Cash Flow Management and Manufacturing Firm Financial Performance: A Longitudinal Perspective

A firm\u27s cash flow policies, which manage working capital in the form of cash receivables from customers, inventory holdings, and cash payments to suppliers, are inexorably linked to the firm\u27s operations. Building on earlier research, this study: (i) extends prior studies by examining the relationships between changes in cash flow measures and changes in firm financial performance using a longitudinal sample of firm data; and (ii) investigates the direction of the relationship between quarterly changes in cash flow positions and firm financial performance. This study is conducted using the Generalized Estimating Equations (GEE) methodology to analyze a longitudinal sample of eight quarters of cash flow and financial performance data from 1233 manufacturing firms. The analyses find that changes in the widely used Cash Conversion Cycle (CCC) metric do not relate to changes in firm performance; however, changes in the less used Operating Cash Cycle (OCC) metric are found to be significantly associated with changes in Tobin\u27s q. This examination of how changes in specific cash flow measures relate to changes in Tobin\u27s q shows that both reductions in Accounts Receivables (measured as Days of Sales Outstanding [DSO]) and reductions in Inventory (measured as Days of Inventory Outstanding [DIO]) relate to firm financial performance improvements that persist for several quarters. Endogeneity tests of whether a firm\u27s cash flow management strategy leads to changes in firm performance or if the cash flow strategy is a byproduct of firm performance suggest that reductions in DSO lead to improved firm financial performance

An Exploration of ‘Sticky’ Inventory Management in the Manufacturing Industry

Traditional models examining relationships between firm resources and revenues assume that the many expenses and asset holdings change in proportion to changes in demand. However, research has found that for many costs and assets assumed to be variable, the magnitude of a change in a cost or asset in proportion to a change in revenue is smaller during periods when revenue decreases compared to the change in the cost or asset when revenue increases. Costs and assets which behave in this manner have been denoted as ‘sticky’ costs or assets. This study examines if inventory in the manufacturing industry is managed in a ‘sticky’ manner and what implications inventory stickiness has on firm performance. Utilising firm panel data over a 25-year time window we find that inventory stickiness does exist amongst manufacturers and that it has negative implications for firm performance

The Operational Impacts of Chief Supply Chain Officers in Manufacturing Firms

Many firms have elevated their supply chain management decision-making responsibilities through the creation of ‘Chief Supply Chain Officer’ (CSCO) positions. This is widely attributed to the recognition that superior supply chain operations can generate a competitive advantage. Prior studies have found that firms with CSCOs outperform firms without CSCOs along many financial dimensions. However, these prior efforts did not examine the pathways by which these improvements occur. This study addresses this gap in the literature by investigating whether supply chain characteristics of manufacturing firms differ within firms with CSCOs. To explore this, we investigate the relationship between CSCOs and operational dimensions of supply chain performance using data from the 10-year period between 2008 and 2017. We find that the presence of a CSCO in a firm is associated with shorter cash conversion cycles, lower levels of operational slack, and larger buffers of inventory during periods of high market instability

Do Online Consumers Value Corporate Social Responsibility More in Times of Uncertainty?: Evidence from Online Auctions Conducted During the Onset of the COVID-19 Pandemic

The relationships between Corporate Social Responsibility (CSR) and consumer behaviors have been widely explored in the literature. From the consumer standpoint, it has been shown that individuals largely want to be socially responsible actors and that, more than ever, they consider the CSR aspects of products or services when contemplating purchasing decisions. We utilize data from 23,247 online auctions conducted before and during the COVID-19 pandemic to analyze in what way consumer preferences might be influenced by how the CSR characteristics of products are touted in their descriptions. We find that a greater CSR emphasis is positively associated with an increased prospect of an online auction item selling. Additionally, we find CSR is valued more by consumers during a period of economic hardship and social uncertainty (COVID-19). Finally, we find that profit-seeking behaviors by intermediary auction house brokers undermine the effect of CSR on consumer purchasing behavior

The Role of Socioemotional Wealth in Entrepreneurial Persistence Decisions for Family Businesses

Many factors may influence entrepreneurial persistence in various contexts. For example, scholars find that family business entrepreneurs are more persistent than other entrepreneurs. However, the reasons why they are more persistent are not as well known. Utilizing a conjoint experiment with 64 entrepreneurs and 376 decisions, this paper examines the influence of socioemotional wealth (SEW) on persistence decisions in a family business context. The results of the Hierarchical Linear Modelling show that the expected financial returns, expected non-financial benefits, expected switching costs, and probability of expected outcomes influence entrepreneurial persistence decisions. Further, family business entrepreneurs with higher levels of SEW focus more on non-financial benefits when facing alternative opportunities. This study also provided empirical evidence for different dimensions of SEW. The results show that the emotional attachment of family members and the renewal of family bonds to the firm are effective indicators, which provide a direct measurement of SEW. The findings of this study increase scholarly understanding of both entrepreneurial persistence literature founded in threshold theory and SEW literature

A Newsvendor Approach to Compliance and Production under Cap and Trade Emissions Regulation

Since the 1990s, governmental agencies have increasingly turned to market based cap and trade programs to control the emission of pollutants. Firms subject to cap and trade regulation are typically required to acquire emissions allowances via open auction markets. The cost to acquire allowances may impose a substantial financial burden on a firm. While emissions reduction efforts may eliminate some firm\u27s need to acquire additional allowances, there are still numerous firms that need to purchase additional allowances on the open market. This study presents a new forward buying heuristic, designed for those firms that need to purchase emissions allowances via auctions, which reduces the impact of emissions allowance acquisitions on the firms\u27 financial performance. The heuristic, designated as the Newsvendor Production Planning with Emissions Allowance Forward Buying (NPPAFB) method, applies a forward buying algorithm to determine the number of periods for which to forward buy allowances, the current production order up to level, and the current and future emissions allowance requirements (which serves as the order up to level for allowance purchases). Additionally, NPPAFB also authorizes unused emissions allowances to be sold when market conditions are favorable. Compared against three existing production planning and allowance procurement strategies, a simulation exercise finds that the NPPAFB method significantly reduces a firm\u27s emissions allowance expenditures. These results indicate that heuristic can be readily adopted by any firm that is required to procure emissions allowances via open markets in an effort to improve the firm\u27s profitability

Scaling Agile Beyond Organizational Boundaries: Coordination Challenges in Software Ecosystems

The shift from sequential to agile software development originates from relatively small and co-located teams but soon gained prominence in larger organizations. How to apply and scale agile practices to fit the needs of larger projects has been studied to quite an extent in previous research. However, scaling agile beyond organizational boundaries, for instance in a software ecosystem context, raises additional challenges that existing studies and approaches do not yet investigate or address in great detail. For that reason, we conducted a case study in two software ecosystems that comprise several agile actors from different organizations and, thereby, scale development across organizational boundaries, in order to elaborate and understand their coordination challenges. Our results indicate that most of the identified challenges are caused by long communication paths and a lack of established processes to facilitate these paths. As a result, the participants in our study, among others, experience insufficient responsivity, insufficient communication of prioritizations and deliverables, and alterations or loss of information. As a consequence, agile practices need to be extended to fit the identified needs

A Model to Define an eHealth Technological Ecosystem for Caregivers

The ageing of world population has a direct impact on the health and care systems, as it means an increase in the number of people needing care which leads to higher care costs and the need for more resources. In this context, informal caregivers play an important role as they enable dependent persons to stay at home and thus reduce care costs. However, long-term continuous care provision has also an impact in the physical and mental health of the caregivers. Moreover, geographical barriers make it difficult for caregivers to accessing psychoeducation as a way to alleviate their problems. To support caregivers in their needs and provide specialized training, technology plays a fundamental role. The present work provides the theoretical basis for the development of a technological ecosystem focused on learning and knowledge management processes to develop and enhance the caregiving competences of formal and informal caregivers, both at home and in care environments. In particular, a platform-specific model to support the definition of the ecosystem based on Open Source software components is presented, along with a Business Model Canvas to define the business structure as part of the human elements of the technological ecosystem

How Firms Adapt and Interact in Open Source Ecosystems: Analyzing Stakeholder Influence and Collaboration Patterns

[Context and motivation] Ecosystems developed as Open Source Software (OSS) are considered to be highly innovative and reactive to new market trends due to their openness and wide-ranging contributor base. Participation in OSS often implies opening up of the software development process and exposure towards new stakeholders. [Question/Problem] Firms considering to engage in such an environment should carefully consider potential opportunities and challenges upfront. The openness may lead to higher innovation potential but also to frictional losses for engaged firms. Further, as an ecosystem progresses, power structures and influence on feature selection may fluctuate accordingly. [Principal ideas/results] We analyze the Apache Hadoop ecosystem in a quantitative longitudinal case study to investigate changing stakeholder influence and collaboration patterns. Further, we investigate how its innovation and time-to-market evolve at the same time. [Contribution] Findings show collaborations between and influence shifting among rivaling and non-competing firms. Network analysis proves valuable on how an awareness of past, present and emerging stakeholders, in regards to power structure and collaborations may be created. Furthermore, the ecosystem’s innovation and time-to-market show strong variations among the release history. Indications were also found that these characteristics are influenced by the way how stakeholders collaborate with each other