School of Management (SoM)

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Open Access
Are fund managers skilled or lucky? Practitioners’ perspective
(Cranfield University, 2021-06) Monin, Benjamin; Agarwal, Vineet; Poshakwale, Sunil
The market share of the passive fund management industry has increased from 3% in 1995 to 41% in 2020 (Anadu et al., 2020). This study investigates whether fund managers are skilled, and if they are, can investors distinguish between skilled and lucky managers? The empirical research relies on the interviews of 20 fund managers. This sample covers various countries and different strategies and styles. I find that fund managers firmly believe they can beat their benchmark. They have clear rationales behind their investment decisions and believe the ability to go beyond conventional wisdom and to differentiate between short-term noise and long-term trends is the key skill. Hence, they believe they should be assessed over at least a 3-year horizon. My results contrast with the popular belief that the market has a short-term view. The fund managers also argue that the popular measure of their performance, the net alpha, is a poor proxy for measuring their skill for several reasons, the most important being that the management fee is not under their control. Further, skill can only be assessed through an intimate knowledge of their every trade, the degree of conviction, and the investment process. Hence, it is not possible to assess their skill using secondary data. I also show the investors value more than just the financial return from their investment, and fund managers try to build trust with the investors. Finally, I demonstrate that the fund managers are aware of the biases and have developed elaborate systems to reduce their impact and to handle the inherent randomness of their environment. These findings provide academics and practitioners with a framework to understand the complexities and challenges of the fund management industry, and why the performance is much more than simply net alpha. This research explores new topics which are fundamental to align investor and fund manager interest (e.g., relationship to information, portfolio management, etc.).
Open Access
Barriers and enablers for the adoption of professional management
(Cranfield University, 2018-09) El Gallad, Ahmed; Hussels, Stephanie
The inability to survive across generations is the main challenge facing all family businesses with only 30% of family firms managing to survive to the second generation, and less than 15% last to the third generation. The generational succession process, primarily from the founder to the second generation accentuates managerial transition, making the founder's style of management potentially no longer the ideal way to run the family firm. It has been argued that the inability of family businesses to adapt to the managerial changes after the founder's era is one of the reasons behind the low survival rate. Professional management is the style of management that follows the founder era and is sought to be applied by the subsequent generations. Therefore, this research investigates the barriers and enablers that family- controlled firms face when they attempt to adopt professional management. Based on the systematic literature review and the empirical study using semi- structured interviews in the Egyptian family business context, the research developed a model that clarifies the three processes involved to adopt professional management during generational transition. The first part of the model provides a deeper understanding of family businesses management through providing clearer demarcations between the family, entrepreneurial and founder management. This helps in clarifying some vagueness and confusion existing in literature between these styles of management. The second part of the model deals with the components of the professional management which are divided between practices and norms. The third part, based on the empirical project, is concerned with the barriers and enablers of professional management where obedience vs. disobedience to the father is considered an enabler or a barrier to professional management. This is the first research that highlights the importance of the relationship between professional management and the father and son relationship in certain Middle Eastern context, which the Egyptian family business context.
Open Access
Constructive deviance in the defence context
(Cranfield University, 2022-05) Taylor, Chris; Parry, Emma; Denyer, David
“Do not conform to the pattern of this world, but be transformed by the renewing of your mind”. (Romans 12:2) This study addresses the question: what motivates and influences constructively deviant behaviour in the UK Defence context? It answers this question by asking interviewees, in semi-structured interviews, to reflect on two occasions when they had the opportunity to constructively deviate. By comparing the enablers and barriers from an episode in which they destructively conformed with those from one in which they constructively deviated, the research focuses on the organisational and contextual factors that affect people’s decisions to constructively deviate or destructively conform. The research suggests that individuals in the Defence context are motivated to constructively deviate to improve their immediate environment or increase operational effectiveness or efficiency. It finds that there are factors in the Defence context which influence constructive deviance that are common to those in less normative environments such as supportive leadership, felt empowerment and a sense of responsibility. It also finds that there are Defence-specific factors that influence constructive deviance such as the relative importance of leaders compared to peers, leader rhetoric, the performance appraisal system and Defence bureaucracy. The research adds to the body of knowledge through its exploration of enablers and barriers to constructive deviance and a deeper understanding of the UK Defence context.
Open Access
a design research study of customised management development.
(2017-11) Shepherd, Wendy; Kwiatkowski, Richard; Bowman, Cliff
This Design Research study of customised management development (CMD) develops an explanatory model of how CMD generates organisational level impact. The model makes a contribution to the management development literature by providing a plausible explanation of the connectivity between CMD as an input and performance as an organisational level outcome. The model is consistent with a realist perspective and suggests that CMD does not cause change, but changes the course of change that is already in process within the organisation through, inter alia social interactions and practice based learning. In contrast to prevailing more linear perspectives of the CMD process, the notion of the participant leaving their organisational context to be developed has been replaced with a representation of CMD where the organisation’s context is ever present within the development process. The practical validity of the model and its artefacts has been field tested at Cranfield School of Management. This has resulted in the implementation of a ‘Design for Impact’ process. The process utilises knowledge artefacts in the form of diagrams and design propositions that recommend what to do and what to avoid when designing interventions within specific organisational contexts. The model and knowledge artefacts that form the output of this research have been developed using a Design Research method. The method combines knowledge drawn from a systematic review of the literature with practitioner interviews. The application of the approach to the management development literature progresses the discussion from ‘How do we prove the organisational level impact of management development?’ to ‘How can we improve the organisational level impact of management development?’.
Open Access
“Do i have the right to lead?“ identity work of emerging Russian business leaders in a leadership development programme
(Cranfield University, 2022-03) Shapenko, Andrey; Dickmann, Michael; Horwitz, Frank
Through a qualitative study of 30 Russian managers and entrepreneurs who graduated from an 18-month Master of Business Administration Programme (MBA) in Moscow, Russia, the research answers two questions: (1) what does leadership mean in the Russian context as described by emerging Russian business leaders? and (2) how do these leaders develop their leadership identity within a leadership development programme? Key research findings reveal that perceptions about effective leadership in Russia are changing, presumably due to a generational shift, and that the leadership identity work in a leadership development programme is fuelled by participants' efforts to promote their leader efficacy. The thesis contributes to social identity theory, implicit leadership theory, and identity theory. Social identity theory is enriched by proposing specific characteristics of Russian leadership identity and describing the challenges emerging Russian leaders face because of conflicting leadership prototypes for self-to-leader comparison. Implicit leadership theory benefits from the evidence that perceptions about Russian leadership characteristics are changing; emerging business leaders prefer a more participative, humane oriented, transformational approach over a transactional, directive and authoritarian one. Finally, identity theory is strengthened by establishing a link between leader efficacy and leadership identity work and by proposing a process model of leader efficacy development and leadership identity work within an educational programme. The study also indicates avenues for further research.
Open Access
Modelling credit risk for SMES in Saudi Arabia.
(2017-07) Al Baz, Naif A.; Zhao, Huainan; Agarwal, Vineet
The Saudi Government’s 2030 Vision directs local banks to increase and improve credit for the Small and Medium Enterprises (SMEs) of the economy (Jadwa, 2017). Banks are, however, still finding it difficult to provide credit for small businesses that meet Basel’s capital requirements. Most of the current credit-risk models only apply to large corporations with little constructed for SMEs applications (Altman and Sabato, 2007). This study fills this gap by focusing on the Saudi SMEs perspective. My empirical work constructs a bankruptcy prediction model based on logistic regressions that cover 14,727 firm-year observations for an 11-year period between 2001 and 2011. I use the first eight years data (2001-2008) to build the model and use it to predict the last three years (2009-2011) of the sample, i.e. conducting an out-of-sample test. This approach yields a highly accurate model with great prediction power, though the results are partially influenced by the external economic and geopolitical volatilities that took place during the period of 2009-2010 (the world financial crisis). To avoid making predictions in such a volatile period, I rebuild the model based on 2003-2010 data, and use it to predict the default events for 2011. The new model is highly consistent and accurate. My model suggests that, from an academic perspective, some key quantitative variables, such as gross profit margin, days inventory, revenues, days payable and age of the entity, have a significant power in predicting the default probability of an entity. I further price the risks of the SMEs by using a credit-risk pricing model similar to Bauer and Agarwal (2014), which enables us to determine the risk-return tradeoffs on Saudi’s SMEs.
Open Access
Quality-at-reasonable-price: developing a UK equity portfolio
(Cranfield University, 2019-03) Bissat, Mohamad Ali; Agarwal, Vineet
Equity investing has evolved significantly since its formalisation during the early twentieth century. Two major recent evolutions are Quality investing and Value investing. Asness et al. (2019) demonstrate fundamentally strong stocks have higher expected returns. Solt and Statman (1989) show that strong companies can be bad investments. Therefore, it is important that investors do not overpay for quality. In this research, I demonstrate that a quality-at-reasonableprice equity portfolio outperforms on an absolute and risk-adjusted basis. Using the non-financial FTSE 350 constituents at the end of December of each year from 2000 to 2016, I develop a multidimensional approach using Quality and Value variables that generate a significant outperformance. Before risk adjustment, the portfolio produces an average monthly return of 0.99% with an annualised Sharpe ratio of 0.73. This compares with an average monthly return of 0.46% and an annualised Sharpe ratio of 0.30 for the remaining stocks in the benchmark. Regression analysis demonstrates that the investment approach produces statistically significant Alpha. Adjusting for risk using the Fama and French (1993) and Carhart (1997) four-factor model, the portfolio earns a statistically highly significant (t = 4.4) abnormal return of 0.56% per month. This compares with a weakly significant (t = 1.5) abnormal return of 0.16% per month for the remaining stocks in the benchmark. In this project, I propose an optimised approach to equity investing relative to passive indexing and traditional active stock selection. Unlike most academic research which works with all stocks including small and micro stocks (e.g. Fama and French (1992, 1993, 1996), Piotroski (2000) and Bartram and Grinblatt (2018)), I consider only the larger stocks in the UK by restricting my sample to the non-financial members of the FTSE 350 index. Since I use only large and more liquid stocks, my strategy can be easily implemented by investors.
Open Access
Segmenting customers based on their unconscious needs.
(2018-09) Simmons, Sid; Baines, Paul R.; Dimitriu, Radu
This paper contributes to the literature by proposing a new methodological approach for understanding customers’ unconscious needs. This approach combines Unconscious Thought Theory (UTT) with Choice-Based Conjoint (CBC), for the first time, to identify needs that segment members are either unaware of, or unable/unwilling to articulate. This methodological approach identified an additional market segment, distinct from those identified by a traditional customer segmentation approach based on customer need articulation. Ergo, understanding unconscious needs may provide additional customer insight and aid marketeers in developing new propositions and gaining market share. This study, therefore, makes a methodological contribution to the literature. The study involves the segmentation of buyers of snack bars (i.e. cereal bars), based on subjective nutritional information importance (as revealed on packaging). Separate samples of buyers were recruited: one group as a control sample completing a traditional CBC exercise; a second group completing the same CBC exercise but asked to complete a UTT working memory distraction-task between each choice-task and responding to it. This allowed a comparison of the segmentations of two groups (one which incorporated unconscious thought theory and the other which did not). Latent Class Segmentation (LCS) analysis indicated that whilst both approaches generate four similar segments, the CBC/UTT approach revealed a fifth (hidden) segment, unidentified in the other sample. In addition, the nutritional preferences of four of the five segments produced via the CBC/UTT approach matched those demonstrated by the participants’ store card behavioural data in a manner unobserved for the traditional CBC approach. This research provides a framework for further exploration and identifies a number of issues, such as which types of working memory distraction-tasks are most effective, that could potentially improve the approach if replicated.
Open Access
The governance of interorganizational relations: case study investigation in triads and tetrads Addendum: The response of governance structure to project-critical incidents: case study investigation in triads and tetrads
(Cranfield University, 2019-09) Fausten, Thierry; Pilbeam, Colin; Alinaghian, Leila
BSTRACT The management of supplier relationships is asserted to be a key contributor to the performance of firms and organizations, notably as the globalization of the economy and the pace of change have significantly increased the competitive pressure. The interdependence of organizations, reflected in supplier portfolios, demands a finer understanding of the interplay of relationships across multiple tiers. After a thorough literature review on the governance of triads, an empirical investigation was conducted in the energy sector in Switzerland. Four cases studies were executed to investigate how does the governance of buyer-supplier relationships influence the other relationships within a buyer-supplier-supplier triad. Data was collected during semi-structured interviews and complemented with documentary evidence, on four concomitant projects involving the same organizations. The findings revealed the interplay of external and internal factors in the choice of governance arrangements and were summarized in a causal network. As well, the evolution of governance in response to threats to the attainment of goals exposed the primacy of functional-level logics in the prioritization of problem resolution. This also allowed to highlight how the governance of one link can affect another link, by changing the structure of the project-level triad, and/or the instruments enacted in the links. Managerial implications were materialized in a practical model displaying the interactions of internal and external influences to be accounted for in the continuous adaptation of supplier relationship and portfolio management practice. A limitation is that full reciprocal recounting of events was not achieved due to access restrictions even when data was collected from all parties in the triads. The value of this research lies in the demonstration of governance evolution across multiple tiers, how it affected both the structure of the triads and the choice of instruments, and the importance of intrinsic values in decision making. The contribution to managerial practice provides insights to improve readiness and flexibility in the management of intra and inter organizational relationships.
Open Access
The integration of exploration and exploitation in the context of innovation teams: fostering and leveraging paradoxical tensions
(Cranfield University, 2018-09) Delley Frederic; Reinmoeller, Patrick
This doctoral research was conducted in the context of Cranfield’s Executive DBA program. The central theme running through each of the three papers that constitute the core of this thesis is the integration of exploration and exploitation in the context of innovation teams. The first paper is a systematic literature review of the mechanisms used to integrate exploration and exploitation at multiple levels of the organization. Based on the findings from this review, the concept of “integrative capacity” is introduced and related propositions are developed. The second and third papers are empirical studies that examine different parts of Smith and Lewis’s (2011) dynamic equilibrium model of tension management. The first is a quantitative study of 42 innovation teams. Its primary objective is to develop and validate hypotheses about optimal team configurations. Specifically, the study looks at the distribution of paradox mindsets within teams and its impact on the innovativeness of project outputs. The second is an exploratory, qualitative study of 16 senior innovation leaders working in large multinational organizations across different industries. It identifies the types of tensions that surface in the process of developing new products or services, describes the resolution strategies used to deal with these tensions, and infers causal relationships between the use of particular resolution strategies and their propensity to embed tensions in the context of new product development projects. Together, these papers contribute primarily to paradox theory and, more specifically, to our understanding of how exploration and exploitation can be brought together in valuable ways in the context of innovation teams. Importantly, despite their unique perspectives and different methodologies, all three papers suggest that the synergistic integration of exploration and exploitation rests on two distinct and complementary sets of factors: those that foster and those that leverage paradoxical tensions
Open Access
The role of numbers, power and status of female corporate directors on gender diversity below the board
(Cranfield University, 2022-09) Tessaro, Michelle; Vinnicombe, Sue; Turnbull James, Kim
This thesis explores the relationship between women on corporate boards and the representation of women in the two senior levels below the board. During the past twenty years there has been considerable efforts to improve the numbers of women in leadership roles. While there has been significant progress in developing a critical mass of WoB, it has not had the anticipated effect of improved gender diversity below the board, where progress has been slow and has yielded inconsistent results. Drawing on data from UK FTSE100 companies, this research moves beyond the trickle-down effect related to critical mass theory and incorporates the constructs of power and status to examine the relationship of women on boards and women in the executive levels. The findings suggest that it is the confluence of women on boards in their numbers, and in positions of power and status that drives gender diversity below the board. This thesis makes a number of contributions to knowledge. Taking a configurational approach using Qualitative Comparative Analysis (QCA), was a departure from previous research which has mostly relied on the use of traditional regression analysis. Instead, a QCA embraces casual complexity using a comparative case-based method to systematically analyze configurations of conditions and outcomes. The use of this methodology was important in developing two theoretical contributions. First, it allowed for a more complex analysis, incorporating the theoretical lens of power and status and women’s numerical representation to examine the impact of the gender composition of corporate boards on gender diversity below the board. The findings provide empirical evidence that a critical mass of women is not enough on its own to activate trickle-down mechanism as it is neither necessary nor sufficient in its association with improved gender diversity in the executive levels. Instead, a multi theoretic approach results in strong empirical evidence that female directors on corporate boards, when represented in their numbers, power and status, indicate gender integrated boards and gender integrated boards are key to consistently activating the trickle-down effect. This research also facilitated the development of a board evolution model. Although speculative, it provides a preliminary hypothesis describing how boards have evolved from male dominated ones to ones that are not only gender balanced but gender integrated, where women directors are present in positions of power and influence.
Open Access
What middle managers do to manage performance in the public sector
(Cranfield University, 2019-09) Higson, Paula; Kelliher, Clare
Performance management continues to be an important area of research in the public sector, especially with reducing budgets and the recognition of operational delivery as a core discipline in the UK civil service. The performance management literature, in all sectors, treats operational and people performance as separate topics. Middle managers were historically seen as an expensive overhead and, even now, little is known about what they do to manage performance. Equally, the research has focussed on the relationship between a manager and their direct report and not about their wider role in motivating their work-unit. This study of 20 in-depth, qualitative interviews in a large, operational, UK government department asked middle managers what they did to manage performance. The study found four groups of activities. Middle managers monitor and oversee the performance of their work-unit, identify causes of performance gaps and supervise mitigating actions. They manage, coach and develop their frontline managers. They engage directly with the frontline staff of their work-unit: regularly investing time in this, despite being busy. They manage their own change projects and play a key role in supporting staff in coping with corporate- level change. A further, unexpected, finding was that different sub-groups of middle managers, with different demographic profiles, had differences in their attitudes and approaches to performance management. The contributions of this study are: (i) an integration of the performance management literature: with a proposed integrated model of performance management; (ii) further development of the concept of the performance gap; (iii) demonstration that the relationship between the middle manager and frontline staff is a critical part of performance management. The implications of these findings, for middle managers and their organisations, are discussed. Further research is recommended.
Open Access
Wind energy diffusion in developing countries
(Cranfield University, 2022-04) Zwarteveen, Jan Willem; Angus, Andrew; Zawwar, Imran
Wind energy is valuable, but many developing and emerging economies (DEEs) do not utilize their substantial wind potential. The objective of this research is to understand wind energy diffusion with the aim to promote wind energy in underdeveloped areas for sustainable benefits of both country and wind industry. The literature review and meta-analysis identified 259 factors that influenced wind energy diffusion. A novel conceptual framework that describes wind energy diffusion was developed, dissecting factors that influence wind diffusion into factors related to the desire for wind energy, factors related to the mechanism of change and disturbing factors. Regarding DEEs, the meta-analysis showed indications of the importance of economic factors and, opposing expectations, environmental factors appear not to drive wind energy growth. Based on path creation theories but using binary logistic regression as a novel quantitative approach, the empirical study explored the factors influencing early wind energy diffusion. Key indicated drivers appeared to be climate adaptation, vested interests (fossil fuels and hydropower), and the business case potential. Regarding DEEs, a negative business case potential formed a key barrier. Novel market entry strategies for the wind power Original Equipment Manufacturer (OEM) are to collaborate with vested power producers rather than compete and promote wind for climate adaptation instead of climate change mitigation. Most high wind potential countries have installed less than 500 MW of wind power capacity (commercialization threshold). The remaining countries have on average 20596 MW of wind capacity installed per country. The lagging wind adopting countries were assessed on their probability to adopt commercial wind in the near future, by using a novel quantitative path creation forecasting method. Passive entry, passive waiting, active entry and active waiting were defined as suggested market entry and development strategies for the wind OEM.

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