Comparative Institutional Analysis and the New Paternalism | Organizations and Markets

]]>Maths can be misleading even in the physical sciences

http://www.the-rathouse.com/2010/Schwartz_on_mathematics.pdf

]]>I have never thought about how interviewing managers might yield data relevant to understanding the relationship between multiple mechanisms for generating profit (such as rivalry restraint and competitive advantage). If you have any ideas, let me know.

Meanwhile, if you want to learn more about this theory as it currently stands, then I would recommend reading the following recent articles (listed chronologically):

Makadok, Richard (2010). “The Interaction Effect of Rivalry Restraint and Competitive Advantage on Profit: Why the Whole Is Less Than the Sum of the Parts.” Management Science 56(2): 356-372.

Chatain, Olivier, & Zemsky, Peter (2011). Value creation and value capture with frictions. Strategic Management Journal, 32(11): 1206-1231.

Makadok, Richard (2011). “The Four Theories of Profit and Their Joint Effects.” Journal of Management 37(5): 1316-1334.

Makadok, Richard and Ross, David Gaddis (2013). “Taking Industry Structuring Seriously: A Strategic Perspective on Product Differentiation.” Strategic Management Journal 34(5): 509-532.

Also, Mike Ryall and his coauthors, Joao Montez and Francisco Ruiz-Aliseda, have written a very interesting not-yet-published working paper on this same topic, where they extend the value-capture style of modeling that he mentioned in his comment above (download from http://works.bepress.com/michael_ryall/20/ ).

Thanks again,

Rich

Thanks for your response, you’ve clarified several points for me. I can certainly appreciate the ability of mathematical models to generate, as you put it, useful insights, especially in relatively new fields of research. Though I didn’t learn much formal modeling in undergraduate B-school, the RBV, Porter’s 5 Forces, and other insights of strategy have had a tremendous impact on my thinking as an economist. I’m happy to work in a field (agricultural and applied economics) that respects B-school perspectives as well as “traditional” economics. While I don’t see myself “bringing my plow over to [your] farm,” I certainly appreciate the invitation and hope I can incorporate the insights of the strategy literature into my research program.

The risk issue originates, I think, with the “need” for developing mathematically-derived theoretical hypotheses for empirical work. Mean-variance modeling is prevalent in the literature likely because it is an elegant way of deriving mathematical hypotheses. If the requirement for mathematically-derived theoretical hypotheses weren’t in place we could begin from what is plainly obvious to all of us, namely that risk aversion is a down-side issue, and use “verbal” theory and whatever empirical method is in line with that theory. I think this is an example of mathematical rigor dictating our (theoretical) understanding of economics. Of course, this isn’t directed at you as a criticism, but at what we both criticize as an over-reliance on formal modeling.

I’m glad you enjoyed the Levins piece. It was presented to me in a research methods class in graduate school. The professor focused on criticisms of the article, but I found Levins’ article quite convincing (and, of course, humorous).

Best,

Levi Russell

]]>This discussion is really useful for early career researchers like me also contemplating adding new quant skills to increase ‘marketabilty’. I do case studies, interviews, ethnography, and follow grounded theory methodology. It appears this abstract model building goes against the grounded methodology where models need to emerge from empirics, and it should be beyond just a ‘relationship between models and data. Going back to Rich’s example on dividing effects into rovalry and comp advantage, wondered what comes in the way of discovering this through indepth interviews and field work. In other words, how could someone observe this dual effect through grounded theory work.

Thanks,

Amer khan

Curtin university Malaysia