Author Archive
Annoying Summertime Pursuit Numero Uno: Writing Tenure Letters
| Nicolai Foss |
OK, it is June and high season for tenure letter requests. I have written tons of these letters within the last decade or so, and I confess that I find this activity increasingly annoying and the tenure letter institution increasingly hard to fathom. Deans will write me, saying that I have “been identified” (well, yes, in the sense that I was on someone’s shortlist, and you just picked me) as an “expert” (hmmm) in “X” (X may be strategy, organization theory, HRM, knowledge management, entrepreneurship — even organizational behavior, but not yet, alas, sociology), and I have “three weeks” to write up my letter (and I have nothing else to do in June?) for “Dr. Doe” (who didn’t bother to ask me whether I would write such a letter).
I once brought up the issue of compensation for at least one day of intense work effort with a dean, but that was not well received. However, at least for us Euro professors the “what’s in it for me” question is quite real. Euro schools typically don’t use the tenure letter institution (INSEAD and LBS do, but they are “Americanized” schools), and we get zero credit for this service. (Euro schools tend to pay for comparable services, BTW). Still, when I bring up these issues, righteous types will say things like “”Nicolai, citizenship isn’t tit-for-tat” or lecture me on “generalized reciprocity.” However, the argument that ultimately made me continue writing these letters, rather than turning requests down, was that apparently people are harmed by someone’s refusal to write the letter.
So, I do it. But I reserve the right to bitch and whine. And speculate on the rationale of this institution. What is really its purpose? Anyone can produce a list of half a dozen people (close colleagues, former advisors, friends …) and get them to write nice letters. What kind of objective assessment is produced by some dean picking people from such a list? Is this empty ritual? Or, is there some underlying efficiency rationale?
Birger Wernerfelt Receives Honorary Doctorate from CBS
| Nicolai Foss |
Wernerfelt, a key originator of the resource-based view of strategy (here) who has made numerous important contributions to the economics of organization, marketing, and other fields, received the degree at a ceremony at the Copenhagen Business School yesterday (another recipient of the honorary doctoral degree was Deirdre McCloskey). I motivated the degree with the following remarks: (more…)
Capabilities and Organizational Economics Once More
| Nicolai Foss |
As readers of this blog will know, the dialogue between the firm capabilities literature and organizational economics has a long history in management research and economics. Co-blogger Dick Langlois has been an important contributor in this space. The forty years long discussion (dating it from George B. Richardson’s 1972 hint that his newly coined notion of capability is complementary to Coasian transaction cost analysis) has proceeded through several stages. Thus, the initial wave of capabilities theory (i.e., beginning to mid-1990s) was strongly critical of organizational economic. This gave way to a recognition that perhaps the two perspectives were complementary in a more additive manner. Thus, whereas capabilities theory provided insight in which assets firms need to access to compete successfully, organizational economics provide insight into how such access is contractually organized. However, increasingly work has stressed deeper relations of complementarity: Capabilities mechanisms are intertwined with the explanatory mechanisms identified by organizational economists.
In a paper, “The Organizational Economics of Organizational Capability and Heterogeneity: A Research Agenda,” that is forthcoming as the Introduction to a special issue of Organization Science on the the relation between capabilities and organizational economics ideas, Nick Argyres, Teppo Felin, Todd Zenger and I argue, however, that the discussion has been lopsided—hardly qualifying as a real debate—and that a reorientation is necessary.Specifically, the terms of the discussion have largely been defined by capabilities theorists. Part of the explanation for this dominance is that capability theorists have had a rhetorical advantage, because everyone seems to have accepted that organizational economics has very little to say about organizational heterogeneity. We argue that this rests on a misreading of organizational economics: while it is true that organizational economics was not (directly) designed to address and explain organizational heterogeneity, this does not imply that the theory is and must remain silent about such heterogeneity. In fact, we discuss a number of ways in which organizational economics is quite centrally focused on explaining organizational heterogeneity. Specifically, we argue that organizational economics provides guidance around how organizational design and boundaries facilitate the formation of knowledge, insight, and learning that are central to the heterogeneity of firms. We also demonstrate how efficient governance can itself be a source of competitive heterogeneity. We thus call on organizational economists to actively and vigorously enter the discussion, turning something closer to a monologue into real dialogue. (more…)
Economists, (Hard) Data, and (Soft) Data
| Nicolai Foss |
Economists have typically been suspicious of data generated by (mail, telephone) surveys and interviews, and have idolized register data. The former are soft and mushy data, the latter are hard and serious ones. I have always been a bit sceptical regarding whether the traditional economist’s suspicion of soft data is really that well-founded; after all, the statistical agencies of the world and other government institutions that are in the business of data collection are populated by fallible individuals and respondents are the same ones that respond to, say, a mail survey conducted by Prof. N. J. Foss, PhD. (Having recently conducted a major data collection effort with a public statistical agency, my skepticism has dramatically increased!)
The argument is sometimes made that there may be a legal duty to respond to the queries of a government agency and this means a high response rate and accurate reporting. However, it appears that we know rather little about the accuracy of data generated in this way, and it is quite conceivable that measurement error is high, exactly because the provision of data is “forced” (those anarcho-capitalist types out there may delight in providing errorneous data!). The serious content of the traditional economist’s prejudice is rather, I think, that surveys often have respondents reacting to subjective scales rather than providing absolute numbers. This is a warranted concern, but not a critique of surveys and interviews per se, because these methods do not imply commitment to subjective scales per se.
As a rule register data are not available that can be used to address numerous interesting issues in organizational economics, labor economics, productivity research and so on. Scholars working on these issues have to resort to those softy surveys and interviews that have been the workhorses of business school faculty for decades. This is a new recognition in economics. Case in point: A recent paper by Nicholas Bloom and John Van Reenen, “New approaches to surveying organizations.” There is absolutely nothing, I submit, in this short, well-written paper that would surprise virtually any empirically oriented business school professor (i.e., virtually all bschool professors) to whom this would not be anything “new” at all, but rather old hat.
This is not a critique of Profs. Bloom and Van Reenen at all (on the contrary, it is excellent that they educate their economist colleagues in this way). It is just striking and a little bit amusing, however, that we have had to wait until 2010 until empirical approaches that have been mainstream in management research for decades reach the pages of the American Economic Review.
Birger Wernerfelt to Become Honorary Doctor at CBS
| Nicolai Foss |
Over the last few years, CBS has bestowed honorary doctoral degrees on the likes of Jay Barney, Oliver Williamson, Oliver Hart, Michael Brennan, and other luminaries in strategy, the theory of the firm, and finance (in addition to a number of reps of pomo in management research that are of small interest to O&M readers). At a ceremony on 19 April a CBS honorary doctorate will be bestowed upon Birger Wernerfelt.
Wernerfelt is the JC Penney Professor of Management of the MIT Sloan School of Management. A Danish citizen, Wernerfelt holds degrees from the University of Copenhagen and Harvard. Wernerfelt’s best known work is no doubt “A Resource-based View of the Firm.” With more than 12,000 cites (google scholar) this paper is also one of the most cited social science research articles ever, and, of course, one of the founding papers of strategy’s (still) dominant view, the resource-based approach. The paper develops a conception of firms as bundles of heterogeneous and partly firm-specific resources, and links this conception to sustainable performance differences between firms as well as to growth strategies through resource-based diversification. These ideas opened up several paths of research in strategic management in the following decades, including Wernerfelt’s own influential empirical work (with Cynthia Montgomery) on diversification and its link to performance (e.g., here).
More recently, Wernerfelt has been working on other truly fundamental aspects of the theory of the firm, namely the reason why firms exist and what explains their boundaries and internal organization. Thus, in a series of papers, Wernerfelt has developed an argument that the employment relationship exists because it allows the parties to the contract to exploit economies of scale in bargaining costs (e.g., here) — a stream that may be seen as much more true to the original message in Coase’s (1937) “The Nature of the Firm” than the asset-specificity branch of the theory of the firm. Wernerfelt has extended the argument to the understanding of asset ownership, communication within and between firms, and the strength of incentives in firms versus markets. In addition to these contributions to strategic management and the theory of the firm, Wernerfelt has contributed to the economics of search and numerous important contribution to marketing theory.
Job Openings of Interest to O&M Readers
| Nicolai Foss |
It is not yet online, but the University of Paris-Sorbonne is looking for a Full Professor in the Economics of Organization (see the ad text below). Importantly, proficiency in French is not a requirement … “upfront,” at least.
Very apropos (if I may) the Department of Strategic Management and Globalization will be hiring one assistant professor and three associate professors in ”strategic and international management” over the next few months. Proficiency in French, or Danish for that matter, is not required at all. The job ads are here. Or, contact me directly on njf.smg@cbs.dk (more…)
SMG Research Blog and FB Page
| Nicolai Foss |
The department for which I serve as Head, the Department of Strategic Management and Globalization (SMG) at the Copenhagen Business School, has set up a new research blog, where we plan to report on our cooler recent publications. SMG is doing increasingly well in the publication dimension, at least for a very small Euro-department at a state business school, with publications/acceptances in the last few months in the Academy of Management Review, Academy of Management Journal, Organization Science (mult.), and the Journal of International Business Studies (mult.), and we want to advertise these successes a bit. Also, SMG has a Facebook page. Please visit it — and “like” it.
Rick Perry Episodes
| Nicolai Foss |
Watching Rick Perry commit political harakiri made me wonder whether academia can report similar incidents (and with similar career-destroying results?). To be sure, many of us academics have engaged in Rick Perry-like behaviors — as is only to be expected when, as many of us do, we regularly talk to (student, executive, colleague) audiences of varying sizes, often several times a week.
I have certainly had my share of situations similar to the Perry episode. Thus, about a decade ago I was supposed to talk about the challenges of managing “knowledge workers” to a bunch of middle-aged (and beyond) medical professors, all with management responsibilities, very impressive scientific records, and all supremely arrogant and self-confident. I got 5 mins into my talk, before I was cut down. Totally. Decisively. Left dumbfounded. Another example, more research-oriented, derives one from one of the BYU-UUtah winter conferences on strategy. I gave a talk on transaction costs economics and competitive strategy. It was rather abstract. After the talk a very (in fact, extremely) prominent strategy scholar asked me in a very pointed and inquisitive manner: “What is in this that I can teach my MBA students?” Again, I was left dumbfounded, probably in awe of this person (and didn’t come up with the obvious answer: “So, do you think that is a good criterion for scientific progress?”).
Of course, there are other Rick Perry episodes from my career, but these two must suffice. Of course, these gaffes just emphasize my humanity. And your Rick Perry episodes?
“Micro Chauvinists” Pushing Back …
| Nicolai Foss |
A reviewer of a recent book proposal by Teppo Felin and me (which was accepted, BTW; details later) had the effrontery to note that “Felin and Foss get considerable pushback when they take a strong stand on methodology.” Of course, this reviewer got it all wrong. To wit:
- Teppo and I recently published “The endogenous origins of experience, routines and organizational capabilities: The poverty of stimulus” in the Journal of Institutional Economics, accompanied by critical comments by Sidney Winter, Brian Pentland, Geoff Hodgson and Thorbjørn Knudsen. Here is our response to the comments of our critics. The response has been accepted for publication in the Journal of Institutional Economics.
- In a recent paper in Sociological Theory, influential sociologists Ronald Jepperson and John W Meyer took issue with the rampant “micro-chauvinism” that, in their opionion, increasingly dominates social science, and called for multi-level explanation that admits a role for causation that (in some unexplained fashion) takes place at levels above that of individuals. In this brief note, Teppo and I (and Peter Abell of LSE) take issue with their arguments, and argue that they fundamentally misunderstand methodological individualism and its crucial role in understanding those phenomena that are “multi-level”, “complex” and “emergent.”
Thus, the macro chauvinists are the ones who are getting the pushback ;-)
More on Selective Intervention
| Nicolai Foss |
“Selective intervention” and the more narrow notion of the “impossibility of selective intervention” are among the more elusive notions in the theory of the firm. We have blogged on them a number of times (the most explicit treatment is here). Coined by Oliver Williamson, selective intervention simply means intervention to produce net gains. Thus defined, selective intervention is, of course, not “impossible.” The” impossibility” refers to the conjecture that firms cannot just be grown continuously by selective intervention; at some point various commitment and enforcement problems associated with managerial intervention kicks in, resulting in zero net gains. However, demonstrating this is a “puzzle.”
A new paper, “Solving the Selective Intervention ‘Puzzle’,” by noted French economist, Jacques Cremer, usefully places the problem in context, provides a nice overview of the extant literature, and argues that the problem has essentially been solved:
I have shown that the common thread to all the solutions is the fact that the principal stays in the game” after the contract is signed, and cannot commit himself to a policy which would make the world similar to the world in which there would be no vertical integration. On this basis, solutions that stress incompleteness of contracts, the change in the allocation of authority, the change in the amount of information available to the principal, all provide solutions that are theoretically consistent, and, furthermore, often not incompatible with each other. Determining which solution provides a better guide to applied analysis requires an examination of other features of the model.
C. K. Prahalad Interview
| Nicolai Foss |
The late über-influential management thinker C K Prahalad would have been 70 this August. booz&co’s strategy+business magazine features an interesting interview with CK, “The Life’s Work of a Thought Leader.” It may surprise some that Prahalad was trained as a physicist, and in the beginning of his career worked as an industrial engineer. And for someone, like myself, who has criticized the absence of microfoundations for notions such as “core competence” (e.g., here), it certainly came as a surprise to find Prahalad stating that
If I had to characterize my deepest belief, I would say it’s the centrality of the individual…. Institutions are not central. Institutions are different ways of combining skills and capabilities of the moment. That, of course, is the opposite of the traditional way of thinking, starting from Max Weber and Frederick Taylor in the early 20th century. They posited that institutions were central to society, not individuals. I believe the contrary is true.
Another notable feature in the interview is Prahalad’s view of scientific progress in strategic management which does not come from the kind of cross-sectional studies that take up 93 % of the pages of the Strategic Management Journal, but, he says, from in-depth small-N research:
If you look historically at the strategy literature, starting with Alfred D. Chandler Jr.’s Strategy and Structure: Chapters in the History of the Industrial Enterprise [MIT Press, 1962], the most powerful ideas did not come out of multiple examples. They came out of single-industry studies and single case studies. Big impactful ideas are conceptual breakthroughs, not descriptions of common patterns. You can’t define the “next practice” with lots of examples. Because, by definition, it is not yet happening.
Journal of Institutional Economics
| Nicolai Foss |
I confess that I was a bit skeptical when I was invited by Geoff Hodgson eight years ago (or so) to join the editorial board of the Journal of Institutional Economics. Given Hodgson’s prolific work within the tradition of so-called “old” institutional economics, I frankly saw a risk that what was lined up could end up as another (in addition to the Journal of Economic Issues or the Cambridge Journal of Economics) journal specialized in Williamson-bashing and Veblen-exegesis, crusading against “individualism” (methodological, ontological, political), “mainstream economics,” and the like.
Now, Hodgson is, of course, non-doctrinaire and open-minded, and he enlisted prolific co-editors (O&M blogger Dick Langlois, Esther-Mirjam Sent, Benito Arrunada and Jason Potts), who, although all non-mainstream, were non-mainstream in quite different ways. The result, now in its 7th year of existence, has been an undeniable success, publishing all sorts of institutional economics papers (including some relatively mainstream ones), and featuring contributions by luminaries such as Robin Dunbar and Richard Posner.
As a result of a sustained emphasis on quality, JoIE has now been selected by Reuters Thomson for the SSCI, Journal Citation Reports (Social Sciences Edition) and Current Contents (Social and Behavioral Sciences), that is, it is now what was formerly called an ISI journal. Congratulations to Geoff, Dick and the rest of the gang for founding and very efficiently running a journal that caters to the interests of O&M and our readers!
Leijonhufvud on the Current Crisis
| Nicolai Foss |
We have often blogged on the work of Axel Leijonhufvud on O&M (here). Here is a 2008 talk which was given in Denmark (and which, unfortunately, somehow missed my attention at that time) on “Keynes and the Crisis.” The talk contains many characteristic Leijonhufvudian themes (smashing of Ricardian equivalence, representative agent modeling, and the foundations of financial theory), little on Keynes (luckily!), and much critique of monetarism, in particular the choice of the CPI as the unique target of central bank policies and the notion of the independence of central banks from the political system. Here is Leijonhufvud’s overall diagnosis of the root causes of the current crisis:
The process leading up to today’s American financial crisis had the dollar exchange rate supported by foreign central banks exporting capital to the United States. This capital inflow was not even to be discouraged by a Federal Reserve policy of extremely low interest rates. The price elasticity of exports from the countries that prevented the appreciation of their own currencies in this way kept US consumer goods prices from rising. Operating an interest-targeting regime keying on the CPI, the Fed was lured into keeping rates far too low far too long. The result was inflation of asset prices combined with a general deterioration of credit quality (Leijonhufvud 2007a). This, of course, does not make a Keynesian story. It is rather a variation on the Austrian overinvestment theme.
Two New Papers …
| Nicolai Foss |
… by Yours Truly. The Academy of Management Review just published my paper with Siegwart Lindenberg, “Managing Joint Production Motivation: The Role of Goal Framing and Governance Mechanisms,” and Organization Science just published “Linking Customer Interaction and Innovation: The Mediating Role of New Organizational Practices,” by me, Keld Laursen and Torben Pedersen. Here are the abstracts: (more…)
More Serious Stuff
| Nicolai Foss |
Economists may have models of zero intelligence traders, but so far there are no models of zombie traders (that I know of). Possible inspiration for future modeling efforts here.
Gans on Google+
| Nicolai Foss |
I have been using Google + for about a week now. I am unimpressed, and I think I will remain unimpressed. Quite simply, it doesn’t do a lot for me. On his HBR blog, the always thoughtful Joshua Gans points out that because Google+ is a network technology it must build sufficient installed base. However, G+ may face difficulties doing just that, because it offers users rather little extra problem-solving value compared to the existing alternatives:
Facebook provides “hyper-local news,” allowing people to broadcast news, opinions, and interests to their social circle in a way that feels authentic. Twitter, because it is essentially public and open, delivers news fast and also permits users to follow famous or interesting individuals.
Google+ does both of these things in one. But because the problems are already solved separately, then Google+ only solves the increment: you can view private and public content on the one “page.” To be sure, some harmonization across content platforms can be valuable to consumers. But Google+ is only adding the increment and not the whole lot. So while it might be argued that if Google+ happened five years ago, its technical implementation might have made it a clear winner, that is not the world we find ourselves in now.
Pomo Periscope XXII: There Is No Such Thing as a Free Diversocrat
| Nicolai Foss |
The California budget crisis may be tough on the university system. But as Heather MacDonald points out in City Journal, California universities (specifically, UC San Diego) are still adding “diversity fat even as it snuffs out substantive academic programs.” As she notes, the opportunity costs of pomo are becoming very visible indeed:
UC San Diego just lost a trio of prestigious cancer researchers to Rice University. Rice had offered them 40 percent pay raises over their total compensation packages, which at UCSD ranged from $187,000 to $330,000 a year. They take with them many times that amount in government grants. Scrapping the new Vice Chancellorship for Equity, Diversity, and Inclusion could have saved at least one, if not two, of those biologists’ positions.
Do Senior Managers Make Better Decisions Than Students?
| Nicolai Foss |
Even management students may occasionally suffer from confidence and self-esteem problems. I have had many students confide that they were more than a little scared at the prospect of landing a real job where their decision-making skills would be compared to older, wiser, smarter, etc. colleagues. Rather than directing them to this site, in the future I am going to give such students a copy of Gary E. Bolton, Axel Ockenfels and Ulrich Thonemann’s “Who Is the Best at Making Decisions? Managers or Students?” They set up a simple experiment based on a simple profit maximizing problem, and find that practitioner performance isn’t as good as graduate business students’. Moreover, the learning curve of the latter is steeper than that of practicioners. (more…)
More on Free Speech
| Nicolai Foss |
We have blogged a number of times in the past on (the economics of) free speech. John Stuart Mill is, of course, the towering figure when it comes to philosophical defenses of free speech. Here is a recent working paper, “Speech, Truth, and Freedom: An Examination of John Stuart Mill’s and Justice Oliver Wendell Holmes’s Free Speech Defenses,” that compares Mill with Holmes’ views, undertakes a dehomogenization exercise, and argues that their different free speech positions are rooted in different underlying views of liberty. For free speech afficionados, perhaps, but still recommended.
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