Posts filed under ‘– Foss –’
“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.
More on Recommendation Letters
| Nicolai Foss |
An earlier blog post addressed the ever fascinating topic of recommendation letters. Last week I had the opportunity to discuss this with a prominent MIT Professor who provided some inside information. According to her, if the expression “solid worker” or “hard-working” or the like appears in a recommendation letter, this is likely to be a signal that the recommended person isn’t too bright. That sounds reasonable enough. But I was somewhat disturbed to learn that what I took to be uncontroversial boilerplate — namely, the standard ending “Don’t hesitate to contact if you need further information about NN” (or some such formulation) — is a signal that something is likely to be wrong with the applicant and that the recipient of the letter better drop the writer a phone call. I have ended all my recommendation letters with that formulation! Here is a question for the O&M readership: Is it a problem to have a Euro professor recommending you?
Individuals and Organizations at DRUID Redux
| Nicolai Foss |
There are few things more time-consuming than hustling for slush funds in the university system (as George Stigler once quipped, academic infights are particularly violent because the stakes are so low!) — which explains my very low blogging frequency over the last 4-5 weeks. However, I should have more time on my hands now, so here goes:
As I related earlier, this year’s D(anish) R(esearch) U(nit) (for) I(ndustrial) D(ynamics) conference highlighted methodological individualism in a panel debate between Peter Abell, Thorbjørn Knudsen, Sid Winter, and yours truly (here is the stream). Although the DRUID crowd didn’t wholeheartedly embrace methodological individualism, the broader theme of micro-foundations — explicitly promoted in a management context for some time now by Teppo Felin and I (eg., here, here, and here) — seems to have caught on.
Thus, Thorbjørn Knudsen organizes a one day event, a “DRUID Fundamental” back-to-back to next years DRUID conference on the subject of micro-foundations in strategy and organization. It takes place on June 17. Among the speakers are Rich Burton, Linda Argote, Ranjay Gulati, Sid Winter, and the present blogger. Check Thorbjørn’s call here.
NYU Students Are Rational
| Peter Klein |
Twenty percent of NYU students would trade their right to vote in the next Presidential election for an iPod. Two-thirds would do it for free tuition. And half would give up their right to vote forever for $1 million. Where do we rational non-voters sign up? (Via Drudge.)
The Philips Machine
| Nicolai Foss |
I just spent three days in London. Jolly, indeed. Before going to the London Business School yesterday, where I had a paper expertly demolished and teared apart by Michael Jacobides, I visited for the first, but certainly not last, time the Science Museum on Exhibition Road. The museum is really quite marvelous, and I very strongly recommend it. Even wives are likely to take interest.
I was strolling through the section on computing when — quite unexpectedly, because I had no idea it was on display at the museum — I noticed the famous Philips Machine (here is a pic), essentially a hydro-mechanical analogue computer designed to exhibit the functioning of the economy from the point of a very crude Keynesian perspective. The Machine was constructed by Bill Philips, of Philips curve fame, and was the reason why 1950s macro is sometimes referred to as “hydraulic Keynesianism” (a term that was coined by the brilliant, but now forgotten Alan Coddington). No less than 12 copies were built for teaching purposes and sold to various UK universities. The one that is on display at the museum was resurrected from a LSE lumber room (shockingly, the machine was actually used in teaching until 1992. But then again the macro I was exposed to in the 1980s was no less silly than Philips’ machine). Here is an excerpt from a BBC programme on the machine.
Are Transaction Costs a Distraction?
| Nicolai Foss |
Yes, says Harold Demsetz in a paper, “Ownership and the Externality Problem,” which was published in 2003, but which I only read recently (there does not seem to exist an online version; the paper is chpt. 11 in this book).
Consider the steel mill and the laundry of the Traditional Externality Tale. The two firms could merge, in which case externalities per definition would be absent. This, of course, only substitutes (additional) management costs (the costs of reduced specialization) for the transaction costs of market exchange. The former may exceed the latter in which case specialization is preferable, but then externalities emerge. (more…)
Contract Design Capabilities
| Nicolai Foss |
In his thoughtful appraisal of Milgrom and Roberts (1992), Brian Loasby pointed out that the ability to transact and exchange is itself a capability, that firms may differ in terms of such capabilities, but that organizational economics routinely assume that firms have perfect transacting capabilities. This insight has been curiously neglected in the lenghty debate on the relations between transaction costs and capabilities. Former O&M guest blogger Dick Langlois is one of the few scholars who have embraced the insight, mainly from the capabilities side of the debate and casting it in terms of his notion of “dynamic transaction costs.”
A recent line of research initiated by Nick Argyres and Kyle Mayer addresses the issue more from the organizational economics, mainly TCE, side. Thus, Nick and Kyle’s excellent 2004 Organization Science paper, “Learning to Contract,” makes the empirically grounded point that changes in the structure of the contracts that govern a relationship may (for complex contracts in uncertain environments) reflect joint learning rather than the risks of specific assets. (more…)
Shameless Self-Promotion
| Nicolai Foss |
The European Management Review has started a series of portraits of innovative research environments in management in Europe. The first such environment to be portrayed was the Institute of International Business at the Stockholm School of Economics and Business Administration (here). The Winter 2007 issue will feature a narrative that focuses on the Center of Strategic Management and Globalization which I am heading here at Copenhagen Business School. You can read the paper, “Knowledge Governance in a Dynamic Global Context: the Center for Strategic Management and Globalization at the Copenhagen Business School” here. Oh, did I mention that I wrote the paper myself?
Pomo Periscope XV: Orientalistic Pomo
| Nicolai Foss |
One of most influential modern disciples of pomo was the late Edward Saïd, a follower of Michel Foucault and Jacques Derrida. His famous, highly problematic, but surprisingly widely accepted thesis in Orientalism concerns the (alleged) European construction of the Islamic orient as a something radically different from Europe, a construction that developed from the 18th century on and became an instrument of European colonialism and imperialism vis-a-vis the Orient. However, the construction was just that, a mere construction; “Orientalism” was at best a mirror of Europe and not of the Islamic “Orient.” (Here is an intro to the critique of Saïd, and here is a forthcoming bashing). (more…)
Foss & Klein Chapter on “Organizational Governance”
| Nicolai Foss |
Peter and I often get requests that we blog something of a more introductory nature on organizational economics, the theory of the firm, etc. Until now, we haven’t really had the opportunity.
However, we just completed a draft of a chapter on “Organizational Governance” for the Handbook of Rational Choice Social Research, a major project initiated by sociology professors Rafael Wittek, Tom Snijders and Victor Nee for the Russell Sage Foundations (thus dispelling strange claims by Brayden and others that this is the anti-sociology blog). As the title suggests, the contributors, representing economics (/game theory), anthropology, and sociology are united by their commitment to the rational choice approach. The project involves such luminaries as Avner Greif, Jean Ensminger, Sigwart Lindenberg, and others. You can find the chapter under “Papers.” (more…)
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