the Webometrics 2021, was used. This research reveals the following main results. First, intellectual capital readiness fully mediates the influence of global market orientation strategy on the institutions’ performances. Second, open innovation does not mediate the effect of global market orientation strategy on institutions’ performances. This study is the first attempt to understand how global market orientation strategy enhances institutions’ performances via intellectual capital readiness and open innovation. This study reveals the insignificant effect of open innovation on performance. Thus, the main implication of these findings is that institutions need to downstream their innovations to the community for future performance and communities’ benefits. The applied execution does matter in the open innovation–institution performance relationship

The role of GoJek and Grab sharing economy platforms and management accounting systems usage on performance of MSMEs during covid-19 pandemic: Evidence from Indonesia

This study investigates the influence of MSME actors' characteristics on the use of sharing economy, management accounting system, and financial performance during the Covid-19 Pandemic. Based on a questionnaire survey obtained from 167 respondents, we hypothesize and find that age and non-formal education have a positive effect on the use of the sharing economy. MSMEs that are managed by actors at a young age tend to use the sharing economy to maintain their business. In addition, MSMEs’ leaders that receive non-formal education acquire additional business knowledge encouraging them to use the sharing economy. Furthermore, the use of the sharing economy has a positive effect on Managemen Accounting Systems usage. Finally, Management Accounting Systems usage has a positive effect on the financial performance. The results of this study provide useful insights into the design of effective MSMEs' mentoring systems and support the Indonesian government program toward empowering MSMEs