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The purpose of this paper is to study the internationalization of family firms, exploring specifically if the transition from family control to non-family control (losing family managerial influence) affects a firm’s export activity.

Based on panel data for Spanish firms from 2006 to 2012, a random effect tobit and probit regression and a propensity score matching were run on a sample of 225 firms moving from family to non-family control (switchers) matched with 4,213 firms remaining under family control (non-switchers).

Although from a static viewpoint family controlled firms export less than their non-family counterparts, from a dynamic perspective family firms remaining under family control (non-switchers) are associated with a fall in export activity in comparison with family firms transitioning to non-family control (switchers). Both findings are related back to the socioemotional wealth (SEW) perspective.

The findings of this study shed light on the trade-offs that family firms experience in order to balance their desire to increase their internationalization (and the risk associated with it) and their wish to maintain SEW.

The findings should encourage family owners and managers to take long-term strategic decisions leading to internationalization which, although risky, will prevent subsequent loss of SEW in terms of family control.

This work provides evidence concerning family firms’ willingness to undertake risky activities, such as internationalization, considering the threats to their wealth.

We investigate the interaction of debt covenants and tax accounting on the adoption of Financial Interpretation No. 48 (FIN 48). We examine how firms respond to the potential tightening of covenant slack upon FIN 48 adoption and whether these actions are penalized by creditors and anticipated by equity markets. We find that upon FIN 48 adoption, the majority of sample corporate borrowers increase their tax reserves and reduce equity. Firms close to debt covenant violation were even more likely to increase tax reserves upon FIN 48 adoption; however, the size of the adjustment was relatively smaller, suggesting that the FIN 48 standards limited, but did not eliminate, firms use of discretion in reporting uncertain tax positions to avoid costly covenant violations. For firms near net worth debt covenant violation, the act of decreasing equity upon FIN 48 adoption imposes real economic costs, as the average cost of debt increased by 43 basis points. Finally, we extend prior research on the market response to FIN 48 by showing how the market response to FIN 48 adoption is a function of debt covenant slack and tax aggressiveness. Specifically, the cumulative abnormal return at the FIN 48 exposure draft release date is negative only for tax aggressive firms that are close to debt covenant violation.

The purpose of this paper is to provide a better understanding of what drives firms’ choice between exploration alliances and exploitation alliances by examining the role of organizational slack and its interaction with market uncertainty.

An empirical study is conducted based on 1,614 alliances formed by 581 US biotechnology firms, and the hypotheses are tested using a zero-inflated multilevel Poisson model.

The results indicate that firms’ strategic choice to pursue exploration or exploitation alliances is a reflection of organizational intention and adaptation to environmental turbulence. More specifically, firms with more financial slack tend to form more exploration alliances and fewer exploitation alliances. However, under high market uncertainty, firms with financial slack tend to establish more exploitative partnerships and avoid exploration collaborations.

This paper contributes to the literature on exploration–exploitation alliances, which tends to fall short of providing an understanding of why organizations pursue such alliances. By identifying the impact of organizational slack and its interaction with market uncertainty, this study shows that organizations are able to respond to environmental change, and those with capabilities are likely to craft their strategic choice configurations based on their own characteristics.

Participative budgeting can benefita firm by incorporating subordinates’ private information into financing and operating decisions. In the managerial accounting literature, studies of participative budgeting posit superiors that range from passively committed to highly active participants, some of whom are permitted to communicate, choose compensation schemes, negotiate with subordinates, and reject budgets. This paper synthesizes and analyzes experimental research in participative budgeting with a focus on the role of the superior defined in the research design, and on how that role affects budget outcomes, subordinate behavior, and in some cases superior behavior. We demonstrate how superior type influences economic and behavioral predictions, and likewise affects budgeting outcomes and the interpretation of the results. This paper is intended to further our understanding of how superior type affects behavior in participative budgeting studies, and to facilitate the choice of superior type in future research designs.

Previous studies employing the behavioral theory of the firm have not explicitly taken the roles of decision makers and corporate governance into consideration. The purpose of this paper is to fill in this gap by integrating CEO overconfidence and discretion into the performance feedback mechanism.

Financial data were collected from 1,730 Chinese listed companies in the period 2011–2015. Firm-level patent application data were collected for 1988–2015 to measure firm patent application rhythm. Hypothesis testing relied on the fixed effect panel data model.

There is a positive relationship between performance discrepancy and a firm’s patent application rhythm. CEO overconfidence will weaken this positive relationship. The negative moderating effect of CEO overconfidence will be less pronounced when CEO discretion is high.

To the best of the authors’ knowledge, this work is the first empirical study that investigates the roles of CEO overconfidence and discretion in shaping the performance feedback mechanism.

This study aims to improve the understanding of the relationship between organizational slack and firm performance for high technology initial public offerings (IPOs).

Using cluster analysis the paper investigates configurations of slack and their associated performance implications.

The findings indicate the existence of distinct configurations of slack resources and associated performance differences among the configurations. Implications of the findings for managerial practice and future research are discussed.

The purpose of this study is to extend slack measurement research by examining the slack and performance relationship in high‐technology IPOs from a configurational perspective.

This study examines how two important situational factors (corporate diversification and business unit strategy) and two elements of a firm’s administrative system (accounting‐based budgetary controls and associated incentives) affect the presence of slack in business unit budgets in diversified firms. The relationships among these variables are established by building on theories from organizational economics, the information‐processing view of organizations, and organizational behavior. Data are collected from 37 firms and 153 business units within these firms. The main results indicate: that corporate diversification is positively associated with slack in business unit budgets; and that tight budgetary controls and high‐powered incentives effectively curtail such slack. However, diversification does not seem to drive corporate managers to rely more on these systems to reduce higher budgetary slack associated with diversification. This suggests: that diversified firms employ a conscious strategy of slack at the business unit level to reduce information‐processing needs at the top; or that the design of the internal management control system is a function of factors other than corporate diversification. With respect to the latter explanation, the results indicate that business units that pursue a differentiation strategy receive less tight budgetary controls, which leaves them with the necessary slack to effectively pursue the critical success factors on which their strategies are built.

The world in which companies operate today is volatile, uncertain, complex, and ambiguous, thus subjecting contemporary forms to an array of risks that challenge their viability in an increasingly competitive landscape. Organizations that cling to their traditional ways of operating impede their ability to survive while those able to embrace evolving changes and lever their strategic response capabilities (SRCs) will thrive against the odds. The possession of such capabilities has become a prominent explanation for effective adaptation to the impending changes but is rarely analyzed and tested empirically. Strategic adaptation typically assumes innovation as an important component, but we know little about how the innovative processes interact with the firm’s SRCs. Hence, this study investigates these implied relationships to discern their effects on organizational performance and risk outcomes. It explores the effects of SRCs and the role of innovation as intertwined adaptive mechanisms supporting strategic renewal that can attain superior performance and risk effects. The relationships are analyzed based on a large sample of US manufacturing firms over the decade 2010–2019. The study reveals that firms possessing effective SRCs have the ability to exploit opportunities and deflect risky situations to gain favorable performance and risk outcomes. While innovation indeed plays a role, the precise nature and dynamic effect thereof remain inconclusive.

The purpose of this paper is to attempt to reconcile previous views of the relationship between organizational slack and performance by examining the influences of heterogeneous corporate strategy and different slack resources. Differences in performance resulting from variations in slack can also be moderated by strategy.

The proposed model was tested by examining operating and financial information from 529 Taiwan high‐tech companies during the period 1997‐2005. Owing to the study, data were both cross‐sectional (across firms) and time series (over years), a panel data approach were applied for hypothesis testing.

The results broadly demonstrate that relationships differ based on strategy and organizational slack. Additionally, this study is the first to empirically identify a U‐shaped relationship between slack and performance, indicating that, in certain circumstances, either more or less slack is better for performance.

The results support a dynamic perspective regarding the slack‐performance relationship was proposed for different strategy and different types of slack resources. Moreover, the authors argue that not only resource heterogeneity, but also firm strategic orientation, should be considered when performing change activities. Restated, the authors believe the best interest for a firm aspiring to conduct organizational change behaviors is to maintain the “fitness” among the environment, strategy orientation, and slack resources will induce higher performance. This study, thus demonstrates how organizational change behaviors are influenced by slack resources and strategy heterogeneity.

We use a laboratory experiment to examine a multitask environment common to practice, in which managers have multiple responsibilities, including both managerial reporting, as in participative budgeting settings, and effort provision toward daily tasks. Consistent with typical contracting arrangements, we examine incomplete contracts where honesty and effort are not enforceable. In such a multitask environment, when employers choose to offer comparatively generous wages to managers, we predict that managers will elect to provide higher effort. Meanwhile, we remain agnostic ex ante about the degree of misreporting due to findings in studies on gift exchange, moral licensing, and moral wiggle room. Overall, we find evidence that reciprocity, consistent with the gift-exchange model, does extend across both tasks. Implications for theory and practice are discussed.