Business Policy and Strategy

This is an advance summary of a forthcoming article in the Oxford Research Encyclopedia of Business and Management. Please check back later for the full article.

Academic integrity is an interdisciplinary concept that provides the foundation for every aspect and all levels of education. It is a term that evokes strong emotions in teachers, researchers, and students, not least because it is usually associated with negative behaviors. When considering academic integrity, the discussion tends to revolve around cheating, plagiarism, dishonesty, fraud, and other academic malpractices and how best to prevent these behaviors. A more productive approach entails a focus on promoting the positive values of honesty, trust, fairness, respect, responsibility, and courage as the intrinsically motivated drivers for ethical academic practice. Academic integrity is much more than “a student issue” and requires commitment from all stakeholders in the academic community, including undergraduate and postgraduate students, teachers, established researchers, senior managers, policy-makers, support staff, and administrators.

Contemporary organizations operate under turbulent business conditions and must adapt their strategies to ongoing changes. Sustainable performance can be achieved when the organization engages in interactive processes that link emerging opportunities to forward-looking analytics. But few organizations are able to practice this consistently. Fast processes performed by managers at the frontline respond to ongoing environmental stimuli and slow processes initiated by managers at the center interpret events and reasons about updated strategic actions. Current experiential insights from the fast processes can be aggregated systematically to inform the slow processes of reasoning. When the fast and slow processes interact they can form a dynamic system that adapts organizational activities to changing conditions.

Many discussions of the creation and appropriation of value stop at the firm level. Imperfections in the market allow for a firm to gain competitive advantage, thereby appropriating rents from the market. What has often been overlooked is the continued process of appropriation within firms by parties ranging from shareholders to managers to employees. Porter’s “five forces” model and the resource-based view of the firm laid out the determinants of value creation at the firm level, but it was left to others to explore the onward distribution of that value. Many strategic management and strategic human capital scholars have explored the manner in which employees and managers use their bargaining power vis-à-vis the firm to appropriate value—sometimes in a manner that may not align with the interests of shareholders. In addition, cooperative game theorists provided unique insights into the way in which parties divide firm surplus among each other. Ultimately, the creation of value is merely the beginning of a complex, multiparty process of bargaining and competition for the rights to claim rents.

Since the earliest days of strategic management research, scholars have sought to measure and model the effects of top managers on organizational performance. A watershed moment in this effort came with the 1984 introduction of Hambrick and Mason’s upper echelon view and their contention that firms are a reflection of their top management teams (TMT). An explosion of research followed and hundreds, if not thousands, of manuscripts have since been published on the subject. While a number of excellent reviews of this extensive literature exist, a relative few have asked questions about the overall state and future of the field. We undertook this assessment in an effort to answer some key questions. Are we still making progress on the big questions that gave rise to the upper echelon view, or have we reached a point of diminishing returns with this stream of research? If we are at an inflection point, what are the issues that should drive future inquiry about top management teams?

Business groups are an organizational model in which collections of legally independent firms bounded together with formal and informal ties use collaborative arrangements to enhance their collective welfare. Among the different varieties of business groups, diversified business groups that exhibit unrelated product diversification under central control, and often containing chains of publicly listed firms, are the most-studied type in the management literature. The reason is that they challenge two traditionally held assumptions. First, broad and especially unrelated diversification have a negative impact on performance, and thus business groups should focus on a narrow scope of related businesses. Second, such diversification is only sustainable in emerging economies in which market and institutional underdevelopment are more common and where business groups can provide a solution to such imperfections. However, a historical perspective indicates that diversified business groups are a long-lived organizational model and are present in emerging and advanced economies, illustrating how business groups adapt to different market and institutional settings. This evolutionary approach also highlights the importance of going beyond diversification when studying business groups and redirecting studies toward the evolution of the group structure, their internal administrative mechanisms, and other strategic actions beyond diversification such as internationalization.

Scholars have devoted significant attention to understanding the determinants and consequences of executive compensation. Yet, one form of compensation, executive severance agreements, has flown under the radar. Severance agreements specify the expected payments and benefits promised executives, upon voluntary or involuntary termination. Although these agreements are popular among executives, critics continually question their worth. Yet severance agreements potentially offer three important (but less readily recognized) strategic benefits. First, severance agreements are viewed as a means of mitigating the potential risks associated with job changes; thus, they can serve as a recruitment tool to attract top executive talent. Second, because severance agreements guarantee executives previously specified compensation in the event of termination, they can help limit the downside risk naturally risk-averse executives face, facilitating executive-shareholder interest alignment. Third, severance agreements can aid in firm exit, as executives and directors are likely to be more open to termination, in the presence of adequate protection against the downside.

Severance agreements can contain provisions for ten possible termination events. Three events refer to change in control (CIC), which occurs under a change in ownership. These are (1) CIC without termination, (2) CIC with termination without cause, and (3) CIC with termination for cause. Cause is generally defined by events such as felony, fraud, embezzlement, neglect of duties, or violation of noncompete provisions. Additional events include (4) voluntary retirement, (5) resignation without good reason, (6) voluntary termination for good reason, (7) involuntary termination without cause, (8) involuntary termination with cause, (9) death, and (10) disability. Voluntary retirement and resignation without good reason occurs when CEOs either retire or leave under their own volition, and voluntary termination with good reason occurs in response to changes in employment terms (e.g., relocation of headquarters). Involuntary termination refers to termination due to any reason not listed above and is often triggered by unsatisfactory performance.

Although some prior work has addressed the antecedents, consequences, and moderators of severance, the findings from this literature remain unclear, as many of the results are mixed. Future severance scholars have the opportunity to further clarify these relationships by addressing how severance agreements can help firms attract, align the interests of, and facilitate the exit of executives.

Organizational diversity is regarded positively, but haphazardly embraced. The absence of a cultural mandate at work (one which includes an emphasis on managing differences) can result in minority assimilation, and in either unintended bullying or in intentional abuse. Declining stock price, loss of goodwill, inability to recruit qualified candidates, and internal havoc marked by perpetuation of firm dysfunction may occur. These outcomes are especially alarming in the face of transformative population growth, in which minorities are predicted to become the demographic majority within the United States.

Inattention to employee misconduct prevents firms from experiencing enhanced productivity. Encouraging civil behavior is thus essential to engendering camaraderie in a diverse workforce, in which incivilities, or micro-inequities, are disproportionately targeted at minority groups. Management modeling of appropriate behavior (and swift action toward perpetrators for non-compliance) are necessary to achieve human capital integration.

The New Public Management (NPM) is a major and sustained development in the management of public services that is evident in some major countries. Its rise is often linked to broader changes in the underlying political economy, apparent since the 1980s, associated with the rise of the New Right as both a political and an intellectual movement. The NPM reform narrative includes the growth of markets and quasi-markets within public services, empowerment of management, and active performance measurement and management. NPM draws its intellectual inspiration from public choice theory and agency theory.

NPM’s impact varies internationally, and not all countries have converged on the NPM model. The United Kingdom is often taken as an extreme case, but New Zealand and Sweden have also been highlighted as “high-impact” NPM states, while the United States has been assessed as a “medium impact” state. There has been a lively debate over whether NPM reforms have had beneficial effects or not. NPM’s claimed advantages include greater value for money and restoring governability to an overextended public sector. Its claimed disadvantages include an excessive concern for efficiency (rather than democratic accountability) and an entrenchment of agency-specific “silo thinking.”

Much academic writing on the NPM has been political science based. However, different traditions of management scholarship have also usefully contributed in four distinct areas: (a) assessing and explaining performance levels in public agencies, (b) exploring their strategic management, (c) managing public services professionals, and (d) developing a more critical perspective on the resistance by staff to NPM reforms.

While NPM scholarship is now a mature field, further work is needed in three areas to assess: (a) whether public agencies have moved to a post-NPM paradigm or whether NPM principles are still embedded even if dysfunctionally so, (b) the pattern of the international diffusion of NPM reforms and the characterization of the management knowledge system involved, and (c) NPM’s effects on professional staff working in public agencies and whether such staff incorporate, adapt, or resist NPM reforms.

Growth strategies have long been a priority for executive leadership. However, growth can also create problems. Leaders may need to use restructuring and divestiture actions to regain control, improve transparency, and re-establish efficiency. Given that leaders benefit from having insights into the antecedents, processes, outcomes, and decisions associated with unwinding growth most effectively, it is essential to consider the body of knowledge that exists in strategic management on restructuring and divestiture. This review seeks to describe what is currently known and not known about restructuring and divestiture and will give future researchers some suggested directions for further developing knowledge about these expensive and risky actions. The assessment is organized round five key questions that have shaped the field’s literature base: Why do firms divest? How do firms divest? Do divestitures create value? What happens to the divested units? And what are some promising directions for future knowledge development? Afterwards, three challenges for knowledge development are presented: What is value creation and for whom does it matter? What to do about incomplete information? And, is there a need for integrating different levels of strategy? Overall, it is important to identify, develop, and analyze the conceptual models of restructuring and divestiture with the purpose of guiding future research to provide knowledge that decision-makers will find useful as they engage in restructuring and divestitures.

Corporate governance scholars have long been interested in understanding the mechanisms through which firms and their leaders are held accountable for their actions. Recently, there has been increased interest in viewing the media as a type of corporate governance mechanism. Because the media makes evaluations of firms and leaders, and can broadcast information to a wide audience, it has the potential to influence the reputation of firms and firm leaders in both positive and negative ways and thereby play a role in corporate governance.

The media can play a governance role and even influence firm outcomes by simply reporting about firm actions, giving stakeholders a larger voice with which to exert influence, and through independent investigation. However, despite the potential for the media to play a significant governance role, several barriers limit its effectiveness in this capacity. For example, media outlets have their own set of interests that they must strive to fulfill, and journalists often succumb to several cognitive biases that could limit their ability to successfully hold leaders accountable.

While significant progress has been made in understanding the governance role of the media, future research is needed to better understand the specific conditions in which the media is effective in this role. Understanding how social media is changing the nature of journalism is just one example of the many exciting avenues for future research in this area.