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Article
Publication date: 3 July 2023

Karen Watkins-Fassler, Lázaro Rodríguez-Ariza, Virginia Fernández-Pérez and Guadalupe del Carmen Briano-Turrent

This study analyses interlocking directorates from the perspective of an emerging market, Mexico, where formal institutions are weak, and family firms with high ownership…

Abstract

Purpose

This study analyses interlocking directorates from the perspective of an emerging market, Mexico, where formal institutions are weak, and family firms with high ownership concentration dominate. It responds to recent calls in the literature on interlocks, which urge the differentiation between family and non-family businesses and to complete more research on emerging economies.

Design/methodology/approach

A database was constructed for 89 non-financial companies (52 family-owned) listed on the Mexican Stock Exchange (BMV) from 2001 to 2014. This period includes normal times and an episode of financial crisis (2009–2010). To test the hypotheses, a dynamic panel model (in two stages) is used, applying GMM.

Findings

In normal times, the advantages of Board Chairman (COB) interlocks for the performance of publicly traded Mexican family firms are obtained regardless of the weak formal institutional environment. By contrast, during financial crisis, interlocking family COBs are more likely to jointly expropriate minority shareholders with actions that further their family objectives, which mitigates the positive effect of interlocks on performance. These findings contrast with the insignificant effects of COB interlocks found for non-family corporates.

Originality/value

A new framework is proposed which, through agency theory, finds points of concordance among resource dependence and class hegemony theories, to understand the effect of interlocking directorates on the performance of family firms operating in Mexico. The results of the empirical exercise for family companies listed on BMV during normal and financial crisis periods suggest its applicability.

Details

Journal of Family Business Management, vol. 14 no. 1
Type: Research Article
ISSN: 2043-6238

Keywords

Article
Publication date: 24 July 2023

José Arias-Pérez, Juliana Chacón-Henao and Esteban López-Zapata

Digital technology is increasingly important in enhancing organizational agility (OA). Institutional theory and resource-based view were harmonized to analyze firms' adoption of…

Abstract

Purpose

Digital technology is increasingly important in enhancing organizational agility (OA). Institutional theory and resource-based view were harmonized to analyze firms' adoption of digital technologies. However, previous studies on OA have revealed that external pressures imply the imposition of barriers or technological standards that ultimately restrict OA. This study employs this double theoretical lens to investigate the mediation role of business analytics capability (BAC) in the relationship between co-innovation (CO), i.e. open innovation in digital platforms, and OA, as well as the negative moderating effect of external pressure for artificial intelligence adoption (EPAIA) on this mediation.

Design/methodology/approach

Structural equation modeling was used to test the moderated mediation with survey data from 229 firms.

Findings

The main result indicates that 72% of OA variance is explained by the effect of CO that is transmitted by the mediator (BAC). However, contrary to the authors' expectations, EPAIA only has a positive moderating effect along the path between BAC and OA.

Originality/value

This work contradicts the prevalent notion of the negative consequences of external pressures for artificial intelligence adoption. Specifically, this study's findings refute the notion that institutional pressures are the source of technical problems that disrupt CO and BAC integration and reduce OA. In contrast, the unexpectedly positive effect of EPAIA may indicate that this type of external pressure can be viewed as a significant sign and an opportunity for the company to adopt the industry's most advanced and effective digital transformation practices.

Details

Business Process Management Journal, vol. 29 no. 6
Type: Research Article
ISSN: 1463-7154

Keywords

Article
Publication date: 29 January 2024

Randy Priem and Andrea Gabellone

This article aims to analyse the relationship between the environmental, social and governance (ESG) score and the cost of capital of 600 large, mid and small capitalization…

Abstract

Purpose

This article aims to analyse the relationship between the environmental, social and governance (ESG) score and the cost of capital of 600 large, mid and small capitalization companies across 17 countries that are component of the EURO STOXX 600 Index. By examining whether ESG has an impact on the cost of capital, this article contributes to the solutions to improve the impact of organizations and societies on sustainable development. The article further examines whether the effect is because of the environmental, social and/or governance components. In addition, the article analyses which WACC component (i.e. the cost of equity, the cost of debt, the beta or the leverage ratio) is affected. Furthermore, this article analyses whether a high ESG score can substitute for a weaker legal environment.

Design/methodology/approach

The results were obtained by using ordinary least squares panel data modelling to analyse the relationship between the ESG score and the cost of capital. The sample consists of companies that are part of the STOXX Europe 600 Index over the period 2018–2021, which is composed of 600 companies, including large, mid and small capitalization firms listed across 17 countries. The sample finally includes 1,960 firm-year observations.

Findings

Companies with a higher ESG score tend to have a lower cost of capital, but this relationship holds only for firms domiciled in countries with a weaker legal environment. In addition, these firms should not only increase their ESG score to create a more sustainable environment but also to reduce their cost of debt. Environmental and social factors have a significantly negative impact on the cost of capital only in countries with a weaker legal environment, while the governance component positively impacts the cost of capital by allowing firms to borrow more.

Research limitations/implications

There is not yet a standardized taxonomy to define ESG, making the study dependent on commercial data providers.

Practical implications

The new insights can be used by companies domiciled in countries with weaker legal environments to reduce their cost of capital. The results also allow us to know on which components of the ESG score to focus. It can also help policymakers, specifically those in countries with a weaker legal environment, to provide incentives to further stimulate ESG investments and disclosure, thereby contributing to a more sustainable society.

Social implications

To achieve the sustainable development goals put forward by the United Nations, it is important for firms to invest in ESG projects. It is nevertheless insightful to know whether these ESG investments, which are currently observed as a cost, also provide benefits to firms and in which countries. If firms clearly see the advantages of investing in ESG projects, they are likely to proactively engage in them.

Originality/value

This article is the first, to the best of the authors’ knowledge, to focus on 17 European countries, thereby capturing divergent legal environments. This setting allows us to answer the main novel research question, namely, whether the ESG score can act as a substitute for the legal environment in which the company is domiciled. The article also goes further than previous articles by examining whether the effect is because of the environmental, social and/or governance component and whether these impact the components of the weighted cost of capital, namely, the cost of equity, the cost of debt, the beta or the leverage ratio of the companies.

Details

Sustainability Accounting, Management and Policy Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2040-8021

Keywords

Article
Publication date: 29 July 2022

Herman Aksom

Once introduced and conceptualized as a factor that causes erosion and decay of social institutions and subsequent deinstitutionalization, the notion of entropy is at odds with…

Abstract

Purpose

Once introduced and conceptualized as a factor that causes erosion and decay of social institutions and subsequent deinstitutionalization, the notion of entropy is at odds with predictions of institutional isomorphism and seems to directly contradict the tendency toward ever-increasing institutionalization. The purpose of this paper is to offer a resolution of this theoretical inconsistency by revisiting the meaning of entropy and reconceptualizing institutionalization from an information-theoretic point of view.

Design/methodology/approach

It is a theoretical paper that offers an information perspective on institutionalization.

Findings

A mistaken understanding of the nature and role of entropy in the institutional theory is caused by conceptualizing it as a force that counteracts institutional tendencies and acts in opposite direction. Once institutionalization and homogeneity are seen as a product of natural tendencies in the organizational field, the role of entropy becomes clear. Entropy manifests itself at the level of information processing and corresponds with increasing uncertainty and the decrease of the value of information. Institutionalization thus can be seen as a special case of an increase in entropy and a decrease of knowledge. Institutionalization is a state of maximum entropy.

Originality/value

It is explained why institutionalization and institutional persistence are what to be expected in the long run and why information entropy contributes to this tendency. Contrary to the tenets of the institutional work perspective, no intentional efforts of individuals and collective actors are needed to maintain institutions. In this respect, the paper contributes to the view of institutional theory as a theory of self-organization.

Details

International Journal of Organizational Analysis, vol. 31 no. 7
Type: Research Article
ISSN: 1934-8835

Keywords

Article
Publication date: 1 November 2023

Jacqueline Jarosz Wukich, Erica L. Neuman and Timothy J. Fogarty

Albeit gradual and uneven, the emergence of social and environmental reporting by publicly held corporations has been a major development in the last few decades. This paper aims…

Abstract

Purpose

Albeit gradual and uneven, the emergence of social and environmental reporting by publicly held corporations has been a major development in the last few decades. This paper aims to explore patterns of the emergence of these disclosures. Using an institutional theory lens, this paper considers mimetic, normative and coercive possibilities.

Design/methodology/approach

US publicly traded company data from 2013 to 2019 is used to test the hypotheses. Mimetic forces are proxied with corporate board interlock frequency. Normative ones use the extent of gender diversity on corporate boards. Measures of business climate and industry regulatory sensitivity proxy coercive potentiality.

Findings

Studied in isolation, each of the three forces through which organizations pursue the heightened legitimacy of enhanced environmental and social disclosures has credibility. The strongest support exists for mimetic and normative mechanisms, perhaps because the US government has been reluctant to make these expanded disclosures mandatory.

Research limitations/implications

In the world of voluntary action, more attention to diffusion is needed. For these purposes, better proxies will be needed to study change. Social and environmental information should be separated for individual analysis.

Practical implications

At least in the USA, companies are attentive to what other companies are doing. There is something to be said for the ethical dimension of corporate transparency.

Social implications

Governmental action in this area has not been effective, at current levels. Corporate leadership is essential. Critical information is shared about disclosure by board members.

Originality/value

Although institutional theory makes several appearances in this area, to the best of the authors’ knowledge, the current study is the first empirical archival study to examine the three forces simultaneously, providing evidence as to the relative magnitude of each institutional force on environmental and social disclosures. Should these disclosures not be mandated by government, this study shows pathways for enhanced disclosures to continue to spread.

Details

Journal of Accounting & Organizational Change, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1832-5912

Keywords

Article
Publication date: 20 March 2024

Duane Windsor

This study aims to help develop “business principles for stakeholder capitalism” in two steps. First, the study defines internal logic of three theories of capitalism and two…

Abstract

Purpose

This study aims to help develop “business principles for stakeholder capitalism” in two steps. First, the study defines internal logic of three theories of capitalism and two variants within each theory. Second, it examines approaches to integration into modern democratic capitalism. Treating the three theories as substitutes identifies relative strengths and weaknesses; complementarity and partial overlap approaches to integration study the institutional settings within which stakeholder capitalism operates. Empirical outcomes reflect competition between market and stakeholder businesses for participants, with institutional conditions determining the scope of collective action.

Design/methodology/approach

The approach aligns three typologies in a unique conceptual arrangement defining the three theories of capitalism: forms of capitalism, potential failures of each form and associated types of goods. The first method examines the internal logic of each theory of capitalism. The second draws on traditional narrative review of references documenting each theory of capitalism and variants together with modern Marxist anti-capitalism.

Findings

Three typologies align uniquely with the theories of capitalism, each having two variants. Both variants of stakeholder capitalism are compatible with compassionate capitalism, constitutional government or polycentric governance but not with self-interest capitalism, dictatorship or Marxism. A theory of modern democratic capitalism allocates roles for private, club and social goods with empirically variable mixes occurring across countries. Competition among different types of enterprises provides an empirical test for comparative advantages of stakeholder capitalism. Future research should consider approaches for testing the proposed conceptual scheme in practice concerning capacity to deal with grand challenges, wicked problems and black swan events.

Research limitations/implications

Research approach is limited to logical examination of theories and literature documentation without direct empirical confirmation. The study does not address practical implications for managers and public officials or social implications concerning private incentives, stakeholder cooperation or collective action.

Originality/value

Originality lies in shifting terms of debate about stakeholder capitalism from advocacy of substitute theories to understanding of its relationship to market capitalism and collective action capitalism. Value lies in explaining desirability of theoretical integration of three types of capitalism into a comprehensive framework for modern democratic capitalism.

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