Urs Fueglistaller

We contribute to a conceptual understanding of how SME managers can efficiently influence their employees' exploration-exploitation activities or, in other words, how they can foster individual-level ambidexterity, which arises in SMEs when exploration and exploitation activities are balanced. We adopt arelational-contract perspective to discuss informal external drivers of employees' ambidexterity. More specifically, we draw on social-learning theory to analyse how managers' ambidextrous behaviours might enable employees' exploration-exploitation activities. We suggest that it is important for SME managers to serve as role models of ambidextrous behaviour in order to foster non-managerial employees' ambidexterity. Furthermore, we draw on rational-choice and social-exchange conceptualisations of employee-manager exchange to analyse the influence of extrinsic motivators on employees' exploration-exploitation activities. Top-down social processes of learning and employee-manager exchange might together constitute relational contracts between managers and employees. We suggest that such contracts can efficiently foster employee-level ambidexterity as they combine relational with transactional elements by enabling social learning via managers' exploration-exploitation role models and aligning employees' interests with those of the organisation via social exchanges. As the social processes behind relational contracts cannot be easily copied, we argue that employees' ambidexterity facilitates the emergence of sustained competitive advantages.

Based on theory of regulatory focus and organizational ambidexterity, we hypothesize that the level of engagement in exploration and exploitation in a small or medium-sized enterprise (SME) is affected by the respective CEO's chronic regulatory focus. In our analysis of survey responses from CEOs in Switzerland, we find that the CEO's level of promotion focus positively affects the firm's engagement in both, exploration and exploitation, while the CEO's prevention focus is negatively associated with the firm's exploration but not significantly related to its exploitation. The positive associations between a CEO's promotion focus and the firm's exploration/exploitation activities are enhanced under conditions of intense competition.

Recent studies provide empirical evidence that family firms are outperforming their non-family counterparts in terms of stock market performance. For the Swiss stock market we find that family firms indeed outperform their non-family counterparts after controlling for firm size and beta. In addition, our data shows that family firms display more stable earnings per share in contrast to their non-family counterparts. Furthermore we find that the variance of earnings per share positively affects analyst forecast dispersion. According to anomaly literature, lower analyst forecast dispersion has been found to induce higher excess return, which our data supports for the Swiss stock market. By linking variance of earnings per share, analyst forecast dispersion and stock performance we provide an insightful explanation for the excess stock market returns of family firms. In addition, our text extends the theory of dispersion effect with an additional empirical element, the variance of earnings per share.