Corporate growth and how to finance it are issues fundamental to business strategy. Starting in the mid‐1960s, many firms issued bonds and borrowed heavily to fuel their growth…
Abstract
Corporate growth and how to finance it are issues fundamental to business strategy. Starting in the mid‐1960s, many firms issued bonds and borrowed heavily to fuel their growth. At the time, this method of creating capital offered numerous potential benefits, including improved returns to shareholders and lower average costs of capital. However, as the economy began to enter a volatile period of increased competition and skyrocketing interest rates, many firms began to feel the first symptoms of overindulgence in debt. Yet, despite these warning symptoms, the trend toward higher leverage and declining interest‐expense‐coverage ratios continued clear through the 1970s. Only with the financial crunch of the 1980s bringing the well‐publicized problems of Braniff, Chrysler, and International Harvester before us as cautionary tales, have corporate strategists begun to ask themselves: Has financial leverage gone too far?
Business planners have become increasingly aware of the need to take into account both the return on capital investment and the cost of capital. However, establishing appropriate…
Abstract
Business planners have become increasingly aware of the need to take into account both the return on capital investment and the cost of capital. However, establishing appropriate rate of return targets is not a simple task. In particular, diversified firms must recognize the differing risk characteristics of their business units and employ different hurdle rates when allocating capital. Failure to account for differences in risk can lead to overinvestment in highly speculative projects and, as a likely outcome, substandard return on investment. This, in turn, will ultimately diminish the market value of the firm.
Measuring corporate performance is difficult. No single measure can fully describe how well a firm is doing in the diverse aspects of its operations. As a result, analysts are…
Abstract
Measuring corporate performance is difficult. No single measure can fully describe how well a firm is doing in the diverse aspects of its operations. As a result, analysts are forced to choose between synthesizing the dozens of ratios that describe a company or relying on simple aggregate measures to summarize overall performance. Return on equity (ROE) is one of the most popular of the latter indices. For example, ROE is used widely by investors in appraising common stock purchases, and by corporate planners in evaluating corporate performance.
J. Martin Fraering and Michael S. Minor
This is a follow‐up of a study conducted by William Shanklin andpublished in 1988. He found a positive relationship between market shareand return on total assets, but concluded…
Abstract
This is a follow‐up of a study conducted by William Shanklin and published in 1988. He found a positive relationship between market share and return on total assets, but concluded that the absence of market share leadership did not preclude achievement of superior profitability. Attempts to verify Shanklin′s findings, but analysis of the data in this study does not support Shanklin; it suggests that the relationship between market share and profitability is questionable, except in certain industries. The pursuit of market share is not a useful “generic” strategy which can be applied in most industries.
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Michael G. Harvey, Robert F. Lusch and Branko Cavarkapa
Antitrust legislation in the United States was originally enacted in 1890. This legislation and subsequent amendments established the historic precedent of government controlling…
Abstract
Antitrust legislation in the United States was originally enacted in 1890. This legislation and subsequent amendments established the historic precedent of government controlling the power of business by limiting its influence over markets. This paper reflects on why this unique set of laws was originally enacted, reviews these laws in the United States compared to other global competitors, and recommends revisions in the present legislation to more accurately reflect the competitive arena that United States based companies face in the global economy.
The following bibliography focuses mainly on programs which can run on IBM microcomputers and compatibles under the operating system PC DOS/MS DOS, and which can be used in online…
Abstract
The following bibliography focuses mainly on programs which can run on IBM microcomputers and compatibles under the operating system PC DOS/MS DOS, and which can be used in online information and documentation work. They fall into the following categories:
WordPerfect version 5.0 has been widely praised for its enhancements with programmable macros. Based on a tradition of macro support since version 2.23, WordPerfect 5.0 allows…
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WordPerfect version 5.0 has been widely praised for its enhancements with programmable macros. Based on a tradition of macro support since version 2.23, WordPerfect 5.0 allows users to manipulate text in ways previously possible only with more advanced programming languages. The new version, for example, allows for the assignment of variables, conditional testing, advanced looping, sub‐routines, and error handling. It also includes a macro editor as part of the basic software package. With the editor, you can easily modify existing macros—a feature particularly useful with large macros created with the new programming features. In this article I will provide a basic introduction to these macro capabilities and their uses. I have also designed a simple accessions list macro (ACCLIST) that demonstrates some of the new features. A later article will illustrate more complex possibilities.
Steven Arvid Scherling and Olivia L.H. Wang
The complexity and competitiveness of global business is increasingly being managed by international strategic alliances. As a result, the two central tenets of…
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The complexity and competitiveness of global business is increasingly being managed by international strategic alliances. As a result, the two central tenets of market‐based‐capitalism, that competitive market forces ensure optimum innovation‐led growth and that individual firms can best accomplish this by competition rather than cooperation, are being re‐examined. These tenets directed management in an elaborate process of alliances control, which is now giving way to a system of control based on trust. The economic model explaining the formation of alliances and the research on joint venture alliances are discussed. This is followed by a discussion of trust and a process‐approach to trust development. Finally, a case methodology to examine evolving IJV relationships is proposed.
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H. Young Baek, Soonhong Min and Sungmin Ryu
We introduce agency and team production theories to explain the international joint venture (IJV) phenomenon. We regard IJV partners as participants in a team production and…
Abstract
We introduce agency and team production theories to explain the international joint venture (IJV) phenomenon. We regard IJV partners as participants in a team production and identified agency conflicts among partners as well as between parents and IJV affi liates. We empirically test the stability of IJVs with such determinants as the existence of monitoring principal, the history of repeated exchanges between partners, the efficiency of mutual monitoring by partners, the effi ciency of affiliate monitoring by parent firms, and the degree of international experience of the partners. The test results show that the existence of monitoring principal and the degree of international experience prove to be significant factors for IJV stability.
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Nadia Hanif, Jianfeng Wu and Kenneth A. Grant
The purpose of this study is to test a model for cross-border technological acquisitions (CBTAs) focusing on the level of ownership acquired in the target firm and the acquiring…
Abstract
Purpose
The purpose of this study is to test a model for cross-border technological acquisitions (CBTAs) focusing on the level of ownership acquired in the target firm and the acquiring firm's post-acquisition innovation performance (PAIP), with the degree of integration as a mediator, based on the dynamic capability perspective of the resource-based view. This study further concludes the role of the country-of-origin effect (COE) (when emerging economies' acquiring firms purchase technological resources from developed economies' target firms) on the success of the acquiring firms in CBTAs.
Design/methodology/approach
Data on CBTAs initiated by 542 acquiring firms was quantified from four high technology industries from 1995 to 2015 for the empirical investigation of the research hypotheses. Hierarchical fixed year effect negative binomial regression technique was used to analyze the proposed model for the success of CBTAs.
Findings
The analysis of the CBTAs confirmed that acquiring firms who opt for a higher level of acquired ownership strategy increase the degree of integration of the target firm's technological resource stock. The level of acquired ownership improves the PAIP of the acquiring firms; however, the degree of integration positively accelerates the relationship between the acquired ownership and the PAIP. Considering the COE, acquiring firms that initiated CBTAs from emerging economies to purchase technological resources from developed economies' targets have firm-specific technological capability holes to execute the integration, which negatively impacts the emerging economies acquiring firm's PAIP.
Originality/value
This study contributes to the CBTAs literature by exploring the enabling role of the degree of integration between the level of acquired ownership and the PAIP of the acquiring firms. Further, this study put forward empirics on the COE of the acquiring firms for their integrative capability to integrate the target firm's resource stock and subsequent innovation performance.