Author Archive
Strategic Management Theory and the Financial Crisis
| Nicolai Foss |
We (well, in fact, mainly Peter) have blogged extensively on the current financial crisis. Guest blogger Benito Arruñada suggested that macroeconomists may learn something from forest management. In a recent paper Rajshree Agarwal, Jay Barney, Peter, and I suggest that macroeconomists may learn something from strategic management theory. The paper is forthcoming as a SO!apbox Essay in the November issue of Strategic Organization. Hopefully it will stir considerable controversy. Here is the abstract:
Macroeconomic theory assumes that factors of production in the economy are homogeneous and fungible. As a result, it is poorly suited for analyzing and developing policy responses to the recent financial crisis. Theories of strategic management and organization, with their emphasis on heterogeneous resources and capabilities, are better positioned. We provide examples of how macroeconomic theory may lead policies astray, and how theories of strategic management provide insight into the nature and causes of the financial crisis and the appropriate policy response.
Special Issue of HRM on “HRM and Knowledge Processes”
| Nicolai Foss |
With Scott Snell (Darden Graduate School of Business) and my SMG colleague Dana Minbaeva, I have edited this just-published special issue of Human Resource Management on the intersection of knowledge management and HRM. One of this highlights of the special issue is an excellent paper by Teppo Felin, Todd Zenger, and Joshua Tomsik that takes issue with some influential ideas on how “knowledge” prompts the emergence of “communal” forms of organizing.
Patenting Economics (and Other Things)
| Nicolai Foss |
The Google Empire appears to be expanding continually, and it is not easy to keep track of its recent conquests. Actually, I learned only yesterday that Google indexes patents and patent applications from the United States Patent and Trademark Office under www.google.com/patents.
The engine — which comprises 7 million patents — is fun to explore. Surprisingly many patent (applications) relate to economics. Many seem downright cranky, such as the application for a Method for the Determination of Economic Potentials and Temperatures (or perhaps I am just ignorant). Lots of management tools are also patented. For example, here is a patent describing a tool for analyzing “strategic capability networks.”
Ian Stewart claims (here) that two prime numbers have been patented (here is the short one: 7,994,412,097,716,110,548,127,211,733,331,600,522,93757,046,707,3,776, 649,963,673,962,686,200,838,432,950,239,103,981,070,728,369,599,816,314,646, 482,720,706,826,018,360,181,196,843,154,224,748,382,211,019 (now, don’t reproduce this, unless you want to get into trouble ;-)), but I haven’t been able to locate them.
Bounded Rationality or Skilled Performance?
| Nicolai Foss |
In my 2003 contribution to the Festschrift for Richard Nelson and Sidney Winter (here), I argued that Nelson and Winter’s main oeuvre, their 1982 book, An Evolutionary Theory of Economic Change, is much more about tacit knowledge than about bounded rationality. The notion of routines is intended to capture the firm-specific and tacit character of productive knowledge rather than heuristics, satistificing search, and the like (these may not be opposed, though).
I am reading Great Minds in Management at the moment (highly recommended!). In his chapter, “Developing Evolutionary Theory for Economics and Management,” Sidney Winter seems to agree:
Skill provides a compelling model of effective behavior that is different, and deeply different, from what we are told either by theories of rational decision or by behavioral theories featuring ‘bounded rationality.’ As far as I can see, the latter theories do not lead one to expect that the word ‘awesome’ will ever be needed to describe human behavior” (p. 533).
Indeed, as my frequent co-author, Teppo Felin, argues, bounded rationality is almost always about people’s foolishness (notably the heuristics and biases literature), rather than about how and why people actually cope, sometimes quite successfully, with most of the decision situations they confront. It is about decision failure, rather than decision success (possibly premised on the implicit assumption that the standard model of rational decision is the only existing model of decision success). The problem with Winter’s alternative, namely that of behavior as skilled performance, is that it seems unclear what are the available models. Skilled performance seems as arbitrary as bounded rationality.
Inspirational Weekend Reading
| Nicolai Foss |
I am reading Ben Goldacre’s Bad Science in which Dr. Goldacre explodes the ridiculous claims of medical quacks of all stripes (e.g., homeopathy, the idiocies of the media re the interpretation of research results, hostility towards “mainstream medicine,” etc.). The book is much needed and very, very entertaining.
And it makes me think that management research needs its Goldacre. A few quick ideas:
- Perhaps we need something akin to the Cochrane Collaboration. We can all agree that “evidence-based management” is a good idea. Indeed, it is such a good idea that there should be no need for writing books or blogs about it. We should all embrace and internalize the idea. However, in practice, there is probably much too little effort devoted to meta-analysis and other synthetic efforts in management research.
- There are quacks in management. Some of them write books. Some consult. Shrugging the shoulder is the typical reaction on the part of management academics. Should we treat them more harshly? Should management quacks be identified and fought?
- Perhaps the majority of research articles in management end with a variation over “There is a need for more research.” Articles in medicine used to end similarly. However, as Goldacre notes (p. 57), “… it is a little known fact that this very phrase has been banned from the British Medical Journal for many years, on the grounds that it adds nothing: you may say what research is missing, on whom, how, measuring what, and why you want to do it, but the hand-waving, superficially open-minded call for ‘more research’ is meaningless and unhelpful.” Amen!
Management Journal Impact Factors 2008
| Nicolai Foss |
The new ISI impact factors for 2008 have just been released. There are lots of surprises this time. The biggest one is arguably that Organization Science is now out of the top 10 range, a long drop from its #4 status in 2006 (this sucks when you got two recent papers, one forthcoming and one R&R, at this journal :-( ). The second surprise, at least to me, is that the Journal of Management has made it to #5. One possible explanation is its rather influential yearly review issues. Another surprise is that Organization Studies, which was among the top 10 in 2006, has now moved down a lot to close to #30. The Journal of Management Studies, while not among the top 10 this year, has not been harmed as badly, dropping to #14. ASQ, once the undisputed top-management journal, is now #9. Less surprising is Academy of Management Review’s #1 position (it is usually among the top 3), and that the Strategic Management Journal is #4.
The rank order down to LRP at # 36 is: AMR – AMJ – MIS Q – SMJ – JoM – ORM – JIBS – AMLE – ASQ – OBHD – RP – JPIM – Org. Sci. – JMS – RoB – JoM – JOperationsM – IMA – JMIS – Man Sci -DS – IRS – LQ – Omega – R&D Man – GOM – JIT – Techno. – Org. Stud. – Brit. JoM – Adv. Strat Man. – HBR – Int Small Bus. J – Int. J. Oper. Prod. M. – Int. J. Man. Rev. – Int. J of Forec. – LRP
A new feature of the list is the inclusion of a five-year impact factor which, given the rather turbulent movements from year to year, makes a lot of sense (and which produces a rather different rank order from the above!).
If You’re So Smart …
| Nicolai Foss |
… that it makes sense to delegate a lot of decision-making authority to you when you perform as an agent for a principal, you may also be so smart that you can game the incentive plan. In “Ability and Agency Costs: Evidence From Polish Banking,” Douglas Frank and Tomasz Obloj, both INSEAD, argue (rightly, IMO) that the link between cognitive ability and agency costs has not yet been studied in agency theory. (more…)
Mises and Hayek in Progress in Human Geography
| Nicolai Foss |
It is surprising, even bizarre, to see Mises and Hayek, as well as other luminaries of 20th-century classical liberalism, being extensively cited, quoted, and discussed in one of the leading geography journals, Progress in Human Geography (here is the wiki on the field of “human geography”), specifically in the form of the printed version of an invited lecture by Jamie Peck. (more…)
Sid Winter and Alice Rivlin on the Current Crisis
| Nicolai Foss |
Sidney G. Winter is a towering figure in management research, essentially being the current thought leader in the strategic management field as it pertains to issues of capabilities, routines, knowledge assets, etc. Most of his work in strategic management is founded on his earlier work in evolutionary economics (notably this seminal volume). Winter is married to Alice Rivlin, a long-time critic of Reagan-era economic policies and a high-ranking bureaucrat under Johnson and Clinton.
Here is Winter and Rivlin on “fixing the global financial system.” Winter thinks that business schools are partly to blame, but is not very concrete in his critique (at least he doesn’t blame agency theory). And here is Winter answering the question, “Is capitalism dead?” Note his comments about “people on the extreme right.” Neither Winter nor Rivlin leave much doubt about where they stand politically.
UPDATE: There is more Winter on YouTube: “Inflation or Deflation,” “Economic Cassandras,” and “The Price of Oil.” They are all very recent and done under the auspices of the Australian School of Business.
Sociology that We Like
| Nicolai Foss |
Contrary to the conviction perhaps held by the boys over at orgtheory.net, O&M bloggers are not at all hostile to sociology. In fact, we are highly sympathetic to what is sometimes called “analytical sociological theory,” that is, James Coleman, Raymond Boudon, Jon Elster, Peter Abell, Diego Gambetta, Siegwart Lindenberg, Karl-Dieter Opp, and so on. Here is a nice summary of AST, which — we are told — embraces realism and objectivity, is anti-relativist, appreciates formalization and the use of models, is reductionist, eschews bullshit, etc. (Also check out the nice and entirely well taken acerbic treatment of Foucault on p. 7). Now we only need to know: How exactly does AST differ from microeconomics?
New Editorial Team at the EMR
| Nicolai Foss |
Not long ago after the start of O&M I blogged on the change of editor at the European Management Review, paraphrasing Keynes’s examination of Lloyd George’s pledge on unemployment policy. While EMR is not yet ISI listed and has not surpassed the Journal of Management Studies as the leading Euro management journal, Kogut has most certainly “done it” in terms of boosting the general reputation of the journal. This is another demonstration that an editor with a clear mission, a strong network, and well-defined objectives can rather quickly do wonders for a journal (think Arie Lewin with Organization Science or Joel Baum (et al.) with Strategic Organization).
Kogut has now stepped down as editor, and Professors Maurizio Zollo and Alfonso Gambardella, both of Bocconi University in Milan, carry the mantle. While Zollo is a fullblown management scholar, Gambardella is much more an economist. They share a basic evolutionary outlook. Needless to say, both a very well connected to the US research context in management and economics. The new team’s inaugural issue with a handful of invited paper is available here. Everything is downloadable for free.
Professional Defenses
| Nicolai Foss |
In Critical Mass (an excellent book, although its treatment of economics is confused, but that is a different story), Philip Ball recounts an amusing anecdote about James Lighthill, an expert on the physics of fluid flow who did early work applying this part of physics to understanding traffic patterns:
In the Lighthill-Whitham model, the individuality of drivers is entirely submerged beneath average driving behavior. . . . This is ironic, for Lighthill himself was anything but average in his driving habits. He was a persistent speeding offender, but would explain in court that as Lucasian Professor of Mathematics at Cambridge (the chair once occupied by Newton), he was fully aware both of the laws of mechanics and of his social duty not to waste energy. As a result, he told the hapless judges, he felt obliged to desist from braking when going downhill. It seems that this defence was occassionally succesful (pp. 197-98).
Perhaps economists and management scholars should try something similar:
- The Decian Excuse: “Yes, your Honor, I did pay below the minimum wage, but that was because I know that what truly matters to the plaintiff is his intrinsic motivation.”
- The Kirznerian Excuse: “I did sell that stock in my company after learning from the CEO about the breakthrough in our drug development, but I did so in order to close pockets of ignorance in the market.”
- Etc. Please add.
Pomo Periscope XVIII: “The French Don’t Care What You Actually Say as Long as You Pronounce It Correctly”
| Nicolai Foss |
This line from My Fair Lady seems to be an accurate summing-up of the emphasis on rhetorics, conversation etc., a branch of pomo, in certain quarters in economic methodology and related fields and disciplines. Or, so Robert Solow argues in a review in the latest issue of the always-interesting Journal of Economic Methodology of Arjo Klamer’s Speaking of Economics; How to Get Into the Conversation (here is a site dedicated to the book, and here is another review).
Essentially, Solow criticizes those who engage in the conversation talk for not adding any substantive insights on the level of meta-theory (whether positive or normative). “I have real doubts,” he says about the utility of describing the practice of academic economics as a ‘conversation’ or a bunch of simultaneous conversations. . . . My claim is that it does not advance the serious understanding of what academic economists are up to, and its relation to what the economy is up to” (p. 94). He sums up by saying that “In the end, I did not find find the proposed connection between postmodernism and contemporary economics convincing. Maybe theories with little or no application, theories about chaos and complex systems, and theories that leave practical people clueless about the economy (those are all Klamer’s words) have something to do with the architecture of Frank Gehry or the philosophy of Gilles Deleuze, but the connection needs work” (p. 95). It seems so.
Lund Routines and Capabilities Workshop
| Nicolai Foss |
Niklas Hallberg, a post-doc researcher at the Lund University School of Economics and Management, and currently a visiting scholar at the Center for Strategic Management and Globalization at the Copenhagen Business School, has put together a nice afternoon workshop on the subject of “Routines and Capabilities — Useful Constructs for Management?”. It takes place on Thursday, June 25, so if you are in the vicinity of Lund University you may pop in and listen to various luminaries as well as yours truly. The program and other details are below. (more…)
One More Ill-Defined, Un-Measured (?) Core Construct: Routines
| Nicolai Foss |
It seems that O&M may usefully introduce a new category: “Constructs that are central to one or more management fields, but so far have not been measured.” Yesterday, we blogged on opportunity discovery, and could report only one existing scale in the entrepreneurship literature. Today the focus is on routines, a frequently discussed topic here on O&M.
Routines are, of course, absolutely central in much management research, notably strategic management, international business, technology strategy, organizational theory and much else. The construct itself was essentially introduced to management research in Nelson and Winter’s 1982 book, An Evolutionary Theory of Economic Change, although it is often argued that it originates somewhat earlier, namely with the behavioralists (Simon, Cyert, & March; for a critique of this interpretation, see this paper).
The boundaries of the concept are, even for management research, highly ill-defined and virtually everything in an organization, save for physícal capital, that has some degree of stability has been called a routine by some author. As if this extreme inclusiveness wasn’t enough, it has even been argued that routines can be “sources of continuous change.”
Such conceptual fuzziness would seem to imply that almost anything goes, empirically speaking. In fact, there is quite a lot of empirical work on routines, and of a rather diverse nature. However, it all seems to be qualitative in nature (e.g., this recent paper), as least as far as I can see.
So, do you know of any attempts to grapple empirically with routines in the sense of actual measurement? Are there any scales out there?
Opportunity Discovery Measurement Scale Bleg
| Nicolai Foss |
Opportunity discovery is a key construct in large parts of the recent management literature on entrepreneurship (e.g., this important paper). We have often blogged on opportunity discovery here on O&M, for example, noting the problematic relation of the management construct of opportunity discovery to Kirzner’s original notion, and suggesting that new projects may be superior units of analysis for certain purposes.
Still, the sensing, perception, discovery of, etc. opportunities is surely relevant in entrepreneurship studies and should not be bypassed. Which brings us to the issue of, How is it measured? Given that dozens of articles have been written now with “opportunity discovery” in the title, I am struck by the paucity of empirical work that actually makes a stab at measuring opportunity discovery. Most articles on opportunity discovery are theoretical. And most consider the antecedents of opportunity discovery (e.g., personal knowledge, psychological attributes, search costs) rather than the discovery itself. (more…)
The Extreme Makeover of the AMR
| Nicolai Foss |
I just received my copy of the April issue of the Academy of Management Review, stuffed with matrices, probability density functions, NKC models, Boolean algebra, isoquants, Max This and Max That, etc. etc. Yes — that’s right: The Academy of Management Review, the journal that over the last decade has only published one single formal article.
Of course, this is the long-awaited special issue, “Special Topic Forum on Formal Approaches to Management Theory,” edited by Ron Adner, Laszlo Polos, Michael Ryall, and Olav Sorenson. (One of the papers has already been extensively discussed here at O&M). The papers are a mixed bag in terms of the formal approaches that are applied, i.e., analytic methods, simulation, and formal logic. I have only read a couple of the papers (Alvarez & Parker on “Emerging Firms and the Allocation of Control Rights: a Bayesian Approach”) and Postrel’s “Multitasking Teams with Variable Complementarity: Challenges for Capability Management,” which both are excellent, but I look forward to reading the rest.
The editors supply an introduction which reiterates the often claimed benefits — familiar to those with an economics background — of formalization in terms of precision and transparency, logical consistency, and unanticipated implications (for a general treatment, see Suppes’s 1968 classic). They are careful to say that they “would not claim that verbal theorizing . . . has no place in management research”! (p. 206). (more…)
More Economic Institutions of Strategy
| Nicolai Foss |
In his post of yesterday, Peter failed to mention that among the O&M bloggers not just Klein and Lien but also yours truly contributed to the Nickerson and Silverman 2009 edition of Advances in Strategic Management. Specifically, with Stieglitz (Nils — and with an “e”) I have written “Opportunities and New Business Models: Transaction Costs and Property Rights Perspectives on Entrepreneurship.” The paper can be downloaded from SSRN.
Call for Papers for a Special Issue of JMS: “Micro-Level Origins of Routines and Capabilities”
| Nicolai Foss |
The micro-foundations theme is gaining increased attention in management research. As a partial reflection of this, please check the Call for Papers below for a SI of the Journal of Management Studies on the topic in the title of this post. Submit a paper! (more…)
New Foss Sell-Out (?) Paper
| Nicolai Foss |
With Siegwart Lindenberg, Professor of Cognitive Sociology at the University of Groningen, I have written “Why Firms Work? A Goal-Framing Theory of the Firm.” Colleagues already refer to it as the “Foss sell-out paper” (but wait until I blog on that recent sell-out paper on entrepreneurship and the government by a certain O&M blogger . . . ).
Whatever that is, the paper starts from the familiar and long-standing debate between organizational economists and proponents of the knowledge-based view, and the many interesting recent attempts to merge key insights from TCE with ideas on learning and capabilities (Argyres, Nickerson, Mayer, Leiblein, Zenger, Hoettker, and others). The underlying idea is that additional explanatory leverage, for example, with respect to understanding the boundaries of the firm, will emerge from an integration of the two (clusters of) theories. (more…)
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