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The single-minded pursuit of a short-term shareholder value maximization “mantra” by top managers often results in long-term value destruction for shareholders. We explain this paradox and develop ...

Firms strategically expand to countries that offer important location advantages. Yet, for digital firms, which can instantly release their technologies worldwide, it is unclear whether a focus on specific locations can still provide strategic advantages. The authors argue that digital firms reap critical demand-side location advantages for the internationalization of their technologies by strategically interacting with users in lead markets that exhibit either high within-country demand heterogeneity or preference overlaps with several other countries. Simply penetrating a lead market is not enough, however, as both demand-side and supply-side factors influence the digital firm’s potential to take advantage of lead markets. On the demand side, a digital firm should avoid focusing on paying users or acquiring light users. On the supply side, the digital firm must deploy adequate technological and marketing capabilities to benefit from user interactions in lead markets. Thus, the authors link demand-side opportunities and supply-side firm capabilities to develop nuanced theory on how digital firms can spur international expansion. They find empirical support for their arguments by analyzing a large multicounty database of mobile apps in Apple’s App Store.

Restricted stock awards carry upside and downside risks for CEOs. We follow a socio-cognitive perspective by suggesting that awards of restricted stock are viewed as potential gains or potential losses depending on each CEO's dominant regulatory focus. Regulatory focus, therefore, helps determine how a CEO responds to restricted stock awards. We also propose that the moderating effect of regulatory focus strengthens as firm complexity increases and as CEO tenure lengthens, because complexity and tenure both increase CEOs' reliance on heuristic information processing. Specifically, complexity restricts a CEO's cognitive capacity for thoughtful deliberation during decision making, and tenure affects a CEO's motivation to search for and process information thoroughly. We find general support for the hypotheses and discuss the implications of our findings for future research and practice.

Teaching strategic management well involves instilling in students a lifelong process of improving critical thinking that can lead them to sound judgments (i.e., wisdom) concerning strategic issues...

Research summary: We investigate the effects of monitoring by boards of directors and institutional shareholders on merger and acquisition (M&A) performance extremeness using a sample of M&A deals from 1997 to 2006. Both governance research and legal reforms generally have espoused a “raise all boats” view of monitoring. We instead investigate whether monitoring may serve as a double-edged sword that limits CEO discretion to undertake both value-destroying M&A deals and value-creating ones. Our findings indicate that the relationship between monitoring and M&A performance is more complex than previously believed. Rather than “raising all boats” in a shift towards better M&A outcomes, monitoring instead is associated with lower M&A losses, but also with lower M&A gains. Managerial summary: Mergers and acquisitions (M&As) are a quintessential corporate activity. There were $3.8 trillion worth of M&A deals in 2015, despite scholars and practitioners reporting that M&As often perform poorly. We question the widespread belief that more vigilant monitoring by boards of directors and large shareholders will raise M&A performance, overall. Put differently, does monitoring constrain CEOs' discretion to pursue bad deals, while simultaneously encouraging them to pursue good ones? We find that monitoring limits both large M&A losses and large M&A gains. Contrary to widely held beliefs, our results indicate that constraining executives' ability to pursue value-destroying M&A deals does not simultaneously encourage or enable CEOs to pursue value-creating deals. Copyright © 2017 John Wiley & Sons, Ltd.

Boards of directors must navigate between adopting standardized “best practices” for their CEOs’ pay plans, on the one hand, and customizing their CEOs’ pay to align their particular CEO’s goals with those of shareholders, on the other. We build theory proposing that the incentive effects of different CEO compensation types vary consistently over CEO tenures and, therefore, that overstandardization of CEO pay plans actually can hurt shareholders. Our analysis of a sample of U.S. Standard & Poor’s 500 firms from 1998 to 2005 shows declining benefits to shareholders from performance-based compensation (i.e., options and bonuses) as CEO tenure increases but an opposite effect for non-performance-based (i.e., salary) pay. These findings can be considered a preliminary warning that normative “best practices” should not become the exclusive approach to determining CEO pay packages; instead, boards should consider more holistic approaches that incorporate the fit between CEO characteristics and organizational goals.

Family business researchers are well-positioned to build important new knowledge in, and even set new directions for, general management research. We show in this commentary how the family business context is especially rich in opportunities for contributing new knowledge concerning otherwise-intractable strategic issues. Such issues include: the need for temporal depth in strategic decision-making; the complexity of multiple sub-goals for strategic decision-makers; and the often-unseen variety and contingent effectiveness of corporate governance structures and processes. Carefully examining these issues in the family business context will likely give all organizational researchers new insights. This new knowledge from family business research may clarify the ongoing problem of managerial short-termism, may prod other researchers to move beyond single measures of firm performance, and may help move the corporate governance literature beyond the idea that one-size-fits-all “best practices” are desirable or even possible. Given the opportunities, now is the time for family business researchers to light the way forward.

In the current study we distinguish between CSR (corporate social responsibility) activities targeted at internal stakeholders and CSR activities targeted at external stakeholders, reexamining the ...

Value creation for consumers, as the conditio sine qua non for value capture, is at the heart of demand-side strategy research and is a core element of almost any business model. In this paper, we discuss the unique ideas that demand-side strategy and business model research jointly contribute to the strategy literature, and we elaborate on the potential for cross-fertilization between both areas of study. We argue that both the demand-side perspective and the business model concept could jointly promote a better understanding of strategy-making by mutually relying on the distinctive insights from each stream; specifically, while research on demand-side strategy can help business model scholars gain a more robust and granular understanding of effective value propositions, business models can serve as a “bridging concept” that links the shared ideas of both areas of study to resource-based streams of strategy research.

Demand-side perspectives represent a burgeoning research area in the fields of technology innovation, entrepreneurship and strategic management, yet are only at an early stage in the field of international business. Demand-side research looks outside the focal organization toward consumers and product markets to explain managers' strategic decisions — decisions that increase value created within a value system by emphasizing: consumer benefits experienced; thematic similarity (i.e., products and services that are used in performance of the same activity); value systems/ecosystems rather than a single focal organization only; and value creation for consumers rather than value capture for a firm. Demand-side research can be valuable for expanding the strategic actions available to multinational organizations and international social enterprises by integrating geographical expansion and business diversification in ways that can create the most value for heterogeneous end users both across and within national boundaries. This adds conceptual complexity to the international business field by raising international consumer issues to the strategic level – with, for example, investments in mergers and acquisitions and strategic alliances – rather than the more typical single-business or functional marketing levels. This added complexity has the potential to extend international business theories in new ways.

Our “stakeholder synergy” perspective identifies new value creation opportunities that are especially effective strategically because a single strategic action (1) increases different types of value for two or more essential stakeholder groups simultaneously, and (2) does not reduce the value already received by any other essential stakeholder group. This result is obtainable because multiple potential sources of value creation exist for each essential stakeholder group. Actions that meet these criteria increase the size of the value “pie” available for essential stakeholder groups, and thereby serve to attract exceptional stakeholders and obtain their increasing effort and commitment. The stakeholder synergy perspective extends stakeholder theory further into the strategy realm, and offers insights for realizing broader value creation that is more likely to produce sustainable competitive advantage. Copyright © 2014 John Wiley & Sons, Ltd.

At the pinnacles of organizations, comparative tests of unity of command and shared command are nearly impossible because only one individual sits atop most organizations. In organizations led by co-CEOs, however, such a test is possible because co-CEOs can truly share power. But do they? Our research pits the unity-of-command principle against the shared-command principle and finds overall support for the former, even within the co-CEO context. Our sample of 71 co-CEO pairs at publicly traded U.S. firms shows that increasing power gaps between co-CEOs are positively associated with firm performance. This positive association wanes and turns negative, however, as power gaps become very large. We conclude that whatever benefits the co-CEO structure might offer likely lie outside the shared command paradigm

Firms across industries and geographies are increasingly orienting themselves towards a wider group of stakeholders, with on average positive long-term performance implications (Flammer, 2015; Hill...

We focus on implications of an agreed upon yet little considered conclusion from our 2001 article—that resource value is determined outside the business-level resource-based view. Starting with this premise, we argue that knowledge accumulation from strategy research—especially actionable knowledge about effective versus ineffective managerial judgments—would be stimulated with more balanced attention not only to value capture for the firm but also to value creation for the firm's customers and, ultimately, consumers. To spur such wider attention, we offer an expanded boundary model that includes the demand side, business models, and business ecosystems within the strategy research “umbrella.” Our proposal (1) extends what the current scholarly consensus might consider “normal” strategy research, (2) sets specific boundaries to guide future research, and (3) brings value creation for consumers to a more central position in the field. Viewing strategy from this broader perspective requires a shift in minds...

PurposeThis study seeks to identify antecedents of trust among top managers representing partners in international joint ventures (IJVs) and to show how this trust influences IJV performance.Design/methodology/approachThe paper proposes that the national cultural distance of the foreign partner, the business similarity of partners' organizations and behavioural integration are antecedents to trust, and that trust is a key mediator through which these antecedents affect IJV performance. Data are collected through a field survey from IJVs in Beijing and Shenzhen, PRC, and employ regression analysis to test these propositions.FindingsIt is found that: trust across IJV factional subgroups is influenced by partners' business similarity and by the behavioural integration of top managers representing the partners from both sides; and this trust mediates the relationship between the behavioural integration of top managers in Sino‐foreign IJVs and overall venture performance. The effects of business similarity and partner national cultural distance on overall performance were not mediated by trust.Research limitations/implicationsThe sample of the study used is limited to one country only – China. Besides, the paper's measures of cultural distance and categorization of national origin of foreign partners of IJVs may be subject to criticism.Practical implicationsFirst, the paper explicitly hypothesizes and tests the role of trust as a mediator of the relationships between trust antecedents and IJV performance. This is done in order to develop a more detailed understanding of how fixed partner characteristics and adjustable group processes affect IJV outcomes. Second, the study finds evidence that supports situational perspective and developmental perspective of trust development, but not the deterministic perspective. This is also consistent with some additional qualitative evidence which the authors collected through interviews. Third, the results indicate that some trust antecedents have direct effects on IJV performance, while others affect IJV performance through partner trust.Originality/valueThe study's exploratory results offer important new information for IJV researchers and for managers of IJVs.

We advance franchising research by explaining the important role, so far overlooked, of different franchising forms in developing low-cost competitive advantage. We analyze the most meaningful cost drivers for franchising systems: economies of scale, reduced transaction costs, economies of learning, reduced monitoring costs, standardization, and relative bargaining power. Our analysis suggests that asymmetrical cost effects are likely for franchisors and franchisees. For franchisors, relative to single-unit franchising (SUF), multi-unit franchising (MUF) should yield lower costs from scale economies and monitoring, higher costs from bargaining power, and similar costs from learning economies and standardization. For franchisees, lower costs for MUF are indicated from scale economies and standardization but not for monitoring. Within MUF, comparisons between area development franchising (ADF) and incremental franchising suggest that ADF yields lower costs from scale economies and learning economies for the...

The authors review the progress of three rapidly growing macro management literatures—in technology innovation, entrepreneurship, and strategic management—that have in common the use of a “demand-side” research perspective. Demand-side research looks downstream from the focal firm, toward product markets and consumers, to explain and predict those managerial decisions that increase value creation within a value system. Typical characteristics of demand-side, macro-level management research include clearly distinguishing value creation from value capture, emphasizing product markets as key sources of value-creation strategies for firms, viewing consumer preferences as dynamic and sometimes latent, and recognizing that managers’ differing decisions in response to consumer heterogeneity contribute to firm heterogeneity and, ultimately, value creation. The authors review recent demand-side findings showing that strategies based on consumer heterogeneity can result in competitive advantage even if the firm holds only obsolete or mundane resources, these advantages can be sustainable without resource- or ability-based barriers to imitation, successful innovations can be consumer driven rather than resource or technology driven, and consumer knowledge can play a key role in entrepreneurial idea discovery. These seemingly counterintuitive findings from demand-side research indicate the promise of future demand-side work for generating new knowledge useful to scholars and managers. The authors suggest directions for future demand-side research based on their review. What’s more, the research they review represents a start—but only a start—toward integrated theories that could attend to both the demand side and the producer side of the value creation equation.

A temporary workgroup of trained British soldiers fractured and nearly lost members’ lives when it encountered unexpected adversity in Low’s Gully, Borneo. Although demography-oriented theories of group faultlines and diversity types offer useful cross-sectional baselines for predicting and explaining workgroup fracture, the authors examine the Low’s Gully expedition to build theory exposing the longitudinal microfoundations of workgroup fracture under adversity. The authors incorporate the long-established concept of common ground among parties—information that is both mutually held and mutually understood to be mutually held—to uncover changes in group members’ communications success, intragroup trust, tacit coordination, and fracture likelihood as the expedition’s situation became increasingly tenuous. Their study of how this diverse workgroup faced extreme adversity shows how group trust can dissolve under adversity in a sequence moving from initial trust, to trust-with-trepidation, and then to distrust. Theoretical insights indicate that common ground arising from shared positive experiences increases workgroup resistance to fracture under adversity more than does common ground arising from similar backgrounds; a trust violation occurring among highly similar group members is perceived to be more severe and results in a greater increase in group fracture likelihood than does the same trust violation among dissimilar group members; perceived leader benevolence and integrity are more vital than ability for maintaining intragroup trust, even when ability is necessary for task success; and finally, distrust can sometimes be warranted and even vital for a workgroup’s task accomplishment. The authors discuss the implications for future research and practice.

We explore whether manufacturers of fast-moving consumer goods react to their rivals’ strategic competitive attacks–namely, new brand introductions–on a routine imitation basis, proportionally base...

An effective bridge for spanning the macro—micro divide in management studies requires strong disciplinary foundations on each side of the chasm, along with the versatility to address a range of management issues. This will likely involve simultaneous multilevel, multiparty action—response research. The authors argue that judgment policy studies are especially suited to developing the interactive multilevel context theories that are necessary to narrow the divide across multiple areas of management research. Literally millions of organization members go through judgment processes every day, on many topics, and their choices critically affect individual, group, and organizational success. The authors provide examples—using the literatures on trust, diversity climate, workplace romance, and strategy implementation—to demonstrate how judgment policy analysis methods can help narrow the macro—micro divide in each area. The authors also briefly discuss available techniques for analyzing individuals’ judgment p...

We take a step beyond the resource-based view that resource characteristics (i.e., valuable,rare, inimitable and non-substitutable) are the sole basis for isolating mechanisms. Instead,we apply Ricardo’s principle of Comparative Advantage in a two-firm, two-product scenario toshow how additional isolating mechanisms can result from economic incentives that providemanagers with distinct strategic choices. Specifically, our analysis indicates that managers’strategic decisions based on comparative firm advantage (CFA) affect their willingness toimitate competitors, even when their firms are fu lly capable of such imitation. This willingness,in turn, helps to determine the direction of firm expansion. We discuss how Ricardo’s CFAlogiccanprovidespecificguidanceformanagersregarding effective firm strategies in specificcomparative advantage situations by factoring in both internal efficiencies and competitivepressures when designing and imple menting rent-seeking strategies. European Management Review (2010) 7, 91–100. doi:10.1057/emr.2010.6;published online 29 April 2010

This study argues that first- and second-generation immigrant entrepreneurs’ endowments of economic, human, and social capital, together with their degrees of social identification with their ethnic community, affect their elemental strategic choice to pursue a venture strategy focused either on their ethnic enclave or the dominant market. The authors then propose that this choice affects venture performance indirectly, depending on how well the entrepreneur’s capital endowment allows the chosen strategy to be executed. The authors test these ideas via a field study of 103 first- and second-generation immigrant-owned ventures in a U.S. Midwest state. The findings indicate that immigrant entrepreneurs’ capital endowments and social identities influence their choice of an enclave versus dominant market venture strategy. Moreover, it is the particular alignment of entrepreneurial capital and strategy that ultimately shapes venture performance.

Leader succession often occurs because a performance decline highlights the need for change within an organization. When this need is especially high, successors are likely to be drawn from different cognitive communities than those of the replaced incumbents. Successors representing different cognitive communities carry out more change immediately after succession. This increased, rapid change will be most effective when the new leaders have had successful recent “top-job” experience. When successors lack recent top-job success, too much change too soon will actually hurt performance. We find moderate support for these relationships using panel data from the USA's National Football League.

The author revisits the issue of possible unintended consequences from special issue proliferation, in light of Mowday's and McKinley's responses, and then comments on their suggestions concerning the driving forces that may have led to so many special issues. The author especially emphasizes how the effects of both consequences and antecedents might differ when special issues are commissioned by the most prestigious journals versus less prestigious or niche journals.

F raud by top managers has become a worldwide problem. Major scandals have rocked the U.S. (e.g., Enron Corp., Fannie Mae, Global Crossing and WorldCom Inc.), drawing attention to the serious consequences of fraud, not only for companies but also for their employees, communities and society at large. But fraud by top management is not just a U.S. problem; Asian, European, Latin American, African and Australian companies also have been afflicted. Revelations of such fraud have been alarming across the political and ideological divide. After all, how can well paid and highly respected senior executives develop such elaborate schemes to defraud the very people who invested in their companies? What would lead successful and accomplished senior executives to lie for money and jeopardize their honor, reputations and careers? Moreover, revelations of fraud by senior executives have made many wonder: How can these crimes be committed and persist for years in spite of external audits by professional companies and monitoring by boards of directors? What can be done to reform corporate governance and to instill a strong ethical perspective among top managers? In this paper, we discuss different types of fraud by top managers and link them to various classes of white-collar crime. We then identify key societal, industry, organizational and individual characteristics that contribute to such behaviors. Next, we highlight the various societal, industry and organizational effects of top management fraud. WHAT IS TOP MANAGEMENT FRAUD?

I show how company strategies that focus on improving consumer benefits can create value by increasing consumer payments to an entire value system. This “consumer benefit experienced” viewpoint on value creation complements the value capture orientations of the firm positioning, transaction cost, and resource-based approaches. It helps to clarify often-blurred distinctions between value creation and value capture and offers an additional tool for addressing intractable issues in strategic management.

Trust plays a fundamental role in facilitating social exchange, yet recent global events have undermined trust in many of society’s institutions and organizations. This raises the pertinent question of how trust in organizations and institutions can be restored once it has been lost. The emerging literature on trust repair is largely focused at the micro level, with limited examination of how these processes operate at the macro level and across levels. In this introductory essay, we show how the papers in this special issue each advance our understanding of macro-level trust repair. We draw on these papers, as well as the extant interdisciplinary literature, to propose an integrated conceptual model of six key mechanisms for restoring trust in organizations and institutions, highlighting the merits, limits and paradoxes of each. We conclude that no single mechanism can be relied on to rebuild organizational trust and identify a future research agenda for advancing scholarly understanding of organizational and institutional trust repair.

Are special issues becoming “too much of a good thing” in elite general management journals? Although a few special issues might serve to spur innovative research in important areas of management scholarship that otherwise are being overlooked, the author argues that profligate commissioning of special issues distorts the marketplace for ideas by commanding particular frequency distributions of preferred topics in journals. This results in a “command economy” for ideas that, ironically, can retard innovation. Scholars would be well served by being more selective when commissioning special issues in elite general management journals.

Fraud by top management is a topic that has stirred public interest, concern, and controversy. In this article, the authors analyze fraud by senior executives in terms of its nature, scope, antecedents, and consequences. They draw on the fields of psychology, sociology, economics, and criminology to identify societal-, industry, and firm-level antecedents of management fraud and the individual differences that enhance or neutralize the likelihood and degree of such fraud. The authors also review the consequences of management fraud on various stakeholder groups such as shareholders, debtholders, managers, local communities, and society.

Following from research on firms' upper echelons, this article examines the previously unstudied issue of how technological dynamism moderates the relationship between a CEO's time in office and co...

Upper echelons research has emphasized decision making either by individual CEOs or by teams of top managers. The authors introduce the CEO-Adviser model as an intermediate model of strategic decision making. The CEO-Adviser model leads to new propositions that have not been explored through the individual CEO or top management team models concerning how context affects the use of formal versus informal advisory systems and how advisers are selected.

In this study, we examine the origins of minority venture strategies and performance. We propose that the entrepreneur is central to venture strategy and performance. Specifically, the forms of cap...

When franchisors pursue different priorities, different agency problems become relevant, which drive the franchisors’ choices among various franchising organization forms. We use archival and key informant data from a multi-industry sample of 94 franchisors to examine franchisors’ choices of organization forms based on their goals for growth, uniformity and local responsiveness. Our results indicate that franchisors emphasizing high growth are more likely to use multi-unit rather than single-unit franchising and, within the multi-unit franchising form, they are more likely to use area development franchising than incremental franchising. Franchisors emphasizing uniformity instead of growth are more likely to use area development franchising, but those emphasizing local responsiveness are more likely to use incremental franchising. We discuss the implications of these results for franchising research and practice.

Venture creation is at the heart of entrepreneurship. Enterprising individuals or groups start new ventures and, thus, we must understand the role of individuals if we are to understand venture creation. In this article, we review and critique the venture creation literature that has examined the role of the individual, with an eye toward identifying under-researched topics and improving research designs. We then highlight individual judgment as a particularly important future direction for research on the role of enterprising individuals in venture creation. We also discuss techniques for accessing entrepreneurs and for evaluating entrepreneurial judgments.

Perceived environmental uncertainty (PEU) is a foundational concept in organization studies. The PEU typologies used in organizational research were developed using private sector managers. But, do public sector managers perceive the same uncertainty sources? We asked public sector managers in Hong Kong to identify and group uncertainty sources facing their organizations. Multidimensional scaling and cluster analysis yielded classes of uncertainty sources that differ from those developed using private sector managers.

Chief executives must allocate their scarce time for scanning efforts among relevant domains of their firms' external environment and their firms' internal circumstances. We argue that high-performing CEOs vary their relative scanning emphases on different domains according to the level of dynamism they perceive in their external environments. The concepts of dominant logic and sector importance were used to develop predictions about which external domains and which internal domains should receive relatively more or less scanning emphasis in external environments that, overall, are more dynamic or more stable. A field survey of 105 single-business manufacturing firms evaluated CEOs' scanning emphases and firm performance. Results indicated that, for dynamic external environments, relatively more CEO attention to the task sectors of the external environment and to innovation-related internal functions was associated with high performance. In stable external environments, however, simultaneously increased scanning of the general sectors in the external environment and efficiency-related internal functions produced higher performance. These relationships were strongest between relative scanning emphases among domains and sales growth. We discuss the implications of these results for researchers and practitioners. Copyright © 2003 John Wiley & Sons, Ltd.

Managing directors and executive vice presidents in Hong Kong were asked to identify all sources of uncertainty facing their firms. They later made similarity judgments by grouping similar uncertainty sources. We employed multidimensional scaling (MDS) to determine the underlying dimensions used by the executives when distinguishing among uncertainty sources. Cluster analysis then produced a taxonomy of uncertainty sources. This classification, based directly on executive perceptions, encompasses uncertainties that are both external and internal to the firm. We discuss the implications of our results.

There is broad agreement among strategy scholars that customers and the demand side more generally are a central but very much underdeveloped aspect in current strategy theories. This panel brings ...

A fundamental question in upper echelons research is how strategic decisions are made at the apex of the organization. While earlier studies typically focused on linking characteristics of CEOs and...

Opportunities for financial reporting fraud arise because of information asymmetries—often labeled “lack of transparency”—between top managers and their diverse shareholders. We evaluate the relative contributions of information asymmetries arising from industry-level and firm-level complexities to the likelihood of top managers committing financial reporting fraud. Using a sample of 453 matched pairs of firms that have and have not been identified as having committed financial reporting fraud, we found that information asymmetries arising from industry- and firm-level complexities increase the likelihood of financial fraud. Moreover, more CEO stock options increase the likelihood of fraud when industry complexity is high, while aggressive monitoring by the audit committee reduces the likelihood of reporting fraud when firm-level complexity is high.

This comparative field study evaluated the choices made by U.S., Portuguese, and Hong Kong Chinese evening MBA and graduating university business students when resolving business-related moral dilemmas. The authors developed hypotheses at the country level based on Hofstede’s ratings of each country’s national culture dimensions of power distance, uncertainty avoidance, individualism, and masculinity. The more individualistic U.S. respondents resolved the dilemmas with choices indicating less self-interest and more concern for unidentified others than did their Portuguese and Hong Kong Chinese counterparts, who are from more collectivist societies. The authors discuss implications for future cross-cultural research on business dilemmas and for cooperative interactions among managers from these and other countries.

HHL was listed on the Hong Kong stock exchange in 1972. During the first twelve years, chairperson and managing director Sir Gordon Wu focused on property development in the local market. In the early 1980s, Wu saw great potential in the infrastructure development markets of the Asia-Pacific Region's developing economies. He left the highly profitable property development market in Hong Kong and, over the next twelve years, led HHL to undertake highway and electricity-generation projects throughout the Asia-Pacific region. HHL undertook these projects on a Build-Operate-Transfer (BOT) basis. Many impatient shareholders and financial analysts were critical of the HHL's declining economic condition. In October 1997, Wu was forced to make provisions for the potential loss of HK$5.133 billion resulting from HHL's investment in the Bangkok Elevated Road and Train System, a project that was started in late 1990. There were threats from the Thai authorities to terminate the project and new negotiations would have to be conducted with a new, untested cabinet that was formed after the former Prime Minister was toppled because of the currency crisis. The case deals with the difficulties in undertaking infrastructure development projects in developing countries and in maintaining corporate-government relationships.