Category Archives: Business Research

Business Research, News

Consumers are more likely to forgive family firms when a product fails

Consumers are more inclined to forgive family firm brands than non-family firm brands in product harm crisis situations, reveals new research from NEOMA Business School.

This is when a product fails to comply with standards, and risks attracting widespread negative publicity for the brand in question as a result.

According to Subhadeep Datta, Assistant Professor of Strategy and Entrepreneurship at NEOMA Business School, and Sourjo Mukherjee from the Birla Institute of Technology and Science, even when companies are caught engaging in questionable impression management tactics in the aftermath of such a crisis, family firms retain their advantage.

This is because family firms appear more human-like, with relational values and virtues. As such, they tend to hold a higher reputation and more trust from consumers and stakeholders than non-family firms.

The researchers’ findings indicate that this trust is not a fleeting, momentary feeling among consumers. It is relatively resilient and resistant to breakdown even in the face of hurdles such as product harm crises.

“By extension, it seems reasonable to expect that a brand’s family firm status would help preserve its image and reputation following such crises,” says Professor Datta.

Previous research by the Institute of Family Business (UK) indicates that many family firm owners and managers have reservations about the extent to which family should feature in their branding.

Concerns were raised over negative responses regarding perceived lack of professionalism and nepotism, as well as increased family visibility during crisis situations. However, the findings of this new research indicate the positives far outweigh the possible negatives.

The researchers believe the findings will help family firms in developing their branding strategies. The study was published in the Journal of Business Research.

Business Research, News

Cashflow growing concern for business leaders as SMEs face new challenges from rising costs and inflation

  • A new survey by alternative lender Capify finds most SME business owners concerned about cashflow and cash reserves, with over half lacking confidence in existing banking partners to meet future borrowing needs. 
  • But survey also points to resilience and optimism in UK SMEs, with 60% expecting turnover and headcount growth in the next 12 months.

A growing number of business owners are being kept awake at night by worries over cash flow. A Q1 2022 Confidence Survey released today by small business lender Capify, finds 37% citing cash flow as a major concern (up 14pp from 23% in Q4 2021). Whilst a further 13% were concerned specifically about non-payment of invoices.

The survey, in which the majority of respondents reported turnover of between £1m and £10m, also found just under 60% of SME owners worried about the impact of rising costs and inflation on their businesses.

Despite 56% reporting turnover growth in the past 12 months, the survey finds a more challenging conditions for the first quarter of 2022. Reflecting on business performance in Q1 2022, 37% of companies say they are behind on their targets.

These challenges appear to be contributing to a negative trend in the cash position of UK SMEs. Over half of the survey respondents (53%) were concerned about the levels of cash in the bank, whilst 43% report having less than £50,000 in the bank (an increase of 6pp on Q4 2021).

47% of respondents identify these working capital/ cash flow struggles as the primary driver for seeking external finance. But 52% of those surveyed state that they would not be confident of securing that finance from their traditional banking partners.

John Rozenbroek, CFO/CCO at Capify, said: “Cashflow continues to be a real and growing issue for UK SMEs”

“Some businesses have endured a torrid time over the past two years. UK SMEs have had to develop a deep resilience to deal with the impacts of Brexit, the pandemic and global supply chain complexities”.

“Like all of us, UK business owners were hoping that 2022 would see an return to ‘normal’ business operations and growth. Unfortunately, the impact of rising prices and the tragic war in Ukraine is adding further challenges and worries to this vital part of the economy. There is a growing sense that they need help”.

Whilst many SMEs made use of the Government’s support mechanisms during the pandemic, there seems to be a widespread belief that the Treasury is doing little to help businesses deal with the new challenges. 94% of UK SMEs believe that the Chancellor’s Spring Budget will have no positive impact on business stability.

Despite those concerns, the survey found cautious optimism in its SME respondents, with 57% projecting a growth in turnover in the next 12 months.

Exactly half (50%) grew their profits over the past 12 months – with larger SMEs faring better than their smaller counterparts. 39% of larger SMEs (£5m-£10m turnover) grew profits by over 10% compared to 31% of smaller SMEs (Under £500k turnover).

Additionally, 51% of businesses expect to grow their headcount 2022, up 6pp from 45% in Q4, with 14% aiming for growth of 20% or more. Attracting and retaining the right talent is clearly a major enabler for SME growth, with 48% looking to invest in their acquisition and development of personnel.

Mr Rozenbroek added: “It is encouraging to see businesses responding to the challenges of today with pragmatism and cautious optimism for the future. The fact that the majority of our respondents are projecting growth in 2022 is testament to the resilience they have had to develop over the past years.”

“To ease the cash crunch and address the staffing shortages, access to finance will play a critical role over the coming months. It is likely that things will get worse before they get better for the UK SME community, but at Capify we will continue to help small business owners in any way we can.”

The survey received responses from UK SMEs across a wide range of sectors, including construction, manufacturing, professional services, retail and IT services. Almost 60% of respondents had been trading for over 15 years.

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Point of no return: 89% of consumers identify returns as priority for ecommerce retailers

  • 81% of consumers would write off a retailer if they saw issues with return process
  • 61% say easy returns result in exchanges over refund

London UK; 1st February 2022: 89% of consumers identify ease of returns as top priority when purchasing online. That’s according to new data from delivery experience platform Sorted, which found that retailers who get the returns process right will reap the most consumer loyalty.

The survey, consisting of 2,000 UK respondents, found that those with strong returns processes in place will also see a return on investment, with 61% saying they would be more likely to exchange a product bought online than get a refund if exchanging was made simpler.

Adversely, 81% say they would avoid ordering from an online retailer if they saw issues with their return process, a concern for retailers when 29% of consumers claim to have had an unsatisfactory returns experience in the last 12 months. The data also revealed that 44% would not re-order from an online retailer if they had experienced issues with their return process, and 36% would be reluctant to reorder from those retailers failing to provide clear returns details.

The need for seamless returns

The research also demonstrated a real hunger for proactive communications, with 77% saying that getting timely updates on the progress of their return, refund or exchange would make them more likely to purchase from that retailer again. Additionally, a quick and simple refund process (42%) and the ability to return via a local shop or a convenient location (26%) was revealed as crucial for customers.

Consumer expectations were also identified, with respondents saying they are more likely to be lenient with smaller retailers when it comes to returns. Alternatively, over nine in ten believe it is important for large corporate retailers to have a seamless returns process (94%).

The findings come at a time when ecommerce continues to soar, following a trend that has polarised retail since the onset of the pandemic. Shipping volumes through the SortedREACT platform increased by 429% during peak season (October to December 2021 vs the same period in 2020), meaning UK retailers have reached a critical point with the delivery and returns experiences they offer to consumers.

“In the aftermath of the Christmas peak, retailers are going to be dealing with an influx of returns. However, at every opportunity, a refund could become an exchange. Those who fail to offer quick and convenient ecommerce experiences will no doubt suffer in this competitive landscape,” shares Carmen Carey, CEO of Sorted.

“Retailers must learn that they can’t simply stop the brand experience the very moment an order reaches the customer’s door, but ensure a seamless process is carried right through the customer journey. With returns now a major point of differentiation for brands, retailers – big and small – must invest in the full post-purchase journey in order to both attract and retain the modern customer.”

Business Research, News

Firms that gain more media visibility can expect to perform better, according to new research

Firms that are more visible in the media increase their value and their stock returns, according to new research from Aalto University School of Business and Goethe University.

Assistant Professor Michael Ungeheuer from Aalto University School of Business and Professor Alexander Hillert from Goethe University analysed the relation between firm visibility and stock returns using comprehensive data on news coverage of U.S. firms ranging from 1924 to 2019.

The researchers found that firms with higher media visibility exhibit predictable improvements in corporate governance, a higher likelihood of forced CEO turnover after poor performance, as well as higher sales growth and higher profitability growth.

“Our research suggests that future returns of more visible firms are significantly higher. This provides new insights on the common view that media coverage affects a firm’s cost of capital through a reduced risk premium for well-known firms” says Ungeheuer.

But why is this? The researchers claim that their research supports previous studies that have suggested that media coverage could increase sales, similar to product market advertising.

As well as this, their research shows how the media could play a monitoring role and prevent value-destroying behaviour by managers.

“If these positive effects of visibility on profitability are not adequately priced, a positive relation between visibility and future stock returns follows” says Ungeheuer.

So, this research implies a positive role for the media, and more generally, a positive role for firm visibility.

As such, managers should learn about the value of visibility from stock markets and, thus, increase their efforts to improve firm visibility in the media.

This paper is published in ‘SSRN’.

Business Research, News

Top business school partners with geopolitical think tank

From power relations between countries, to issues around maritime zones and trade wars, today geopolitics is an essential skill for managers to understand. This is why ‘IRIS Sup’, the school of the French Institute for International and Strategic Affairs (IRIS) and NEOMA Business School, have signed a new global partnership.

‘IRIS Sup’ is one of France’s leading think tanks specialising in geopolitical and strategic issues, and alongside NEOMA, they have now joined forces to strengthen their teaching in geopolitics and management.

Ranked among the best think tanks in the world on foreign policy and international affairs, IRIS is the only think tank in France that directly links a research centre and a school. With this partnership, IRIS Sup’ will now offer NEOMA students the opportunity to follow a course of study specialising in geopolitics that is renowned and recognised by the world of work.

“It is absolutely necessary to provide future managers with solid knowledge to better understand the current world,” says Michel-Edouard Leclerc, President of NEOMA Business School and member of the IRIS Board of Directors.

“The Covid-19 crisis, the American presidential elections, the rise of China, and the possible European awakening are all elements that prove that external events have immediate repercussions within our borders. Having an education in geopolitics is no longer a choice, it is a necessity,” says Pascal Boniface, Director of IRIS.

The partnership will provide four mixed courses around topics such as geo-economics, risk management, corporate responsibility, defence, security, and crisis management – to name a few.

“The courses are extremely complementary: at NEOMA, students acquire a good knowledge of how companies work, and at IRIS, they will acquire monitoring methods and develop their capacity for analysis and decision-making in complex international environments,” says Christine Aubrée, IRIS’s director of courses.

“More and more students are passionate about these subjects. They are aware that geopolitics is an integral part of business development”, says Delphine Manceau, Dean of NEOMA Business School.

NEOMA’s mission is to respond to this expectation and to help students develop a sharp eye for the realities of the international world.

Business Research, News

Knowledge is power: Information influences how well markets work

Knowing more about the economy and politics is an advantage not only for individuals but also for society as a whole, according to new research by Vienna University of Economics and Business (WU).

The study, conducted by Professor Christoph Weiss from WU’s Department of Economics investigated how more information makes markets work better and found that if we have better knowledge and more information, we are able to make better decisions, which benefits everyone in the end.

“We’ve all been there: you’re a tourist on vacation in a foreign country. You’re unfamiliar with the pricing policies of the restaurants and bars at your destination, so you’re likely to end up paying way too much for your pizza. The well-informed locals, in contrast, choose restaurants where they know they’ll get better value for their money. Having more information is clearly an advantage for the local population in this scenario,” says Professor Weiss.

In competitive markets, the way price levels are set is sometimes very similar to the mechanism in the example about overly expensive restaurants in foreign cities: if there is a lack of information or transparency in the markets, companies can get away with charging higher prices.

If consumers have better information and the number of well-informed customers increases, however, there will be fewer restaurants that offer poor value for money – this means that average market prices will go down.

“In the scenario we discussed above, the markets don’t work particularly well. Government interventions aiming to provide better information or increase transparency – for example in the form of consumer, competition, and regulation policies – can help to improve the situation,” says Professor Weiss.

The study was published in the journal International Economic Review.

Business Research, News

Giving CEOs financial-based incentives actually damages long-term firm profits

The greater stress companies put on financial incentives and financial performance in bonus systems for CEOs, the more negative the impact is on the firm’s financial performance, according to new research from Vlerick Business School. These findings come from a research study into the top 600 European firms and their CEOs remuneration.

The study was conducted by Xavier Baeten, a Professor in Reward and Sustainability at Vlerick Business School and director of the school’s Executive Remuneration Research Centre, alongside Vlerick researcher, Marthe Van Hove. The study examined the pay levels, habits and incentives of CEOs and CFOs of the STOXX 600 – a stock index of the 600 largest firms across European countries, including 155 UK firms.

The researchers did find however, that these financial performance incentives had a positive impact on the firm’s financial performance in the short-term. Therefore, granting high-level remuneration and committing strongly to incentives such as bonuses and share-related reward schemes, is an effective way to boost firm’s profitability, but only in the short-term.

Professor Xavier Baeten says,

“These financial incentives have a positive impact on firms profitability in the first year – the short-term, however, as we look into the long term, the impact over a two-year period is very surprising. All the positive effects disappear, and the incentives even end up having the opposite effect. Loading CEOs with as many financial incentives as possible is not an effective way to boost financial performance, as it treats CEOs like machines having an exact input and an exact output, reminding us of the saying “the grass won’t grow by pulling it”. CEOs need a variety of motivations and purposes to be incentivised by – not just money.”

The researchers, who have reached their 10th consecutive year of this study, also reviewed the time period from 2014-2019, to see how CEOs remuneration and incentives has changed over these 5-years. The researchers found that over the 5-year period, overall CEO remuneration in Stoxx Europe 600 firms peaked in 2015 at €3.5M, and has decreased since then to €3.3M in 2019.

The researchers also found that over this time period, obliging CEOs to keep shares once vested has grown by 14%. Also, a number of interesting evolutions have taken place related to key performance indicators used in incentive systems.

Professor Xavier Baeten said,

“Between 2014 and 2019, we have seen an increase in the use of non-financial KPIs (such as employee-related measures, sustainability-related measures etc.) in short-term incentive schemes from 71% of the firms in 2014 using non-financial KPIs, this has increased to 83% in 2019. A remarkable finding is that in 2019, no more than 30% of the firms used non-financial indicators in their long-term incentive schemes. We see that employee-related measures, such as employee engagement, are quite popular (used by 44%) in non-financial KPIs, and there has been an important increase in the use of CSR measures, now being used by 30% of the firms, up from 12% in 2014.”

The researchers also found other interesting results about UK CEOs in comparison to their European colleagues, including UK CEOs earning significantly more than their colleagues in Belgium, Netherlands, Scandinavia and Germany. Only French CEOs earned more on average per year – which the researchers suggest could be due to the fact French companies in the index were generally larger firms.

The research also shows the average UK CEO remuneration was €3.3M per year in 2019, which was composed in three different ways on average; base pay (26%), short-term incentives (27%) and long-term incentives (47%).

The Executive Remuneration Study by Professor Baeten from Vlerick Business School, has been carried out now for ten consecutive years.

Business Research, Education News, HR News

Self-confident entrepreneurs thrive in stable economies, while resilient entrepreneurs thrive in adverse settings

In times of economic stability, entrepreneurs who exude self-confidence are the most likely to thrive. However, when faced with unstable and adverse economic conditions, those entrepreneurs who possess greater resilience are most likely to come out on top, according to new research from Durham University Business School.

The research, conducted by Saadat Saeed, Professor in Management and Marketing at Durham University, alongside colleagues from University of Delaware and DePaul University, surveyed over 1,000 individuals from six countries to investigate the relationships between individual resilience, entrepreneurial self-efficacy and entrepreneurial intention, and compared this to a country’s state fragility –  defined as the degree to which state power is unable and/or unwilling to deliver core functions and services to the majority of its people.

Individual resilience was defined as the ability to recover and positively adapt within the context of adversity in the pursuit of personal growth, while self-efficacy was defined as the degree to which an individual believes that he or she can perform the roles and tasks of an entrepreneur.

Respondents to the survey spanned six countries, and each country’s level of fragility was determined by the Fragile States Index (FSI). Of the six, Iraq and Afghanistan were deemed the most fragile states, Tajikstan and Peru had an average score of fragility, and the United States and Finland were judged amongst the most stable in the world.

The survey results show that, in highly adverse environments, entrepreneurial self-efficacy is less important than resilience in the intent to start a business, but in stable countries entrepreneurial self-efficacy is the more important trait to possess.

Professor Saadat Saeed says,

“Many of the world’s aspiring entrepreneurs face an unstable economic environment with breakdowns in the rule of law, public services, and security, involving refugees, human rights, terrorism, and war. These create huge boundaries for entrepreneurs and to overcome these, entrepreneurs have to be resilient and adaptable. Whereas for entrepreneurs in more stable countries who do not contend with such boundaries, what is more important is having self-assurance in their business abilities.”

The researchers say their findings hold significant implications for global entrepreneurship education and training programs. Similarly, scholars and individuals in less fragile and more stable areas of the world have a lot to learn from their entrepreneurial counterparts who live and operate businesses where high amounts of adversity and state fragility affect their daily lives.

Saadat Saeed is a Professor in Management and Marketing at Durham University Business School.

Business Research, News

Claiming to be patriotic can improve a company’s performance

Companies that operate on a national level can boost their success by stressing their contribution to national interests, according to new research by Vienna University of Economics and Business.

The research, conducted by Professors Alexander Mohr and Christian Schumacker, found that companies which emphasized their commitment to act in line with the national interest perform better under certain conditions.

This is because nationalist sentiment can affect the employee’s identification and motivation to work for the firm, as well as consumers’ willingness to buy a firm’s products and services.
The researchers analysed corporate communications using statements made by the CEOs of US firms during 20,458 conference calls with investors and analysts, and looked at 12,260 press releases issued by these companies in the period from 2002 to 2015.

“From what we can see, strong populist sentiment in a firm’s home country can lead governments, consumers, and employees to expect a stronger commitment to national interests on the part of the company. Companies are rewarded by these groups if they claim to live up to this commitment. In contrast, a lack of patriotism might be sanctioned, governments might cancel tax discounts, employees might quit their jobs, and consumers might boycott companies’ products and services,” says Professor Mohr.

However, the results also show that the use of patriotic rhetoric has negative effects on performance for companies that depend strongly on foreign markets.
These firms are rewarded in their home markets but, at the same time, might be sanctioned by governments, consumers, and employees in other countries.

“Under certain circumstances, catering to nationalism and populism may be beneficial for firm’s operation mainly in the domestic market, but we see that this strategy backfires for companies with significant operations abroad, for instance export activities or international branch locations,” Professor Mohr adds.

The research was published in the journal Strategy Science.

Business Research, News

Finance employees are the least trustworthy

Employees in the financial sector are 30 per cent less trustworthy than other industries, according to new research by the University of Cologne.

The study, conducted by Professors Matthias Heinz and Matthias Sutter, measured the trustworthiness of students and found that those who were less trustworthy ended up in the financial sector after graduation.

In order to show this, the researchers identified the degree of trustworthiness of business and economics students several years before they entered the job market by analysing their career aspirations, social preferences and personality traits.

They then followed up on the students’ professional specialisation as well as their job placement after graduation and found that most of those who were considered untrustworthy, had entered the financial industry.

“A well-functioning financial market is of the utmost importance for social welfare, however, the industry struggles with widespread misconduct and corporate scandals which compromises its benefits for society. Our paper argues that this is as a result of the companies selecting candidates with little trustworthiness,” says Professor Heinz.

The research also highlights that that companies within the financial industry do not screen out less trustworthy individuals, in fact, it seems that the opposite is the case.

The researchers suggest that policy interventions might be needed to change incentive structures in the financial industry to ensure that they attract more trustworthy and pro-social candidates in the future.

Professor Matthias Heinz and Matthias Sutter are scientists at the University of Cologne and the Cluster of Excellence ECONtribute: Markets & Public Policy.