When Does Corporate Social Performance Pay for International Firms?

[We’re pleased to welcome author Alan Muller of the University of Groningen. Dr. Muller recently published an article in Business & Society entitled “When Does Corporate Social Performance Pay for International Firms?,” which is currently free to read for a limited time. Below, Dr. Muller reflects on the impact and innovations of this research:]

What motivated you to pursue this research?

I was inspired to pursue this research because I wanted to better integrate the literature on corporate social performance and internationalization. There is a rich body of research on the link between social performance and financial performance, and an equally rich body of research on the link between internationalization and financial performance. Yet thus far the two had not been connected in any meaningful way. This paper seemed like a great opportunity to link these two streams.

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

The financial crisis that began in 2008 had profound consequences for both corporate social performance and internationalization. Society’s demands for greater responsibility grew louder while it became painfully clear that international success should not be taken for granted. In a way, the crisis intensified scrutiny of both realms, and led to increased recognition that we need to attend to both the costs as well as the (highly uncertain) benefits associated with both. I began thinking that the costs and benefits of both are likely mutually contingent and unequally distributed.

What has been the most challenging aspect of conducting your research? Were there any surprising findings?

The challenge is not so much in the empirics as it is in the positioning of the research. Given the split between the social responsibility literature and the international business literature, the question is: to which audience should the paper be aimed at? To be honest, I positioned it initially as a contribution to the international business literature, but in hindsight it fits better as a business and society paper.

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

I hope it will function as a bridge between the two bodies of scholarship, and spur more rigorous dialogue with the aim of linking the two more systematically. Because in this day and age, I do not know how the performance effects of social performance and internationalization could be conceptualized in isolation. I also incorporated a few robust analytical techniques that I hope will inspire others.

What did not make it into your published manuscript that you would like to share with us?

I initially had a role in mind for firms’ consumer orientation, because I expected that the legitimacy effects of social performance would work differently for consumer-oriented industries. I incorporated consumer orientation as an additional moderator to an already moderated U-shaped curve. My findings indicated that consumer-oriented firms had even more difficulty benefiting from their social performance internationally, which made sense to me. However, all my friendly reviewers told me that a four-way interaction was a bridge too far!

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

Follow your passion! But remember that your story, no matter how inspiring to you, will not sell itself. Be clear who is in the audience you are speaking to, and how your story matters for them.

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

This is difficult, but probably “The Role of Short-Termism and Uncertainty Avoidance in Organizational Inaction on Climate Change”, by Slawinski, Pinkse, Busch, & Banerjee (Business & Society, 2017): https://doi.org/10.1177%2F0007650315576136

A close second would be “Do‐no‐harm versus do‐good social responsibility: Attributional thinking and the liability of foreignness”, by Crilly, Na, and Jiang (Strategic Management Journal, 2016): https://doi.org/10.1002/smj.2388

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Global Banks or Global Investors? The Case of European Debt Flows

euro-1974711_1920[We’re pleased to welcome author Robert Sweeney of the University of Leeds. He recently published an article in Competition and Change entitledGlobal banks or global investors? The case of European debt flows,” which is currently free to read for a limited time. Below, Sweeney reflects on the inspiration for conducting this research:]

ccha_21_3.coverWhat motivated you to pursue this research?

It was part of my PhD. Initially I was examining capital flows in Europe from conventional perspectives and critiquing those approaches. This included a focus on unit labour costs, fiscal imbalances, and so on. I found there was already a quite large body of existing research that critically examined those accounts. That led me to consider more finanical-based explanations of capital flows. Having examined the data I felt that the emphasis on banks was unwarranted. Upon further investigation I became convinced that institutional investors are the driving force in capital markets in general, and debt-based capital flows in Europe in particular.

What has been the most challenging aspect of conducting your research? Were there any surprising findings?

The most challenging part of the research was finding the data. The paper relies on a variety of sources, many of which are pieced together by sifting through consultancy and industry reports. The most surprising thing about the paper was that the centrality of institutional investors in European debt flows had not been established previously. As the article is being published almost 10 years have passed since the crisis broke. A lot has been written on capital flows in Europe and much of existing research has built on or is some variant of previous work. Of course my work doesn’t reinvent the wheel, but I was surprised that nobody had taken my approach before.

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

Be open minded. Don´t get too wedded to any particular theoretical framework whether you´re part of the consensus or a dissenting voice. Look at the data and see if a certain analytical framework is appropriate. Don´t try to shoehorn a theoretical approach in a context where it is not empircally supported. It can be difficult to realise that you were wrong about something. Rather than trying to defend your position to the hilt, see flaws in your argument as opportunities to learn something new. State your argument as clearly as possible. That sounds simple but all too often in social science research arguments are couched in unnecessary complexity. Economics rightly gets a hard time for mathematical rigour over substance, but the problem generalises across the social sciences. Rather than using complex mathematical constructions, research in other fields too often clouds its arguements in obscurantist language. So if you are reading an article and find it difficult to unpack, it´s probably not your fault.

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Euro photo attributed to NikolayFrolochkin. (CC)

The Internationalization of Commercial Real Estate Markets in France and Germany

[We’re pleased to welcome authors Gertjan Wijburg and Manuel B. Aalbers of KU Leuven/University of Leuven, Belgium. They recently published an article in Competition and Change entitledThe internationalization of commercial real estate markets in France and Germany,” which is currently free to read for a limited time. Below, Wijburg and Aalbers reflect on the inspiration for conducting this research:]

ccha_21_3.coverPolitical economists rarely look at real estate markets. Our research group at the KU Leuven, named “The Real Estate/Financial Complex” and funded by the European Research Council, studies the relationships between finance, real estate and the state in a range of countries, including France and Germany, the two typical examples of Continental European capitalist countries. In this paper, we look into the commercial investment markets of these countries. Fieldwork and data collection have been conducted during two extended research stays in Frankfurt am Main and Paris.

Our work is deeply informed by our empirical research and interactions with real estate and finance professionals. The challenging aspect of our work was to get wider access to real estate and finance professionals in Frankfurt am Main and Paris, two global financial centres, and interviewing these specialists, often in prime real estate locations. Commercial real estate investors have their own account of processes of internationalization in their daily work experiences, which are central to our article.

Our results show how the French state perceived the arrival of foreign investors in the 1990s as a potential threat to the French property companies and implemented a new tax regime that allowed these companies to launch publicly listed real estate vehicles known as a Société d’Investissement Immobilier Cotée (SIIC). As such, the French property sector could attract foreign capital and increase liquidity, while enjoying new tax advantages. The rise of the SIICs was a major driver of the French investment boom of 2003–2007. In 2007, another major reform followed: the new tax regime of Organisme de Placement en Immobilier (OPCI) would gradually replace the old one of SCPI and transform French investment funds into ‘hybrids’ that could invest both in listed and non-listed real estate, with investments from not only institutional investors but also the general public.

Due to the shocks of German reunification, the momentum for internationalization of commercial real estate arrived relatively late. Major reforms in the German property sector were not implemented in the 2000s. Between 2003 and 2007, American private equity and hedge funds entered the market and invested unprecedented amounts of capital in the German property sector. However, the traditionally dominant non-listed investment funds in Germany also responded. The German Spezialfonds were able to invest heavily because they collected capital from pension funds and insurance companies. In the aftermath of the GFC, the German state has introduced a new Investment Code to make the non-listed real estate sector stronger. Contrary to France, the introduction of the G-REIT in 2007 has so far made little difference; the German preference for non-listed real estate remains strong.

We hope that our work inspires other researchers to conduct similar projects. We recommend researchers working in related fields to participate in real estate fairs and congresses to meet and encounter potential interviewees.

 

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Why Some Firms Internationalize Better Than Others

Editor’s note: We are pleased to welcome Chris Graves of the University of Adelaide in Australia. His paper “An Empirical Analysis of the Effect of Internationalization on the Performance of Unlisted Family and Nonfamily Firms in Australia,” co-authored by Yuan George Shan of the University of Adelaide, is forthcoming in Family Business Review and now available in the journal’s OnlineFirst section.

This FBR article was motivated by the growing body of research comparing the performance of listed family and non-family controlled firms. Coming from Australia, where the number of listed family-controlled enterprises is low (only ~17 percent of all listed firms), I was interested in ascertaining whether the performance differences between listed family and non-family controlled firms is generalisable to unlisted firms.

pullquoteHence the first objective of this FBR article is to examine whether the performance of unlisted family firms is similar / different to that of their non-family counterparts (many of which are single owner-managed firms). Also, back in 2006, I completed my PhD titled ‘Venturing Beyond the Backyard: An Examination of the Internationalisation Process of Australian SME Family-Owned Manufacturing Enterprises’. This study highlighted that family firms lag behind their non-family counterparts when it comes to venturing overseas. Subsequent to this study, I’ve been undertaking further research on possible reasons for this, one of which is the second focus of this FBR article. Specifically, what effect does internationalisation have on the financial performance of family firms, and is this effect similar / different to that experienced by their non-family counterparts?

fbr_coverInterestingly, from an agency theory perspective (the dominant theory used to explain performance differences amongst listed firms), there should be little difference in performance amongst unlisted family and non-family firms, as both firms are likely to experience low levels of agency costs because of the high degree of overlap between ownership and management. Despite this, the findings reported in this FBR article highlight that family firms achieve a significantly higher Return on Assets (ROA) compared to their non-family counterparts. Further analysis revealed that this was due to the fact that family firms are able to achieve a higher profit margin, that is, keep their expenses relative to sales revenue lower compared to their non-family counterparts.

The other interesting finding reported in this FBR article is that family firms financially outperform their non-family counterparts when they expand internationally. Overall, growing overseas had a significant negative effect on ROA for firms in general, an issue that was not observed with family firms.

How do I see this study influencing future research and/or practice? For family business owners and advisors:

1. Although prior research suggests that family firms are less likely to venture into foreign markets (Fernández & Nieto, 2005; Graves & Thomas, 2004), based on the results in this study, there are no reasons on performance grounds why they should not be encouraged to do so.

2. Don’t underestimate the value that comes from a stewardship style of leadership. This approach to leadership may enable the firm to develop competencies not available to other firms and consequently achieve superior performance (such as lower profit margins and therefore a superior ROA). This includes building a group of talented, motivated and loyal employees who help keep costs and bureaucracy down, work together to achieve a common purpose and improve prospects for its future performance.

For future research:

1. Further research is required to examine the effect of different internationalisation strategies on the relative performance of family and non-family firms (foreign entry method employed, countries targeted).

2. Findings from this study highlight that agency theory provides little value in explaining why unlisted family firms outperform their unlisted non-family counterparts. This suggests that alternative theoretical perspectives, such as stewardship theory and / or the Resource-Based View (RBV) of the firm, may provide a better basis for explaining performance differences amongst unlisted firms.

Chris Graves 2010Read the paper, “An Empirical Analysis of the Effect of Internationalization on the Performance of Unlisted Family and Nonfamily Firms in Australia,” online in Family Business Review.

Dr. Chris Graves is a Senior Lecturer in Accounting and Family Business Management and co-founder of the Family Business Education and Research Group [FBERG] at the University of Adelaide Business School. His family business research focuses on firm performance, internationalisation, financing and corporate governance. Chris teaches financial management and family business management at both the undergraduate and postgraduate levels. He is currently serves on the board of the International Family Enterprise Research Academy (www.ifera.org).

The Internationalization of Family Firms

When and how do family businesses internationalize? The question has been percolating for years among international management, entrepreneurship, and family business academics, practitioners, and policy makers. Thilo J. Pukall and Andrea Calabrò, both of Witten/Herdecke University in Witten, Germany, provide an updated and complete assessment with “The Internationalization of Family Firms: A Critical Review and Integrative Model,” forthcoming in Family Business Review and now available in the journal’s OnlineFirst section:
FBR_72ppiRGB_150pixWThis article systematically reviews and critically examines 72 journal articles published (from 1980 to 2012) on the internationalization of family firms. Stemming from existing literature, core aspects and main gaps are identified. We aim to overcome the inconclusiveness of findings of previous research by offering an integrative theoretical model integrating the concept of socioemotional wealth with the revised Uppsala model. Our framework helps understand behaviors of internationalizing family firms by focusing on when and how they internationalize, especially related to risk attitudes, the role of knowledge and networks. Ultimately, we provide future research themes flowing from our suggested model.
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