Author Archive
More on Opportunity Discovery and Entrepreneurial Judgment
| Nicolai Foss |
Peter and I (well, mostly Peter) have often contrasted the Knightian notion of entrepreneurial judgment with other notions of entrepreneurship, mainly Kirzner’s concept of alertness (here). In “Entrepreneurship: From Opportunity Discovery to Judgment” (download from this page), we provide what is no doubt the definitive statement on the issue. The paper is a draft of chapter 2 in our forthcoming book, Entrepreneurial Judgment and the Theory of the Firm, and constructive criticism is most appreciated. Here is the abstract:
Entrepreneurship has become a fast-growing subfield in management research, and is increasingly appearing in economics, finance, and even law. We survey a number of approaches to entrepreneurship in the economics and management literatures, and argue that modern research in this area need to be focused around ideas from Austrian economics and Frank Knight on entrepreneurial judgment. We critically discuss the recent opportunity discovery literature in management, and argue that it has partially misunderstood the Austrian origins of the theory, and fails to adequately distinguish between opportunity identification and opportunity exploitation.
UPDATE: You can also download the paper from SSRN.
Off to Sundance
| Nicolai Foss |
Teppo Felin has been raving about the BYU-University of Utah Winter Strategy Conference, and I decided to accept an invitation for this year’s conference which takes place at the Sundance Resort. I am off tomorrow, and should arrive after about 17 hours of travel (sigghhh!). The program (which doesn’t seem to be online) looks magnificent with talks by Michael Tushman, Dan Levinthal, and Brian Silverman, and panels with Jay Barney, Joel Baum, Jackson Nickerson and other illustrious people in the strategic management community. The conference seems to be relatively small (max. 50 people) and largely Euro-free (with the exception of Gino Cattani and yours truly), which means clear and focused. I will offer some thoughts here on O&M on what I hear at the Sundance conference.
Entrepreneurship and Capital Theory
| Nicolai Foss |
Suppose all capital were what Robert Solow called “Shmoo” (after a Lil’ Abner cartoon; check this for some Shmoo info), that is, a homogenous substance. In such a world, the (intertemporal) coordination problem deals only with selecting the intensity of the input services that must be supplied over time to match consumer preferences. All capital assets are substitutes, so there is no path-dependence. Asset prices are presumably instantaneously equilibrated. In such a world, there are no coordination problems and no Misesian “calculation” problems. Many decision problems disappear as there are no costs of inspecting, measuring, and monitoring the attributes of capital assets. Decision makers do not reach the bounds of their rationality. In sum, a world of homogeneous capital is a world where there nothing (or very little) for entrepreneurs to do. (more…)
Queer Economics?
| Nicolai Foss |
An earlier post in the O&M Readers’ Favorite, the Pomo Periscope Series, concerned “queer economics.” Many commentators took issue with the association between pomo and queer, and they may well be right, so I will refrain from making that association here. I was, however, quite baffled about the queer/economics connection, failing to see any, but I think I may now be understanding what it is about (namely, codes).
In a recent article in Intelligent Life, a new Economist-sponsored internet-based outlet, Queen’s College (NY) professor Evan Zimroth discusses John Maynard Keynes’ early sex life. That Keynes in his younger years was very actively practicing his homosexuality is no secret (Austrians will recall a famous Margit von Mises anecdote). It is also well known that Keynes kept a meticulous “sex diary,” but apparently he kept a second — coded — one. The main part of Zimroth’s article is an attempt to break the code. Note: the article may be a bit too strong for some people.
(Thanks to Lasse Lien for the pointer).
Special Issue of JEM on Thomas Schelling
| Nicolai Foss |
Nobel Prize winner (2005) Thomas Schelling makes social science come alive. He has contributed fundamental insights to game theory (e.g., the notion of a focal point, the importance of commitment, early insights in the epistemic conditions of Nash equilibrium, signaling, etc.) and to the understanding of social dynamics (e.g., the famous 1971 checkerboard segregation model; early insights in “critical mass” and “tipping”). He is among the founders of game-theoretic conflict theory.
Schelling has an amazing knack for drawing fundamental lessons from simple illustrations. He rarely uses advanced mathematics, he is more interested in processes than in equilibrium states, and substantial parts of his work is accessible to the educated layman (e.g., this one and this one). He is quite an unusual social scientist.
The latest (Dec.) issue of the ever-interesting Journal of Economic Methodology features a Symposium on Thomas Schelling edited by Abu Rizvi (who, in other journals and volumes, has published some of the most penetrating meta-theoretical work on game theory). (more…)
Klein in Wikipedia
| Nicolai Foss |
Yes, that’s right: Some Klein fan has penned an entry on my esteemed co-blogger. Note, however, the warning at the bottom of the page: “This article lacks information on the notability of the subject matter.”
Workshop on Performativity and Finance
| Nicolai Foss |
We have blogged occasionally on performativity and related issues here at O&M (e.g., here), though by no means with the frequency of the chaps at our evil twin, orgtheory.net (here is a sample of their 1,206 posts on the subject).
Daniel Beunza (Columbia) and Yuval Millo (LSE) are organizing a workshop 28-29 April on performativity and finance, one of the main areas of applications of the performativity concept. The title of the workshop? Well, “From Bodies to Black-Scholes” (what else?). (more…)
“Let’s Write a Paper”
| Nicolai Foss |
I have noticed that an increasing number of colleagues build up and afterwards desperately try to manage increasingly large portfolios of paper projects. It is very common to have paper portfolios that encompass more than 20 ongoing projects. At any rate, that’s about the size of my own current portfolio.
I have also noticed that a lot of these paper ideas don’t seem to ever come to be written, or, at best exist in a fragmentary form. I can relate many anecdotes (some from personal experience!) relating to substantial regret over set-up costs (aka pissing your would-be co-author off). It is possible that this may increasingly become a management problem, certainly on the level of the individual scholar, but perhaps also on the level of university managers (mainly dept. heads).
The question is: Is this (personally and socially) wasteful? The basic problem is that in order to end up with a suitable amount of published papers a certain amount of exploration is necessary. Co-authoring papers is a Hayekian discovery process. It is pretty hard, perhaps particularly for younger, unexperienced colleagues, to make reasoned decisions on how many papers one should initiate and with whom (given the costs of experimentation, i.e., set-up costs, the risk of ruining your reputation, etc.). Reputation mechanisms work imperfectly. Big, but lazy, guys may exploit this, hoping for the rookie to do the job. Problems of procastination and melioration may complicate the decision problem. Etc.
From another point of view, however, not much has really changed. Whereas scholars in the past may have spent much time discussing research issues over the lunch table, etc., the publication pressure that most of us are subject to nowadays means that many discussions that would previously have simply ended over the lunch table are now turned into paper ideas. If that is the case, the process appears much less wasteful — and, importantly, in need of less intenvention by well-intentioned, but (naturally!) misguided university bureaucrats.
Thank You, David!
| Nicolai Foss |
Many thanks to David Hoopes for guest blogging at O&M. David has contributed some excellent blog posts which are among the most viewed ones on the site (particularly this one). We hope David will continue to visit O&M in the future and post comments. Thanks, David, for allowing us to benefit from your fertile mind.
“The Age of Temporary Advantage”
| Nicolai Foss ]
Rich D’Aveni, Gianbattista Dagnino and Ken Smith have just disseminated a call for papers for a special issue of the Strategic Management Journal on the above subject. The purpose of the special issue, they explain, is to “develop theory and empirical evidence about whether and why competitive advantages are becoming less sustainable, and how organizations can successfully compete using a series of temporary or dynamic competitive advantages. The primary goal is to ask: What would the field of strategy look like if the sustainability of competitive advantage was very rare or nonexistent?” (more…)
The End of an Academic
| Nicolai Foss |
Three clear signs:
- Edward Elgar has asked me to edit a collection of my papers. It will be published later this year under the title Organization, Property Rights, and Knowledge: Selected Papers of Nicolai J Foss.
-
I got back a review report that condemned my submission with the following words: “It lacks the freshness of the early Foss papers.”
-
And, now, the decisive sign, I received a mail with the following content (here anonymized):
“Dear Professor Foss,
I am contacting you from a London based executive search firm called the NN Partnership. We are currently working with UU University to find them a Dean of their Business School. I would be delighted to speak to you about this and wondered if there is a convenient time to call and indeed the best number on which to reach you.
I look forward to hearing from you. With kind regards and many thanks,
JJ, the NN partnership”
I suppose all that is left for me now is to gracefully retire to my front porch where I can spend the time reading Human Action, smoking my old pipe, and yelling at the neighborhood kids. :-(
The Journal of Human Capital
| Nicolai Foss |
Although human capital theory goes back to at least the 1950s, and is a thriving area that has yielded at least two Nobels, the field hasn’t had a dedicated journal. That is, until two days ago when Chicago Journals announced the inaugural issue of the Journal of Human Capital. The papers look controversial and therefore interesting, such as Todd and Wolpin’s finding that the main determinant of differences in educational performance is the home environment, as measured by the mother’s score on the Armed Forces Qualification test. (more…)
The Logic of Appropriateness
| Nicolai Foss |
To paraphrase Fritz Machlup, the rational-choice model has been a sort of “universal bogey” for many scholars in sociology, psychology, and management. The nature of the alternative(s) has, however, seldom been clarified. Thus, most models of bounded rationality are really variations on the basis RC model.
However, a much-cited attempt to characterize an actual alternative is James March’s notion of the “logic of appropriateness,” which may be characterized thus:
The logic of appropriateness is a perspective that sees human action as driven by rules of appropriate or exemplary behavior, organized into institutions. Rules are followed because they are seen as natural, rightful, expected, and legitimate. Actors seek to fulfill the obligations encapsulated in a role, an identity, a membership in a political community or group, and the ethos, practices and expectations of its institutions. Embedded in a social collectivity, they do what they see as appropriate for themselves in a specific type of situation” (quoted from this paper).
In in a logic of appropriateness, the agent/actor does not begin by identifying alternatives, preferences, etc. as in the rational choice model, but rather asks, “What kind of situation is this? Who or what am I? What is the appropriate thing to do given who I am?” (more…)
More Econ Bashing
| Nicolai Foss |
A topic that has frequently been discussed on O&M is the bashing of economics that appears to have become a favorite pastime of management writers such as Jeffrey Pfeffer, Henry Mintzberg, (the late) Sumantra Ghoshal, and others (e.g., here, here, and here). The most radical statement of that recent wave is the Ferraro, Pfeffer, and Sutton 2005 paper in the Academy of Management Review (here is a selection of O&M posts on this paper). Or, so we thought …
Max Bazerman and Deepak Malhotra, both of Harvard University, have contributed a chapter, tellingly titled “Economics Wins, Psychology Loses, and Society Pays,” to a recent edited volume, Social Psychology and Economics (check Herbert Gintis’ review of the book on Amazon) (here is the Google copy). What they say is so uncompromising (and cranky) that it has to be read to be believed. Here is a sample:
Recent history has witnessed the financial distress of companies such as Enron, Adelphia, Global Crossing, Halliburton, Xerox, Worldcom and Tyco. Millions of jobs and tens of millions of retirement plans have been lost. Shortcomings in U.S. security policies were at least partially responsible for the tragedies involved with 9/11. Eleven of the 17 major fisheries in the world are commercially extinct. The United States needlessly allows thousands of people to die each year because of an ill-conceived organ donation system. Behind each of these disasters is the hand of economic logic, the dominance of this logic to the exclusion of other useful social sciences (p.264).
The solution? A Council of Psychological Advisers to parallel (or trump?) the Council of Economic Advisers. Yes, that’s right.
Austrian Economics and Pictograms: A Connection?
| Nicolai Foss |
Here is a possible research subject for a historian of ideas. The invention of pictograms is very often ascribed to Otto Neurath, Austrian philosopher (hardcore positivist) and political economist. Of course, pictograms go back much longer. For example, “A” is essentially a pictogram, namely the inverted head of a cow. Still, Neurath contributed very significantly in coming up with new designs for pictograms, designs that are still with us, codifying the art of the pictogram, disseminating and propagandizing for their use, etc.
Now, Neurath was a participant in the Böhm-Bawerk seminar, and a contemporary of Ludwig von Mises whom he clearly knew. Mises didn’t symphatize with Neurath’s view, and this lack of sympathy may have been reciprocated by Neurath. Still, it is at least conceivable that Mises’ views on prices as necessary for rational economic action may have influenced Neurath-the-inventor-of-the-pictogram (Mises’ views were formed and published before Neurath’s work on pictograms). Prices summarize information and provide direction in a complex world. Pictograms do the same. A possible connection?
Pomo Periscope XVI: An Unusually Honest Journal
| Nicolai Foss |
It might be that the most popular category of posts on O&M has the same name as this journal — but, seriously, would you read a journal that is this explicit about its aims, content, readership, etc.? Then again, if you do you might be exposed to nifty little nuggets like this delicately titled piece. Or, you might be able to join a conference where
Researchers, activists and media-artists meet on the Trans-Siberian train from Moscow to Beijing September 11th-20th 2005.
The conference “Capturing the Moving Minds” gathers a pack of people … artists, economists, researchers, philosophers, activists … who are interested in the new logic of the economy, the new form of war against terrorism and in the new cooperative modes of creation and resistance, together in a space moving in time. Spatially moving bodies and bodies moving in time (through the different time zones) creates an event, a meeting that not really ‘is’ but ‘is going on’.
The nonsense continues in the same vein; read the rest yourself. One thing is certain: This will not be the last time that the Periscope zooms in on Ephemera!
Bounded Rationality and Economic Organization
| Nicolai Foss |
While many economists and management scholars agree that bounded rationality is important to the understanding of economic organization and there is no shortage of calls for integrating it more with existing theory (e.g., here), how exactly this should be done has been unclear. A problem is that there are so many different conceptions of bounded rationality. Thus, should Ariel Rubinstein´s approach be foundational in attempts to integrate BR with organizational economics? Or the behavioral tradition that stems from Tversky and Kahneman’s research? Or something else?
Moreover, it seems to be notoriously more difficult to work with cognitive assumptions derived from bounded rationality ideas than to doctor utility functions, which may explain why we currently see more research on how alternative specifications of agent motivation (rather than agent cognition) influence economic organization. It is therefore not surprising that to the extent that bounded rationality appears in the organizational economics literature, it is either as a label for “something that makes contracts incomplete” (Williamson, Hart) or as “whatever makes agents commit errors of evaluation” (Sah and Stiglitz) or “whatever makes agents’ information processing speed less than infinite” (team theory). Anything seems to go when it comes to modelling BR, and one is often left wondering what exactly BR is. (more…)
Agency Theory and Intrinsic Motivation
| Nicolai Foss |
Agency theory represents one of the most influential and controversial bodies of microeconomics. To some, it is an extraordinarily powerful theory that can be applied in all sorts of ways and provides the theoretical foundation for the understanding of reward systems, many contractual provisions, the use of accounting methods, corporate governance, etc. To others (e.g., Bob, Jeff, and Alfie), it is the brainchild of overly cynical economists, responsible for most evil in the World, including bad managerial practices and Enron. (more…)
Want a Euro Career?
| Nicolai Foss |
The center for which I serve as director, the Center of Strategic Management and Globalization at the Copenhagen Business School, has two vacancies in strategic management and/or international business on the assistant professor level. Check the job ad and mail me (njf.smg@cbs.dk) if you want to hear more. CBS, the second largest BSchool in Europe, is very much a “rising school” with an increasingly strong research culture, good career opportunities, and improving FT rankings every year. And Copenhagen is a funky boom-city. Not bad, eh?
More on Plagiarism
| Nicolai Foss |
We have treated plagiarism in two earlier posts. Here is Enders and Hoover on Plagiarism in Economics. Also try out the Plagiarism Risk Quiz.
Organizations and Markets 
Recent Comments