Posts filed under ‘– Foss –’
The SWOT Model May Be Wrong
| Nicolai Foss |
One of the basic, indeed foundational, frameworks of strategic management, the SWOT model, may be fundamentally flawed. The “model” advises managers to align their Strengths of their company to the Opportunities of the environment, while simultaneously safeguarding the company’s Weaknesses from the Threats of the environment.
This very basic idea — it is only in B Schools that it is called a “model” — is no doubt the most universally used planning tool in companies and is often used in the public sector. Students (and, one suspects, managers) love it on account of its extreme simplicity. Many textbooks are written on a SWOT formula: The first part deals with the external environment — i.e., industry analysis — and the second part then deals with the firm level, i.e., competitive advantage. I myself have always used the SWOT framework intensively in my strategic management teaching, and I have endorsed countless student papers and theses that argued that resource-based and industry analysis approaches are, after all, consistent because they can be aligned under the SWOT umbrella.
A recent paper by Richard Makadok of Emory University, “The Competence/ Collusion Puzzle and the Four Theories of Profit: Why Good Resources Go to Bad Industries,” suggests that the SWOT framework (at least in its usual interpretation) gets it wrong. How can something so simple, even trivial, as the SWOT framework be wrong? (more…)
Heavily Cited, But Wrong
| Nicolai Foss |
Here is an example of the apparent irrationality of citation practices. The example concerns the paper “Production, Information Costs, and Economic Organization,” by Armen A. Alchian and Harold Demsetz (American Economic Review 62, 1972, 772-95). This is the famous “team-production” paper, one of the first to try to revitalize the Coasian agenda of explaining the “nature” of the firm (why firms exist, what explains their scope and internal organization). It is also one of the first agency theory papers (in what is sometimes misleadingly called “positive agency theory”).
However, the analysis in the paper is flatly errorneous. Here are some points where the paper gets it wrong: (more…)
Do Austrian Economists Get Sufficient Credit?
| Nicolai Foss |
Apart from the occasional ritualistic mention of Hayek's work in the context of information economics or Mises and Hayek's work in business cycle theory, Austrians as a rule get very little credit from their mainstream colleagues. It is arguable that they get too little credit.
Here is a case in point. In "Information Structures with Unawareness," Jing Li points out that the standard approach to modeling information — the state space approach — cannot accomodate unawareness (the paper is one example of a small literature on how to model unawareness in game theory terms). An agent is "unaware" (a nicer word for "ignorant") of something when he does not know it and does not know that he does not know it.
Li says that there is "little research on these obviously important issues" and goes on to treat unawareness in terms of modeling information as a pair, consisting of factual information and "awareness information."
It is, of course, true that unawareness/ignorance is under-researched relative to its importance. But why then not mention the literature that does deal with it? Such as Austrian economics, in particular Israel Kirzner's work. For example, in his 1997 paper in the Journal of Economic Literature, "Entrepreneurial Discovery and the Competitive Market Process," Kirzner explains in great detail why unawareness/ignorance is not compatible with the standard paradigm.
Malthus and the Most Cited Economist in the World
| Nicolai Foss |
Who is the world's most cited economist? I thought Ronald Coase. When I asked some of my economist colleagues they virtually all came up with either Kenneth Arrow or John Maynard Keynes.
No, says Geoff Hodgson, Research Professor at the University of Hertfordshire, UK, and one of today's leading "heterodox" economists. It's Oliver Williamson. Geoff says so announcing the following event:
Williamson will give the Second Malthus Lecture, organized by Geoff Hodgson, at 6pm on Thursday 19th October at the University of Hertfordshire, in the Fielder Centre in Hatfield, UK. All are welcome. The topic of Williamson's lecture will be: "Corporate Governance and Economic Organization: A Contractual and Organizational Perspective." The First Malthus Lecture — commemorating the Hertfordshire economist Thomas Robert Malthus — was given by Nobel Laureate Douglass North in May 2005.
I am sure the management-gurus-turned-economics-bashers that I critized in my post of yesterday will be delighted by the association between Malthus — who was the reason why economics was christened the "dismal science" — and Williamson!
The New Bashing of Economics: The Case of Management Theory
| Nicolai Foss |
Where is the place to go for real, hardcore economics-bashing? Anthropology? Sociology? Hardly. At least for the outside observer (i.e., this blogger), these disciplines seem to have become so absorbed in terminological nitty-gritty, paradigm proliferation, and pomo excesses that they seem to have lost much interest in neighbouring disciplines. No, the answer is, management theory.
Cases in point? Check out any of these rather recent papers by management heavyweights: (more…)
We Got a Contract, We Got a Contract!!
| Nicolai Foss |
Peter and I have been working for some time on an idea for a book volume, entitled The Theory of the Firm: Emergence, Synthesis, Challenges, and New Directions.
There are several textbooks that present or make extensive use of the theory of the firm (e.g., Paul Milgrom and John Roberts, Economics, Organization, and Management; George Hendrikse, Economics and Management of Organizations; James Brickley, Clifford W. Smith, and William Zimmerman, Managerial Economics and Organizational Architecture; etc.). There are also lots of readers and reference collections (e.g., Louis Putterman, The Economic Nature of the Firm and Jay Barney and William Ouchi, Organizational Economics).
There is no need for yet another textbook or reader/reference collection. What the literature lacks, however, is a critical synthesis of the various streams in the theory of the firm, one that places these streams in a historical and methodological context, discusses the various controversies that have stimulated internal development in the theory of the firm, and assesses the many critiques that have been leveled at the theory by scholars in sociology, psychology and management.
Peter and I think we can write such a book. Luckily, Cambridge University Press agrees with us, and will offer a contract. (more…)
Ranking Mania
| Nicolai Foss |
I just received a mail from the administrators of SSRN: “SSRN is pleased to announce a new service: Top Business Schools Rankings based on downloads from SSRN's eLibrary. This list will be updated at the beginning of each month and joins the Top Law School Rankings, announced last year.”
Here is the list of US school for those who care:
SSRN TOP 20 U.S. BUSINESS SCHOOLS (BETA)
1 Harvard Business School
2 University of Chicago – Graduate School of Business
3 University of Pennsylvania – The Wharton School
4 Yale School of Management
5 New York University – Leonard N. Stern School of Business
6 Massachusetts Institute of Technology (MIT) – Sloan School of Management
7 Stephen M. Ross School of Business at University of Michigan
8 Columbia University – Columbia Business School
9 Dartmouth College – Tuck School of Business
10 William E. Simon Graduate School of Business Administration
11 Duke University – Fuqua School of Business
12 University of Texas at Austin – Red McCombs School of Business
13 Stanford Graduate School of Business
14 University of Southern California – Marshall School of Business
15 Northwestern University – Kellogg School of Management
16 Ohio State University – Fisher College of Business
17 Cornell University – Samuel Curtis Johnson Graduate School of Management
18 Indiana University Bloomington – Kelley School of Business
19 University of California, Berkeley – Haas School of Business
20 University of Illinois at Urbana-Champaign – College of Business
And here is the so-called “international list”: (more…)
What is the Austrian Critique of Socialism, Really?
| Nicolai Foss |
Any self-respecting Austrian or Austrian-influenced blog must have a discussion of the Austrian critique of socialism. So, here goes.
In conversations with Austrians and when reading articles from the Austro-revival of the last three decades, I have always been struck by the prominence that Austrians tend to give to Hayek and Mises’ critiques of socialism. One senses a feeling that this an area where Austrians made an independent, decisive, and lasting contribution, one that even mainstream economists stand ready to acknowledge. Perhaps for this reason there has been quite a lot of internal debate among Austrians about the true meaning of the Austrian critique of socialism (usually under the rubric of “calculation” (i.e., Mises) versus “knowledge” (i.e., Hayek). Most of the debate has concerned whether and to what extent Mises and Hayek’s critiques were different (and perhaps who made the most fundamental argument).
I believe, however, that it is time to change the debate to more fundamental terms and issues, specifically the meaning and validity of the Austrian arguments. (more…)
Can Kogut Do It? The New European Management Review
| Nicolai Foss |
The only-two-years-old European Management Review has just changed its editorship. The main change is that Bruce Kogut has taken over as new editor. In his editorial statement he proclaims that "The European Management Review has the ambition of being the journal of first choice for scholars interested in the theory and empirical study of management."
Kogut goes on to mention established top-journals such as Administrative Science Quarterly and Academy of Management Journal — without, however, directly implying that these are the direct competitors. It is clear that Kogut wants to position the EMR as an "ideas journal." How then does it differ from the intended competition? (more…)
Copenhagen Conference on Strategic Management 2006
| Nicolai Foss |
In addition to being a Professor at the Copenhagen Business School, I am also the Director of CBS' Center for Strategic Management and Globalization. The Center arranges the Copenhagen Conference on Strategic Management 2006 on 12-14 December. These dates should be particularly convenient for those who cannot make the Strategic Management Society conference in Vienna about 1½ month earlier, for example because of teaching commitments.
The first CCSM was held last year and was a great success. We want to make the CCSM 2006 into an even bigger success. Among the confirmed speakers are Jay Barney, Rich Makadok, and Rich Bettis.
Here is the conference homepage. Submit a paper!!
Is Economics Losing Its Spine?
| Nicolai Foss |
The critique of economics from sociologists, so-called “heterodox” economists, management scholars, etc. used to be that it was too “rigid,” because of a too heavy commitment to fundamental principles, such as strong interpretations of individual rationality (maximization), equilibrium, and so on. As a result, the critics maintained, the central insights of disciplines such as sociology, psychology and anthropology were not only at variance with economics but also much more realistic, applicable, etc. Attempts to apply maximization, stable preferences and equilibrium to neighbouring disciplines only led to disciplinary bastardization in which the essential ideas of these neighbouring disciplines got lost. And so on.
While this kind of critique continues to be made, of course, I believe that the basis for making it is becoming increasingly weak. (more…)
Getting Old?
| Nicolai Foss |
I got back a review report today. Among many thoughtful observations, the report noted about the paper: “It lacks the fresh originality of the early Foss papers.”
Organizations and Markets 
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