Language and Competition: Communication Vagueness, Interpretation Difficulties, and Market Entry

Guo, Wei; Yu, Tieying; Gimeno, Javier

doi:10.5465/amj.2014.1150

Cited by 54 publications

(87 citation statements)

References 116 publications

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“…We measured our independent variable, firm strategic emphasis on digital transformation, as the count of words, related to digital transformation, by 1,000 words in a firm's annual report [43]. For this purpose, we counted the absolute number of words, beginning with "digit*", divided it by the total number of words in an annual report in the respective year [31], and then multiplied the result with a factor of 1,000 [43]. This measurement approach is appropriate for our Page 5474 study for three main reasons.…”

Section: Methodsmentioning

confidence: 99%

“…), "digitalization", "digitization", etc. Second, annual reports constitute a representative form of firm's communication, which does not noticeably differ in its language choice from other sources of organizational communication such as press releases [31]. Annual reports are directed at external stakeholders such as investors or financial analysts, who use these reports as a central information source in order to understand firm's strategic decisions [31].…”

Section: Methodsmentioning

confidence: 99%

“…Second, annual reports constitute a representative form of firm's communication, which does not noticeably differ in its language choice from other sources of organizational communication such as press releases [31]. Annual reports are directed at external stakeholders such as investors or financial analysts, who use these reports as a central information source in order to understand firm's strategic decisions [31]. Indeed, not only financial analysts [44], but also investors can be expected to read companies' qualitative announcements in the form of annual reports [44][45][46].…”

Section: Methodsmentioning

confidence: 99%

“…Hereby, especially long-term oriented investors, who are interested in a future development of firm's strategic and intangible assets such as strategic emphasis on digital transformation, usually have profound skills in monitoring and detecting the relevant information, which is positioned outside the balance sheet in firm's annual reports [47]. Third, a word-count approach in annual reports or their selected parts has been widely used in strategic management research to approach an orientation of a company or its executives [e.g., 31,43,48]. Therefore, the chosen operationalization of firm strategic emphasis on digital transformation is capable of covering company's language, related to digital transformation; relies on a data source, which addresses appropriate stakeholders; presents a suitable means of expressing strategic emphasis of a firm; and is a representative and valid source of a firm's strategy communication [31].…”

Section: Methodsmentioning

confidence: 99%

“…Hence, they look out for observable actions and visible signals of a company to be able to assess its strategic position concerning digital transformation and its likely performance outcomes [17][18][19]. Hereby, investors can rely on such visible signals as firm strategic emphasis on digital transformation, as reflected in firm's annual reports as a central mean of corporate strategy's communication to external stakeholders [31], as well as firm size as an indicator of a sufficient resources base for digital transformation [5,21,23,[26][27][28]30]. Thus, if a larger firm discloses a higher strategic emphasis on digital transformation, investors will be likely to assess this firm as having a higher probability of successfully managing its digital transformation and realizing the corresponding performance benefits [6,7].…”

Section: Theoretical Background and Hypothesesmentioning

confidence: 99%

See 4 more Smart Citations

It Depends on the Size: How Firm Strategic Emphasis on Digital Transformation Predicts Market Capitalization

Moker

Brosi

Welpe

2020

Proceedings of the Annual Hawaii International Conference on System Sciences

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Whereas digital businesses can have an enormous market value, it remains an open question, whetherfirms, embarking on a digital transformation journey, can realize similar benefits. Thus, we rely on the signaling theory to study, whether strategic emphasis on digital transformation -i.e., the extent, to which a firm focuses on digital transformation in its strategyas well as firm size as an indicator of a large resource basis jointly influence market capitalization. To answer this question, we conducted a longitudinal panel data analysis of the largest German publicly listed companies from 2000 to 2017. Our results show, that strategic emphasis on digital transformation leads to a higher market capitalization for larger firms and to a lower market capitalization for smaller firms. Whereas larger firms should further disclose their strategic emphasis on digital transformation, smaller firms should consider sending additional signals to investors, demonstrating their ability to undergo digital transformation successfully.

show abstract

Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Section: Theoretical Background and Hypothesesmentioning

confidence: 99%

See 3 more Smart Citations

It Depends on the Size: How Firm Strategic Emphasis on Digital Transformation Predicts Market Capitalization

Moker

Brosi

Welpe

2020

Proceedings of the Annual Hawaii International Conference on System Sciences

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Do I see what you see? Institutional quality, action observability, and multimarket contact in the global mobile phone industry

Giachetti

Lampel²,

Onoz

2022

Global Strategy Journal

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Research SummaryDrawing on signaling theory and the international business literature that addresses the role of institutions, we argue that multinational enterprises (MNEs) that use multimarket contact (MMC)—that is, meet the same competitors in multiple countries—to reduce rivalry in a given country, will have their actions and performance influenced by the institutional quality of that country. More specifically, we contend that action observability is the mechanism that explains why institutional quality facilitates an MNE's use of MMC with competitors in a host country. We also contend that an MNE's ability to successfully reduce rivalry with host country competitors via MMC is contingent on the institutional quality distance between the MNE's home and host country. We test our hypotheses with data from the mobile phone industry.Managerial SummaryMNEs often meet the same rivals simultaneously in multiple countries, a phenomenon known as market overlap or MMC. Prior studies have found that MMC deters rivals from attacking each other in the countries they have in common. However, these studies have not taken into account the heterogeneity of the institutional environments of the countries in which multimarket rivals compete. We contend that the quality of countries' institutions and the institutional quality distance between home and host countries affect the extent to which MNEs can observe each other's actions, which in turn helps rival MNEs to avoid mutually damaging moves for their sales performance in the countries they have in common.

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Using machine learning to revisit the diversification–performance relationship

Choi

Menon²,

Tabakovic³

2021

Strategic Management Journal

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Research Summary In this article, we examine the relationship between corporate diversification and firm performance using a machine learning technique called natural language processing (NLP). By applying a widely used NLP technique called topic modeling to unstructured text from annual reports, we create a new, multidimensional measure that captures the degree of diversification of both multisegment and single‐segment firms. Additionally, we introduce a novel method to incorporate human judgments into the interpretation of machine‐learned patterns, which allows us to measure diversification across multiple dimensions, such as products and geographies. Finally, we illustrate how these new measures can generate novel insights into the relationship between the degree and type of diversification and firm performance, furthering our understanding of the diversification–performance relationship. Managerial Summary At some point, most firms face dilemmas about whether to diversify their business activities across industries or geographic markets—an important decision that invariably affects firm performance. Albeit very important, the direction of a relationship between diversification and firm performance is not always clear. Inconsistent results of previous studies are partially driven by inherent difficulties in reliably measuring diversification. This study introduces a novel methodology to address that problem: a machine learning‐based technique to quantify diversification from unstructured corporate annual report texts. An analysis of firm performance based on these novel diversification measures suggests that diversification, in contrast to earlier studies that find a diversification discount, is associated with higher firm value—a premium particularly pronounced for firms diversifying within a single industry.

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Language and Competition: Communication Vagueness, Interpretation Difficulties, and Market Entry

Cited by 54 publications

References 116 publications

It Depends on the Size: How Firm Strategic Emphasis on Digital Transformation Predicts Market Capitalization

It Depends on the Size: How Firm Strategic Emphasis on Digital Transformation Predicts Market Capitalization

Do I see what you see? Institutional quality, action observability, and multimarket contact in the global mobile phone industry

Using machine learning to revisit the diversification–performance relationship

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