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Corporate Governance, Corporate Social Performance, and New Product Introductions
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Author: Maria Jose Murcia, IAE Business School - Argentina
Author: Jorge Tarzijan, Pontificia U. Católica de Chile
Author: Rajat Panwar, Appalachian State U.
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A dominant stream of research has linked a firm’s innovation capacity to its shareholder orientation (SHO), pertaining to how effectively corporate governance mechanisms maximize shareholder wealth and sustain competitive advantages. However, firms are increasingly mandated to engage with stakeholders such that firms simultaneously pursue SHO and a stakeholder orientation (STO) through corporate social performance (CSP). Strikingly, extant research has analyzed the effects of SHO and STO on innovation on a separate basis. The present paper integrates SHO and STO to provide a more comprehensive theoretical framework of firm innovation and, more specifically, of new product introductions (NPI). Drawing from agency and stakeholder theory, we develop hypotheses examining the moderating effect of CSP in the relationship between internal governance mechanisms (i.e., independent board monitoring and incentives alignment) and the rate of NPI. We conduct our test drawing on a sample of 133 manufacturing S&P 500 index member firms and 2374 press releases on NPI for the period 2007-2015. After running robustness checks, results overall support our contentions.
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Paper is No Longer Available Online: Please contact the author(s).
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The Opportunity Cost of Share Repurchases
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Author: Tim Swift, Saint Joseph's U.
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In 2018, firms repurchased more than $1 trillion of their own shares for the first time. Given the enormous scale of this resource allocation away from investment in innovation and growth and toward shareholders, it is reasonable to consider if these buybacks create opportunity costs. Stock buybacks increase earnings per share, even in the wake of no earnings growth, driving up share price and benefitting the top executives who make these capital allocation decisions by increasing the value of their stock options. Pundits disagree on the impact that high levels of buybacks have on the economy, some arguing that stock buybacks come at the expense of strategic investment in innovation while others point to growth in private sector R&D in the past decade as evidence that firms have enough cash to innovate and repurchase shares simultaneously. In this paper, I empirically test whether share buybacks are suppressing corporate innovation in ways that control for widely observed declines in returns to R&D investment, and the endogenous relationship between stock buybacks and innovation. I provide strong evidence that share buybacks are, indeed, suppressing corporate innovation. This has enormous ramifications to the long term viability of American industry and to social justice.
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Paper is No Longer Available Online: Please contact the author(s).
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Does CSR Affect Managerial Myopia? The Case of Corporate R&D Strategy
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Author: Xiaoping Zhao, Shanghai Jiao Tong U.
Author: Feibo Shao, Missouri State U.
Author: Yue Song, Auburn U.
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This study askes a novel question regarding CSR’s influence on firm strategy and behaviors. Although CSR has been studied extensively, it is surprising that existent literature primarily views CSR as an outcome of managerial decision-making and that few studies examine whether CSR can influence firm strategy and behaviors. In this study, we address this research void by investigating the effects of CSR on R&D investments. Drawing from the risk-management perspective of CSR, we propose that, as managers have realized that CSR can reduce the risk of R&D investments, they are likely to invest more in R&D activities. Our empirical analyses are based on a sample of U.S. listed firms from 2001 to 2010. Using instrumental variables approach to account for endogeneity, we find empirical support for our arguments. Our results are also robust to several alternative empirical specifications. Our study contributes to the literature of CSR, as well as studies on managerial myopia.
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Paper is No Longer Available Online: Please contact the author(s).
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High- vs. Low-Performance Configurations of Stakeholder Management and Innovation Strategies
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Author: Naomi Haefner, U. of St. Gallen
Author: Maximilian Palmié, U. of St. Gallen
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Why do some firms benefit more from managing for stakeholders than others? Under which conditions can stakeholder management actually diminish firm performance? In order to improve our knowledge about these important questions, we consider a firm’s stakeholder management in conjunction with its innovation strategies, which also allows us to resolve the recent puzzle whether stakeholder management and innovation are complements or substitutes. Distinguishing between external and internal stakeholders and exploratory and exploitative innovation, we argue that firms will achieve high performance when they align their stakeholder management and innovation strategies and poor performance when they misalign these strategies. Combined primary survey and time-lagged secondary data from 222 European firms, analyzed by means of fuzzy set qualitative comparative analysis, strongly support our theoretical argument. Our findings also indicate that stakeholder management and innovation are complements in some configurations and substitutes in others. We discuss the implications of our findings for the academic literature and management practice.
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Paper is No Longer Available Online: Please contact the author(s).
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