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40/3 June 2007



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Charles Baden-Fuller Editorial

It gives me pleasure to introduce this issue that consists of quite diverse pieces. First there is a provocative piece by Trevor Buck and colleagues on Executive Bonuses in UK firms. They argue that attempts to tie bonus payments more strongly to performance have in general resulted in ‘‘woolly arrangements’’ that make the connections between pay and performance weaker not stronger, at a cost to shareholders. Simplicity is often best is their message.
In the first of the next two pieces, Bernd Wirtz and his colleagues examine strategy effectiveness in high velocity environments (that is environments with a lot of change). Our readers always knew that proactiveness (often labelled as entrepreneurial outlook at behaviours) was important, but this statistical work shows that its importance is even stronger than we may have realised. This piece leads nicely into the next piece, where Bo Nielsen and Snejina Michailova examine what (entrepreneurial) managers should do if they want to make knowledge management more effective in the large multinational firm. They identify four different approaches from the simple ‘‘fragmented’’ approach to the more sophisticated ‘‘capability approach’’. They point out that more sophisticated systems are not always better, and that the costs of switching between systems can be high. They conclude by identifying the contextual factors that drive the right choice for managers.
How can organisations avoid wasting large amounts of resources on socially responsible projects? Robert Spekman and his colleagues argue that managing Corporate Social Responsibility in Supply Chains requires a new approach. Rather than trying to obtain the maximum advantage by adversarial structures, firms should adopt an approach that emphasises fairness and procedural justice. Following this theme, Juan Arago´ n-Correa and Enrique Rubio argue that too many firms make simple mistakes when implementing green strategies because managers often overestimate the benefits of eye-catching projects. The authors argue that there is no substitute for careful thinking and detailed analysis that is oriented towards the long term.
Finally, Don Antunes and Howard Thomas look at the value added provided by European Business Schools (in comparison to their North American counterparts). They argue that the European model has developed in parallel to that of North America successfully emphasising different values and outcomes such as reflective thinking and a preference for action-based learning. World business leaders need to understand these differences if they are to get the best from business school providers.


Alistair Bruce, Rodion Skovoroda, Jay Fattorusso and Trevor Buck Executive Bonus and Firm Performance in the UK t.w.buck@lboro.ac.uk

The eye-popping rewards of top executives make regular appearances in the UK media; all too often the story focuses on the juxtaposition between a CEO’s fat bonus and his company’s mediocre performance. Yet executive bonuses are supposed to act as the carrot that spurs senior directors to improve value to shareholders. So far, moves by UK regulators to promote greater answerability over bonus schemes have been pretty woolly: remuneration committees are exhorted to impose ‘challenging performance conditions’, but there are no detailed mandatory requirements against which performance must be measured, nor are companies obliged to make public the basis of the bonus rewards they pay.
The authors argue that this relatively light regulatory touch in bonus scheme regulation does not necessarily stand shareholders in good stead. The emergence of more bureaucratic schemes with multiple targets, though designed to put executive directors through their paces, may actually decrease transparency - making it more difficult for outsiders to see exactly what those directors have achieved to merit their payouts. Basing their investigations on analysis of the bonus arrangements of the FTSE 350 firms over two discrete years, they look at the different types of scheme in operation, and at links between the transparency of those scheme types and shareholder value. Their disturbing conclusion is that there’s evidence of a trend towards increasingly complex bonus schemes and associated higher payouts to directors e but that there’s no sign of shareholders feeling the benefit.


Bernd W. Wirtz, Alexander Mathieu and Oliver Shilke Strategy in High-Velocity Environment Bernd.Wirtz@uni-wh.de

While all companies operate within an environment, some face the challenges of rapid and continuous changes in demand, competition, regulation and technology e in other words, they find themselves operating within a high-velocity environment. Despite the emergence of these high-velocity environments, particularly in sectors such as ICT and biotechnology, there has been little empirical research focusing on how companies conceptualise or operate their strategy, or the effect of such strategy on performance. This paper draws from industrial economics and the resource-based view to develop a holistic framework for strategy in high-velocity environments, encompassing seven dimensions: product differentiation; image differentiation; focus; proactiveness; replication; reconfiguration; and co-operation. The authors measured their strategy construct based on a survey of 210 German companies that operate in the ICT sector. The construct’s positive effect on business performance is empirically proven. The authors say that while each dimension forms a cornerstone for the successful management of a company operating in a high-velocity environment, the results show that the dimension that has the biggest effect on business performance is proactiveness; followed by product differentiation; and reconfiguration. By using a framework based on each dimension, the company’s strategic orientation can be analysed which can assist managers formulate a holistic strategy that concentrates not only on market-orientated performance, but also stresses the importance of anticipating and developing necessary resources.


Bo Bernhard Nielsen and Snejina Michailova Knowledge Management Systems in Multinational Corporations: Typology and Transitional Dynamics bo.nielsen@wwu.edu

The idea of a knowledge management system or KMS can mean very different things to different firms. For some, such as the Swedish construction company Skanska, it is in effect a straightforward database, much like a Yellow Pages directory. At the other end of the KMS spectrum are companies such as the US systems design group CSC, where knowledgesharing and generation is a core philosophy, fundamental to the whole enterprise and key to its competitive advantage in a fast-moving industry. But what factors influence a company’s decision to choose a particular type of KMS? When might it be impelled to switch to a different type of system? And, crucially, why do so many companies fail to reap the full benefits from their investment?
Basing their conclusions on in-depth case studies of seven multinational corporations, the authors have created a typology of four different kinds of KMS. Firms make their choice according to various considerations, including the nature and flow of knowledge within the company, the structure of the firm itself and the kind of business environment in which it operates. Importantly, warn the authors, when it comes to choosing a KMS or switching to another kind of system, firms shouldn’t make the mistake of assuming that a more sophisticated set-up necessarily equates to a more appropriate and effective one in every case. Fit with the corporate structure and business environment is the key.


D. Eric Boyd, Robert E. Spekman, John W. Kamauff and Patricia Werhane Corporate Social Responsibility in Global Supply Chains: A Procedural Justice Perspective spekmanr@virginia.edu

When buyer firms want to respond to their customers’ or shareholders’ concerns and develop corporate social responsibility policies for labour practices or environmental issues, how should they best ensure compliance through their supply chain relationships? At first sight, it would seem enunciating policies and structuring a monitoring regime ensure supplier adherence would seem to be the right road. Even making the suppliers responsible for self-monitoring seems to be a widely adopted mechanism.
But are these the marks of a CSR ‘champion’, or of a supply-chain ‘bully’? As integrated supply chains become a critical part of the competitive landscape where firms seek to create strategic advantages, such adversarial structures can be seen as risking inducing retaliatory defiance, increasing conflict, lowering trust and commitment, and in the end harming performance. Instead, the authors propose a procedural justice basis for implementing CSR initiatives, where the perception of ‘fairness’ is supported by ethical treatment principles using consistently applied, unbiased criteria based on accurate information and affording suppliers both a ‘voice’ in the dialogue and the chance to correct errors. Such a regime, they claim, is more likely to lead to mutual success, in both implementing CSR initiatives and overall supply chain performance.


Juan Alberto Aragón-Correa and Enrique Rubio Proactive Corporate Environmental Strategies: Myths and Misunderstandings jaragon@ugr.es

How can business help to save the world? Despite repeated claims that proactive environmental strategies are both urgent for the planet and good for corporate reputation and financial performance, many of those who have tried them have retired in some confusion. The authors of this paper have a simple message: business must begin to measure real progress, rather than just adhering to mythical indices.
They examine six classic myths e by which they mean, commonly accepted understandings about proactive environmental strategies, which turn out on closer inspection to be unreliable e to show the difference between what is too often taken notice of and what really matters. Is ISO14001 accreditation necessarily linked with actual progress towards raising standards? Are recycling rates a reliable index of environmental progress? Are eco-friendly strategies bound to be good for the bottom line or for convincing your stakeholders? What good is it if the organic food market grows rapidly, if the nonorganic market still grows far more in absolute terms?
Their challenge to managers, and to society at large, is to accept the ethical responsibility of ‘green’ strategies even if they don’t pay immediate dividends, to use less rather than recycle more, to develop markets where the societal costs of damaging products and processes are properly internalized, so that they cost more, not less, than more benign alternatives, and for firms to lead in rebuilding business/society trust by being ‘entrepreneurial’ and ‘creative’ in anticipating requirements, and leading the process of change.


Don Antunes and Howard Thomas The Competitive (Dis)Advantages of European Business Schools Howard.Thomas@wbs.ac.uk

The US business school model has come to dominate the business school landscape and it has been argued that the globalisation of management education is US-led. However European business schools have developed their own identities, styles and approaches to management education. And they have been recognised as strong and distinctive providers of management education by students, employers and media rankings such as The Economist and the Financial Times. What has evolved is a distinctive set of European business school features and characteristics, including a focus on reflective and integrative learning; a preference for action-based learning and critical perspectives on management and management controversies; a greater sensitivity to international relations and public sector management; and a greater recognition of the important public policy issues of corporate social responsibility and corporate citizenship. Therefore, what the Europeans have done successfully is to exploit cultural, societal and linguistic differences to develop a range of distinctive approaches to business education. The European business school model comprises a range of national role models that have, in turn, developed strong status and reputation in the international arena, and have built innovative strategies and niches which allow for future pathways for growth. This paper identifies the range of European business schools and collects evidence from secondary sources and a well-regarded set of business school rankings published annually by the Financial Times, to address the key features of those schools. It then maps the competitive characteristics and relative competitive strengths/advantages of European schools and provides managerial and administrative insights about their value and importance to the European landscape.



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