Journal of Management Inquiry

Some scholars have argued that the use of leverage can improve the efficiency and effectiveness of firms by disciplining managers. In fact, many U.S. corporations significantly increased their use of leverage during the 1980s. However, a number of these highly leveraged corporations have encountered severe performance problems in recent times. The reductions in performance are often attributed to extraordinary debt and, consequently, the value of debt as a disciplining force in the modern corporation is being questioned. Herein, the authors explore inconsistencies in the logic underlying popularly held views regarding the use of debt as a managerial disciplining force. They also highlight investment tradeoffs associated with high debt. Although they do not advocate the elimination of debt, they argue that it must be effectively balanced with other governance mechanisms to ensure maximum firm performance.

This article suggests that strategy research (and other management disciplines as well) should move beyond a neo-Hobbesian approach to contracting toward a new social contract approach. Work from an agency theory perspective in particular has generated utilitarian insights, but its description of agent behavior is too limited and its assumptions are not a useful guide to productive alliances among firms. Altruism, ethics, goodwill, moral sentiments, and trust need to be placed in the foreground of our vision, and society must be accepted as the ultimate principal to which both individuals and firms are responsible.

The authors decompose equity theory into its component parts, evaluating related cross-cultural research to determine how culture would influence the operation of the theory. They explore complexities of and questions raised about equity theory via an analysis of this research, including methodological issues and suggestions for future research.

The issue of culture fit is explored through the use of a model that identifies the characteristics of the internal work culture of organizations in developing countries. The context of their sociocultural environment and the manner in which the cultural characteristics are likely to facilitate or hinder the effective use of the state-of-the-art human resource management practices and techniques are discussed. The problems and prospects associated with the uncritical adoption in developing countries of human resource management practices relating to work design, performance management, and reward systems are analyzed.