Because current management theories evolved in the context of brick-and-mortar firms, this paper examines three key questions raised by the advent of e-business: (1) Will the strategy types found among e-business firms resemble Porter’s (1980) generic strategies? (2) Will we find performance differences among e-business firms pursuing different types of strategies? (3) Will we find differences in the strategy-performance relationships of pure online firms (pure plays) and firms with both online and offline operations (clicks-and-bricks)? We conclude that integrated strategies that combine elements of cost leadership and differentiation will outperform cost leadership or differentiation strategies. We also argue that, regardless of business strategy type, clicks-and-bricks firms that closely integrate their on-and offline operations will enjoy performance advantages over their pure play counterparts.

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Earnings management occurs when managerial discretion allows managers to influence reported earnings and thus mislead some investors about the underlying economic performance and quality of the firm. This study considers how potential investors may guard against earnings management by observing negative stock price reaction at the lockup expiration period of initial public offering (IPO) firms as a negative signal. Findings from a sample of 160 newly public firms show that earnings management behaviour is stronger in IPO firms backed by venture capitalists (VCs). Moreover, VC reputation negatively moderates this relationship such that IPO firms backed by reputable VCs are less likely to manage earnings, suggesting that reputable VCs serve an auditing function following an IPO. Overall, we provide insights into signalling theory by examining negative signals arising from the behaviour of multiple agents in an IPO firm.