Local Banking Development and the Use of Debt Financing by New Firms

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[Professor Marc Deloof of the University of Antwerp, Maurizio La Rocca of the Universita degli Studi della Calabria, and Tom Vanacker of Ghent University recently wrote an article in Entrepreneurship Theory and Practice entitled “Local banking development and the use of debt financing by new firms.” It is available for free through this link. Below,  Dr. Deloof explains the inspiration behind this research and reveals additional findings not included in the final publication.

ETP_72ppiRGB_powerpointBank debt represents a critical source of external financing for new firms. At the same time, attracting bank debt remains a major challenge for many new firms. In this study, we ask the following question: How does local banking development—taking into account the presence of different types of banks—affect the use of debt by new firms? We use a unique dataset covering data on 274,271 Italian new firms founded between 2007 and 2013. Italy provides an ideal setting to address this question as it is characterized by significant differences in local banking development, and all Italian firms, including new firms, are required to report detailed financial accounts.

Our results suggest that new firms have a better access to debt in provinces where there are more bank branches. Additionally, the cost of debt for new firms is lower in those provinces. Thus, more bank branches in a province not only make debt more accessible but also cheaper for new firms. Debt financing is also associated with a greater or similar likelihood of survival in provinces with high branch density, compared to provinces with low branch density. This result is inconsistent with the argument that firms receiving loans in provinces with a higher branch density tend to be of poorer quality.

However, we also find that the presence of more foreign banks in a province reduces access to bank debt for new firms. This finding offers an important counter to the often acclaimed beneficial effects of internationalization in banking sectors. Foreign banks “cream skim” whereby they lend only to the most profitable and established local firms. Foreign banks thus make it harder for domestic banks to lend to new firms if the foreign banks consistently take away more profitable business from the domestic banks.

Our results carry important practical implications for entrepreneurs and policy-makers. Particularly entrepreneurs that are setting up new firms that are highly dependent on external debt financing may benefit from selecting locations that are rich in terms of local and national banks. Policy-makers have often been concerned with the consolidation of the local banking system and its impact on the financing of informationally opaque firms, such as new firms. On the one hand, our results are encouraging, in that both branches of local banks and branches of national banks increase the availability of debt financing for new firms. However, when consolidation involves a general reduction in branch density of domestic (local and national) banks this is problematic for new firms. Moreover, our study suggests that a particular concern for policy-makers may be the increasing globalization in the banking industry, particularly in Europe where an increasing integration of financial markets at the E.U. level is actively promoted.

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Banker photo attributed to Free-Photos (CC)

How Should Paradox Be Studied?

[We’re pleased to welcome Dr. Gail T. Fairhurst of  the University of Cincinnati and Linda L. Putnam of the University of California, Santa Barbara. They recently published an article in Organizational Research Methods entitled, “An Integrative Methodology for Organizational Oppositions: Aligning Grounded Theory and Discourse Analysis,” which is currently free to read for a limited time. Below, Dr. Fairhurst reflects on the methodology and significance of this research:]

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Does the study of organizational paradox require its own unique methods?

As scholarship on paradox weaves itself ever more strongly into the fabric of the organizational sciences, we take the unusual position in our article that the answer is “yes.” Grounded theory methods have certainly done yeoman’s work in explaining this concept but, like all methods, it has its limitations. There is also a complexity to paradox due to its embeddedness in the daily actions and interactions of organizational life that are hard to capture. This complexity may explain the rampant definitional confusion in the literature over such related concepts as tensions, contradictions, and dialectics. It may explain the relative lack of attention to power dynamics in paradox research and the underutilized data from exhaustive interview or mixed method studies that could tell us something more about the origins of paradox and how it organizes life in organizations.

Our article offers paradox researchers a more refined method in the hopes of addressing some of these concerns. We propose an integrative methodology for studying paradox (and related oppositional phenomena) by aligning grounded theory techniques with the little “d” and big “D” orientations of organizational discourse analysis. This integrative methodology not only aids in identifying and determining various types of organizational oppositions and responses to them, but also fosters assessment of their potential power effects and micro organizing dynamics.

We should hasten to add that we provide an extended example explaining our methodology for the adventurous paradox researcher wishing to give it a try. We also conclude with a discussion of some possible new directions for using this approach, including the study of disorder and disequilibrium in organizations—and moving beyond just the study of paradox. We believe that grounded theory and organizational discourse analysis have some natural compatibilities that could serve other research areas as well. We very much hope to inspire paradox researchers to give this new methodology a try!

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Do Negotiating Teams have an Advantage Over Individuals?

[We’re pleased to welcome authors Joachim Hüffmeier, TU Dortmund University; Alfred Zerres, University of Amsterdam; Philipp Alexander Freund, Leuphana University Lüneburg; Klaus Backhaus,University of Münster; Roman Trötschel, Leuphana University Lüneburg; and Guido Hertel, University of Münster. They  recently published an article in the Journal of Management entitled “Strong or Weak Synergy? Revising the Assumption of Team-Related Advantages in Integrative Negotiations,” which is currently free to read for a limited time. Below, they briefly discuss the motivation and potential impact of this research.]

JOM_44.1_72ppiRGB_powerpointQ: What motivated you to pursue this research?

When organizations face important and complex negotiations, they usually send teams rather than individuals to the negotiation table because teams are expected to provide team-related beneficial negotiation processes (i.e., higher information processing and problem solving capabilities in teams) and, as a consequence, generate superior economic outcomes. In negotiation research, the assumption of team-related processes as important mechanism behind superior economic outcomes of teams has been theoretically proposed for 20 years – but it has never been empirically tested.

With our research we wanted to challenge this predominant view because an emerging discussion in the literature started to conceptualize integrative negotiation as a so-called “disjunctive” task. For such tasks, one competent person is sufficient to identify the correct solution, for instance by detecting the integrative potential of a negotiation (i.e., revealing that the interests of the negotiation parties are reconcilable to some degree). If integrative negotiations are in fact disjunctive tasks, the often-assumed, beneficial processes in negotiation teams might not be necessary to explain superior economic outcomes of teams as compared to individual negotiators. Instead, we argue that advantages of teams are a matter of statistical aggregation: Because in team negotiations more negotiators are present, the chance of having a very competent negotiator at the table who detects the integrative potential is simply higher than in individual negotiations.

Q: In what way is your research innovative, and how do you think it will impact the field?

Our study clarifies the process underlying team advantages in integrative negotiations, a process that has long been theoretically discussed, but has not been empirically demonstrated for more than 20 years (i.e., an individual member asking interest-related questions, which reveal the existence of the negotiation’s integrative potential). In doing so, we show that negotiating teams merely achieve weak synergy (a performance better than the average team member would achieve alone) but no strong synergy (a team performance that exceeds the performance that the best team member would achieve alone). By introducing this strong synergy comparison, we also introduce a new approach to compare team and individual-level performance to the field of negotiation research, which – as we hope – may become a new standard for future team negotiation studies. Further, we identify interest-related questions as the responsible individual-level process behind the team advantage in integrative negotiations – a behaviour that does not require a team context but can also be applied by competent individuals.

Q: What advice would you give to new scholars and incoming researchers in this particular field of study?

We think that a lot can be done to help negotiating teams to live up to their full potential. Studying how these teams can be instructed and coached to achieve strong synergy may be a good next step for new scholars in this field.

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Confronting the Digital: Doing Ethnography in Modern Organizational Settings

[We’re pleased to welcome Dr. A. Onajomo Akemu and Dr. Samer Abdelnour. Dr. Akemu recently published a guest editorial in Organizational Research Methods entitled, “Confronting the Digital: Doing Ethnography in Modern Organizational Settings,” which is currently free to read for a limited time. Below, Dr. Akemu reflects on the significance of the articles featured in this issue in the context of today’s political environment:]

ORM_72ppiRGB_powerpointWhat motivated you to pursue this research?

We were motivated by practical challenges we faced during our ethnographic research. Work in modern organizations is undertaken using computer-mediated means, in ways that are unobservable using conventional fieldwork approaches such as interviewing and participant observation. As ethnographers, we know that the best ethnographic studies engage scholarly audiences when they paint credible, authentic accounts of organizational life. Our inability to directly observe our informants’ digitally-mediated work challenged us to reconsider how we follow the people and processes we study.

As we began exploring different ways of improving how we represent our informants’ lives, we were confronted with another challenge: what we observed in person was different than what we could “observe” digitally. We thus sought to write a paper to make sense of our experiences, to support researchers facing similar challenges, and offer suggestions for designing and undertaking fieldwork that crosses physical and digital sites.

In what ways is your research innovative, and how do you think it will impact the field?

Our research is innovative in the way we relate emergent theory about the unique attributes of digital artifacts (such as email and digital documents) to the enduring concerns of ethnography: authenticity, presence, and representation of informants. Though there is a growing body of literature on digital ethnography or netnography, we are not aware of any methods paper that explicitly problematizes the differences between informants’ physical and digital data, especially within organizations. We articulate these differences, identify two modes in which researchers can be co-present with informants, and then offer practical guidelines on how to improve authenticity in ethnographic studies. We hope that organizational ethnographers will recognize similar challenges in their own research, expand upon our proposals, and identify additional modes of being co-present with informants.

What is the most important/influential piece of scholarship you’ve read in the last year?

The most influential paper we have read in the last year is an article by Gail Whiteman and William Cooper in the Academy of Management Discoveries (Whiteman, G., & Cooper, W. H. (2016). Decoupling rape. Academy of Management Discoveries, 2(2), 115–154). We liked the paper for at least three reasons. First, Whiteman and Cooper’s article is substantively and methodologically rich—an exemplar of qualitative research and abductive theorizing. Drawing on findings from a single site ethnography, Whiteman and Cooper advance our understanding of corporate social irresponsibility as not simply located at the level of an individual firm, but collectively enabled by systemic decoupling within a field of organizational actors. Second, though the central observation of the paper—the exploitation of vulnerable populations—is heartbreaking, the authors achieve a fine balance between narrative power and theoretical abstraction. Finally, the paper is well crafted and presented. By creatively using videos, pictures and sound in the paper, Whiteman and Cooper situate themselves at the heart of the research project while richly describing their ethnographic context to the reader.

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Job Crafting as Reaction to Organizational Change

arrows-2027262_960_720We’re pleased to welcome authors Dr. Marlene Walk of Indiana University-Purdue University and Dr. Femida Handy of the University of Pennsylvania. They recently published an article in the Journal of Applied Behavioral Science entitled “Job Crafting as Reaction to Organizational Change,” which is currently free to read for a limited time. Below, Dr. Walk briefly describes the research and its significance.

JAB_72ppiRGB_powerpointWere there any specific external events—political, social, or economic—that influenced your decision to pursue this research?

The organizational change we study originated in an external event; the implementation of inclusive education in the German education sector. We focus on one state, Lower Saxony, where the implementation started relatively late as compared to others.

   In what ways is your research innovative, and how do you think it will impact the field?

This particular study is innovative as it particularly focuses on proactivity during organizational change. Whereas proactivity has been identified as potential reaction for change, there is not much empirical research available. We identify job crafting as positive and proactive reaction to change in a previous qualitative study and hypothesize in this work how job crafting is related to burnout and job satisfaction during organizational change.

 What is the most important/ influential piece of scholarship you’ve read in the last year?

Definitely the work by Shaul Oreg and his colleagues Jean Bartunek, Gayoung Lee, and Boram Do, who developed an affect-based model of recipients’ responses to organizational change events, published in 2018 in Academy of Management Review. This paper served as one of the frameworks for our publications.

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Arrow Photo attributed to Free-Photos (CC)

How do Quality of Teaching, Assessment and Feedback Drive Undergraduate Course Satisfaction in UK Business Schools?

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univ[Dylan Sutherland of Durham University Business School, Philip Warwick of Durham University Business School, John Anderson of the University of Northern Iowa, and Mark Learmonth of Durham University Business School recently published an article in the Journal of Management Education. We are pleased to feature their article, “How do Quality of Teaching, Assessment and Feedback Drive Undergraduate Course Satisfaction in UK Business Schools? A Comparative Analysis with Non-Business School Courses using the UK National Student Survey,” and are excited to announce that the article will be free to access on our site for a limited time.  Below they reveal further insights regarding the inspiration behind the research, as well as additional information not included in the final publication.]

JME_72ppiRGB_powerpointOur research aimed to understand the most significant issues which contribute to student satisfaction. We also hoped to identify if there are any differences between students in business schools and those studying other subjects. We were motivated to look at this issue by the importance placed on student satisfaction by UK Higher Education System (many of the university and subject ranking tables place a significant weighting on student satisfaction scores).

We found that good teaching remains the most important driver of satisfaction, along with being well-organised (smooth running courses are very important to students). We also detected a noticeable tendency among business students to instrumentalism. That is, they focus on results and achieving those results, like a good job at the end of the course, rather than studying for the love of the subject. We think instrumentalism is different to adopting a strategic learning style, because of this emphasis on the end result. We finish the article by considering the implications of this work. With increasing tuition fees and the imperative of getting a good job at the end of the course, it seems likely that a wider range of students will adopt an instrumental approach in the future. Business students may be the forerunners.

 

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Lecture Hall Photo attributed to Free-Photos (CC)

How are Management Educators Helping Students to Prepare For Turbulent Times Ahead?

[Professors Lisa Anderson of the University of Liverpool, Paul Hibbert of the University of St Andrews, Katy Mason of Lancaster University Management School, and Christine Rivers of the University of Surrey recently published a research article in the Journal of Management Education which is entitled “Management Education in Turbulent Times”. We are delighted to welcome them as contributors, and their article will be free to read for a limited time. Below they reveal the inspiration behind their research.]

JME_72ppiRGB_powerpointWhat motivated you to pursue this work?

We are all heavily involved with and committed to the British Academy of Management’s Management Education and Knowledge project. The MKE project is an academy-wide initiative that aims to raise the profile, standing and quality of research into management knowledge, knowing, education and learning. This was a great opportunity to put together a set of papers that addressed some of the key issues that are being faced by management educators and business schools and to learn about the ways in which academics are encouraging management students to learn about and deal with the turbulent times currently faced by organisations and managers. We wanted to discover new ideas that were out there both in terms of framing and addressing the issues.

Were there any specific external events—political, social, or economic—that influenced your decision to pursue this research?

Yes! We were struck by the critical commentaries of Higher Education, examining the costs associated with it and the profit to be made by it. There is also a new regime of regulation of teaching and graduate outcomes in the UK that is forcing universities and business schools to examine their ‘offer’ to students and this means that we may view our work through a different set of lenses. We aimed to prompt an examination of how management education can make a difference against the backdrop of our turbulent times, characterised by extreme political views that are creating division and acrimony, the widening gap between rich and poor and the instability of our natural environment. Issues such as the election of President Trump, the Brexit vote and the Syrian refugee crisis had an impact on our decision to work together on this.

In what ways is your research innovative, and how do you think it will impact the field?

We hope that our editorial and the papers in the section will encourage management scholars to consider the way in which they teach their students about our changing times and management’s place and responsibility within them. The question we initially posed was, As educators, what should we be doing, and helping future managers learn how to do, to deal with turbulent times? We strongly believe that societal change can be driven through impactful research and teaching in business schools, by using management theory to understand the nature of turbulence, develop new curricula and ways of teaching and learning and to develop adaptive, reflexive and resilient managers who can engage with knowledge to find new ways of framing and addressing the wicked problems of our time. We realise this is all quite aspirational but we think that can all sometimes get too focused in on the detail of our teaching and forget the wider purpose of what we do. We hope our contribution encourages colleagues to think about how their practice can change the way managers think and interact with society and to be aware of the impact we might have.

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