Exploring the linkages between firm misconduct and entrepreneurial growth in China
Journal of Small Business and Enterprise Development
ISSN: 1462-6004
Article publication date: 27 July 2023
Issue publication date: 4 December 2023
Abstract
Purpose
This study aims to investigate the tendency for firms, exhibiting an entrepreneurial spirit in their growth strategies, to engage in misconduct within the context of China's rapidly developing economy. The authors also examine how this relationship is influenced by governance mechanisms, specifically management shareholding and executive functional diversity. Furthermore, the authors explore the mediating roles of organizational complexity and performance pressure in linking entrepreneurial growth to firm misconduct. This research provides a novel perspective for understanding the impact of entrepreneurial growth on corporate ethical risks, and offers practical insights for maintaining ethical standards in firms during their pursuit of growth.
Design/methodology/approach
This study focuses on publicly traded, mature companies that exhibit an entrepreneurial inclination in their growth strategies, demonstrating entrepreneurial vigor through activities such as product innovation and market expansion. This exploration incorporates both theoretical and empirical approaches, scrutinizing A-share listed companies in China from 2008 to 2019. To validate the robustness of this study's findings, the authors have applied diverse methodologies such as propensity score matching, classification regression, and alternative indicator analysis.
Findings
This study found that the entrepreneurial growth-oriented strategy is positively related to firm misconduct. It also uncovers that governance mechanisms like management shareholding and executive functional diversity moderate this relationship. Moreover, organizational complexity and performance pressure partially mediate the relationship between an entrepreneurial growth strategy and firm misconduct.
Research limitations/implications
For instance, more detailed categorization of corporate misconduct, based on punishment severity, could be explored. Additional characteristics like age, education, gender, and team/board diversity could help further understand the relationship between entrepreneurial growth strategy and misconduct. By addressing these limitations and exploring further avenues for research, the authors can deepen the understanding of this relationship and provide valuable insights for firms seeking to mitigate potential risks.
Practical implications
First, for regulators, shareholders, creditors and investors, knowing and understanding the relationship between growth-oriented strategies and corporate violations is helpful for them to scientifically evaluate the potential risks that may exist in the company, and can also carry out differentiated supervision on the company based on different types of company-oriented strategies. Second, when designing the corporate governance mechanism, listed companies should fully consider the role of management shareholding. Finally, executives should treat cross-functional experience dialectically, especially in growth oriented strategic companies.
Social implications
This research provides a novel perspective for understanding the impact of entrepreneurial growth on corporate ethical risks, and offers practical insights for maintaining ethical standards in firms during their pursuit of growth.
Originality/value
This study stands out by examining the influence of entrepreneurial growth strategy on firm misconduct, thus enhancing previous studies that primarily centered on entrepreneurial start-ups. The authors offer a nuanced comprehension of the potential risks intrinsic to corporate entrepreneurship and highlight the crucial role of efficient governance structures in curbing corporate misbehavior while fostering entrepreneurial growth.
Keywords
Acknowledgements
This work is supported by the National Social Science Fund of China (21BJY240).
Citation
Wang, J., Xing, Z. and Zhang, R. (2023), "Exploring the linkages between firm misconduct and entrepreneurial growth in China", Journal of Small Business and Enterprise Development, Vol. 30 No. 7, pp. 1503-1520. https://doi.org/10.1108/JSBED-03-2022-0156
Publisher
:Emerald Publishing Limited
Copyright © 2023, Emerald Publishing Limited