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Business cycle management and firm performance Tying the empirical knot

Business cycle management and firm performance Tying the empirical knot Purpose – Business cycles strongly influence corporate sales and profits, yet strategy research largely ignores the possibility that corporate management practices related to the business cycle influence profitability. This paper aims to offer initial empirical support for the view that high peformance firms use a variety of business cycle management (BCM) practices that low performance firms do not. Design/methodology/approach – This exploratory study examines the association of firm performance with business cycle management behaviors identified in the prescriptive literature and further developed from a set of case analyses. The empirical analysis uses a matched sample of 35 pairs of high vs low performers from the S&P 500. Findings – Discriminant and conditional logit analyses provide preliminary evidence that business cycle‐sensitive behaviors such as countercyclical hiring and investment associate positively with firm performance. Research limitations/implications – Future research should use larger data sets and strictly archival data to overcome the limitations of the small sample size and data coding with some subjective elements. Practical implications – This research suggests a variety of business cycle related practices dealing with staffing, capital investment, acquisitions and divestitures, capital financing, credit policy, pricing, and advertising may improve firm performance. Originality/value – This is the first paper to offer evidence of the impact of business cycle related practices across a range of practices and industries. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Strategy and Management Emerald Publishing

Business cycle management and firm performance Tying the empirical knot

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Publisher
Emerald Publishing
Copyright
Copyright © 2010 Emerald Group Publishing Limited. All rights reserved.
ISSN
1755-425X
DOI
10.1108/17554251011019413
Publisher site
See Article on Publisher Site

Abstract

Purpose – Business cycles strongly influence corporate sales and profits, yet strategy research largely ignores the possibility that corporate management practices related to the business cycle influence profitability. This paper aims to offer initial empirical support for the view that high peformance firms use a variety of business cycle management (BCM) practices that low performance firms do not. Design/methodology/approach – This exploratory study examines the association of firm performance with business cycle management behaviors identified in the prescriptive literature and further developed from a set of case analyses. The empirical analysis uses a matched sample of 35 pairs of high vs low performers from the S&P 500. Findings – Discriminant and conditional logit analyses provide preliminary evidence that business cycle‐sensitive behaviors such as countercyclical hiring and investment associate positively with firm performance. Research limitations/implications – Future research should use larger data sets and strictly archival data to overcome the limitations of the small sample size and data coding with some subjective elements. Practical implications – This research suggests a variety of business cycle related practices dealing with staffing, capital investment, acquisitions and divestitures, capital financing, credit policy, pricing, and advertising may improve firm performance. Originality/value – This is the first paper to offer evidence of the impact of business cycle related practices across a range of practices and industries.

Journal

Journal of Strategy and ManagementEmerald Publishing

Published: Feb 23, 2010

Keywords: Business cycles; Business performance; Working practices; Organizational behaviour

References