Technological Development and the Boundaries of the Firm

6 August 2006 at 11:07 am Nicolai Foss Leave a comment

| Nicolai Foss |

Increasingly, my favorite journal is Management Science (along with Organization Science). It seems to me to feature more research that is truly at the frontier than, say, Strategic Management Journal and the Academy of Management Journal, and one will certainly not encounter the silly pomo exercises that too often feature in the pages of the Academy of Management Review.

Of course, a journal is made great by the great articles that are published in it. Case in point: Jeffrey T Macher’s “Technological Development and the Boundaries of the Firm: A Knowledge-based Examination in Semiconductor Manufacturing” in the June issue.Starting from the knowledge-based view of the firm, Macher argues that “Underexplored in this literature is a theoretical and empirical examination of organizational alignment that considers the advantages and disadvantages of markets and hierarchies in knowledge development and transfer” (p.826) (the main point of my 1996 Organization Science paper (which is not cited by Macher)). He continues by linking up with the problem-solving approach to governance choice, pioneered by Nickerson and Zenger, in which the problem (rather than the transaction) is the unit of analysis and where governance choice is linked to a clever dimensionalization of problems.

The paper finds that the speed and quality of problem-solving is determined in part by organizational modes that facilitate and hinder solution search. Thus, “…in the context of the empirical setting of semiconductor manufacturing, integrated manunfacturers achieve performance advantages for problems that are complex and ill-structured …, whereas specialized manufacturers realize performance advantages for problems that are simple and well structured” (p.827) — a line of reasoning that seems very close to the recent work of my co-blogger Dick Langlois (e.g., this paper) (Macher cites Dick’s older work but not the more relevant recent stuff). A very nice empirical complement to the emerging problem-solving approach to economic organization.