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The firm and its governance along the industry life cycle

Author

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  • Jackie Krafft

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique)

  • Jacques-Laurent Ravix

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique)

Abstract

The paper explores this issue by reconciling two trends of literature that are generally disconnected - the industry life cycle (ILC) on the one hand and the governance of large and small firms on the other - to generate results on how the governance of the firm may look like over the industry life cycle. When the two bodies of literature are connected, the immediate result is that the governance of small, young and innovative firms in the early stages of the life cycle should be different from the governance of large, mature and routinized firms. Small young and innovative firms should benefit of a mode of governance based on cooperation and assistance to stimulate innovation, while large mature and routinized firms should be imposed a mode of governance based on control of the manager's action in the interests of shareholders. We argue that this immediate result can only be but preliminary, since age and size are not necessarily the key determinants of innovative behaviours of firms. In the ILC, small new firms engage product innovations, while large mature firms continue the process of innovation by investing in process capacities . In that perspective, imposing these firms a governance based on control may not be the optimal solution, since we know that this mode of governance favours short term choices that may be detrimental to the development of innovation. What is more important is thus to consider how the innovative behaviour of firms can be maintained in phases of growth and decline of the industry. In the paper, we advance the idea that new principles of governance should be proposed for innovative corporations (large or small) as a distinctive category.

Suggested Citation

  • Jackie Krafft & Jacques-Laurent Ravix, 2008. "The firm and its governance along the industry life cycle," Post-Print hal-00211206, HAL.
    • Handle: RePEc:hal:journl:hal-00211206
    Note: View the original document on HAL open archive server: https://hal.science/hal-00211206
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    Cited by:

    1. Jackie Krafft & Yiping Qu & Jacques-Laurent Ravix, 2011. "Gouvernance d'entreprise et performances sectorielles : une réévaluation de la fiabilité des scores et des mesures de bonne gouvernance," Economie & Prévision, La Documentation Française, vol. 0(1), pages 145-158.
    2. Jackie Krafft & Yiping Qu & Francesco Quatraro & Jacques-Laurent Ravix, 2014. "Corporate governance, value and performance of firms: new empirical results on convergence from a large international database," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 23(2), pages 361-397.
    3. repec:hal:wpaper:hal-00786664 is not listed on IDEAS
    4. Jackie Krafft & Jacques-Laurent Ravix, 2009. "The Governance of the Knowledge-Intensive Firm in an Industry Life Cycle Approach," Chapters, in: Mario Morroni (ed.), Corporate Governance, Organization and the Firm, chapter 3, Edward Elgar Publishing.
    5. Jackie Krafft & Yiping Qu & Jacques-Laurent Ravix, 2008. "Corporate governance, industry dynamics and firms performance on the stock market," Post-Print hal-00203544, HAL.
    6. Marco Cucculelli, 2018. "Firm age and the probability of product innovation. Do CEO tenure and product tenure matter?," Journal of Evolutionary Economics, Springer, vol. 28(1), pages 153-179, January.

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