temporal orientation: an analysis in Europe.
Master Thesis
MSC Business Administration, International Management Track University of Amsterdam/Amsterdam Business School
Name: Bo Wullings
Student #: 10362673 Submission date: 24-06-2016
Statement of Originality
This document is written by Student Bo Wullings, who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
Table of contents: Statement of originality 2 Abstract 4 1. Introduction 6 2. Literature review 8 2.1. Time perspective 8
2.2. Managerial temporal orientation 10
2.3. Agency theory 13
2.4. Shareholder and stakeholder models 15
2.5. Stakeholder influence 18
2.6. Combining shareholder and stakeholder theory 18
2.7. Employee participation 19
2.7.1. Works councils 20
2.7.2. Employee board level representation 22
3. Conceptual framework 23 4. Methodology 26 4.1. Sample 26 4.2. Content analysis 27 4.3. Procedure 28 4.4. Measure 28 4.4.1. Independent variable 28 4.4.2. Dependent variable 29
4.4.3. Control variable – national culture 31 4.4.4. Control variable – industry type 32
4.4.6. Control variable – firm performance 34
5. Results 35
5.1. Preliminary analysis 36
5.2. Correlations 37
5.3. Regression analysis – hypothesis testing 40 5.4. Regression analysis – new measure EBLR 41 5.5. Regression analysis – separate transcripts analysis 43
5.6. Alternative calculation 46
6. Discussion 47
6.1. Discussion of the results 47
6.2. Theoretical discussion 49
6.3. Contributions 51
6.4. Strength and Limitations and suggestions for future research 52
6.5. Concluding remarks 55
7. References 57
Abstract
In recent history, many companies have had the primary objective to maximize shareholder value or ownership wealth, and the pressure is felt by many firms to achieve this objective in shorter and shorter time spans. A phenomenon like managerial temporal orientation, which is defined as the time into the future that a manager typically focus on when making decisions (DesJardine & Bansal, 2014), is thus becoming more and more important. The pressure of time and the search for short-term value maximization has led according to some researchers to a
phenomenon called short-termism, which is defined as the systematic
disproportionate focus on short-term results at the expense of long-term interest (Von Thadden, 1995). Some possible reasons for short-termism exist in the academic literature, but the exact influences on managerial temporal orientation and reasons why manager’s resort to short-termism is something that is still heavily debated in the academic literature. Therefore, this thesis examines how employee participation in the boardroom, by means of works councils and employee board level representation, influences managerial temporal orientation. This is done by performing a content analysis based on two types of linguistic data derived from conference calls and chairman letters regarding the largest companies in 17 European countries.
Regression analyses using this data showed very limited, or no influence of employee participation on managerial temporal orientation, and additionally the significant influences that were found, were not in line with what was hypothesized.
1. Introduction
Researchers have stated that in recent history many companies have had the primary objective to maximize shareholder value or ownership wealth (Lazonick & O’sullivan, 2000). These objectives are often influenced by constraints such as laws, employee well being, customers and other stakeholders (Merchant & van der Stede, 2003), but even with these constraints in place, an effort is still made by many companies to maximize shareholder value in recent decades. This maximization of value has become more and more important and has to be achieved in shorter and shorter time spans. A phenomenon like managerial temporal orientation, which is defined as the time into the future that managers typically focus on when making decisions (DesJardine & Bansal, 2014), is thus of great importance in the strategic decision making process, and can be seen as one of the fundamental principles of the strategic decision-making process (Venkatraman, 1989).
According to some researchers this process of value maximization in a short-time span even caused a phenomenon that is referred to as short-termism (Barton, 2011). This short-termism is described in the literature as the systematic
disproportionate focus on short-term results at the expense of long-term interest (Von Thadden, 1995). Some possible reasons for short-termism exist in the academic literature, for example flawed management practice, managerial opportunism, stock market myopia, fluid or impatient capital and information asymmetry (Laverty, 1996), but the exact reasons why manager’s resort to short-termism is something that is still heavily debated in the literature. Even though the exact causes of short-termism are not known, there is a consensus about the possible far reaching consequences of short-termism. According to some researchers even as great as the recent economic crisis (Barton, 2011).
Due this lack of consensus, this study takes a closer look at some of the possible influencers of managerial temporal orientation. One of the factors brought forward by researchers that influences the strategic decision-making process and thus possibly managerial temporal orientation, is the amount of employee participation present in a firm. This phenomenon of employee participation present itself predominately in Europe, and does so in two forms, works councils and employee board level representation (EBLR). Where works councils benefit the enhancement of information exchange, employee consultation and conflict settlement (Freeman & Lazear, 1995), EBLR benefits the effectiveness of decision makers, by reduction of information asymmetry and greater diversity between the decision makers
(Kleinknecht, 2014). However, there are some downsides of works councils and EBLR, especially from the shareholder perspective. A downside of works councils for example is the increase of employee bargaining power, which in return could possibly lead to “rent seeking” by employees (Freeman and Lazear, 1995), and in the case of EBLR it can slow down the decision-making process, due to the difficulty of effective communication between executives with different backgrounds (Kleinknecht, 2014).
Works councils and EBLR are both expected to operate with the best interest of firm employees in mind, especially in regards to long-term issues like job security and employment conditions. Due to this interest of works councils and EBLR in long-term issues, it is expected they elongate the strategic decision making process.
Conversely, the absence of employee representation might lead to the shortening of the decision making process. However, these possibilities have never been researched, and empirical research is lacking on both temporal orientation of managers (Souder & Bromiley, 2012), and employee participation in corporate governance (Freeman & Lazear, 1995). Therefore, this study will combine the two and focus on the influence
of employee participation in corporate governance and its effects on the temporal orientation of managers, and does so by answering the research question of:
RQ: Does employee participation in corporate governance effect the temporal orientation of managers?
As a result, this study will contribute to both fields of academic literature in regards to employee participation in corporate governance and managerial temporal orientation by bringing these two academic fields together. Additionally due to the relatively new way of measuring managerial temporal orientation by use of a content analysis, this study tries to provide a new robust measure of managerial temporal orientation. This is done because the phenomenon of managerial temporal orientation has in the past proven itself to be difficult to measure. Past research often measured managerial temporal orientation with variables like research & development figures to indicate long-term focused investments (Souder & Bromiley, 2012), but this often resulted in ambiguous results. Therefore the use of a “new” measure of managerial temporal orientation in this study possibly sheds a different light on the academic literature of managerial temporal orientation.
2. Literature review
2.1 Time perspective
One of the challenges of doing research is to clearly define and conceptualize the terms used in the academic field that is studied. The same issue arises in this thesis, and therefore some concepts and terms used in the field of temporality need to be addressed The first overarching concept that needs to be addressed is time
perspective. The concept of time perspective is seen as the overall view an individual
has towards various aspects of time such as time orientation and time attitude. This perspective of time can thus be of great influence on human behavior (Shipp et al., 2009). Furthermore, concepts like time horizon, temporal depth, temporal focus and temporal orientation are brought forward in the academic literature concerning
temporality and seen as parts of the overarching concept of time perspective (Shipp et al., 2009).
What makes these concepts different from each other is that they either focus on distance in time, or the attention given to a certain timeframe. When defining some of these concepts more specifically, temporal depth is seen as “the temporal distance
in to the past and future that individuals and collectivities typically consider when contemplating events that have happened, may have happened, or may happen”
(Bluedorn, 2002, p.114). In the academic literature time horizon has also been used to define this concept.
Where Bluedorn (2002) recognizes the correlation between people’s future and past time horizons, we see that Shipp et al. (2009) introduce the concept of temporal focus, where an emphasis is put on the attention given to a specific time frame. Temporal focus is thus defined as the allocation of focus to the past, present and future (Shipp et al., 2009). The important part to take away from temporal focus, is the notion that it is possible for an individual to shift attention, and is thus able to allocate attention between past, current and future to varying degrees (Shipp et al., 2009).
In this thesis we will predominately focus on the concept of temporal orientation, which will be used to express the dependent variable of this thesis, the temporal orientation of managers. The definition for managerial temporal orientation
given by DesJardine & Bansal (2014) is stated as the time into the future that a manager typically focuses on when making decisions. Temporal orientation is thus similar to the concept of temporal focus since both focus on the attention given to time instead of distance in time. The difference between temporal orientation and temporal focus is thus that according to temporal orientation theory individuals have a predominant focus for one time frame, and are not able to focus at more than one time frame at once (Shipp et al., 2009), where temporal focus theory claims that it is possible to have a diverse focus on multiple time frames.
The concept of temporal orientation is chosen in this thesis due to focus it puts on the individuals’ decision-making process in terms of time, which is in line with the goals of this study (Shipp et al., 2009). Another reason for choosing temporal
orientation is the assumption of temporal orientation that individuals have a predominant focus on one, or the other time frame, and is therefore better suited to develop a clear measure of analysis, which would be a bigger challenge in the possibility of a larger attention span on multiple time frames.
2.2 Managerial temporal orientation and short-termism
Research shows that every individual thinks differently about the past, present and future, (Bluedorn, 2002), but individuals not only feel time differently, they are also affects differently by time in regards to the decision-making process, goals, investments, and self-regulation (Bandura, 2001). Strategic decision-making in combination with time is thus not as clear-cut as it might seem and according to Souder & Bromiley (2012) these choices can be helped by formal methods to aid in the mitigation of ambiguity & uncertainty. Managerial temporal orientation is
dynamic that can be influenced by factors from outside or inside the firm (Souder & Bromiley, 2012).
One of the problems that arises, as a results of these influences on the strategic decisions making process is the problem of intertemporal choice, which is illustrated by following choice between project A and B. In project A there is no need for high initial investment and profits will be moderate in the foreseeable future. In the case of project B high initial investment is needed, resulting in losses in the near future exist as a result of these investments, but with the prospect of higher profits in the far future. Choosing project A is thus very appealing due to its immediate positive results, but at the same time choosing project A is something that is suboptimal for the long run. Choosing project A would thus indicate a preference for economic short-termism (Laverty, 1996).
This phenomenon of (economic) short-termism is defined as “decision and outcomes that pursue of course of action that is best for the short term, but suboptimal over the long run” (Laverty, 1996: 826), and is especially interesting in regards to the goal of managers to find a balance between the short-term results and the long-term health of a company. In a perfect world it should be possible to align short-term and long-term goals without negatively influencing one or the other. Unfortunately, we do not live in a world with perfect conditions and such an alignment is thus rarely
possible (Laverty, 1996). Managers thus have to make decisions that are maybe at cost of the long-term or vice versa. This decision is often made under pressure of improving quarterly earnings (Liljeblom & Vaihekoski, 2009). Often this leads to favoring short-term choices at the expense of long-term choices, which in return could be harmful to the overall performance of a firm (Marginson & Mcaulay, 2008). When a manager is concerned with the long-term more often than not, the manager is
considered to have a long-term temporal orientation. Conversely, when a manager is concerned with the short-term more often than not, the managers is considered to have a short temporal orientation, and when a managers focuses excessively on short-term goals this can lead to short-short-termism (Desjardine & Bansal, 2014).
Other factors influencing the phenomenon of short-termism that are brought forward by Laverty (1996) are several forms of flawed management practice. For instance, performance might be measured over a too of short of a time period, before the actual long-term effects of these short-term decisions becomes apparent.
Additionally, managers might make decisions that are beneficial for them as an individual and not for the firm as a whole. Such decisions are often associated with relatively quick gains and profits, resulting in an enhancement of their reputation (Narayanan, 1985). Another incentive for personal gain and possible short-term decisions by managers is the way managers are compensated, since compensation is often tied to short-term performance indicators (Souder & Shaver, 2010).
One other important factor that cannot be forgot in regards to managerial short-termism is the pressures felt in regards to stock markets. To run a successful firm, capital is needed. To gain this capital some short-term performance is needed in regards to the stock market, since the stock markets tend to undervalue long-term investments (Laverty, 1996). This search for capital can thus be attributed to a strong focus on shareholder value, resulting in managers that put more emphasis on short-term results, and maximize short-short-term shareholder value, whereas the firm might benefit more from long-term investments with higher returns.
Short-termism is thus heavily dependent on the type of managerial temporal orientation, and as a result it is also associated with several performance-related outcomes. A preference for the short-term performance can for example lead to
unintended consequence in regards to long-term value adding activities of a firm (Marginson & McAulay, 2008). Other researchers also found indications, that the shift of managers in American firms to more short-term goals severely threatened competitiveness and innovation (Hayes & Abernathy, 1980), but not all research indicates that managers are forced to favor short-term results. Reports are also found that indicate significant stock market returns, as an answer to the announcement of large R&D investment (Marginson & McAulay, 2008). A lot of debate is thus still going on about the causes and consequences of short-termism and that is where this thesis comes in by trying to find answer for such questions.
2.3 Agency Theory
Managers thus have to difficult task to determine whether they want to focus their efforts towards the maximization of shareholder value and listen to investors, or choose a path that is more in line with their own preferences. This could lead to a conflict of interest between managers and shareholders, and this conflict of interest is exactly what is described as the agency problem in the academic literature. The agency problem is defined as: “one in which one or more persons (the principal(s))
engages another person (the agent) to perform some service on their behalf, which involves delegating some decision-making authority to the agent” (Hill & Jones,
1992, pp. 132).
In relation to this thesis the principle can be seen as the shareholders, and the agent is seen as the manager. Shleifer & Vishny (1999) state that the questioning of the shareholders (principle) explains the central issue of the agency problem.
Shareholders are investing resources into the firm, but they are a not able to see what is exactly done with their resources. This is due to the fact that they do not run the
day-to-day business, but the managers do. A separation of ownership and control thus arises in the firm. Managers need shareholders for their resources, and the shareholder need the managers to generate returns on these resources. As a result, shareholders are often stuck with the question of how to be sure if their resources are used in the best way possible and not wasted on projects that will deliver no returns.
In addition, academic literature suggests that the market institutions in place, possibly not control managers enough to prevent them from using corporate resources for their personal gain, or at least prevent them from pursuing goals that were not those of shareholders (Lazonick & O’Sullivan, 2000). Shleifer and Vishny (1997) propose a solution for this problem in the form of a contract, which is drawn up to settle the agency problem. In this contract it is specified what is exactly done with all the resources provided by the shareholders. This contract is not fool proof though, a problem still exist. As mentioned before the shareholder is not able to make decisions on a day-to-day basis due to his position in the firm. Also shareholders possess less expertise and information than managers (Jensen & Meckling, 1976).Contracts are therefore not fully closed off, and leave some room for interpretation for both the shareholder and managers.
As a result, shareholders may fear the improper use of their resources in certain circumstances, and are therefore more likely to demand short-term returns on their investments (Jackson & Petraki, 2011), This fear of improper use is often due to an information asymmetry between the shareholder and managers (Eisenhardt, 1989). Also the amount of risk shareholders and managers are willing to take can cause a problem in aligning the two (Eisenhardt, 1989). To align managerial decisions with the demands of shareholders in the long-term, multiple things can be done. One solution would be the appointment of an experienced manager, because managerial
experience has shown to be inversely related to incentives for short-term results (Naranayan, 1985). Also, when managers are given long-term contracts, and the task division of a manager is not changed too frequently managerial temporal orientation will lengthen and decrease the likelihood of short-term goals (Naranayan, 1985).
Agency theory is a commonly used theory in the academic literature, but as with most theories it is not perfect. Researchers for example state that other possible actors, e.g. the labor force can influence the shareholder-manager relationship are left out (Gospel & Pendleton, 2003). The exclusion of the labor force is especially amiss in regards to this study. Examples of how the labor force can influence this
shareholder-manager relationship are works councils and employee board level representation, but both will be discussed in detail later on in this thesis.
2.4 Shareholder and Stakeholder models
As mentioned before, agency theory is not perfect. Managers still have to try and balance the wishes of shareholders, with their individual goals and wishes. Some researchers argue that it is possible to adhere to all interests of all stakeholders (e.g. employees, investors, customers, unions, etc.) involved with the firm. Two models that illustrate the choice of a manager to respect all involved are: the Anglo-Saxon, market-based model, predominately seen in the United States and United Kingdom, and the collaborative model, which is seen predominately in continental Europe and Japan (Aquilera & Jackson, 2003). The Anglo-Saxon or market-based model is also often referred to as the shareholder value oriented model of corporate governance. This model is based on the idea that if the corporate enterprise maximizes shareholder value, everyone will benefit, including the workers, consumers, suppliers, and
associated with the market-outsider system of corporate ownerships. In this model private or institutional portfolio investors often own the firms and no real interest is shown towards the day-to-day operations (Almond et al., 2003). In both models the focus tends to be on the short-term, resulting in no retention of profits, which are instead paid out as dividends to the shareholders and as result making reinvestment unlikely (Almond et al., 2003).
In the other collaborative model, i.e. the stakeholder-oriented model, firm ownership is the difference maker. In this case larger block holders own the firms e.g. banks or families. Control is therefore greater, and additionally these types of firms often operate in less market-oriented contexts with less managerial incentives (Aguilera & Jackson, 2003). Stakeholders are in this case defined as “all individuals or groups who can substantially affect, or be affected by, the welfare of the firm” (Freeman, 1984, p.48). Freeman (1984) divides these stakeholders in two groups, the primary and secondary stakeholders. The primary stakeholders are the individuals or groups who are the reason a firm exists. The primary stakeholders are a necessity. Examples of this group are investors, and employees. Secondary stakeholders are not a necessity for the existence of the firm. The firm only has a moral duty towards these stakeholders; examples are the environment and employee satisfaction issues (Garcia-Castro et al. 2011).
This stakeholder model is also often associated with the insider-model of corporate ownerships. Firms with an insider-model of corporate ownerships are still owned by for example banks, but there is a long-term relationship with the firm and there is an actual interest for day-to-day operations (Almond et al., 2003). The
inclusion of investors into the firm and the consideration of multiple stakeholders, and not just the shareholders, will often result in a longer temporal orientation of a firm.
Additionally, in this type of model profits are often kept by the firm to reinvest, enhancing the likelihood of a long-term perspective (Gospel & Pendleton, 2003).
Where in the shareholder model value maximization is the ultimate goal and motivation for making decisions, the stakeholder-oriented model takes a different approach, resulting in decisions being made with the interests of all stakeholders in mind (Garcia-Castro et al., 2011). Stakeholder theory might therefore seem at odds with the often-economic motivations of a firm by incorporating a social dimension into the operations of a firm, instead on solely focusing on pure economic efficiency. Some explanations exist however for the inclusion of stakeholder theory to improve (financial) performance. An example why stakeholder management can lead to greater performance is the increase in trust among management and stakeholders (Williamson, 1975), additionally by pleasing all stakeholders, the firm gains
attractiveness to potential business partners, employees, and customers (Parmar et al, 2010), and as a result the firm will possibly gain a competitive advantage (Harrison et al., 2010)
In regards to the before mentioned agency theory some remarks can also be made when combined with stakeholders. Hill and Jones (1992)for example, who apply agency theory to the relationship between management and the stakeholders state that a stakeholder-agency model exists, which encompasses the implicit and explicit contractual relationships between management an all stakeholders, instead of just the relationship between shareholders and management. As a result the manager in this model is the only actor that engages in all contractual relations, and is therefore the sole actor with direct control over decision making in the firm (Hill & Jones, 1992).
2.5 Stakeholder influence
The management of stakeholders is often described as a two way street,
indicating that stakeholders can influence the firm, but that the firm can also influence stakeholders. Managing stakeholders is therefore a complex task. Not in the least due to the fact that stakeholders posses leverage over the firm by having control over the resources of a firm. Stakeholders exert this leverage over the firm in two ways, either by controlling if the firm gets the desired resources, or by controlling if the firm gets to use the resources in the way they want, which strategy the stakeholders prefer is dependent on the amount of dependency they have on the firm (Frooman, 1999).
In regards to dealing with stakeholders by the firm, Mitchell et al. (1997) bring forward three attributes that determine the amount of attention given by the
management to stakeholders. These attributes are: (1) the power to influence the firm, (2) legitimacy of the stakeholder’s relationship with the firm and (3) urgency of the stakeholders claim on the firm. Each stakeholder can have a combination of one, two or three of these attributes, and with each addition of such an attribute the amount of influence on the firm increases (Mitchell et al, 1997). If a stakeholder only has one attribute, it is seen as a “latent stakeholder”, if a stakeholder has two attributes it is seen as a “ expectant stakeholder, and finally when a stakeholder has three attributes it is seen as a “definitive stakeholder”.
2.6 Combining shareholder and stakeholder theory.
As with many things in the academic literature, it is hard to find one definite answer to a question, and the same is true in the case of whether it is best to listen shareholders, and their often short-term goals, or also include the issues brought forward by stakeholders in the decision making process. This aligning of interests
seems to be especially difficult in the short-term, where in the long-term the interest of shareholder and other stakeholders seems to be easier to align (Garcia-Castro et al., 2011)
In the case of one specific stakeholder, the employees of a firm some interesting points are made by Hill and Jones (1992), who state that satisfying employee interest can lead to better productivity and as result provide the management with more resources. Additionally, employee satisfaction is also
positively correlated with shareholder value (Edmans, 2011). Both these findings thus stress the importance of employee satisfaction. One way to enhance employee
satisfaction is by providing employees with a voice, which can be achieved by means of works councils and EBLR.
2.7 Employee Participation
Employee participation is something that is defined by Smith (2006) as the expectation that employees will have a measured say and stake in the quality and stability of their jobs. Additionally Almond et al. (2003) not that employees also possess the ability to affect the managerial decision making process, either as an individual or in a group. Resulting in a prominent role for employee voice in the academic discussions regarding different varieties of capitalism and business systems. Therefore, we see a genuine interest from researchers in towards the phenomenon of employee participation in corporate governance. Resulting in observations like the one from Denis and McConnell (2003), that in spite of the growing
internationalization of business, which causes distances and differences to grow closer. There is still a lot of cross-national diversity in corporate governance. These variances often result from the institutions that are in place in different countries.
Examples of such institutions are different national legal rules and systems (La Porta et al., 1998).
Countries with more market- or shareholder-oriented corporate governance or LMEs like the United States and United Kingdom often have weaker institutions in place for employee voice and focus more on market oriented employment patterns (Jackson, 2005), where countries outside the Anglo-Saxon world, i.e. European countries often have more diverse institutions. While corporate governance tends to be less market oriented, some countries still possess market orientation
characteristics. In similar fashion, employment tends to be a more regulated
phenomenon, but forms of unionization or employee participation still differ widely (Jackson, 2005). One thing to note is that in general, shareholder oriented, or market outsider-model firms, tends to be less favorable towards institutions of employee voice, this due to the fact that employee representation is considered to form a barrier towards actions that might benefit the firm in the short-term, e.g. in the case of downsizing (Gospel & Pendleton, 2003).
2.7.1 Works councils
One type of employee participation in corporate governance are works councils which are defined by Frege (2002: 223) as “institutionalized bodies of collective worker participation at the workplace level, with specific informatory, consultative and codetermination rights in personnel, social and economic affairs”. Works councils thus facilitate ways for employees to participate in the decision making process at a company or establishment level (Hyman and Grumbrell-McCormick, 2010), and they exist in countries like France, Germany, Netherlands, Belgium, Luxembourg, Austria, Switzerland, Finland and Sweden (Hyman and
Grumbrell-McCormick, 2010). The decision whether it is necessary to establish a work council at a firm rests on the potential perceived gains, by either the firm or the employees. No formal connection exists between trade unions, but most works councils occupied by a majority of union members (Fitzroy & Kraft, 1993). The goal of works councils is to foster cooperation between employees and management, with the ultimate goal of benefiting all parties involved (Freeman & Lazear, 1995). In regards to the actual influence works councils have, works councils often resort to peaceful and cooperative relations with management, as it is not allowed for works councils to for example call a strike (Frege, 2002). In a country like Germany, one of the for runners in employee participation, works councils have to be informed by law in advance about large issues regarding employees, including layoffs, closures, internal transfers, and changes in work practice (Fitzroy & Kraft, 1993).
The presence of works council at a firm results in some benefits, which include the improvement of information exchange, employee consultation and conflict settlement. However, some downsides also exist from the firms perspective, which include the slowing down of the decision making process, the opportunity for employee rent-seeking and an increase in employee bargaining power. Which might obstruct the firm during restructuring or downsizing (Freeman & Lazear, 1995).
In regards to the economic effects the results are mixed in the academic literature. Works councils are for example associated with a significant reduction in productivity according to Fitzroy & Kraft (1987) but Addison et al. (2001) found the opposite to be true in their research, stating that works councils increase productivity. These mixed results thus only strengthen the proposition of this thesis to further investigate the effects of employee participation.
2.7.2 Employee board level representation (EBLR)
The second predominately found type of employee participation is employee board level representation (EBLR), and although seemingly similar, works councils and EBLR due differ, especially in regards to the way they operate. In the case of EBLR, employee representatives actually have seat in the boardroom of a firm, and thus have the ability to influence the strategic decision making process directly. EBLR thus allows for a more direct connection between the management and
employees, and raising awareness of employee issues among management (Gospel & Pendleton, 2003). Additionally, EBLR allows for some protection against potential opportunistic behavior of shareholders, which could be non-beneficial for employees (Gorton & Schmid, 2004).
One of the main differences between works councils and EBLR is the moment when they influence decisions. Where works councils influence decisions in the implementation phase, employee representatives actually directly influence decisions during the planning phase (Kleinknecht, 2014). Works councils can thus be compared to institutions of management coordination with core employees, whereas employee representatives can actually intervene in strategic and economic decision of firms (Kleinknecht, 2014).
The benefits of EBLR are quite similar to the once brought forward in regards to works councils. EBLR also benefits the exchange of information, resulting in more cooperation and a reduction in conflicts (Fitzroy & Kraft, 2005). A disadvantage of EBLR is that decisions might take longer, due to the fact more parties are involved and a need for consensus might thus arise. This need for consensus might result in a reduction of innovation at a firm and a tendency to stay at a status quo (Fitzroy & Kraft, 2005).
In regards to the economic effects of EBLR, the results are again similar to works councils, and thus inconclusive. Where some studies report a negative
influence on productivity and profits (Fitzroy & Kraft, 2005), others report no harm or good being done by the presence of EBLR (Gold, 2011). Another interesting results in regards to firm performance was found by Addison & Schnabel (2009), who report that EBLR has a minimal effect on firm performance, and additionally even an
indication that employee representatives actually influence the board very little. These inconclusive results thus once again only strengthen the proposition of this thesis to further investigate the effects of employee participation.
3. Conceptual Framework
Researchers still have not reached a consensus about the actual effect of employee participation and its potential influence on the strategic decision making process, but there is a consensus it has a potential influence. Temporal orientation is an important factor in every decision made by managers, it is therefore not unlikely that employee participation can also influence temporal orientation of managers. As discussed before, we see that firms with employee participation have to keep all stakeholders in mind; therefore a need to balance all interests arises. Which results in practice that all decisions are subject to discussion and need to be looked at from multiple perspectives with the aim of satisfying most stakeholders.
Works councils are thus important actors in this decision making process. Due to the fact that works councils are not allowed to call strikes, they often tend to choose a peaceful and co-operative way of operation between them and the managers. In countries like Germany, rules are in place, which state that works councils need to be given information about for example plant closures, lay-offs, and or significant
changes in work practice. As a results management and works councils need to be consulting with each other, and in the case of lay-offs a plan needs to be made by the management for its workers. Due to the limited role of works councils in the decision making process, it seems that they are primarily concerned with job stability for workers. Works councils would thus in return force firms where they are present to be relatively long-term oriented.
Additionally, due to the longer time required for consultation between the different parties involved when works councils are present in firms when for instance decision need to be made about lay-offs, works councils again influence the temporal orientation of managers. Due to fact works councils are also one of the stakeholders in the strategic decision making process they are also able to influence management by the two methods introduced by Frooman (1999), which are withholding resources and influencing the way resources are used. Works councils however do not have a lot of power in the firm. Therefor the option to co-decide how to use resources by the firm is a way more likely strategy to be chosen by works councils. The amount of attention put towards the points made by the works councils are heavily depended on the context. If we use the model by Mitchell et al. (1997), we expect works councils to be at least “expectant” stakeholders due to their often legitimate claims towards the strategic decision making process, but when matters involve for example layoffs works councils could even be considered “definitive” stakeholders, and receive more attention from management.
Finally, works councils are associated with increased bargaining power of labor, which again extends the process to make a decision. Having a longer temporal orientation by managers in a firm with works councils is therefor to be expected, than managers in firms without works councils. Since managers in firms without works
councils do not have to consider the issues raised by works councils and are able to move forward without consulting them in the decision making process. As a result the following hypothesis will be tested in this study:
H1: Managers of firms with works councils have a more long-term temporal orientation than managers of firms that do not have works councils.
If we than look at EBLR we can expect, using the same reasoning used for works councils in explaining H1, that when EBLR is present in a firm, solutions that provide job stability are preferred by the employees representing the other employees in the board room (Kleinknecht, 2014). Where works councils only influence the decision making process in the implementation phase, we see that EBLR is able to influence the decision making process in the strategic planning phase. Therefore EBLR has a more direct influence on temporal orientation of managers (Kleinknecht, 2014). Another factor often attributed to EBLR is the facilitation of direct interaction between the different stakeholders i.e. financiers and the actual labor forces of a firm. As a results employee concerns can be brought to the attention and the interest of employees can be defended. This might again lead to a search for consensus, and negatively influence the speed of the decision making process. Additionally,
employee representation in the boardroom can also protect employee interest against the possible, often short-term and opportunistic behavior of shareholders (Gorton & Schmid, 2004).
Employee board level representatives, similar to works councils, also have to possibility to influence the strategic decision making process by withholding
due to its influence on a higher level, but the power of EBLR might still not be large enough to choose a method of withholding resources, and the other method of deciding how resources are allocated, which is mentioned by Frooman (1999), might be more likely to be chosen. The matter of urgency felt by the other stakeholders is often also a determinant of whether the issues raised by employee representatives are taken seriously. Employee representatives are off course expected to focus on more stability and benefits for employees, and by doing so they pressure managers to focus more on the long-term, this pressure is often felt due to the fact that employee
representatives in most cases possess at least two of the attributes from the model by Mitchell et al. (1997). All of this resulting in the fact that it is expected for firms with EBLR to have managers with a longer temporal orientation, than managers in firms without EBLR. This because managers in firms without EBLR do not have to deal with employee representatives and are therefore less restricted in the strategic
decision making process and decisions can be made quicker. As a result the following hypothesis will be tested in this study:
H2: Managers of firms with EBLR have a more long-term temporal orientation than
managers of firms that do not have EBLR.
4. Methodology
4.1 Sample
In this study an exploratory, quantitative, archival study is carried out in combination with a content analysis. Managerial temporal orientation is something that is very difficult to measure. No public records exist about managerial temporal orientation and accurately quantifying temporal orientation is something that is very
difficult to do. Where other studies have attempted to measure managerial temporal orientation by looking at for example R&D expenditure as a measure of managerial temporal orientation does this study make use of another measure. In doing so an attempt is made to try and provide a more accurate measure of managerial temporal orientation. This “new” measure is a content analysis using data from conference calls and chairman letters. This content analysis is done on a sample of both conference call data, and chairman letters collected from the annual reports of the year 2006 from the largest companies in 17 European countries. The year 2006 was chosen due to the fact some of the data used was already provided by the supervisor. In total data from 532 companies was analyzed, which included conference call data from 298
companies, and chairman letter data from 446.
4.2 Content analysis
Content analysis is a research method that finds itself at the crossroad of qualitative and quantitative methods. The goal of content analysis is the
understanding of cognitive processes of individuals by analyzing texts. Therefore it can be very useful to explore many important but difficult to study subjects (Duriau, Reger & Pfarrer, 2007).The same is the case in this study, by incorporating a
qualitative aspect to this quantitative study a broader view, and clearer understanding of the relationship studied in its own context can be achieved. This inclusion of context to the analysis is seen as something positive due to the fact Souder &
Bromiley (2012), state that temporal orientation is heavily influenced by the context in which the firm or individual operates. Content analysis can therefore be seen as a benefit to this study due to the incorporation of contextual considerations.
4.3 Procedure
To perform our content analysis, word-counting software called CATScanner was used. This software counted the keywords brought forward by Desjardine and Bansal (2014) associated with either long or short temporal orientation. Both lists of keywords associated with either long or short temporal orientation can be found in the appendix.Additionally, the same content analysis methodology was used in this study as in the study of Desjardine and Bansal (2014), who also looked at temporal
orientation.
4.4 Measures
To answer the research question posed in this this thesis, which stated: “Does
employee participation in corporate governance effect the temporal orientation of managers”, the following main variables were used: works councils, EBLR and
managerial temporal orientation.
4.4.1 Independent variables
The independent variables, works councils and EBLR are both based on secondary data. The data needed for these variables, consisted of the conference call data already provided by the supervisor, and additionally collected chairman letters from the annual reports from publicly traded companies in 17 European countries in 2006. In the database provided by the supervisor other data was also included, some of this data was not important in regards to this study and was excluded, but most importantly it did include data about the types of employee representation at the firms included in our study, which was used to create the variables used in this study.
In regards to the actual statistical analysis and to test the hypothesis two dummy variables were created. One for works councils, were a “0” indicated the absence of works councils and a “1” indicated the presence of works councils. The same was done for EBLR were “0” indicated no EBLR, and “1” the presence of EBLR. For details about the distribution of firms see table 1.1.
Table 1.1 Distribution of firms in sample
Country Number of firms Firms with works councils Firms with EBLR
The Netherlands 37 18 0 Germany 100 39 75 Belgium 18 10 0 Luxembourg 5 2 2 Ireland 39 3 1 Portugal 15 1 0 Greece 15 1 3 Denmark 15 5 13 Sweden 27 19 21 Norway 20 5 10 Finland 21 11 2 Austria 14 6 12 Italy 45 6 0 Spain 24 2 0 France 75 40 11 Turkey 44 0 0 Switzerland 18 10 2 Total 532 178 152 4.4.2 Dependent variable
The dependent variable, managerial temporal orientation was constructed using the word count data from the content analysis. This word count data was extracted from the available transcripts of each available company. These transcript files were then divided into three groups with one group containing content from the presentation part of conference calls, a second group containing content from the Q&A part of conference call, and a third group containing content from the chairman
letters. The conference call data was divided in two groups due to the possible
differences between their types of content. Q&A data might have a more spontaneous nature and might therefore be more accurate and honest (Lee, 2014), than the often-scripted presentations. This division between the two parts of the conference call data would allow for the possibility to see if there is a difference between the scripted and unscripted measure in the final analysis. After creating these transcript files all file groups were analyzed using CATScanner word counting software, which resulted in data about the total number of words, number of characters, number of short-term related keywords and number of long-term related keywords in the transcripts. The average amount of words in the transcripts was 10.192 (SD = 11.414) with a
minimum of 151 and a maximum of 53.200. With this data, the dependent variable of managerial temporal orientation could be constructed, using the following formula (Desjardine & Bansal, 2014):
𝑇𝑖𝑚𝑒 ℎ𝑜𝑟𝑖𝑧𝑜𝑛 = # 𝑙𝑜𝑛𝑔 𝑡𝑒𝑚𝑝𝑜𝑟𝑎𝑙 𝑜𝑟𝑖𝑒𝑛𝑡𝑎𝑡𝑖𝑜𝑛 𝑤𝑜𝑟𝑑𝑠
(# 𝑠ℎ𝑜𝑟𝑡 𝑡𝑒𝑚𝑝𝑜𝑟𝑎𝑙 𝑜𝑟𝑖𝑒𝑛𝑡𝑎𝑡𝑖𝑜𝑛 𝑤𝑜𝑟𝑑𝑠 + # 𝑙𝑜𝑛𝑔 𝑡𝑒𝑚𝑝𝑜𝑟𝑎𝑙 𝑜𝑟𝑖𝑒𝑛𝑡𝑎𝑡𝑖𝑜𝑛 𝑤𝑜𝑟𝑑𝑠
As a result of analyzing all three-file groups separately using the
above-mentioned formula, four versions of the dependent variable could be constructed. One version based on the Q&A part of the conference calls, a second version based on the presentation part of the conference calls, a third version based on the chairman letters, and finally a version based on all three. For this final “total” version of the dependent variable all word count scores were added up, to which again the above-mentioned formula was applied. This final version of the dependent variable was used for the final statistical analysis, due to its comprehensive nature, and containing the most information available. Additionally in regards to the meaning of higher or lower
values of the dependent variable, a higher value indicated a stronger focus on long-term results, and lower scores indicated a stronger focus on short-long-term results.
4.4.3 Control variable – National culture
As with many studies, the effect that is researched is rarely only effected by one sole variable. Control variables are therefore necessary to isolate the researched effect, which is in our case the effect of works councils and/or EBLR on temporal orientation of managers. The first variable we will use to control for eventual outside influence on the effect being researched is the national culture of the countries of origin of the firms in the database. This control variable is included due to the fact national culture might be of influence on the temporal orientation of manager. This due to the fact that Hofstede (2003) argues for four dimensions on which national cultures that can compared These dimensions are individualism vs. collectivism, power distance, uncertainty avoidance and masculinity vs. femininity. These factors are not as important for our study, but later Hofstede (2003) added a fifth dimension, long-term orientation, which is of greater interest in regards to this study. Hofstede gave each country he researched a score between 1 and 100, on each of the
dimensions stated in his research.
In the quest for a useful control variable in regards to a countries long-term orientation, the scores of each of country in our sample were assessed and compared with Hofstede’s long-term orientation dimension in mind. These scores were collected from Hofstede et al. (2010). Lower scores on Hofstede’s relative rating scale are the more short-term oriented national cultures, whereas the higher scores indicate the long-term oriented national cultures.
The national culture scores on the LTO dimension of Hofstede (2010), ranged from 24 (Ireland) to 83 (Germany), for the sake of the statistical analysis these scores were divided in 3 groups. One group for short-term national cultures (STNC) with scores lower than 40, a second group for countries with medium-term national cultures (MTNC) with scores between 40 and 65, and finally a group with long-term national cultures (LTNC) with scores above 65. The “medium-term” oriented group was the largest, and represented cultures that were neither short- nor long-term oriented. Additionally, this group was used as a reference category in our statistical analysis. Descriptive statistics about the countries, and their scores on Hofstede’s long long-term orientation dimension can be found in Table 1.2.
Table 1.2 Distribution of National Culture in sample
Culture Group Countries included (LTO-score) N
Short-term oriented National Culture (scores < 40)
Ireland, (24), Portugal (28), Denmark (35), Norway (35), Finland (38)
110
Medium-term oriented National Culture (scores 40-65)
Greece (45), Turkey (46), Spain (48), Sweden (53), Austria (60), Italy (61), France (63), Luxembourg (64)
249
Long-term oriented National Culture (scores > 65)
The Netherlands (67), Switzerland (74), Belgium (82), Germany (83)
173
4.4.4 Control variable – Industry type
Another possible influence on temporal orientation of managers that needs to be controlled for is the type of industry a firm is active in. For example the financial industry is more focused on short-term results, where other industries like the real
estate or energy sector are more long-term oriented. Additionally long or short
temporal orientation can also mean different things in different industries. A period of two years might be considered long-term in the technology industry, where this is considered short-term in the mining industry (Desjardine & Bansal, 2014).
Additionally, in the database 22 industries were present. To avoid
overcomplicating the statistical analysis industries were grouped together according to the Nomenclature of Economic Activities (NACE) code. These industry NACE-codes were retrieved from an overview created by the European Commission (2010). These codes are used to group organizations of similar economic activities together. Each NACE-code has four digits, were the first two digits represent the division a firm is active in, for example mining, or construction. The third number in this code represents the group within this division and the fourth number indicates a specific class of this activity. In our study we only used the first two numbers to group the industries together present in the sample together. This resulted in 6 groups, which were represented by a dummy variable with the group of “other industries” serving as the reference group. See table 1.3 for the categorization of the industry type variable.
4.4.5 Control variable – Firm size
The third variable that needed to be controlled for was firm size. This due to the expectation that not every firm is in the same stage of development, and therefore temporal orientation of managers would also be different. Larger firms for example might be more interested in the long-term and retaining their position were smaller firms might be more interested in the short-term due to their quest for growth and consequently might adhere to more short-term goals. Firm size was determined by
the number of employees in 2006, and obtained from the provided database. The variable for the number of employees was not altered for the analysis like the
previous other control variables. The average number of employees in our sample was 32.141 (SD = 62.548).
Table 1.3 Categorization of the industry variable
4.4.6 Control variable – Firm performance
Additionally, a fourth control variable firm performance was added to our statistical model. Similar to firm size, there is also a difference in temporal orientation of firms due to their relative performance. A firm or manager might alter temporal orientation according to firm performance. When business is slow or bad, short-term results might be of the essence to keep the firm afloat. On the other hand, if business is great, managers might be more inclined to choose more long-term strategies to maintain and stretch growth and prosperity. In the database provided Return on Assets (ROA) data was chosen to indicate firm performance, following the example of Desjardine and Bansal (2014). Similar to firm size, a continuous variable was used to represent firm performance in our statistical analysis, in which the number given
Industry Group Industries included N
Construction, Mining & Manufacturing (CMM)
Construction, Mining, Petroleum, Lumber, Glass, Steel
107
Fast Moving Consumer
Goods Food, Apparel, Wholesale, Retail 73
Financial Banks, Insurance, Holdings 99
Media Radio/Telephone, Advertising 50
Engineering Electrics, Electronics, Engines, Motor vehicles 103 Other industries Chemicals, Transport, Real Estate, Other
industries
represented the actual ROA percentage achieved by the firm in 2006. The average ROA percentage of the firms used in the sample was 7.00% (SD = 14.87).
4.4.7 Control variable – CEO age
Finally, CEO age was added as a control variable. This because older people tend to have a longer temporal orientation and additionally, they could be using different vocabulary than younger people might use (Desjardine & Bansal, 2014). No alterations were made in regards to the CEO age variable. This control variable was represented in a continuous fashion and the value given represented the actual age of a CEO in 2006 in the dataset used. The average CEO age in the sample used was 53.6 (SD = 7.45).
5. Results
In this section the results and outcomes of the statistical analysis used in this study will be presented. These results will give us valuable insights on the earlier made hypothesis. To test these hypotheses a multiple regression analysis was conducted in SPSS. A regressions analysis is a statistical method in which a linear model is used to predict values of an outcome variable, based on one or more predictor variables (Field, 2013). In this study the outcome variable was the
managerial temporal orientation temporal (MTO) predicted by the presence of either works councils or employee board level representation (EBLR). Additionally, to control for other influences on this possible effect, so called control variables were added, which in this study included national culture, industry, CEO age, firm size, and firm performance. In preparation for the actual regression analysis some preliminary analyses were conducted.
5.1 Preliminary analysis
An error check was first performed on the data. This was done by a frequency check for all relevant variables. No large errors or outliers were found. These
frequency checks were followed by another set of checks, which looked at the descriptive statistics, skewness, kurtosis and thus normality for all relevant variables. An overview of all descriptive statistics can be found in table 2.1. In regards to the dependent variable of total managerial temporal orientation (TMTO) the distribution was positively skewed (0.945), indicating that the more frequent scores were clustered at the lower end of the distribution and the tail points towards the higher or more positive scores (Field, 2013). Additionally the distribution was leptokurtic (0.917) indicating a distribution with too many scores in the tails and too many peaks (Field, 2013). Due to the importance, and assumptions made about a normal distribution in many methods of statistical analysis, the data needs to be as close as possible to a normal distribution. To achieve this a logarithmic (Log10) normalization of the dependent variable was performed due to the values found in the preliminary analysis. After the transformation of the dependent variable the skew of the distribution was now 0.583, which was seen as a more acceptable and could therefore be used in the actual statistical analysis. Due to the fact most other variables were dummy variables, there was no need to take look at the normality of these variables. The variables that were not dummy variables, firm size, CEO age, and firm performance did not meet the normality requirements but were still deemed usable due to the fact they were not used as a dependent variable in the analysis.
5. 2 Correlations
The next step in answering the actual research question of this study is to explore some of the possible correlations between the variables involved. This step is included to create some insight in how the variables are related, and how the eventual regression model might look like. All correlations plus descriptive statistics can be found in table 2.1. The first remark that needs to be made in regards to the
correlations seen in table 2.1 is that the control variables, “national culture”, and “type of industry”, are dummy variables. Due to mutual exclusive nature of dummy
variables either being ‘0’ or ‘1’, it was inevitable to find a negative correlation
between them. Additionally, the dependent variable was measured using a logarithmic conversion of the original variable, which had the following descriptive statistics: M = 0.31 (SD = 0.18)
In regards to the independent variable of works councils, the results from the correlational analysis indicate that a significant correlation exists between the national cultures tested. In regards to the STNC a significant negative correlation was found, and a significant positive correlation with LTNC. These results are in line with the expectations of this study due to the countries included in these national cultures groups. Furthermore research shows that short-term oriented economies have a tendency to dislike employee participation (Almond et al., 2003). Additionally, some significant negative correlations were found with two industry groups, namely the financial and media industry. Both these industry groups are often characterized as fast paced and short-term oriented, and a negative correlation with works councils and
Table 2.1 Correlation Matrix: *. Correlation is significant at the 0.05 level (2-tailed), **. Correlation is significant at the 0.01 level (2-tailed), N = 532 Variables M SD 1 2 3 4 5 6 7 8 9 10 11 12 13 1. Temporal orientation (log) .11 .06 - 2. Works councils .34 .47 ,000 - 3. EBLR .29 .45 -,085* ,265** - 4. STNC .21 .40 -,072 -,114** -,056 - 5. LTNC .33 .47 -,013 ,162** ,245** -,354** - 6. CMM industry .20 .40 ,017 ,061 -,058 ,207** -,138** - 7. FMCG industry .14 .34 ,055 ,076 -,022 ,012 ,003 -,200** - 8. Financial industry .19 .39 ,019 -,115** -,024 -,065 -,012 -,240** -,191** - 9. Media industry .09 .29 -,107* -,106* -,075 ,011 -,045 -,162** -,128** -,154** - 10. Engineering industry .19 .40 ,063 ,065 ,185** -,109* ,025 -,246** -,195** -,234** -,158** - 11. Firm size 32083.56 62501.11 ,002 ,425** ,135** -,186** ,134** -,040 ,072 -,071 ,006 ,085 - 12. Firm performance 7.00 14.85 ,001 ,028 ,042 ,023 ,056 ,058 ,060 -,097* ,049 -,004 -,025 - 13. CEO age 53.6 7.44 -,013 ,100* ,005 -,048 -,001 ,022 -,007 -,012 -,016 ,038 ,115* -,018 -
this (Desjardine & Bansal, 2014). Furthermore, a significant positive correlation was found with firm size indicating a larger presence of works councils in larger firms. Finally, a positive significant correlation was found in regards to CEO age, which needs further analysis to give a meaningful explanation of this correlation.
Looking at the results of the correlational analysis in regards to EBLR similar results can be found. Again a significant positive correlation was found with LTNC, but no significant correlation was found with STNC. EBLR only correlated
significantly with one industry group, namely the engineering industry. Similar to works councils a positive correlation was found with firm size, indicating again that employee participation is more prevalent at larger firms.
Finally, in regards to the dependent variable of MTO, some interesting correlations were found. First of all, a negative correlation was found with the media industry group, which again is in line with the fast paced nature of this industry (Desjardine & Bansal, 2014), but surprisingly another negative significant correlation was found between MTO and EBLR. This correlation is surprising due to the fact it is not line with what is expected based on the literature. Based on the literature a
positive correlation would be expected, indicating that managers at firms with EBLR had a longer time horizon, but the opposite seems to be true based on this correlation. Furthermore, no significant correlation was found between temporal orientation and works councils, which is another important correlation to look at in regards to the research question and hypotheses of this study.
5.3 Regression analyses – hypothesis testing
To better understand the above-mentioned significant correlations, further investigation is needed. This is achieved by means of a multiple regression analysis, which in contrast to a correlational analysis can control for other variables, and thus give more insight in the subject researched, and provide the ability to test actual hypotheses. The first hypothesis in this study, which stated: “Managers of firms with
works councils have a more long-term temporal orientation than managers of firms that do not have works councils”, was tested using a multiple regression analysis, to
investigate the way in which the existence of works councils influenced managerial temporal orientation. This regression analysis was carried out in two steps. Step one with just the predictor variables: national culture, industry type, firm size, firm performance, and CEO age, and step two with the inclusion of the works council variable. This splitting of the regression analysis model into two steps was done to isolate the effect of works councils on managerial temporal orientation.
The first model thus included the five-control variables (national culture, industry type, firm size, firm performance, and CEO age). This model was
insignificant: F(10,447) = 1.27, p = .242, R2(adj.) = .006. No conclusions can thus be drawn from these results due to the insignificant results and additionally the model only predicted 0.6% of the variance in MTO. When the independent variable of works councils was included in the model the results remained insignificant F(11,446) = 1.17, p = .308, R2(adj.)= .004, These results thus indicate that the inclusion of works
councils explains 0.2% less of variance. Additionally, none of the variables included in the model showed any significant results, including the main variable of works councils tested by this model (p = .738), therefore hypothesis 1 is rejected. For all results see table 2.2
To test hypothesis 2 which stated: “Managers of firms with EBLR have a more long-term temporal orientation than managers of firms that do not have EBLR,” a similar model was used. Only in this case the influence of EBLR was tested and not the influence of works councils. The analysis method was the same as it was to test hypothesis 1. Which meant the control variables were entered first, and the
independent main variable of EBLR was added later. This model also showed insignificant results F(11,446) = 1.58, p =.100, R2(adj.) = .014, indicating that the inclusion of EBLR explained 0.8% more variance of MTO. Looking at the individual variables in the model, two significant results were found. The first was the industry group of engineering (ß = .122, p = .045) and second was the main variable of interest, EBLR (ß = -.105, p = .033). This last results is not in line with was expected in accordance to the hypothesis, because a positive result was expected to exist between MTO and EBLR. Therefore hypothesis 2 is rejected. For all results see table 2.2.
5.4 Regression analyses – new measure EBLR
In the database made available by the supervisor, another variable was also available to measure EBLR. This variable measured EBLR differently, and instead of just indicating the presence of representatives, this measure represented the actual number of representatives at a company. To further investigate the earlier found significant result between EBLR and managerial temporal orientation the regression analysis was repeated using the same method as above, only now using the new measure for EBLR. The overall model remained insignificant just as before F(11,446) = 1.77, p = .054, R2(adj.)=.018. This model thus showed a slightly higher predictive power due to explaining 0.2% more of variance. In regards to the individual variable
Employee participation and temporal orientation Bo Wullings
Table 2.2: Regression Results
Note * p < .05. Regression coefficients are unstandardized. Values in parentheses are standard errors.
Constant .119(.020) .119(.020) .121(.020) .117(.020) .058(.017) .058(.017) .059(.017) .364(.077) .363(.077) .367(.077) Control variables: STNC -.013(.007) -.013(.007) -.012(.007) -.012(.007) .005(.006) .005(.006) .006(.006) -.035(.027) -.034(.027) -.033(.027) LTNC -.004(.006) -.004(.006) -.001(.006) .002(.007) -.008(.005) -.008(.005) -.005(.005) -.051*(.023) -.057*(.023) -.046(.024) CMM .011(.009) .012(.009) .012(.009) .012(.009) -.012(.007) -.012(.007) -.012(.007) .051(.033) .046(.033) .052(.033) FMCG .016(.009) .016(.009) .016(.009) .017(.009) -.008(.008) -.008(.008) -.008(.008) .037(.036) .034(.036) .037(.036) Financial .009(.009) .009(.009) .010(.009) .010(.009) -.012(.007) -.012(.007) -.012(.007) .049(.033) .053(.033) .050(033) Media -.011(.011) -.011(.011) -.011(.011) -.012(.011) -.023*(.009) -.023*(.009) -.024*(.009) .030(.040) .038(.040) .029(.040) Engineering .015(.009) .015(.009) .018*(.009) .018*(.009) -.012(.007) -.012(.007) -.010(.007) .036(.033) .035(.033) .041(.033) Firm size .000(.000) .000(.000) .000(.000) .000(.000) .000(.000) .000(.000) .000(.000) .000*(.000) .000(.000) .000*(.000) Firm performance .000(.000) .000(.000) .000(.000) .000(.000) .000(.000) .000(.000) .000(.000) .000(.000) .000(.000) .000(.000) CEO age .000(.000) .000(.000) .000(.000) .000(.000) .000(.000) .000(.000) .000(.000) .000(.000) .000(.000) .000(.000) Independent variables: Works councils -.002(.006) .002(.005) .054*(.024) EBLR -.013*(.006) -.003*(.001) -.010(.005) -.020(.023) R2 .028 .028 .038 .042 .061 .062 .080 .037 .049 .039 R2 (adj.) .006 .004 .014 .018 .014 .010 0.29 .011 .022 .011 F 1.274 1.166 1.584 1.772 1.300 1.192 1.571 1.454 1.795 1.387 N 532 532 532 532 225 225 225 446 446 446
