Big-Science Organizations as Lead Users: A Case Study of CERN

switzerland-93275_1920[We’re pleased to welcome authors Poul Andersen of Aalborg University, Denmark and Susanne Åberg of Uppsala University, Sweden. Andersen and Åberg recently published an article in the Competition and Change entitled “Big-science organizations as lead users: A case study of CERN,” which is currently free to read for a limited time. Below, Andersen reflects on the inspiration for conducting this research:]

ccha_21_3.coverWhat kind of customer is CERN – the leading research organization for nuclear research in Europe – and what can a supplier learn from collaborating with them? In this paper we pursue questions that was originally raised by Susanne Åberg – one of the authors – during her study of collaboration between CERN and Swedish suppliers (see Åberg, S. (2013). Science in business interaction: A study of the collaboration between CERN and Swedish companies (Doctoral dissertation, Företagsekonomiska institutionen, Uppsala Universitet. The dissertation can be downloaded, using this link:

In the paper, forthcoming in Competition and Change, we pose the question: What characterizes interacting with big-science organizations as lead users and how does it impact on suppliers’ potential innovation benefits?

We depart from Von Hippel’s Lead user concept to scrutinize user-supplier interaction and learning. We find that the lead-userness of CERN differs from other lead users on a number of vital points. Big-science organizations (BSOs), such as CERN represent a special breed of lead users as their demands are not necessarily the avant-garde of a coming market. Yet, they may be leading in other ways: they provide a valuable test bed for suppliers, because they are pushing the boundaries of technological capacities and thus challenging suppliers’ talents. Also, they are prestigious collaboration partners that help producers to be acknowledged as being at the technology forefront. Moreover, they are often deeply engaged in their suppliers’ manufacturing and development activities, which is seen as a characteristic of the customer-active paradigm, upon which the lead user notion builds. This paper investigates whether and how interacting with CERN concerning their development needs may contribute to suppliers’ innovation.

We believe that both managers and designers of innovation policy may learn from our study. Viewing CERN and other BSOs as lead users change the traditional science-push perspective on knowledge dissemination from leading science. Managers considering engaging with CERN and other BSOs can also learn more about potential benefits and challenges from engaging with customers such as CERN.

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Can Unions, by Themselves, Help Curb CEO Pay?

[We’re pleased to welcome author Muhammad Umar Boodoo of the London School of Economics and Political Science. Boodoo recently published an article in the ILR Review entitled “Do heavily-unionized companies compensate their CEOs less in periods of financial distress?,” which is currently free to read for a limited time. Below, Boodoo reflects on the inspiration for conducting this research:]

ILR_72ppiRGB_powerpointWord on the street is that CEO pay is too high, and more must be done to curb it and reduce inequalities in society.  This topic is quite timely given that the World is still recovering from the effects of the financial meltdown.  The topic of CEO pay is fascinating in and of itself: why is it that some research find that CEO pay is not actually linked to corporate performance?  Why do CEOs still (seem to) earn sizeable bonuses and options when their companies are performing poorly?  These questions remain intriguing, and still attract the interest of various groups in society.  The primary question I ask in my paper is whether labor unions have any influence on CEO pay.  Unions are known to compress pay; they stand for fairness and strive to mitigate the inequalities in their workplaces and in society in general.  Some research also suggest that unions are bad for company profitability.  Is it possible, therefore, that unions reduce profits of companies and/or put pressure on compensation committees to reduce the pay of CEOs in companies where they are organised?

My paper finds that companies which are more heavily unionized tend to pay their CEOs higher salaries and pension benefits.  The same CEOs do not receive lower bonuses or lower options.  In other words, CEOs of densely-unionized companies get paid higher than their counterparts who manage low-unionized companies.  The first result about salaries and pension benefits is not such a surprise, considering that unions do tend to prefer fixed incomes over variable incomes for their own members, which may then also be the case for their management and CEO.  What may be a surprise is that unions do not reduce the profitability of companies, and do not reduce the sensitivity of CEO bonuses and options to corporate performance and market valuation of firms.  In other words, unions do not affect bonuses, options and restricted units of CEO pay.

While the results of this paper are based during the financial crisis, there are a few questions that need to be answered, perhaps in a more “normal” period.  If unions are not the answer to curbing CEO pay, then what can help?  Do we need employee representation on Boards of Directors so that there are more checks and balances?  Should we even be interested in curbing CEO pay, or should we rather focus on closing tax loopholes that allow CEOs (and others) to port money overseas to tax havens?  More research is also warranted on voluntary sorting of CEOs into companies.  It is plausible that older, more mature, experienced CEOs sort themselves into companies that are heavily unionized, while younger CEOs flock more towards lower-unionized firms.  Older CEOs may also be more risk-averse and may prefer higher fixed incomes and security.  They may not care too much about performance-related pay such as bonuses and equity compensation, and may in fact support rather than thwart unions.  These are plausible research questions that need further investigation.

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Is It Better to Govern Managers Via Agency or Stewardship?

[We’re pleased to welcome author Albert E. James of Dalhousie University, Canada. James recently published an article in the Family Business Review entitled “Is It Better to Govern Managers via Agency or Stewardship? Examining Asymmetries by Family Versus Nonfamily Affiliation,” which is currently free to read for a limited time. Below, James reflects on the inspiration for conducting this research:]

fbra_30_2.coverThe research is based upon the first author’s dissertation. It is the result of his effort to understand the many different behaviours and outcomes that he witnessed during his 20-year career working as a non-family employee for various family firms—particularly his desire to understand why and how some families’ businesses seem to be more successful than others. It is also the result of a PhD supervisor’s determination to see her student succeed as an academic and her willingness to let him follow his passion and research questions.

The most challenging aspect of this process has been finding the way to tell the story of the research project. What is published here is the result of many re-writes, iterations, and direction changes. It was challenging to adapt concepts and measures to the particularities of the family business field. And it was challenging to make full use of the reviewers’ and editor’s advice. All in all, though, the challenges were an opportunity for a new academic to learn many things about rigorous research and publishing. Without the patient work, extensive knowledge and leadership of the co-authors, none of the challenges would have been overcome.

One of the study’s most surprising findings is the high level of positive work outcomes exhibited by both the family and non-family managers in the sample. Sometimes family business managers—of either type—are portrayed with at least a hint of negativity. Those in our sample, however, tended to score highly on behaviours and attitudes that are normally considered beneficial to organizations (i.e., job performance, organizational identification and affective commitment). As for the anticipated impact of our research, we hope that it will become known for providing empirical evidence that challenges commonly held assumptions regarding the attitudes and behaviours exhibited by non-family versus family managers and the mechanisms by which each group should be governed.

The advice I would give new scholars is to be willing to re-work the story you wanted to tell to your chosen audience. No matter how interesting you believe your research to be, you have to be willing to find the right way to tell the story. You need to tell the story in a way that fits your audience’s conversations. It is not easy to let go of parts of your research that were highly motivational for you. As hard as it is upon a first read, don’t take the reviewer and editor comments personally. Instead, take your time with the comments, let your reactions cool, and then find the nuggets and gems within them. Don’t be afraid to ask for help. This research started off as a study of non-family manager turnover intentions and became a story of the governance mechanisms used in family businesses. It is important to keep your eye on your end goal. If you can’t tell the entire story this time around, tell what you can, save the rest, add what you learned from the current round, and mix it into your next project.

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Case in Point: Introducing the Performance Review System to Students

[The following post is re-blogged from SAGE Connection. Please click here to view the original article.]

In most companies, performance appraisals (PA) are a common practice used to evaluate overall employee performance while monitoring and fostering the success of both the employee and the company as a whole. This month’s installment of Case in Point, a blog series drawn from SAGE Business Cases and containing insights from thought leaders in business and management, explores a case study written by Dr. David Kimball that follows one human resource director’s journey to construct a valid PA and performance management system (PMS). The following is an interview with Dr. Kimball as he explains the benefits of teaching performance review systems to students in a classroom setting:

  1. The case you wrote describes the implementation of a performance appraisal system at a company that had never had one in place before. In your opinion, what are the top three takeaways from this case for those learning about implementing a performance review system for the first time?

The top takeaway is to consider performance appraisals from the ground up. The student is able to think of the true goals of the PA. What does the company really want to accomplish with the implementation of a PA process?

The second takeaway is for the student to consider what an employee can learn from the PA process. What areas of a job are reviewed in the performance review? In the case, students can assess the areas of work that are the human resource director’s strengths.  Where are  her weaknesses?

The third takeaway is for students to design and complete a PA Form. Students can either use the form in the case or practice designing their own form. Students can also complete the form for this particular director’s performance.

  1. What kind of information would you expect students to bring to this case study in order to accomplish the assignment?

Most students have not been in a management position where they administer a PA. So, the case allows the student to experience what this individual has to accomplish by creating and administering a performance appraisal system. The student in class is able to role play being the human resource director in a performance appraisal situation.

  1. How are problem-based case studies particularly helpful in teaching real-world management issues in the classroom?

Student engagement in class increases dramatically during case discussions.  This case is intentionally short to allow students to read the case in class, discuss it within teams during class, and present their findings in class. Students like to participate in Skill-Building cases that allow them to develop their own skills as managers.

Learn more by reading the full case study, Why Do We Conduct Performance Appraisals? Jennee LeBeau and the Case of the Missing Performance Appraisal System  from SAGE Business Cases, open to the public for a limited time. To learn more about SAGE Business Cases and to find out how to submit a case to the collection, please contact Rachel Taliaferro, Associate Editor:

Read last month’s case in point, A For-Profit Model for Social Entrepreneurship.

Dr. David Kimball, co-author of Sport Management: Principles, Applications and Skills and  Entrepreneurial New Venture Skills

Family Firms and the Impact of Incentive Compensation

[We’re pleased to welcome authors James Chrisman of Mississippi State University, Srikant Devaraj of Ball State University, and Pankaj Patel of Villanova University. They recently published an article in Family Business Review entitled “The Impact of Incentive Compensation on Labor Productivity in Family and Nonfamily Firms.” From Chrisman, Devaraj, and Patel:]

 Family firms are thought to face a managerial capacity constraint owing to the preference of hFBR_72ppiRGB_powerpoint.jpgigh-ability job candidates from outside the family to seek employment with non-family firms, which usually offer higher compensation and more lucrative career opportunities. In our paper, we theorize that incentive compensation can ease this constraint by signaling the attractiveness of working in family firms, thereby increasing the average ability of a family firm’s workforce. We therefore hypothesize that incentive compensation will reduce the productivity gap between family firms and non-family firms.

We are interested in this topic because much of the focus in the literature on non-family employees in family firms deals with issues associated with alignment of interests after workers have been hired. Few studies deal with the pre-employment problem of adverse selection, which is primarily (but not entirely) an issue of worker ability rather than worker effort. We also wanted to emphasize that if job candidates seek employment with firms that are compatible with their self-interest, adverse selection can exist even in the absence of an opportunistic pursuit of self-interest (or in the presence of stewardship motives).

Bounded rationality and information asymmetry make judging the ability of potential employees difficult for the owner-managers of both family firms and non-family firms (and even for the potential employees themselves). However, when the labor pool available to family firms becomes attenuated because high-ability workers self-sort according to a preference to work in non-family firms, the adverse selection problem facing family owner-managers becomes even greater.

Incentive compensation will be more valuable for high-ability job candidates than it will for low-ability job candidates because the former are most likely to benefit from it. Thus, incentive compensation signals performance will be rewarded, which may help alleviate the adverse selection problem facing family firms. Our empirical analysis of a matched sample of over 200,000 small and medium-sized firms obtained from a U.S. Census survey supports our contentions. Findings indicate that the productivity of family firms that provide incentive compensation increases at a greater rate than the productivity of non-family firms that provide incentive compensation (compared, respectively, with family and non-family firms that do not offer incentive compensation).

We hope that our paper will inspire further work on the adverse selection problem facing family firms. We also hope that our paper will lead researchers to focus more on how bounded rationality and information asymmetry, rather than simply opportunism or the lack thereof, influences the behavior and performance of non-family employees in family versus non-family firms.  In this respect, we suggest that the presence of bounded rationality and information asymmetry make incentive compensation and monitoring valuable tools in family firms regardless of the composition or proclivities to behave opportunistically of the workforce.

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Do Reputation Rankings Influence the Perception of Firms?

9671129839_5dd00509e9_z[We’re pleased to welcome Michael Barnett of Rutgers University. Michael recently published an article in Business & Society with co-author Shovi Leih entitled “Sorry to (Not) Burst Your Bubble: The Influence of Reputation Rankings on Perceptions of Firms.”]

I became interested in the topic of how reputation rankings affect individual perceptions of firms when I noticed all the efforts that business schools put into their rankings and the effects that these rankings have on their stakeholders. Potential students, faculty, staff, and alumni can’t really tell what goes on across business schools on a day-to-day basis, and so they must rely on these reputation rankings for insights. Yet, the corporate reputation literature assumes that what one thinks of a particular organization is based on the actions of that organization — even though most of us most of the time have no clue. As a result, in many if not most schools, rankings now drive actions, perhaps more so than actions drive rankings.

Relative to corporations, what information do people rely on to form their views? Reputation rankings  from BAS CoverBusinessweek, the Financial Times, Fortune, US News & World Report, and other such sources have proliferated. Researchers have voiced concerns about reputation rankings; particularly the methodologies used to determine them. In this article, though, we are concerned not with the methods but with the influence of reputation rankings. How do people use rankings when forming their views of a firm? Do rankings affect or overshadow other information that one may have about a firm?

We isolate the effects of reputation rankings on individuals’ perceptions of a firm. Indeed, we find that perceptions are influenced by reputation rankings, particularly when these rankings are negative and congruent with other information about the firm. These findings suggest the need to develop a richer perspective on reputation. Corporate reputation has long been conceptualized as an aggregation of individual perceptions, but it also needs to be understood as a driver of individual perceptions. Greater focus on this latter aspect may help to explain loose linkages between a firm’s characteristics and its reputation. As a result of the influence of reputation rankings, a firm’s reputation may change even if its characteristics remain constant and, conversely, changes in a firm’s characteristics may be slow to produce change in its reputation. Additional insights into the information that individuals do and do not attend to in revising their perceptions of a firm can help better explain the connection between a firm’s behavior and its reputation and thus deepen understanding of how to effectively manage reputation.

The abstract for the article:

We measure the influence of reputation rankings on individuals’ perceptions of firms. Through experimental design, we vary whether and how participants are exposed to a reputation ranking alongside other information about a firm. We find that rankings influence perceptions when they are negative and congruent with other information about the firm. These findings help explain how a firm’s reputation can change even if its characteristics remain constant and why change in a firm’s characteristics can be slow to produce change in its reputation.

You can read “Sorry to (Not) Burst Your Bubble: The Influence of Reputation Rankings on Perceptions of Firms” from Business & Society free for the next two weeks by clicking here. Want to know all about the latest research from Business & SocietyClick here to sign up for e-alerts!

*Skyscraper image attributed to Mike H (CC)

Management Practices: Complementarity is the Key

[We’re pleased to welcome Arthur Grimes of Motu Economic and Policy Research and University 16296308759_8149d18c99_zof Auckland. Arthur recently published an article in ILR Review entitled “The ‘Suite’ Smell of Success: Personnel Practices and Firm Performance” with co-author Richard Fabling of Motu Economic and Policy Research.]

Throughout the world, we see firms in the same industry in the same country having very different productivity outcomes. We have long been fascinated in why this is the case, and whether management can do anything to place their firm in the top quartile of performers within their industry.

It turns out that management practices are key to firms’ productivity outcomes. But the key is not a simplistic application of performance pay or any other single management practice to the firm; a holistic approach is required. Recent analysis ILR_72ppiRGB_powerpointbased on longitudinal data for New Zealand firms across all sectors of the economy, shows that having in place a suite of complementary high-performance management practices can raise productivity by over 10% for firms that are in the top quartile of management practices. This is the case for firms in manufacturing, services and other sectors. The suite of management practices includes having processes for staff consultation, clear firm values, performance reviews coupled with performance pay, room for autonomous staff decision-making and staff training opportunities.  What this means for firms is that there are no ‘magic-bullet’ management practices that can be introduced quickly to transform most firms. Management need to introduce a comprehensive suite of management practices if they wish to raise their productivity to be in the top rung of firms.

The abstract from the paper:

The authors use a panel of more than 1,500 New Zealand firms, from a diverse range of industries, to examine how the adoption of human resource management (HRM) practices affects firm performance. The panel is based on managerial responses to mandatory surveys of management practices in 2001 and 2005 administered by the national statistical office, linked to objective longitudinal firm performance data. The authors find that, after controlling for time-invariant firm characteristics and changes in a wide range of business practices and firm developments, a suite of general HRM practices has a positive impact on firm labor and multifactor productivity. Conversely, these practices tend to have no effect on profitability, in part because the adoption of performance pay systems raises average wages in the firm.

You can read “The ‘Suite’ Smell of Success: Personnel Practices and Firm Performance” from ILR Review free for the next two weeks by clicking here. Want to know all about the latest research from ILR ReviewClick here to sign up for e-alerts!

*Meeting image credited to Ministerie van Buitenlandse Zaken (CC)