Posts filed under ‘Management Theory’
| Peter Klein |
A couple of recent NBER papers of interest to O&Mers, one from Doug Irwin, another from Luis Garicano and Esteban Rossi-Hansberg:
Adam Smith’s “Tolerable Administration of Justice” and the Wealth of Nations
Douglas A. Irwin
NBER Working Paper No. 20636, October 2014
In the Wealth of Nations, Adam Smith argues that a country’s national income depends on its labor productivity, which in turn hinges on the division of labor. But why are some countries able to take advantage of the division of labor and become rich, while others fail to do so and remain poor? Smith’s answer, in an important but neglected theme of his work, is the security of property rights that enable individuals to “secure the fruits of their own labor” and allow the division of labor to occur. Countries that can establish a “tolerable administration of justice” to secure property rights and allow investment and exchange to take place will see economic progress take place. Smith’s emphasis on a country’s “institutions” in determining its relative income has been supported by recent empirical work on economic development.
Knowledge-based Hierarchies: Using Organizations to Understand the Economy
Luis Garicano, Esteban Rossi-Hansberg
NBER Working Paper No. 20607, October 2014
We argue that incorporating the decision of how to organize the acquisition, use, and communication of knowledge into economic models is essential to understand a wide variety of economic phenomena. We survey the literature that has used knowledge-based hierarchies to study issues like the evolution of wage inequality, the growth and productivity of firms, economic development, the gains from international trade, as well as offshoring and the formation of international production teams, among many others. We also review the nascent empirical literature that has, so far, confirmed the importance of organizational decisions and many of its more salient implications.
Update: See also Irwin’s article in Monday’s WSJ: “The Ultimate Global Antipoverty Program.”
| Nicolai Foss |
Here is a recent MIT Sloan Management Review piece by Peter and me, “Why Managers Still Matter.” We pick up on a number of themes of our 2012 book Organizing Entrepreneurial Judgment. A brief excerpt:
“Wikifying” the modern business has become a call to arms for some management scholars and pundits. As Tim Kastelle, a leading scholar on innovation management at the University of Queensland Business School in Australia, wrote: “It’s time to start reimagining management. Making everyone a chief is a good place to start.”
Companies, some of which operate in very traditional market sectors, have been crowing for years about their systems for “managing without managers” and how market forces and well-designed incentives can help decentralize management and motivate employees to take the initiative. . . .
From our perspective, the view that executive authority is increasingly passé is wrong. Indeed, we have found that it is essential in situations where (1) decisions are time-sensitive; (2) key knowledge is concentrated within the management team; and (3) there is need for internal coordination. . . . Such conditions are hallmarks of our networked, knowledge-intensive and hypercompetitive economy.
| Peter Klein |
Along with Gonçalo Pacheco de Almeida I am chairing the Competitive Strategy Interest Group Teaching Workshop at the upcoming Strategic Management Society conference in Madrid. The workshop is Saturday, 20 September 2014, 1:00-4:00pm at the main conference venue, the NH Eurobuilding, Paris Room. Our theme is “The Impact of New Technologies on Teaching and Higher Education” and we have an all-star lineup featuring Bharat Anand (Harvard), Peter Zemsky (INSEAD), Michael Leiblein (Ohio State), Michael Lenox (University of Virginia), Frank Rothaermel (Georgia Tech), Vivek Goel (Chief Academic Strategist at Coursera), and Andrea Martin (President of IBM Academy of Technology).
Background: The higher-education industry is abuzz with talk about MOOCs, distance learning, computer-based instruction, and other pedagogical innovations. Many of you are already using online exercises and assessments, simulations, and other activities in the classroom. How are these innovations best incorporated into the business curriculum, at the BBA, MBA, EMBA, and PhD levels? What can business scholars, say about the impact of these technologies on higher education more generally? Are they sustaining or disruptive innovations, and what do they imply for the structure of the business school, and the university itself?
The plan for this session is to discuss how leading companies and business schools are (a) driving innovation in the Higher Education teaching space, (b) thinking about the business model of virtual education (MOOCs, social learning, etc.), and (c) testing some of the assumptions behind globalization in the education industry.
The full schedule is below the fold. Additional information about the workshop, and the SMS itself, is available at the conference website.
If you’re coming to SMS this year, please plan to join us for the workshop. Pre-registration is encouraged but not required. If you’re planning to attend, please let us know by sending an email to email@example.com. Feel free to email Gonçalo or myself at the same address with questions or comments. (more…)
| Nicolai Foss |
As readers of this blog will know, probably to a nauseating extent, microfoundations have been central in much (macro) management theory over the last decade. Several articles, special issues, and conferences have been dedicated to microfoundations, most recently a Strategic Management Society Special Conference at the Copenhagen Business School. Some, uhm, highlyspirited exchanges have taken place (e.g., AoM 2013), with proponents of those foundations being accused of economics imperalism and whatnot, and critics of microfoundations receiving push-back for endorsing defunct Durkheimian collectivism (an obviously justified criticism). Here is recent civilized exchange on the subject between Professor Rodolphe Durand, HEC Paris, and myself. Complete with heavy Euro accents of different origins.
| Nicolai Foss |
OK, surely you have come across those timelines featuring the great economists, á la Aristotle-the Spanish Scholastics–William Petty-Cantillon-Smith-Ricardo-Say-Menger-Wicksteed-Marshall-Mises-Hayek-Boettke-Langlois-Klein-etc. Here is a similar timeline with the Greats of management theory, 1800-2000 (Lien seems to be missing, however). Many of the names of those management types are clickable, taking you to e.g. their wikis. Fun brush-up, and may be good for students.
| Peter Klein |
Longtime readers of this blog expect skepticism about behavioral social science. One of my issues is the assumed, but unexplored, assumption that private actors and market institutions cannot deal with behavioral anomalies, and therefore government intervention is necessary to make people act “rationally.” But if we can really improve health outcomes by putting the chocolate cake behind the carrot sticks in the display case, why wouldn’t profit-seeking entrepreneurs exploit this fact? Consumers pay substantial price premiums for organic produce, grass-fed meats, and other healthy products, even when the purported health benefits are long-term and uncertain. Wouldn’t some patronize the behavioral-economics-influenced grocer? “Our shelves are arranged to encourage healthy food choices.” Add earth tones, hipster music, an onsite juice bar, and the place will make as much money as your local Whole Foods.
To be a little less flippant: consider adverse selection theory. Many people misread Akerlof’s famous paper as a call for government regulation of used-car markets (or, worse, as a demonstration that used-car markets can’t exist). In fact, as Akerlof states plainly in the original piece, his theory explains the existence of private assurance mechanisms such as warranties, third-party certification, quality signalling, and the like.
A recent Forbes piece puts it this way: How do you make money by helping mitigate behavioral anomalies? Cognitive biases “have been accepted into the mainstream of economics and pop culture, particularly since the recent publication of popular books such as Richard Thaler and Cass Sunstein’s Nudge, Dan Ariely’s Predictably Irrational, and Daniel Kahneman’s Thinking, Fast and Slow. Even so, relatively few companies have attempted to use behavioral economics to try to change people’s behavior around overeating, smoking, or other bad habits many are desperate to break.” The focus is on the diet company StickK, which takes advantage of loss aversion (pun intended) to help people achieve weight and other goals.
StickK is a cool site, and I hope it is successful. But, if behavioral theory is so powerful and general, why aren’t more entrepreneurs taking advantage of it?
| Nicolai Foss |