Information Asymmetries, Family Ownership and Divestiture Financial Performance: Evidence from Western European Countries

Abstract: Combining agency theory and information asymmetry literature this paper examines the controversial relationship between family ownership and the stock market reaction to a divestiture event. We employ a unique dataset of 265 divestiture transactions in West European countries. We reveal that in presence of high information asymmetries the stock market’s positive reaction will be lowered by a higher perception of the risk of opportunistic behaviours that controlling owners may carry out to the detriment of minority shareholders

Verso una "cultura" del disinvestimento: Efficienza, Superiorit\ue0 e Conformit\ue0

Strategic management research has always been committed to portray divestitures just as a reaction to strategic mistakes or a change to earlier decisions. Yet, scholars have recently gauged that divestiture operations represent a keystone in firm value creation (e.g. Moschieri and Mair, 2011) propelling change process. This article reviews existing research on divestiture classifying it into three schools of thought - firm efficiency, firm superiority and firm conformity \u2013 based on different assumptions and conceptualizations of firms and firm objectives. Moreover, it introduces a taxonomy of divestiture operations that accounts for their heterogeneous determinants, thus proposing to read divestiture no longer and not only as a sign of failure, but rather as a tool to create and preserve shareholders\u2019 wealth

Knowledge spillovers from FDI: a critical review from the international business perspective

This paper reviews and organizes the theoretical and empirical research on foreign direct investment (FDI) knowledge spillovers from the international business perspective. In doing so, it develops a framework for the analysis of this phenomenon. The suggested FDI knowledge spillover framework integrates both the macro-level (country, industry, institutions) and micro-level (multinational firm, headquarters, subsidiary, local firms) antecedents of spillovers with their consequences, and proposes to analyse spillovers along three main attributes that characterize their occurrence, i.e. their magnitude, scope and speed

Business outcomes of outsourcing: lessons from management research

Outsourcing has been broadly recognized as an important strategic choice made by companies and other organizations to achieve a wide variety of goals. Many studies have focused on the economic and financial impacts and on the relationship between outsourcers and outsourcees. This chapter offers a comprehensive overview of actual outsourcing outcomes found in management research, including impacts on human capital. Analysis of the evidence on outsourcing in the OECD STAN database (OECD 2011: 1970-2009) shows that both the number of transactions (deals) and their scope (activities involved) have increased constantly during the last 20 years. Over time, outsourcing popularity peaks have coincided with certain trends, such as business process reengineering, strategic focusing on core business, outsourcing/offshoring strategies, shared services and corporate downsizing (e.g. Brunetta and Peruffo 2014). Furthermore, as recent research shows, companies are expeditiously outsourcing non-core business processes and functions in order to maximize their profits. Business profits can be increased through reducing costs and/or via acquiring external sources of strategic differentiation (e.g. higher-quality raw materials or distinctive expertise/competences able to improve the overall quality of products and services, enabling companies to sell them at higher prices) (De Fontenay and Gans 2008; Gospel and Sako 2010; Angeli and Grimaldi 2010; Doellgast and Gospel 2012; Giustiniano et al. 2014). In such a scenario, multinational companies (MNCs) have a wider range of opportunities for outsourcing and offshoring activities due to their scope and international presence. On the other hand, MNCs are exposed to possible changes in employee relations models in the diverse labour markets in which they operate (Marginson and Meardi 2006; Sippola 2011). At company level, the decision to outsource activities is linked to expected structural and strategic changes which can be assessed through the adoption of a long-term perspective. While immediate results are related to purely economic assessments, long-term effects are more strategic and made up of opportunities (e.g. focus on core competencies and pursuit of greater higher specialization) and drawbacks (e.g. less strategic flexibility). Nevertheless, in a company\u2019s strategic plans, management focus is generally on the short-term results due to the (shorter, expected) timespan of their individual assignments and the contingent pressures of shareholders and financial markets. The short-term nature of outsourcing assessments is also a traditional argument used by trade unions and emphasized by the widening geographic scope of outsourcing and offshoring. While unions have been traditionally considered as opposing outsourcing and offshoring (e.g. Lommerud, Meland and Straume 2009), more recent studies have detected a significant shift from resistance to proactive strategies (Ramioul and De Bruyn 2006). Similarly, MNCs embracing outsourcing are better able to interpret the differences existing in national cultures, business practices, workplace representation systems and collective bargaining structures (Anner et al. 2006; Doellgast and Gospel 2012; Pulignano and Doerflinger 2013), contributing to a better local strategic responsiveness in their local subsidiaries (Almond et al. 2005; Arrowsmith and Marginson 2006; Bartlett and Ghoshal 1992). The aim of this chapter is to illustrate the main findings on the expected outcomes as reported in management and financial literature. To achieve this, the chapter explains a number of management paradoxes related to outsourcing, as well as how companies relate to their stakeholders. Management paradoxes referred to include: a) the paradox of financial and economic vs. strategic and organizational outcomes; and b) the time paradox. The chapter draws on previous research conducted on outsourcing antecedents, processes and outcomes, both in general (Marchegiani et al., 2012) and applied to specific activities within the value chain (Gospel and Sako 2010; Doellgast and Gospel 2012; Giustiniano et al. 2014; Brunetta, Giustiniano and Marchegiani 2014; Sorrentino et al. 2015). The focus is on analysing the \u2018lessons learned\u2019 reported in management and financial literature to nurture implementation strategies, for use by workers representatives (e.g., Benassi 2011). Among these lessons, it seems useful to affirm that in order to maximise the positive outcomes of outsourcing strategies, organizations have to take into account all the human implications of outsourcing, such as the effects on workers and their representatives. To illustrate this, the investigation on the outsourcing outcomes will be complemented by an analysis of certain aspects related to organizational design (i.e. company boundaries, coordination mechanisms) and labour issues (i.e. human reactions: resistance to change, hidden costs and the loss of competences and competitive advantage)

Revitalising the Outsourcing Discourse within the Boundaries of Firms Debate

Despite outsourcing has been at the core of managerial practice and literature for a long time, still authors do not agree on a clear understanding of the overall outsourcing process. This article answers two main questions, relevant to researchers and practitioners: 1.What are the main findings so far in outsourcing literature? 2. What do we still need to learn? Through a comprehensive review of the literature, we offer systematization of the existent body of knowledge on outsourcing, its implications on firms’ boundaries, and the theoretical challenges. In conclusion, implications for managers are drawn

Family ownership and the export performance of SMEs: the moderating role of financial constraints and flexibility

Purpose This article investigates the relationship between family ownership and export performance in the context of SMEs while also considering the moderating role of the financial dimension and, in particular, financial constraints and financial flexibility. Design/methodology/approach We select a sample of 1,132 Italian SMEs to examine through an econometric analysis the role and impact of family ownership and the financial moderating variables being used on their export performance. Findings The results indicate that there is a U-shaped relationship between family ownership and export performance: the highest levels of export performance correspond to the lowest and highest family ownership levels, whereas when a mixture of family and nonfamily ownership exists, the performance suffers because of "conflicting voices" dominating strategic visions and approaches, harming the firm's export commitment. Moreover, the findings show that lower financial constraints and/or stronger financial flexibility improve the relationship between family ownership and export performance. Research limitations/implications Our findings show that the ownership structure is important for export performance; in particular, firms should avoid a mixture between family and nonfamily ownership because it is detrimental to export performance. Moreover, Italian SMEs need to develop sources of financing other than the banking channel, and policy makers should favour this process to overcome financial constraint problems and improve financial flexibility. Limitations concern the use of other econometric approaches and measurement variables to further investigate the connection between family ownership and export performance. Originality/value The present study enhances the comprehension of the complex relationship between family ownership and export performance by documenting the relevance of the level of family ownership and considering the moderating role of financial constraints and flexibility

Presence in foreign markets, ethnic minority ownership and financial performance of high-tech SME’s

Small and medium enterprises (SMEs) face strong competition with larger incumbents in a fast-changing globalized economy that undermine their financial performance. For this reason, operating in foreign market could be a valuable solution to pursue growth opportunities and improve their financial performance. The purpose of the paper is to understand the relationship between SMEs internationalization and their financial performance, and whether this effect is moderated by the presence of ethnic minority ownership. Based on a sample of 10.326 high-tech manufacturing US SMEs, our study reveals a positive relation between the number of foreign markets where SMEs operate and their financial performance. In addition, we demonstrate that this effect is positively moderated by the presence of ethnic minorities in the SMEs’ ownership. Therefore, our findings provide evidence of the strong relationship between strategic choice, in the form of presence in foreign markets, and economic results, as well as on the influence exerted by individual-level mechanism