Research on decoupling has long found that organizations facing complex external pressures may say one thing, yet do another. This extremely popular theory presumes that outsiders are unable to peer into the organization, to see what it actually does. Yet a large number of organizational practices are increasingly transparent and visible to outsiders. How do organizations respond to the external pressures surrounding these observable practices? This study suggests that they decouple in a different way, by avoiding some of the formal policies that could support those practices, in order to minimize stakeholders’ expectations and preserve the flexibility to change or abandon those practices in the future. The study examines the connection between practices and these formal policy commitments, predicting that organizations are more likely to develop formal policies when they use the associated practices more frequently, but that the relationship is reduced at organizations in institutionally complex environments where competing pressures require greater flexibility. Empirical tests on the community policing policies of a nationwide law enforcement agency panel provide support for those predictions, though no support is obtained for the notion that powerful stakeholders could pressure agencies to adopt these policies more aggressively as the underlying practices become more commonplace.
The rapid adoption of artificial intelligence tools has changed the way scholarly manuscripts are prepared. Many authors now use AI-assisted tools to improve grammar, style, organization, and readability. Used responsibly, such tools can help authors communicate their ideas more clearly. However, a well-written manuscript is not necessarily a publishable manuscript. For the American Business Review (ABR), the central question remains unchanged: What does the manuscript contribute, and why should that contribution matter to ABR’s readership? Authors remain responsible for the intellectual content, integrity, and contribution of their work (Gatrell et al., 2024; Carobene et al., 2024).
We model price competition between two horizontally differentiated social media platforms, each offering basic and premium services. Users are either platform-anchored or quality-anchored. The platforms are two-sided, with users and advertisers as the two sides. We find a unique and symmetric equilibrium in the pricing game, where platforms earn revenue from both sides. As the quality difference increases, premium service prices rise, while basic service prices drop. Users are subsidized under strong network effects, but the platforms do not subsidize users if they are sufficiently differentiated. Vertical differentiation increases platform profits if sufficient quality difference is achieved for a given marginal cost of serving the premium users. Higher differentiation is required if the share of premium-anchored users increases. The extended model examines the effect of advertiser multihoming on subscription fees and profits. This model explains the pricing and service strategies of platforms like LinkedIn, X (Twitter), and Instagram.
We examine how the forthcoming refinancing of long-term debt affects firms’ overinvestment tendency. We find that firms reduce overinvestment in the year before the refinancing year. Refinancing risk reduces the propensity to overinvest by 6–8%. Firms with relatively higher levels of refinancing risk tend to reduce overinvestment. Since firms with high leverage and low cash holdings are more likely to suffer from liquidity and credit constraints, our findings report that such firms experience a greater reduction in overinvestment. Long-term debt refinancing disciplines managers in reducing the tendency to overinvest. Firms with lower managerial ability have a greater tendency to reduce overinvestment in non-capital expenditures before refinancing. However, the likelihood of overinvestment in capital expenditures decreases irrespective of managerial ability. Reductions in overinvestment before refinancing also have a positive impact on firm performance.
This study examines how CEOs’ early-life experiences shape strategic decision-making, focusing on the influence of parental creativity. Drawing on imprinting and upper echelons theories, we argue that CEOs with creatively employed parents develop an exploratory mindset that promotes greater investment in firm R&D. Crucially, we propose that this learning stems from behavioral modeling of exploratory mindsets through creative problem-solving—rather than the transmission of socioeconomic capital. Using a proprietary dataset of Fortune 100 CEOs and their parents’ occupations, we find robust support for this relationship. The effect is amplified under strong firm performance, while CEO age does not consistently weaken the relationship, suggesting that early-life imprints endure. These findings contribute to the upper echelons and organizational learning literatures by identifying a novel antecedent of CEO innovation behavior and highlighting the lasting influence of formative experiences on strategic choices.
This study investigates the determinants of digital transformation (DT) in S&P 500 firms, examining how the human capital breadth and depth of top management teams (TMTs) influence strategic change. Drawing primarily on Upper Echelons Theory (UET), we theorize that a team’s collective resource portfolio serves as a critical antecedent to digital adoption. Our results demonstrate that TMT role heterogeneity (breadth) exhibits a consistent, linear positive influence on DT. In contrast, TMT tenure (depth) follows a non-monotonic, cubic life cycle. We identify three distinct phases: an “initial liability of newness” (coordination-driven trough), a mid-term “adeptness step” (absorptive capacity-driven peak), and a final “strategic persistence” (fossilization-driven decline). Crucially, these patterns are moderated by environmental dynamism; the cubic tenure-DT relationship is uniquely pronounced in high-dynamism industries, peaking at approximately 17 years, while remaining latent in stable environments. By introducing a validated, text-based measure of digital transformation and migrating the breadth-and-depth framework from board governance to the executive suite, this research provides a nuanced understanding of the cognitive and structural drivers of radical strategic change. We conclude with implications for board-level succession and the strategic design of management teams.
This study takes place at a regional Australian university and its international campus in the United Arab Emirates, involving third-year business internship undergraduate students. As part of a formative learning activity and summative assessment process, students undertake an implicit bias test and critically reflect on their unconscious biases to explore how these biases may have influenced their behavior. Temporality is central to this reflective process, as students engage in retrospective analysis of past experiences, present awareness, and prospective consideration of future professional conduct. Using an autoethnographic approach, teaching staff interpret their experiences of facilitating these discussions and assessing student reflections. Two student narratives are used to deepen this analysis. The findings suggest that bias tests alone are insufficient for fostering awareness of diversity and inclusion. Instead, when combined with structured, temporally grounded critical reflection in safe learning environments moderated by experienced educators, these tools can support transformative learning.
This study examines the volatility spillover effects among geopolitical risk, crude oil prices, and global stock returns across 39 developed economies. Employing the model-free connectedness approach on data spanning the time period from 24 March 2014 to 15 December 2023, the analysis exhibits significant volatility transmission among the three variables. For instance, 72.9% of a shock to one asset class spills over to all other assets within advanced markets. The study identifies Austria, Belgium, Finland, France, Ireland, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and Taiwan as key transmitters of shocks, while countries such as Chile, Cyprus, Iceland, Latvia, Qatar and Slovenia emerge as net recipients. Furthermore, the predictive model shows that oil prices have forecasting power for stock returns in most cases. Geopolitical risk also demonstrates predictive power, particularly in the case of Czech Republic, Greece, Iceland, the Netherlands, Qatar and Switzerland. Our findings offer valuable insights for investors to develop informed investment strategies in a climate of global uncertainties.
We study how host-country ecological risk and carbon emissions shape Indian textile firms’ choice between cross-border acquisitions (CBAs) and cross-border joint ventures (CBJVs). We extend institutional theory by introducing ecological performance and sustainability disclosure shocks into entry-mode choice. The Environmental Outsourcing Hypothesis (EOH) posits that firms facing environmental liabilities prefer full acquisitions in jurisdictions with poorer ecological performance, effectively “outsourcing” environmental exposure to the host setting. Using 171 cross-border transactions (39 countries; 2004–2020) and Tobit/Logit/OLS models plus difference-in-differences and Heckman selection, we find: (i) higher ecological risk and higher direct (Scope 1) emissions in the host are associated with a higher likelihood of CBAs; (ii) sustainability disclosure reforms shift choices toward CBJVs; (iii) strong formal institutions and higher direct partner risk tilt toward CBAs, while higher indirect (sovereign) risk tilts toward CBJVs. Results are robust across specifications. We integrate ecological performance into institutional theory and offer actionable implications for managers and policymakers in environmentally intensive industries.
This study examines the impact of institutional shareholders (ISH) and agency problems on firms' mimicking behavior in corporate payout policies. Using data from all companies listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) between 1996 and 2020, we employ a two-stage least squares regression approach to address endogeneity bias. The study reveals non-linear, inverted U-shaped effects of ISH on firms' mimicking behavior. At low levels of institutional holdings, firms mimic to retain the ISH. However, beyond a certain level, the active role of institutional investors in firms' decision-making reduces firms' incentives to mimic their peers' payout policies, thereby supporting the monitoring hypothesis. Furthermore, the study finds more pronounced effects of peers amongst firms with higher agency costs, reflecting managers' efforts to alleviate mistrust between shareholders and themselves. In additional analysis, our results confirm the superior value and performance of mimicking firms compared to non-mimicking firms. This study provides valuable insights into the motives driving firms' mimicking behavior.
Globally, businesses are implementing energy-efficient strategies that align with market sustainability to enhance their performance. While the environmental and operational benefits of energy efficiency are well understood, its financial implications, particularly in debt financing, remain less clear. To achieve the objective, we examine the relationship between energy efficiency and the cost of debt in the context of emerging economies, with a focus on India, and explore the nature of this relationship. We utilize an unbalanced panel dataset comprising 4,856 Indian firms listed on the Bombay Stock Exchange between 2011 and 2022. We estimate firm-year fixed effects, a Tobit regression, and a two-stage least squares (2SLS) Tobit model to address potential endogeneity concerns. The findings reveal intriguing results, as improved energy efficiency reduces the costs associated with debt. We find a convex (U-shaped, curvilinear) relationship between firms' energy efficiency and the cost of debt. Firms initially benefit from energy efficiency through lower debt costs, reflecting reduced risk perceptions by lenders. However, beyond a threshold level, the marginal financial gains diminish, and the costs of debt rise, suggesting diminishing returns to energy efficiency. Our robustness tests include alternative debt cost proxies to confirm these findings. Our findings contribute to the literature by identifying non-linear financing effects of energy efficiency, where R&D acts as a critical channel through which efficiency translates into financial outcomes. The research findings may also enable firms to establish an energy policy that balances their energy efficiency, debt costs, and sustainability.
This study seeks to gain insight into the impact of economic freedom on the nominal interest rate yield on 7-year U.S. Treasury notes, an interest rate yield that has received effectively no attention in the scholarly literature during the 21st century to date. It is hypothesized that greater economic freedom acts to reduce the nominal interest rate yield on 7-year Treasury issues. Additionally, this study seeks to investigate the interest rate impact of federal government overspending. To reflect the latter, this study adopts the primary budget deficit rather than the much more commonly studied total budget deficit. The primary deficit focuses on the difference between federal government revenues and federal government outlays, excluding all interest payments. Following the conventional wisdom, it is expected that a greater primary deficit acts to elevate the interest rate yields. Within the context of autoregressive distributed-lag (ARDL) estimates, we investigate, using annual data, whether in the context of a progressive income taxation greater economic freedom helps to diminish the interest rate while the primary deficit elevates it, so that greater economic freedom helps to offset the interest-rate impact of budget deficits.
The frequency with which Chief financial officers (CFOs) leave their jobs has puzzled observers and analysts. In 2021, about 21% of the CFOs left their jobs. Word on the street is that CEOs favor CFOs with whom they have personal attraction but show less tolerance for those with whom they have no personal attraction, regardless of the latter’s job performance. To remain in the job, CFOs must therefore gain and sustain the CEO’s personal attraction. The immediate corollary is that the nature of CEO-CFO relations rather than job performance explain CFOs’ turnover. This study explores such a view and finds that CEO-CFO relations largely explain the hazard of early CFO exit, whereas job performance has little effect. Furthermore, powerful CEOs lower the hazard of early CFO exit but have no discernible effects on the impact of job performance or CEO-CFO relation on the hazard of early CFO exit. The findings highlight the implications of CEO-CFO social dynamics for CFOs’ longevity in organizations.
This paper investigates the evolving behavior of calendar anomalies (monthly effects) within the Portuguese stock market over a period spanning approximately 120 years. By employing a combination of sub-sample and rolling window analyses, we demonstrate that the performance of these anomalies fluctuated adaptively over time. Additionally, we apply the "Superior Predictive Ability" test to assess whether these anomalies present exploitable profit opportunities, factoring in data-snooping effects. The results for the full sample indicate significantly higher returns in January and lower returns in June and July, while the positive September effect appears to be historically concentrated in earlier decades of the sample. Sub-sample and rolling window analyses reveal that the strength and even the sign of several calendar effects vary across periods. However, bootstrap simulations suggest that once trading costs are considered, calendar-based strategies do not consistently outperform a buy-and-hold benchmark. Overall, the evidence supports the Adaptive Market Hypothesis as a more suitable explanation for the observed dynamics in the Portuguese stock market.
This paper provides an empirical insight into organizational impression management practices by examining the CSR disclosure-action portrayal gap, specifically the discrepancy between CSR disclosures and CSR actions, from an employee’s perspective. The paper examines the association between this gap and employee work-related attitudes (job satisfaction, employee organizational commitment, and the propensity to remain) using survey data collected from 186 lower-level managers across various industries in the U.S. The hypotheses were examined using structural equation modelling (SEM) with maximum likelihood estimate using AMOS Graphics version 25 software. It was found that many employees perceived that the CSR disclosures of their organization exceeded their actual CSR activities, with the CSR disclosure-action portrayal gap found to be negatively associated with job satisfaction, employee organizational commitment, and propensity to remain. The observed negative association between the CSR disclosure-action gap and employees’ work-related attitudes informs managers of the consequences of excessive CSR disclosure practices.
The composition of a diverse board of directors is crucial in driving innovation within a firm. One of the diversifying factors that has received significant attention in the literature is the presence of interlocking directors on the board. However, despite existing research on the effect of their presence on boards, we know relatively little about how such directors help the firms decide on specific innovation projects to invest in. We examine the relationship between the presence of interlocking directors on the board and the firm’s tendency to undertake exploratory innovation projects using negative binomial regression, as viewed through the lens of resource dependence theory. We suggest that interlocking directors and the firm’s investment decisions in exploration projects are positively related, thereby contributing to the corporate governance and innovation literatures. The paper highlights how board composition through interlocks enhances networking and information flow, improving strategic decisions. The paper advances the idea that interlocking directors enhance firms’ innovative capabilities by promoting exploratory decision-making. Further, the moderating effects of CEO ownership and average board tenure of interlocked directors have also been discussed.
This study examines the stock-pledging behavior of promoters in politically connected Indian firms, using NSE-listed companies from 2009 to 2019. We investigate how capital raised through stock pledging affects investment in high-risk projects and assess the impact of margin call pressure. Results show that higher stock pledging reduces corporate investment; however, promoters with political ties are more inclined to pursue riskier projects. Moreover, politically connected firms exhibit lower stock return volatility, suggesting that political connections help shield these firms from both investment risk and return fluctuations.
In this empirical study, I develop theorizing on the conditions under which employees’ informal, competence-based power in strategically core roles enhances organizational performance. I propose that in contexts characterized by high task specialization and interdependence, employees with high informal power positively influence performance through higher motivation and improved coordination. However, this effect is weaker when managers also hold high informal power or emphasize hierarchical structures, as these factors create power conflicts that undermine employees’ informal influence. Conversely, the positive effect is stronger when employees receive negative performance feedback, which they perceive as a challenge to their competence, leading to stronger association between employee informal power and performance. Empirical analyses provide strong support for these propositions, showing that employees’ informal power in strategically core roles can be a key driver of performance improvements, but only under specific organizational conditions.
This paper explores the role trait social courage has in psychologically unsafe team environments, specifically examining its impact on voice and leadership emergence. Using a sample of undergraduate students engaged in a semester long team business simulation, surveyed at multiple time points and with multiple raters, we found support that trait social courage is activated under conditions of low psychological safety, resulting in voice behaviors. Further, voice was related to perceptions of leadership emergence. Implications and directions for future research are discussed.
This paper explores how exporting firms make production and allocation decisions when confronted with uninsurable background risks – such as abrupt policy shifts, logistical disruptions, and unforeseen compliance costs – that compound traditional exchange rate risks in global trade. Using a mean-variance (MV) utility framework, we model a representative firm’s optimal export behavior under jointly distributed risks and derive comparative static results that elucidate how changes in the magnitude and dependence structure of background risks affect export intensity. Unlike expected utility models, the MV approach offers tractable conditions that capture intuitive properties such as variance vulnerability and decreasing absolute risk aversion (DARA). To empirically validate the model, we conducted a vignette-based experimental study with 120 participants, including experienced export managers with requisite exposure. The findings confirm that firms significantly reduce export intensity in response to heightened background risks, consistent with theoretical predictions. Statistical analyses reveal robust behavioral shifts across varying risk levels. Furthermore, estimated risk aversion parameters align closely with theoretical expectations, reinforcing the model’s applicability to real-world decision-making. This study contributes to a deeper understanding of how firms internalize non-diversifiable risks in global trade environments. The insights derived from this research are particularly relevant for policymakers and managers seeking to navigate the complexities of international trade under heightened uncertainty.
