Author Archive
Uncle Milton Nostalgia
| Nicolai Foss |
Here is what Andrew Sullivan calls “intellectual porn for classical liberals and conservatives of doubt” — a 30 mins. interview with Milton Friedman. Delightful. And in black&white.
HT to Peter Kurrild-Klitgaard at Punditokraterne.
A Doctoral Defence in Sweden
| Nicolai Foss |
I have a hard time keeping up with my co-blogger’s blogging frenzy. Of course, he is much smarter and more energetic than I am and that partly accounts for the increasing discrepancy between our respective blogging frequencies. However, the reason I didn’t blog yesterday on O&M was that I served as an external examiner on a doctoral thesis at the Jönköping International Business School in Sweden. Situated virtually at the brinks of the enormous lake Vättern, JIBS is a newly established and highly entrepreneurial place that aims at pushing its research to a serious international level.
The specific thesis I was asked to discuss was Carlo Salvato’s Micro-foundations for Organizational Capabilities. Salvato is an Associate Professor at Bocconi University and already has an Italian PhD degree, which is based on a thesis utilizing Swedish data. His Swedish thesis, on the other hand, is based on Italian data!
More specifically, its empirical setting is product development projects in Alessi. On the basis of a painstakingly detailed identification, analysis and classification of events in 90 product development projects in Alessi, Salvato applies optimal matching analysis to detect patterns in the projects that may be interpreted as routines and capabilities. He also strongly adds to the notion of capabilities by decomposing that construct in a constituent elements (hence, the title of the thesis), although he does not go sufficiently micro for my taste (in this connection, Carlo claimed that his attempt to build micro foundations for capabilities was seen as heresy by one of the high priests of the evolutionary church, ehhh, approach in management). Although I am no sucker for the capabilities view in management, this thesis impressed me greatly. I am sure we will hear much more of Carlo Salvato in the future.
A peculiarity of the Swedish thesis defence procedure: The external examiner has to summarize the thesis, before he discusses it. After which the candidate has to tell the audience whether he can accept the summary. Odd. And the newly minted Doctor receives an absolutely ridiculous black hat.
New Paper by Kirzner and Sautet
| Nicolai Foss |
Israel Kirzner is surely one of the more neglected of economists. Now that entrepreneurship has become almost a mainstream theme in economics, Kirzner certainly deserves more recognition and credit for his four decades long insistence on the importance of the entrepreneur as the prime mover of the market process. (Here is a great Israel Kirzner site.)
What appears to be Kirzner’s latest paper is “The Nature and Role of Entrepreneurship in Markets: Implications for Policy,” written with Frederic Sautet and published by the Mercatus Center at George Mason University.
The paper is particularly interesting as it is taken up with a theme that has often been claimed to be absent from Kirzner’s work, namely that of institutions and how institutions can be designed (or influenced) to impact entrepreneurship. The new stuff arrives at about p. 14. In addition to discussing how the institutional matrix impacts entrepreneurship, there is so much emphasis on creativity as an aspect of entrepreneurship that the paper sounds Schumpeterian in places. There is also much emphasis on entrepreneurship being embedded in a cultural context.
So, has Israel Kirzner gone applied? Well, not exactly, as the discussion still moves on a fairly abstract level (for an applied exercise that is rather related to Kirzner and Sautet’s, see this excellent paper), but certainly is more “applied” than the Kirzner of, say, Competition and Entrepreneurship.
We Need Some Economics of Pomo
| Nicolai Foss |
I am re-reading Tyler Cowen’s excellent What Price Fame? for the second time. I continue to be amazed by the number of bright ideas that this slim volume is packed with. Among the many observations of the ways that celebrities and critics can game their mutual relations is this one:
Some performers manipulate the style of their product to shift the incentives of critics to pay attention … Unclear authors, at least if they have substance and depth, receive more attention from critics and require more textual exegesis. Individual critics can establish their own reputations by studying such a writer and by promoting one interpretation of that writer’s work over another. These same critics will support the inclusion of the writer in the canon to promote the importance of their own criticism … In the economics literature, enormous attention is devoted to the vagaries of John Maynard Keynes’ General Theory. The monetary writings of Milton Friedman or Irving Fisher, far clearer and not inferior as practical guides to monetary policy, do not receive equal attention from historians of thought (p.34-5).
Perhaps this observation may help us to account for the increasing prominence of pomo ideas in management (economics seems so far to have stayed almost immune to this disease). (more…)
Are Routines Necessary for an Evolutionary Theory of the Firm?
| Nicolai Foss |
The seminal and in many ways founding contribution to the evolutionary theory of the firm, and its numerous relatives in management, such as the knowledge-based , the competence , the capabilities, etc. views, is without much doubt Sidney Winter and Richard Nelson's An Evolutionary Theory of Economic Change from 1982.
The book is very heavily cited in management (e.g., it is among the top 10 cites in Strategic Management Journal), but has made less of an impact in economics (it was originally intended as an economics contribution rather than a contribution to management). The reason can be found in chapters 4 and 5 that develop notions of routines and organizational capabilities, and try to do so from the notion of individual skill. Since Nelson and Winter (1982) organizational routines have become a primitive in the definition of "higher-level" constructs, such as capabilities or "dynamic" capabilities.
In a number of recent papers (beginning with this paper, but mainly with Teppo Felin), I have identified and discussed various problems with the notion of routines. Very briefly, there are still no clean definitions of routines (which evidently makes it somewhat problematic to define capabilities etc. in terms of routines), the routines construct often implies a denial of methodological individualism, the empirical basis for asserting that routines are so strongly prevalent in real world firms that it is meaningful to think of firms in terms of routines is questionable, routines draw attention away from conscious, rational choice, etc. etc.
New Issue of Industry and Innovation
| Nicolai Foss |
Now in its 13 year of publication, Industry and Innovation is a journal dedicated to "scholarship on the dynamics of industries and innovation". (It was originally launched as the Journal of Industry Studies).
Its closest competitors are arguably journals such as Industrial and Corporate Change and Research Policy. In terms of intellectual affiliation, I&I serves the communities that are organized in the Schumpeter Society, attend the DRUID conferences, and the like. In other words, I&I is taken up with research in evolutionary economics, dynamic capabilities stuff, parts of economic geography, technology studies and so on. Its editorial board includes Anita McGahan, Richard Nelson, and yours truly. The editor is my CBS colleague, Mark Lorenzen (check his photo!).
Usually, there may not be much of interest for the readers of O&M in I&I. However, the latest issue — guest edited by my former PhD student, Volker Mahnke (CBS, Informatics Dept.) and Serden Ozcan (CBS, Dept of Industrial Economics and Strategy)– features a set of papers that are clearly relevant to those with an interest in organization and organizational strategy.
Motivation Workshop at CBS
| Nicolai Foss |
One of the more pleasing aspects of being a Professor is to have committed and active PhD students. One of my PhD students, Mia Reinholdt, is organizing a workshop on "Motivational Foundations of Knowledge Sharing" at the Copenhagen Business School on the 27. October.
She has done a good job indeed with respect to keynote speakers. The first keynote speaker is the extremely influential Edward Deci, Professor of Psychology and Gowen Professor in the Social Sciences of the University of Rochester. The second keynote speaker is Europe's perhaps best known, and certainly most productive, economist, Professor Bruno Frey of the University of Zürich.
There is still time to think about a paper theme. Deadline (for abstracts) is 28. August. Send 500 a words abstract (or a full paper) to Mia on mr.smg@cbs.dk
Time Inconsistency and a Stakeholder Theory of the Firm
| Joe Mahoney |
Recently I have become more persuaded that the incomplete contracting literature potentially offers a theoretical foundation for a stakeholder theory of the firm.
In this light, two industrial organization economists — Dan Kovenock and Stephen Martin — have “inspired” me to learn more about the concept of time inconsistency problems. In a world of incomplete contracting, we often face the potential for time inconsistency problems (Grossman and Hart, 1986) and opportunistic rent extraction. A policy that is optimal ex ante but sub-optimal ex post can be described as “time inconsistent.”
Announcing Guest Blogger Joe Mahoney
| Nicolai Foss |
Peter and I are extremely pleased and proud to announce our new guest blogger, Joseph Mahoney. Joe is a Professor of Strategy at the Dept. of Business Administration, College of Business, University of Illinois at Urbana-Champaign. His first blog entry will appear later today.
Many readers of this blog will know Joe’s work. For those who don’t, suffice it to say that Joe is one of the most prolific and influential scholars in strategic management. While perhaps most often associated with the resource-based view, Joe has also done important work on transaction cost economics (indeed, his knowledge of TCE is encyclopedic) and on entrepreneurship, drawing on Austrian economics. His paper with Ron Sanchez on modularity (SMJ, 1996) and another with J.R. Pandian (SMJ, 1992) are among the most cited and influential SMJ papers. He has recently published a nice volume on Economic Foundations of Strategy with Sage.
Welcome, Joe!
Academic Insults
| Nicolai Foss |
I was once told by a prominent German economist over (an otherwise pleasant) dinner: “Nicolai, you have the potential to become a rigorous scientist” (a colleague dryly commented that “at least he said you had the potential”). Well, I ended up doing muzzy management stuff, and, hence, never realized any such potential.
Does anyone out there have any good stories of academic insults that you want to share with the readership of O&M? Perhaps with a little effort we may end with something akin to George Stigler’s Conference Handbook.
Update 1: Here is nice poisonous comment that I received only yesterday but forgot to mention: “Nicolai, you are the master of academic economies of scope” (i.e., excessive recycling).
Update 2: Joe Mahoney reminded me of this classic: “No one can think higher of Professor Z’s paper than I do — and I think the paper is a complete mess.”
Update 3: I just recalled that the German economist mentioned above at a later occasion, a conference dinner, told me: “You know, Nicolai, it is actually really funny, but it turns out — giggle, giggle — that you have more citations than I have, heh-heh-heh.” Oh, the absurdities of this world.
“First, Kill All the Economists …”
| Nicolai Foss |
As regular readers of O&M will know, we are highly critical of the bashing of economics that is represented by recent work by Pfeffer, Ghoshal, Mintzberg and others (e.g., this post).
One of our problems, amongst many, with the new management bashing of economics is that this literature appears to be wholly negative. There is usually at best vague indications of the nature of the critics' alternatives.
However, a recent special issue of Managerial and Decision Economics, while being highly critical of the role of econonomics in management research and education, at least tries to come up with an alternative.
The introductory essay of the editor, Satoshi Kanazawa, indicates the nature of the argument: The sub-title is "The Insuffiency of Microeconomics and the Need for Evolutionary Psychology in the Study of Management" (the title being identical to the adaptation of Shakespeare's "The first thing we do, let's kill all the lawyers" (Henry IV) that is also the heading of this post).
How Heterogenous is Economics, Really?
| Nicolai Foss |
At seminars and conferences, I have often heard management scholars make the following kind of remark: "The economists think that management is fragmented, but look at economics itself. Economists disagree about virtually everything."
It easy to argue that this argument is entirely shallow, and is reflective of reading in the newspaper that this chief economist disagrees with that chief economist and generalizing this to the whole econ profession, while not understanding that economists hold a strong disciplinary core in common, and that disagreements tend to be over application and interpretation rather than about the most fundamental principles. Seen in that light, economics is not fragmented, while management is, even absurdly so. (In fact, some of the management critics of economics that we routinely blast here at O&M (i.e., Ghoshal, Pfeffer et al.) have a correct understanding of the unity of economics, even though their view of economics is entirely outdated).
However, increasingly the argument is being made by economists themselves, albeit mainly so-called "heterodox" economists that economics is changing from a situation in which a single paradigm held uncontested sway to a much more differentiated picture with multiple fundamentally different approaches. (more…)
Summer Reading on Management for Graduate Students?
| Nicolai Foss |
Perform the Gedanken Experiment that a graduate student would actually approach you for summer reading suggestions (not sure this would ever happen, but it is nice imagining). Specifically, the student — say, either a budding management graduate student who wishes to familiarize himself quickly with the very best in management thinking or an econ graduate student who consider a business school a likely future place to work — would like to know what are the indispensable papers from the last two decades in management that anyone who wishes to write a dissertation in management should (ideally) know. Are there any? Is management so fragmented that we cannot up with any papers that everybody should have some knowledge of? Or can we do better?
Please, readers of O&M, suggest 2-3 papers from the last two decades that you would consider indispensable. If you like, explain why you consider them important. (HT to Crooked Timber).
Continuing the Micro-foundations Crusade
| Nicolai Foss |
With Teppo Felin and Peter Abell, I am continuing the crusade for building micro-foundations for management theory that Teppo and I initiated with our editorial essay in Strategic Organization last year ( “Strategic Organization: a Field in Search of Microfoundations"). We have now written the paper, "Building Micro-foundations for the Routines, Capabilities and Performance Links" as a further stride forward in the struggle against macro-mysticism in strategic management and organization theory. Here is the abstract:
Micro-foundations have become an important emerging theme in strategic management. This paper addresses micro-foundations in two related ways. First, we argue that the kind of macro (or “collectivist”) explanation that is utilized in the capabilities view in strategic management –which implies a neglect of micro-foundations –is incomplete. There are no mechanisms that work solely on the macro-level, directly connecting routines through capabilities to firm-level outcomes. While routines and capabilities are useful shorthand for complicated patterns of individual action and interaction, ultimately they are best understood at the micro-level. Second, we provide a formal model that shows precisely why macro explanation is incomplete and which exemplifies how explicit micro-foundations may be built for notions of routines and capabilities and for how these impact firm performance.
Because we may submit to a journal that prohibits uploading of papers while they are under review, reluctantly I must refrain from making the paper downloadable . However, If you would like to get a copy, send me a mail on njf.smg@cbs.dk
Working Papers and Paper Submissions
| Nicolai Foss |
I have noted that people who present papers at conferences here in DK or at the research center I direct increasingly refuse to have their papers uploaded. This is more prevalent among US presenters (than Euro presenters) and more prevalent among management presenters (than econ presenters).
Unlike this blogger (but certainly like my co-blogger) some people will upload only brilliant, perfectly polished papers. Depending on the job market situation, people may be more or less reluctant to upload papers that may not contribute to their reputation for producing high quality, highly polished research. However, that is arguably only part of the explanation. (more…)
Axel Leijonhufvud and a Bit of Autobiography
| Nicolai Foss |
As blogging is an inherently narcissistic undertaking, I hope I will be excused for the following piece of autobiographical indulgence.
I began studying economics at the University of Copenhagen in 1983. The three first years essentially followed a micro and macro division (with a strong dominance of macro stuff). The macro part, particularly in my second year, was positively awful. The intention clearly was that macro should lead directly to econometrics, so all teaching and reading material centered on analyzing the causal structure of one silly Keynesian model after another.
The indoctrination with Tinbergen-style Keynesianism was rather massive, but there was one paper in the syllabus that dealt with monetarist and new classical critiques of Keynesianism. Naturally, this paper (though dismissive of the critics of Keynesianism) triggered my interest in those writers who were somehow in opposition to the tedious Keynesianism that we were taught. Hunting expeditions to the library ensued.
In this way, I discovered a book by a Henry Hazlitt, called The Failure of the New Economics, which was virulently anti-Keynes, and somewhat primitive in its reasoning. Some further search uncovered a book in distinguished blue binding, and an intriguing title in golden letters, On Keynesian Economics and the Economics of Keynes: A Study in Monetary Theory by an author with a familiar Scandinavian name, Axel Leijonhufvud. I was completely captivated by this book, and it became my economics bible until I graduated from the University of Copenhagen. (more…)
Paradoxes in the RBV?
| Nicolai Foss |
One of the hallmarks of pomo (postmodernist) "discourse" (or "conversation") is the indiscriminate use of the word "paradox." In management, organizational scholars are particularly prone to use the p word. I have sat in countless seminars and witnessed several conference presentations where the presenters declared some paradox to exist, in theory, in practice or in both. I have never been successful in my attempts to argue that upon closer inspection (better analysis) the postulated paradoxes usually vanish.
In terms of management journals, one of the pomo strongholds is unfortunately one of our leading journals, the Academy of Management Review. I am pretty much behind in my reading of AMR. But this morning I opened the January 2006 issue, and performed my usual vain search for articles that cited my works. I quickly found Lado, Boyd, Wright and Kroll's "Paradox and Theorizing Within the Resource-based View."
The authors claim to use "paradox in the logical sense to address epistemological issues surrounding RBV logic, such as unfalsifiability, tautology, and infinite regress" (p.117). They argue that they embed their understanding in a non-traditional view of science (in contrast to those — such as Foss (1996; "Knowledge-based Approaches to the Theory of the Firm," Org Science) — who allegedly holds "… that the presence of paradox within a theory undermines its scientific utility" (Foss 1996 says no such thing)). (more…)
Should the Term “Neoclassical” Die?
| Nicolai Foss |
In a characteristically well written paper, "The Death of Neoclassical Economics," David Colander claims that the "neoclassical classification should die." Others, notably Mark Blaug, have also argued that the term is rather meaningless.
Colander's argument begins with a list of necessary criteria of what it means for a theory to be "neoclassical." He then argues that most modern economics do not conform to these criteria. The relevant criteria are: 1) focus on atemporal resource allocation, 2) acceptance of some kind of utilitarianism, 3) focus on marginal tradeoffs, 4) assumption of farsighted rationality, 5) methodological individualism, 6) general equilibrium.
For each one of these points, Colander exemplifies how various modern economics contributions make a break with them. For example, with respect to point 2), he says that "few modern economists today accept utilitarianism" (p.135) and with respect to 5) he invokes new institutitonal economists as engaged in work that is explicitly at variance with methodological individualism. This exercise results in the Solowian conclusion that the only thing that really unites modern economists is the modeling approach to social explanation.
While it is indeed hard to precisely define "neoclassical" economics, I think Colander (and Solow) goes much too far. (more…)
Austrian Economics and the Theory of the Firm
| Nicolai Foss |
My co-blogger has developed a very nice online bibliography on the extremely important research that takes place in the intersection between Austrian economics and the theory of the firm. It numbers almost 50 papers. A booming research area! The list may be incomplete, so be sure to mail Peter if your AE/ToF paper is not listed.
“The Train Wreck That Is Strategy” and Game Theory
| Nicolai Foss |
In a comment on my co-blogger’s post of yesterday, a commentator argues that there is no real alternative to formalism, and then provokingly continues:
If you need any demonstration of the need for formalism in theory-building within the social sciences, take a look at the train wreck that is Strategy. As we are discovering using formal methods, most of what passes for foundational theory in strategy is wrong.
Unfortunately, he doesn’t explain what exactly he means by “foundational theory in strategy” and why it is “wrong.”
I think that formalization is definitely an important goal of social science research and is worth striving for (See Patrick Suppes’ very convincing argument on the “desirability of formalization in science”). Formalization certainly also makes life easier in a number of ways. For example, in my teaching I have found it literally impossible to convey what agency theory is fundamentally about without using game theory.
However, what may be at issue is exactly how important it is and, in connection to this, whether the practice of building formal theory per se should occupy the highest position in the reputational hieararchy of economics. (more…)
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