Essays on corporate growth and management

Abstract

Firms belong to the major producer sector of the general economy known as maker for products and services in economics. To provide products and services, firms play a fundamental role like hiring and payment of wage in economy. Households earn income by providing labor and spend their earning to get the products and services of firms. Moreover, a firm as business type has been regarded as a critical driver of development for society by innovation. A company’s birth, growth, and subsequent death define its life cycle. It is called as Corporate life cycles and it comprises the following stages: birth, growth, maturity, decline or revival. The majority of business organizations follow a predictable pattern through corporate life cycle theory. There are always exceptions. Some companies survive several years without growing or declining, others go bankrupt soon after birth, and still others grow steadily. If even a very old firm subsists, it can get a chance for entering the revival phrase. To survive steadily, a firm should strictly manage liquidity on the asset, especially cash in the short term and do innovation constantly in the medium and long term. Therefore, this study aims to check the factor and effect for firm’s surviving. The study consists of three essays about cash management, innovation, and firms’ strategy related to entrepreneurship. First, it presents an additional factor which is not considered in cash management as looking into the effect of factors which are considered as cash management factors in the finance research. Second, it renders keys for a new system adoption to do innovation in firms, especially small and medium sized enterprises. The keys are drawn from technology-organization-environment model. Third, it suggests the strategy attitude related to entrepreneurship of firms for growth. The suggested additional factor in the first study is peer group effect for cash holding in a firm. The information related to peer firm’s activities is indispensable to build almost all the corporate strategies. The analysis on the rivals and strategic group is the necessary imperative for survival and growth of firms due to the competition intensifying. However, the factors relate to competitor are not taken into account in most corporate financial research. The first paper is the result of study about peer effect on corporate cash holding level in manufacturing firms of Korea. The study analyzes empirically whether information of peer firms’ cash holding and activities plays a role in the decision of individual firm’s cash stockpiling. With listed corporations in Korea Composite Stock Price Index (KOSPI) from 1993 to 2012, the empirical test is conducted to check that the determinants affect cash holding level in the previous studies and to be aware of the peer group effect. The first paper stresses the need of the information related to peer firms on the cash management and provides an explanation of the way that peer firms’ information affect firm i's cash holding level. The empirical results demonstrate 2 implications and a suggestion. The first is peer firms’ cash ratio is a significant factor in the determination of company cash holding levels. Next is endogeneity issue in the research. To handle endogeneity issues, this study also proposes and attempts an alternative empirical method using a hybrid model utilizing both the mediation effect and instrumental variable. The second study is related to big data adoption. The reducing costs and securing competitive advantage have been the drivers of big data in organizational perspective. The increase of environmental uncertainty and competitive pressure has been connected to the adoption of big data in companies. Many companies have used big data in marketing, operation, logistics, and production functions. Some companies have gained the performances such as cost reduction and customer loyalty increase from big data. Therefore, big data is likely to be useful in SMEs through costs reduction and operation efficiency. However, the adoption of SMEs is very low due to the lack of internal resources related to big data. Since the introduction phase of big data, the studies on big data adoption on SMEs are very little. This study investigates the adoption factors of SMEs using technology-organization-environment model. For this, the questionnaire survey is conducted with face-to-face interviews and collected 143 responses of Korean SMEs. The results of multiple regression analysis are as followings. Technology context as technological value, technological readiness and acceptable costs, organization context as organizational support and firm innovativeness, and environment context as competitive pressure and external support are identified as the adoption factors of big data in the model. However, the more research related to the component for each context factors is needed. The third study is about to strategy. For the few companies that do achieve steady growth, the lasting driver for growth and sustainability is not a change and a procurance their resources including strategy, culture, chief executive officer (CEO), etc., but constant innovation. Entrepreneurship of entrepreneurs is the primary driver of innovation within an organization, whereas the principle agent that implements and applies innovation to society is the enterprise itself. To shift growth and revival phase, resulting in innovation, firms take an action like an entrepreneur as acting innovatively and proactively as well as taking on the risks associated with the exploitation of market opportunities. The degree is called entrepreneurial orientation (EO). Lots of empirical studies have shown that entrepreneurial oriented firms perform better. This study investigates the relationship between EO and product (services) of Korean venture firms as creative destructiveness which can shift the paradigm of market. This study asserts that EO positively affects corporate creative destructiveness in every situation as based on the static result of the study.