Author Archive

Was Whole Foods Choking On Their -5% Net?

| David Hoopes |

I’ve used a couple of Ben and Jerry’s cases over the years. One of the interesting things about B&J is that they seem to suffocate under their desire to “do good.” In general, it seems they would have been able to donate a good deal more to charity if they had run their business to be a good business. Then, Ben and Jerry could have taken their salaries or capital gains or dividends and given them to their favorite charities.

Whole Foods, like B&J had a concentrated ownership for quite a while. I don’t know what it’s like now. For a long time John Mackey and his Dad owned 51%. John did not take a large salary. So, giving away Whole Foods’ profits was like he was spending his own money anyway. And, anyone involved with WFM after John got rid of his co-founders knew WFM was John’s thing.

The point with WFM is that it’s an unusual example of corporate charity in part because of concentrated ownership, the marketing benefits of donating money, and the political inclinations of many if not most of its employees (far more left-wing than J. Mackey). Unlike B&J, WFM did not suffocate itself by not paying professional executives. Also, Mackey never felt guilty about turning a profit and is a tried and true capitalist (guilt free).

I worked for Whole Foods when they only had two stores in Austin (oh so long ago). I’m afraid John considered me a pest (I suppose I was).

Did they ever buy Wild Oats? That’s another story.

29 November 2007 at 1:48 pm 2 comments

Integrity and the Academy: Are Academicians in a Position to Preach About Social Responsibility?

| David Hoopes |

Do college faculty — generally untrained in ethics (except for philosophy professors, etc.) — have any business teaching social responsibility and ethics? This question comes from my most recent post.

I interviewed for a job at the Army War College a few years back. I was fortunate enough to hear a high-ranking general speak to the students (mostly lt. colonels). One of things he said is that he stayed in the armed services because of the high integrity of its members. I know in some corners this will be scoffed at. However, I think there is no small amount of truth to this.

I thought, “Cannot say that about academia.” Why so cynical? There are many things one could complain about. There are more passive-aggressive people in the academy than most other place. Academics seem especially prone to speaking with a forked tongue.

The clearest example I can think of is the tenure process. Certainly the tenure process can bring the worst out in people. Beyond that, it is amazing how sexually biased the tenure process seems to be. It is especially amazing to see how entrenched the “old boy” network is among men who fancy themselves liberal or progressive.

I have no proof that the tenure process is sexually biased. Nevertheless, in management it certainly seems easy to think of women getting left out of the loop. Thus, fewer social interactions, fewer coauthored papers, less mentoring. Now part of this may have to do with where I have worked: schools that have had multiple discrimination and harassment charges brought against them.

Yet, I don’t think this is limited to management departments. It’s pretty strange that an institution that fancies itself as being so progressive is so backwards when it comes to mentoring and networking women through the old (or young) boys clubs.

Here is a link that offers some evidence. I found the stuff at the bottom of the page most useful.

27 November 2007 at 5:41 pm 10 comments

Teaching Social Responsibility

| David Hoopes |

I am on the planning committee and the goals committee here at Cal State Dominguez Hills. At a recent meeting it came up that one of the schools goals was academic excellence and social responsibility. I suggested that they are two very different topics but was roundly rebuked. I have a few problems with considering social responsibility to be part of the same goal as academic excellence for college professors.

My first complaint is that “social responsibility” is not very easy to define or operationalize. Usually, it seems to imply donating money to some left wing cause. I might be able to find some left wing causes I like. However, I’m not sure how teaching students to tithe is similar to teaching students a course of study or an academic discipline.

My second complaint is that I don’t think academicians are qualified to teach social responsibility. I admit to being jaded and cynical. But I do not find academicians to be shining examples of virtue. Getting a Ph.D. in management, economics, or sociology hardly qualifies one to determine what students should consider to be socially virtuous.

I do think colleges (especially state funded) have some obligation to promote citizenship and promote and encourage ethical and moral behavior. Additionally, I am very happy to have those who specialize in ethics and related topics to teach them (the philosophy department?).

However, again, I don’t see this as our primary mandate. I might feel better about this if I felt that academics were paragons of ethical and moral behavior. On the contrary, I am continually disappointed in the standards to which academicians hold themselves. Having worked a variety of odd and not so odd jobs before heading to the academy I feel pretty comfortable saying that academicians certainly do not appear to have superior ethical and moral behavior.

What, you might ask, makes me think of academics as being ethically or morally lacking? Well that’s for another post.

26 November 2007 at 11:52 pm 4 comments

Deconstructing Bob and Jeff

| David Hoopes |

For better or worse the hard-hearted authors at O&M have hurt the feelings of our colleagues in other fields. In the spirit of being more specific about why the bloggers here are so harsh I’d like to take a look at an award-winning paper from the Academy of Management Review (Ferraro, F., Pfeffer, J., and Sutton, R.I., “Economics Language and Assumptions: How Theory Can Become Self-Fulfilling”). In this paper we are told how the language of economics (the assumptions that people are selfish cheats) encourages people to be selfish cheats. Aside: in my opinion sociologists have a much darker image of humankind than economists (if we must make careless generalizations).

As I note in an earlier post, the idea of self-interest is often grossly misrepresented. Perhaps economists can thank themselves for this. I don’t know. However, it is important to examine this component of price theory by looking at its roots. In developing public policy toward government intervention in the allocation of goods (mercantilists vs. free traders in Smith’s day) allowing people to make their own decisions is more efficient than having a handful of people making the decisions for everyone. And even if individuals focus on their own needs the result for society is better than having a few people guessing at what everyone else wants and imposing their guesses.

The starting point of the AMR critique is the ever-present complaint about the economics world telling us all that we need to be selfish and greedy (make decisions based on our own self-interest). From here, our friends in the org. theory camp state, “If people are relentless in the pursuit of their own self-interest and equally relentless in the their lack of concern for others’ interests. . . .” What? Where did that second part come in? A very important bridge theory has been added. If people pursue their own self-interest then they also cannot care about anyone else. Management scholars wonder why their (our) work is not used in public policy debates. Small wonder. (more…)

20 November 2007 at 7:33 pm 7 comments

Organizational Learning: Observations from the Shadow of the Fires

| David Hoopes |

A few Mondays [more than a few now] ago the T.V. got turned on pretty early and we found a host of officials discussing a couple of very large fast-moving fires. Someone in charge of emergencies spoke. The sheriff spoke, the fire chief, and more. Winds were blowing above 40 miles per hour and fires were spreading . . . like wildfire! My wife and I started gathering important papers (my ES-137) and other things in case we needed to make a run for it.

We did have to evacuate. However, our house was fine except for some minor wind damage.

What amazed many in the San Diego area was how well local media, emergency institutions, the private sector, and the public coordinated. The news media were very helpful (wow!), fire fighters, sheriff’s office, and other such crews were clear about how people could help them (get out of the way), and local grocery stores delivered lots of food and other supplies to shelters.

It seems there was quite a bit of learning from the many problems that occurred in a previous fire (2003).

20 November 2007 at 7:25 pm Leave a comment

Monty Python and the Health Insurance Business in California

| David Hoopes |

My wife was talking to our dental insurance company the other day and John Cleese, Michael Paline, Eric Idle et al. came to mind.

Wife (Chris): I don’t understand why you haven’t paid us for this.”

Dental non-insurer: “You went over your limit.”

C: “It was our first visit.”

DN: “Sorry.”

“You don’t pay for teeth cleaning?”

“Oh yes. We do.”

“But you are not going to pay for this visit for teeth cleaning?”

“No, I’m sorry but you can only do it so many times per year.”

“That was the first time.”


“Can you tell me why you haven’t paid the January visit?”

“I don’t think we’ve received the claim.”

“I’ve sent you that claim five times”

“Oh, that’s right. Sorry. We need to see the x-rays.”

“The dentist sent you the x-rays 10 months ago.”

“Well, we don’t have them anymore.”

“Where are they?”

“We sent them back.”

“Where did you send them? I didn’t get them.”

“We sent them to who[m]ever sent them to us.”

“Who was that?”

“Whoever we sent them to.” (more…)

9 November 2007 at 12:50 pm 2 comments

Demsetz, Coase, Postrel, and Williamson

| David Hoopes |

A recent post by Nicolai ponders Demsetz’s approach to transaction costs. My understanding (interpretation) of Demsetz’s “The Theory of the Firm Revisited” is quite different from Nicolai’s. Here’s how I remember that paper.

One of Demsetz’s complaints about transaction costs economics is that a number of very different events are bundled together under the term “transaction.” Williamson’s take on transaction costs focuses largely on comparative governance costs. How does making sure a supplier doesn’t cheat you compare to making sure your employees don’t cheat you? Coase’s version of transaction costs is very different. Coase tends to talk about a variety of other frictions that can occur independently of governance costs. These are what Demsetz calls management costs. Demsetz thinks (quite correctly) that referring to these two types of costs using the same term is confusing. In his Nobel speech Coase notes how his beliefs were more consistent with Demsetz’s than with those emphasizing governance.

Steve Postrel and I (in disucssing capabilities in SMJ 1999) separate cooperation costs from coordination costs. I think of this as fitting the Williamson versus Demsetz and Coase types of transaction costs (or management costs as Harold says). Costs dedicated to aligning incentives are different from costs of making sure everyone has the same plan. Steve and I go on to differentiate the costs of sharing specialized knowledge from the costs of coordinating. (Notice how I moved from Coase and Demsetz to myself?!).

Back to Harold. Demsetz believes that you needn’t have oppourtunism to have organizations. Postrel (2003) in an earlier version compared knowledge and governance as theories of the firm. Where Demsetz believes firms economize on managerial costs (or Coasian transaction costs) Postrel believes that without opportunism the firm is unnecessary.

I’m more with Harold (at least in my own mind I’m not sure Harold really wants me tagging along).

5 November 2007 at 2:47 pm 3 comments

A Truly Noble Nobel — Should Gore Really Have Gotten This Prize?

| David Hoopes |

So, my last use of the word noble was a typo, but I left it in case someone might think I’m clever.

Am I the only one who finds Vice President Gore’s prize to be a trifle disturbing?

Former guest blogger extrodinaire Steve Postrel’s post “Taxes al Carbon” raised a number of issues regarding common assumptions on the extent and causes of global warming.

Many people seem to concede (including Gore) that his movie is often incorrect. However, this is rationalized because the issue merits more attention than it gets.

Does anyone else wish the peace prize had more to do with peace?

19 October 2007 at 11:50 am 5 comments

More on the Noble Prize (or the Economics Prize in Memory of Nobel)

| David Hoopes |

Since the O&Mers have been so quiet about the N prize I guess I’ll ramble a bit. In a comment on one of Peter’s posts I mentioned Demsetz and Alchian. For some reason I had it in my head that A.A. had already won. That’s what I get for staying at UCLA for so long (Alchian had just quit teaching when I got there).

I don’t know why I thought Alchian had won it. “Production, Information costs and Economic Organization” (with Harold Demsetz), American Economic Review 62 (1972): 777-95 is a pretty amazing paper. And “Vertical Integration, Appropriable Rents, and the Competitive Contracting Process” (with Robert Crawford and Bejamin Klein), Journal of Law and Economics (1978) has been very influential. Though I think people think of Ben Klein for that paper. As noted above, Alchian is very well known for (and thought of because of ) “Uncertainty, Evolution and Economic Theory,” Journal of Political Economy 58 (1950): 211-21.

Having said all that, I think srp is correct in that Alchian’s best chance is going in with Nelson and Winter for evolutionary economics or Demsetz and Williamson or Oliver Hart for theory of the firm. It’s hard to imagine that evolutionary economics is that appreciated. I think Sid Winter is grossly underrated. His body of work in economics and strategy is pretty amazing.

As readers of my posts might guess, I am a pretty big fan of Demsetz. I don’t know that Harold is as productive or quantitative as most award givers might like. Stilger and Coase were pretty big fans. But, Hart and Williamson seem more likely award winners.

Over at they’ve been discussing sociologists and management people who (in some alternate universe) might win. There are not too many Herb Simons out there.

18 October 2007 at 11:33 pm 2 comments

Why Are Markets So Scary? Some Things (Liberal) Academics Get Wrong

| David Hoopes |

Many people make incorrect assumptions about capitalism. Some would have us believe that capitalism is based on greed, selfishness, and promotes behavior that is completely self-centered. This is a common interpretation of Smith’s advice to allow people to make decisions based on self-interest. Examples are easy to find in the many organization theory-based papers complaining about economics and economists.

Two very good papers can aid in a deeper understanding of the invisible hand. First is James Q. Wilson’s “Adam Smith on Business Ethics.” A central point Wilson makes is that Adam Smith assumed people will behave with a moral sense. Wilson, “A moral man is one whose sense of duty is shaped by conscience; that is, by that impartial spectator within our breast who evaluates our own actions as others would evaluate it.” By suggesting people be allowed to make decisions based on their own self interest Smith was not advocating selfishness and greed. What then was he advocating?

This leads to the second paper, Harold Demstez’s “The Theory of the Firm Revisited.” In the third paragraph Demsetz notes that the debate between mercantilists and free traders was over the role of the government in the economic affairs of the state. “Is central economic planning necessary to avoid chaotic economic conditions?” The great achievement of the perfect competition model, what Demsetz argues should be called perfect decentralization, is its abstraction from centralized control of the economy.

Thus, the central element to capitalism is that decision making is pushed down as far as possible. (more…)

11 October 2007 at 4:19 pm 17 comments

What Is a Capability and What Does It Matter?

| David Hoopes |

I am often surprised when I present or submit papers because audience members and reviewers find my construct definitions problematic. Often, people find my definitions are too narrow. Also, sometimes others don’t find the scholars whose work I would like to develop merit the attention I give them. This attention sometimes comes in the form of using their definition.  Case in point: Sid Winter and capabilities. In a couple of papers I’m working on my co-authors and I have based our definition of capabilities on one Sid Winter has used in an SMJ paper and a book he edited. Tammy Madsen and I have stuck with Sid’s definition. Steve Postrel and I have taken Sid’s definition and made it more specific to our work. Some readers and listeners have had a hard time with this (and given me a hard time). Now, there’s one “school,” that generally does not like definitions or theoretical constructs to be very narrow. Thus, “can’t X, Y, or Z also be a capability?” “Well, it could be. Just not in this paper.” “Aren’t capabilities just resources?” “Sure. So and So big shot thinks so. We just think of resource and capabilities as being two different things.” Another “school” doesn’t understand why we should care about Sid’s opinion. “Shouldn’t you use Other Big Shot’s definition?” “Well, I don’t really understand her definition. Sid has been doing this capability thing for a while.” “Isn’t it the same as Selznick?” “I don’t think so. Sid doesn’t think so” (see Intro to edited volume with Dosi).

I don’t mind that people prefer other definitions. Yet, I am surprised by how agitated people get. I get agitated by definitions when 1) There aren’t any; 2) I don’t understand what the author/presenter is saying; 3) The definition includes everything and the kitchen sink (presumably because that’s the way life is, “complex”).

So, I stumble along with my narrow definitions and hope not to get yelled at too much.

2 October 2007 at 5:41 pm 10 comments

Columbia Dean Considers a Discussion With Hitler

| David Hoopes |

In today’s WSJ, Bret Stephens observes, “John Coatsworth, acting dean of Columbia University’s School of International and Public Affairs, made the remark that “if Hitler were in the United States and . . . if he were willing to engage in a debate and a discussion to be challenged by Columbia students and faculty, we would certainly invite him.” This was by way of defending the university’s decision to host a speech yesterday by Iranian President Mahmoud Ahmadinejad.” My own alma mater, Grinnell College, had Angela Davis speak at last year’s commencement to the chagrin of a few alumni. Granted A. D. is pretty small change compared to Ahmadinejad. Twenty years ago, students at Grinnell shouted down Jack Kemp because they disagreed with his perspective. I doubt A.D. got shouted down. I find it disturbing that it is considered progressive to listen to Dr. Davis but to shout down Mr. Kemp. Ahmadinejad got a rude welcome outside the U.N. But, it’s strange to think that Columbia’s faculty would probably treat George W. (hardly a perfect president) a lot worse than they treated this man who has called for and spent a great deal of money on the destruction of Israel (among other things).

25 September 2007 at 2:43 pm 2 comments

Mental Illness in the Academy: Elyn Saks’ Brave New World

| David Hoopes |

Monday’s LA Times had an amazing story about a USC law professor who has managed to attend Oxford, Yale Law School, and become Dean of Research at the USC law school while battling schizophrenia. Many O&M readers have probably read the book or seen the movie, “A Beautiful Mind,” the incredible story of mathematician John Nash. Like Nash, Elyn Saks suffered hallucinations, delusions, and a litany of other terrible effects of her disease. I probably should not use the past tense because I don’t believe medicine can remove these things. However, they can be tempered. Saks recently published a memior, “The Center Cannot Hold: My Journey Through Madness.” Thus, in addition to the direct suffering of the disease, Saks is now willing to take on the problems of social stigma, no small thing.

I wish I could think of some profound comment or lesson. There are many among us who suffer from a variety of mental illnesses. For better or worse, more jokes about academics come to mind than profundities. Here’s to the day when the social stigma associated with mental illness is much smaller. I’ve always thought I’d wait until I got tenure to open up any of my (much more minor) nightmares.

12 September 2007 at 2:34 pm 2 comments

9-11, Strategic Management, and Public Policy

| David Hoopes |

On this sad anniversary I find myself thinking about public policy and the field of strategic management. After six years, how well integrated are our intelligence agencies? A few management and strategic management scholars probably have a lot to say about such issues. Many more might struggle to apply what they work on to this problem or any other policy issue.

A few years back Bill Ouchi was commended by a panel at an Academy of Management meeting. Bill had long since forsaken traditional academic concerns and devoted his considerable intellect to public policy. His main target: public schools. Ouchi’s work has had a profound impact on a number of large and at one time largely dysfunctional school districts. Portions of the session were published in The Academy of Management Executive (recently renamed). I missed the session, but the account in AME had Bill’s talk followed by a number of notable management scholars opining about other applications of management research to public policy. I’ve met a few of the speakers. They are very nice people who are genuinely concerned about the field of management and about how we might be of service to a constituency beyond our students and the business world. Nevertheless, most of what these talented, hardworking, and successful scholars had to say about the field of management and its possible applications to public policy seemed far removed from a direct application to policy questions. (more…)

11 September 2007 at 7:10 pm Leave a comment

Culture, Cognition, and Strategy

| David Hoopes |

Although managers frequently refer to their companies’ culture, culture’s influence on business strategy receives limited attention in the academy. Over the years, organizational culture has gone in and out of fashion. Currently, it remains out of fashion. Yet, strategy researchers often stress the importance of shared beliefs, shared values, administrative history, and other organizational characteristics presumably influenced by or reflecting an organization’s culture. A cogent theory of culture and organizational culture can better integrate organizational beliefs, values, and knowledge with current theories of strategy (and for my interests in competitive heterogeneity). Of particular interest to me is a branch called cognitive anthropology.

Most anthropologists include themselves in one of two traditions. One, generally associated with Ward Goodenough, considers culture to be knowledge necessary to get along in a particular society. The other, generally associated with Clifford Geertz, considers culture as something outside of any particular person. Thus Geertz (1973: 12) decries “…the cognitive fallacy [that] culture consists of mental phenomena.” Building on Goodenough’s work, cognitive anthropologists describe culture in terms of member’s schema or cognitive models (e.g. D’Andrade, Hollins, Quinn, Hutchinson). D’Andrade states that cultural schema are “Socially inherited solutions to life’s problems” (1995: 249). (more…)

10 September 2007 at 1:17 pm Leave a comment


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Our Recent Books

Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
Peter G. Klein and Micheal E. Sykuta, eds., The Elgar Companion to Transaction Cost Economics (Edward Elgar, 2010).
Peter G. Klein, The Capitalist and the Entrepreneur: Essays on Organizations and Markets (Mises Institute, 2010).
Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy (Routledge, 2007).
Nicolai J. Foss, Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources (Oxford University Press, 2005).
Raghu Garud, Arun Kumaraswamy, and Richard N. Langlois, eds., Managing in the Modular Age: Architectures, Networks and Organizations (Blackwell, 2003).
Nicolai J. Foss and Peter G. Klein, eds., Entrepreneurship and the Firm: Austrian Perspectives on Economic Organization (Elgar, 2002).
Nicolai J. Foss and Volker Mahnke, eds., Competence, Governance, and Entrepreneurship: Advances in Economic Strategy Research (Oxford, 2000).
Nicolai J. Foss and Paul L. Robertson, eds., Resources, Technology, and Strategy: Explorations in the Resource-based Perspective (Routledge, 2000).