Abstract
To propose a research agenda towards making an assessment of a firm’s practices of financial flexibility and their impact on its strategic renewal. The paper takes the form of a theoretical discussion on few major practices of financial flexibility that a firm can choose to exercise in its attempts to bring about strategic self-renewal on a sustained basis. The paper triggers a discussion on few possible takeaways for organizations in their attempts to integrate existing financial practices, generate new practices of financial flexibility and successfully exploit this new knowledge towards strategic renewal initiatives of the organizations. This is a developmental paper and many of its suggestions require rigorous testing through studies in a wider array of settings. Firms can inculcate the spirit of financial flexibility judiciously towards enhancing their strategic flexibility in their attempts to augment their prospects of strategic renewal. Finance being the most fungible resource that a firm possesses, every attempt should be made to leverage such a resource towards optimally managing the diverse portfolio of projects that a firm undertakes in its endeavor to fructify its strategic renewal goal, on an ongoing basis, while generating additional wealth for its shareholders. The paper provides a snapshot of various corporate practices of financial flexibility adopted by firms across industries and the respective success/failure stories the lessons of which when learnt properly can go a long way in the strategic self-renewal of many an organization.
Similar content being viewed by others
References
Aaker, D. A., & Mascarenhas, B. (1984). The need for strategic flexibility. Journal of Business Strategy, 5(Fall), 74–82.
Ansoff, H. I. (1965). Corporate strategy. New York: McGraw-Hill.
Antoncic, B., & Hisrich, R. D. (2000). Intrapreneurship modeling in transition economies: a comparison of Slovenia and the United States. Journal of Developmental Entrepreneurship, 5(1), 21–40.
Antoncic, B., & Hisrich, R. D. (2001). Intrapreneurship: construct refinement and cross-cultural validation. Journal of Business Venturing, 16(5), 495–527.
Arvanitis, A., & Gregory, J. (2003). Credit—the complete guide to pricing, hedging, and risk management. London: Risk Books.
Awerbuch, S. (2000). Investing in photovoltaics: risk, accounting and the value of new technology. Energy Policy, 28, 1023–1035.
Benner, M. J., & Tushman, M. L. (2003). Exploitation, exploration, and process management: the productivity dilemma revisited. Academy of Management Review, 28(2), 238–256.
Bourgeois, L. J. (1981). On the measurement of organizational slack. The Academy of Management Review, 6(1), 29–39.
Bowman, E. H., & Hurry, D. (1993). Strategy through the option lens: An integrated view of resource investments and the incremental choice process. Academy of Management Review, 18(October), 760–782.
Brealey, R., & Myers, S. (1996). Principles of corporate finance. New York: McGraw-Hill.
Brewer, P. C., Garrison, R. H., & Noreen, E. W. (2009). Introduction to managerial accounting. New York: McGraw-Hill.
Caouette, J. B., Altman, E. I., Narayanan, P., & Nimmo, R. (2008). Managing credit risk—the great challenge for the global financial markets. New Jersey: John Wiley & Sons.
Chandra, P. (2003). Finance Sense. New Delhi: Tata McGraw-Hill.
Cooper, R., & Slagmulder, R. (1997). Target costing and value engineering. Mont Vale: Productivity Press.
Covin, J. G., & Slevin, D. P. (1989). Strategic management of small firms in hostile and benign environments. Strategic Management Journal, 10(January), 75–87.
Covin, J. G., & Slevin, D. P. (1991). A conceptual model of entrepreneurship as firm behavior. Entrepreneurship: Theory & Practice, 16(1), 7–25.
Danneels, E. (2007). The process of technological competence leveraging. Strategic Management Journal, 28, 511–533.
Dess, G. G., Ireland, R. D., Zahra, S. A., Floyd, S. W., & Janney, J. J. (2003). Emerging issues in corporate entrepreneurship. Journal of Management, 29(3), 351–378.
Dixit, A., & Pindyck, R. (1994). Investment under uncertainty. Princeton: Princeton University Press.
Eapen, G. (2009). Decision options—the art and science of making decisions. Boca Raton: Chapman & Hall, CRC, Taylor & Francis Group.
Evans, J. S. (1991). Strategic flexibility for high technology maneuvers: a conceptual framework. Journal of Management Studies, 28(1), 69–89.
Foss, N. J., & Christensen, J. F. (2001). A market-process approach to corporate coherence. Managerial and Decision Economics, 22, 213–226.
Guth, W. D., & Ginsberg, A. (1990). Guest editors’ introduction: Corporate entrepreneurship. Strategic Management Journal, 11(summer), 5–15.
Hamel, G., & Prahalad, C. K. (1994). Competing for the future. Boston: Harvard Business School Press.
Hayes, R. H., & Pisano, G. P. (1994). Beyond world class: The new manufacturing strategy. Harvard Business Review, 72(January / February), 77–86.
Hitt, M. A., Keats, B. W., & DeMarie, S. M. (1998). Navigating in the new competitive landscape: building strategic flexibility and competitive advantage in the 21st century. The Academy of Management Executive, 12(4), 22–42.
Jansen, J. J. P., van den Bosch, F. A. J., Volberda, H. W. (2005). Managing potential and realized absorptive capacity: how do organizational antecedents matter? ERIM Report Series Research in Management, ERS-2005-025-STR.
Jorion, P. (2003). Financial risk manager handbook. Inc. New Jersey: John Wiley & Sons.
Kickert, W. J. M. (1985). The magic word flexibility. International Studies of Management & Organization, 14(4), 11–25.
Lehn, K., & Makhija, A. K. (1996). EVA & MVA as performance measures & signals for strategic change. Strategy & Leadership, 24(3), 34–38.
Mahoney, J. T., & Pandian, J. R. (1992). The resource-based view within the conversation of strategic management. Strategic Management Journal, 13(5), 363–380.
Malagoli, S., & Magni, C. A. (2007). The use of fuzzy logic and expert systems for rating and pricing firms. Managerial Finance, 33(11), 836–852.
McGrath, R. G., MacMillan, I. C. (1995). ‘Discovery driven planning’ Harvard Business Review. July–August, 1995.
Miniter, R. (2002). The myth of market share. New York: Crown Business.
Mische, M. A. (2000). Strategic renewal—becoming a high-performance organization. New Jersey: Prentice-Hall Inc.
Momaya, K. (2002). Strategic flexibility for competitiveness. Global Journal of Flexible Systems Management, 3(1), iii.
Morris, M. H., & Sexton, D. L. (1996). The concept of entrepreneurial intensity: implications for company performance. Journal of Business Research, 36, 5–13.
Mullins, J., & Komisar, R. (2009). Getting to plan B—break through to a better business model. Boston: Harvard Business Press.
Penrose, E. T. (1959). The theory of the growth of the firm. New York: Wiley.
Ramaswamy, V. S., & Namakumari, S. (1999). Strategic planning—formulation of corporate strategy. New Delhi: Macmillan India Ltd.
Rao, R. (1992). Financial management: Concepts and applications. Macmillan.
Sanchez, R. (1995). Strategic flexibility in product competition. Strategic Management Journal, 16(special issue), 135–159.
Sanchez, R. (2004). Understanding competence-based management: Identifying and managing five modes of competence. Journal of Business Research, 57, 518–532.
Schneier, R. (1997). People value added—the new performance measure. Strategy & Leadership, 25(2), 14–19.
Schwartz E. S., & Trigeorgis L. (2001). Real option and investment under uncertainty. MIT Press.
Sharma, P., & Chrisman, J. J. (1999). Toward a reconciliation of the definitional issues in the field of corporate entrepreneurship. Entrepreneurship Theory & Practice (Spring), 11–27.
Singh, J. V. (1986). Performance, slack, and risk taking in organizational decision making. The Academy of Management Journal, 29(3), 562–585.
Smit, H. T. J., & Trigeorgis, L. (2004). Strategic investment—real options and games. New Jersey: Princeton University Press.
Stetz, P. E., Stewart, A., Howell, R., Blair, J. D., Fottler MD. (1998). Dimensionality of the entrepreneurial posture/orientation construct: A structural equation study. Paper presented at the 1998 Academy of Management Meeting, San Diego.
Stopford, J. (2001). Should strategy makers become dream weavers? Harvard Business Review, (January), 165–169.
Talluri, K. T., & Van Ryzin, G. J. (2004). The theory and practice of revenue management. New York: Kluwer Academic Publishers.
Teece, D. J. (1982). Towards an economic theory of the multi-product firm. Journal of Economic Behavior and Organization, 3(1), 39–63.
Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7), 509–533.
Upton, D. M. (1994). The management of manufacturing flexibility. California Management Review (Winter), 72–89.
Vedpuriswar, A. V. (2002). Strategic financial management—achieving sustainable competitive advantage. New Delhi: Vision Books.
Vedpuriswar, A. V. (2010). Enterprise risk management—industry experiences. Hyderbad: ICFAI University Press.
Verdú-Jover, A. J., Lloréns-Montes, F. J., & García-Morales, V. J. (2006). Environment-flexibility coalignment and performance: An analysis in large versus small firms. Journal of Small Business Management, 44(3), 334–349.
Vithessonthi, Chaiporn, Financial Flexibility, Financial System, and Organizational Change (2010). The Business Review, 15(1), 72–82. Available at SSRN: http://ssrn.com/abstract=1548227.
Volberda, H. W. (1998). Building the flexible firm. Oxford: Oxford University Press Inc.
Volberda, H. W., & Elfring, T. (2001). Rethinking strategy. California: SAGE Publications Inc.
Volberda, H. W., & Lewin, A. Y. (2003). Co-evolutionary dynamics within and between firms: from evolution to co-evolution. Journal of Management Studies, 40(8), 2111–2136.
Wiklund J. (1999). The sustainability of the entrepreneurial orientation—performance relationship. Paper presented at the 1999 Babson College-Kauffman Foundation Research Conference, Columbia.
Young, D. W. (2003). A manager’s guide to creative cost cutting. New York: McGraw-Hill.
Zahra, S. A. (1991). Predictors and financial outcomes of corporate entrepreneurship: an exploratory study. Journal of Business Venturing, 6(4), 259–285.
Zahra, S. A. (1993). Environment, corporate entrepreneurship and financial performance—a taxonomic approach. Journal of Business Venturing, 8(4), 319–340.
Zahra, S. A., & Covin, J. G. (1995). Contextual influences on the corporate entrepreneurship—performance relationship: a longitudinal analysis. Journal of Business Venturing, 10(1), 43–58.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Balasubrahmanyam, S., Kaipa, P. & Akhilesh, K.B. The Impact of a Firm’s Financial Flexibility on its Strategic Renewal: Key Concepts with Evidential Support from Businesses Across Industries. Glob J Flex Syst Manag 13, 165–175 (2012). https://doi.org/10.1007/s40171-012-0015-4
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s40171-012-0015-4