Posts filed under ‘Management Theory’
The University of Phoenix and the Economic Organization of Higher Education
| Peter Klein |
The Sunday New York Times features a lengthy, and mostly unflattering, look at the University of Phoenix, the world’s largest for-profit university. The tenor of the Times piece is set by the headline, “Troubles Grow for a University Built on Profits” — the p-word clearly chosen to shock the Times’s modal reader. (Where were the stories on the Times’s Judith Miller scandal titled “Troubles Grow for a Newspaper Built on Profits”?)
What’s remarkable about the article is not the conclusion, which is largely predictable, but the form of the argument. There is no attempt to evaluate the University of Phoenix’s efficiency or profitability, the quality of its product, or the value added of its degree. (Just a few quotes from disgruntled students, taken at face value; obviously no one at the Times reads RateMyProfessors.com.) Rather, the focus is on the production function. Because Phoenix uses an unusual production technology, the Times implies, its product is suspect. (more…)
What if Alfie Kohn Ran a Cafe?
| Peter Klein |
What if Alfie Kohn, Bob Sutton, Jeff Pfeffer, Fabrizio Ferraro, Sumantra Ghoshal, and other sociologically minded critics of economics ran their own cafe? Prices and wages would be out, because those constitute incentives for managers, employees, suppliers, and customers, and we all know incentives are bad. Everything would be done in a free, open, collaborative manner in an atmosphere of mutual trust and group love. It might look a lot like the Terra Bite Cafe.
Don’t Believe the E-Hype
| Peter Klein |
Tom Hazlett, writing in Monday’s Financial Times, brings the wiki crowd back to earth. Noting the excitement over user-generated content, club goods, and the electronic commons, Tom warns:
Overhype about the emerging markets is good clean fun when confined to mindless text-messaging. There is an undeniable “wow” factor. But there is also a madness to the e-crowd. Whenever a trend is spotted that captures the fancy of the zeitgeist, it is formulated as a linear trajectory, and shot into orbit. All cross traffic is banned. Call it “asymmetric triumphalism.”
This fits nicely with some of our own recurring themes: little is new under the sun (1, 2), “open” doesn’t always beat “closed” (1, 2), etc. Indeed, as Tom points out:
“Open” networks have evolved, and Time dutifully touts the success of Linux -– the open-source operating system mocked by Microsoft critics during the company’s US antitrust trial but now heralded as a bona fide competitive rival.
But iPod/iTunes is a proprietary platform that has magically restored order to the music download business while creating the iconic consumer electronics product of the 21st Century. Similarly, electronic games are driving explosive growth in entertainment software and broadband markets, riding on the backs of three consoles that are “open” only to the software licensed by their makers — Sony, Microsoft, or Nintendo.
The point is not that “closed” beats “open,” but that capitalism accommodates both.
My former colleague George Selgin, known for his dry sense of humor, used to say that a lot of thinking and writing on e-commerce, e-learning, e-etc. could be summarized in one word: “e-gnorance.”
Open Innovation Site
| Peter Klein |
For something serious on “open” architecture and innovation, see Henry Chesbrough’s Open Innovation site (named for his 2003 book). There’s a nice bibliography, research page, and the official site for Chesbrough’s edited volume (with Wim Vanhaverbeke and Joel West) Open Innovation: Researching a New Paradigm (Oxford, 2006).
The Wikified Firm
| Peter Klein |
Openness is surely the prevailing fetish of our times. In the tell-all memoir, in the airiness and transparency of modern architecture, in the porousness of national borders and, lately, in the flashier theories of business, the overwhelming appeal of openness is nearly a closed question.
Thus opens Daniel Akst’s review of Don Tapscott and Anthony D. Williams’s Wikinomics: How Mass Collaboration Changes Everything from the Saturday W$J. It’s actually a pretty good review considering the book’s underlying flakiness. “Firms that cultivate nimble, trust-based relationships with external collaborators are positioned to form vibrant business ecosystems,” write Tapscott and Williams. “For individuals and small producers, this may be the birth of a new era, perhaps even a golden one, on par with the Italian renaissance or the rise of Athenian democracy.” Notes Akst: “Somehow it seems a little premature for Botticelli to roll over and tell Demosthenes the news.”
The basic problem with Wikinomics, and others in this genre, is the failure to take a balanced, comparative approach to the effect of technology on transaction costs. Of course, information technology has the potential to lower the costs of transacting between firms. But it can also lower the costs of organizing activities within firms (through improved communication, better monitoring, more effective coordination, and so on). The net effect on firm size and vertical integration is ambiguous. (See more discussion here.)
Does anyone else think that “wiki” and its derivatives should be added to the banished words list?
Update: Tapscott published an op-ed on Viacom’s tiff with YouTube in Monday’s WSJ.
Knowledge Governance Primer
| Nicolai Foss |
Along with Euro colleagues such as Prof. Anna Grandori (Bocconi University) and my colleagues at the Center for Strategic Management and Globalization here at the Copenhagen Business School I have championed the notion of “knowledge governance” as a distinct perspective on knowledge management that explicitly relies on “rational” organization theory (including organizational economics), is methodologically individualist, etc. (more…)
Market-Based Management: Two Blogs and a Book
| Peter Klein |
Here are two blogs on market-based management: one official (more content, please!) and one unofficial. And here’s a forthcoming book on Koch Industries, birthplace of MBM (appears to be an inside job, unfortunately).
Here are our own reflections on MBM. (Thanks to Tyler Cowen for the link to the unofficial blog.)
Update: Charles Koch himself has a forthcoming book.
HBR’s Breakthrough Ideas for 2007
| Peter Klein |
The February 2007 issue of Harvard Business Review features the annual breakthrough ideas list. Duncan Watts says viral ideas are spread by everyone (like me!), not just “influentials” (contra Malcolm Gladwell). Eric von Hippel likes Denmark’s national innovation policy (Nicolai? Bo?). Michael Schrage says firms need to recover their Old Math. (“As computing gets ever faster and cheaper, yesterday’s abstruse equations are becoming platforms for tomorrow’s breakthroughs.”) Geoffrey B. West says innovation isn’t really modular (“the existence of superlinear scaling that links size and creative output . . . challenges the conventional wisdom that smaller innovation functions are more inventive, and perhaps explains why few organizations have ever matched the creativity of a giant like Bell Labs in its heyday”). Lots of interesting stuff.
The Dark Side of Open Source: Parenting Edition
| Peter Klein |
The open-source model works well when producers want to encourage collaboration. A potential downside is too much collaboration — sometimes project leaders just want to be left alone.
Who knows this better than parents of small children?
With all due respect to Ward Cunningham, I’d like to take issue, for a moment, with the claim that he is the originator of the wiki. Because anyone who’s had a child can assure you that collective public authorship, collaborative editing, and anonymous generative correction — those wiki hallmarks — have been around since Mrs. Cain first brought Baby Cain over to Uncle Abel’s house dressed only in a too-thin fig-leaf onesie.
That’s Slate’s Dahlia Lithwick reminding us that “babies invented community-based collaborative authorship.” When your kid is sick, all your friends and relatives try to re-write the owner’s manual, whether you want them to or not.
Built to Regress to the Mean
| Peter Klein |
Of 35 “Excellent” companies studied in In Search of Excellence, 30 declined in profitability over the 5 years after the authors’ study ended in 1979. . . . Similarly, of 17 of the 18 “Visionary” companies studied in Built to Last, only 8 outperformed the S&P 500 market average for the 5 years after the authors’ study ended in 1990.
This is from Phil Rosenzweig’s The Halo Effect (Free Press, 2007) (I’m quoting this summary in CFO Magazine). Rosenzweig’s book reads like a primer on research methods for producers (and consumers) of popular management literature. Rosenzweig, a management professor at IMD, explains the problem of selection bias, the difference between correlation and causality, the need to compare rival explanations, the difference between absolute and relative performance, and more.
“Some of what I talk about in The Halo Effect is Research Design 101,” Rosenzweig tells CFO. “You gather your independent variables, independently of the thing you’re trying to explain. You don’t confuse correlation with causality, and you don’t confuse ends with means. You control for other variables. It’s basic stuff.”
But that basic stuff is hard to translate into a BusinessWeek best-seller.
Thanks for the link to Gary Peters, who notes that the book might be good reading for a doctoral seminar on research methods.
Does Sarbanes-Oxley Reduce Innovation?
| Peter Klein |
Thanks to Sarbanes-Oxley, Apple customers can’t take advantage of faster wi-fi cards without paying an extra fee. That’s Apple’s explanation, anyway:
With a quick software update from Apple, customers’ “g” machines would become “n.” Voila, a surprise instant upgrade that means happy customers and good karma for Apple. . . .
According to Apple, however, accounting rules have complicated matters. . . . On the one hand, if it had announced that its computers were shipping with n-capable cards that would be activated later, it would have had to wait to record some of the revenue garnered from each computer until it actually activated the feature. That would have been an accounting nightmare. On the other hand, not having acknowledged the feature when the machines first shipped, Apple can only count it as a valuable feature if it charges users for activation. That way, the original product was “complete,” and accounting rules let Apple count all of the revenue when the machines were sold — the intuitive, straightforward accounting approach that a reasonable observer would expect. . . .
The rule that made Apple’s mess predates Sarbanes-Oxley — but Sarbox’s stiffened penalties may well have changed Apple’s calculus.
This is from a piece in the current issue of American.com. Writer Jerry Brito also quotes Jim Clark’s letter resigning from the board of Shutterfy:
Sarbox dictates that I not Chair any committee due to the size of my holdings, not be on the compensation committee because of the loan I once made to the company, not be on the governance committee, and it even dictates that some other board member must carry out the perfunctory duties of the Chairman. . . . What’s left is liability and constraints on stock transactions, neither of which excite me.
Peter Abell’s Organization Theory Textbook
| Peter Klein |
Peter Abell’s textbook Organisation Theory: An Interdisciplinary Approach is available on the web for free. (Technically it’s not a textbook, but a London School of Economics “subject guide.”) Congratulations to Peter for his fine work. (HT: Teppo)
Carl Schramm on Ethics
| Peter Klein |
Kauffman Foundation president Carl Schramm doesn’t like legislative solutions to business-ethics problems:
The emergence of statutory standards of ethical commercial behavior reflects a belief that fundamental human behavior in the marketplace can be better ordered by government than by honoring and enforcing absolute ethical, shared standards as reflected in the common law. In fact, the substitution of statute and regulations for self-imposed absolute standards may invite further corrupt behavior as statute and regulations tend to parse broad ethical concepts into the minutiae of elements of violations and to articulate the lowest standard of acceptable conduct, if not explicitly, then by means of obfuscatory language.
This from Schramm’s “The High Price of Low Ethics: How Corruption Imperils American Entrepreneurship and Democracy” in the current issue of the Journal of Markets and Morality. (The journal’s site is gated, but a pre-publication version is available here.)
Syllabus Exchange
| Peter Klein |
As a new semester begins professor-bloggers are sharing their notes and class syllabi. We previously mentioned Thom Lambert’s opening lecture in his Business Organizations class. Here are some syllabi that might interest O&M readers:
- Kieran Healy’s Economic Sociology (Arizona)
- Teppo Felin’s Microfoundations of Strategic Organization (BYU)
- Pete Boettke’s Austrian Theory of the Market Process II (George Mason)
- Cory Doctorow’s Is Everyone on this Campus a Copyright Criminal? (USC)
- Henry Farrell’s Institutions and Politics (George Washington)
Coase and Hayek in Law School
| Peter Klein |
My colleague, law professor Thom Lambert, begins his Business Organizations class with Hayek (1945) and Coase (1937). Coase is obviously extremely well known in legal circles, but I doubt Hayek is assigned in many law-school classes. Thom’s students are fortunate.
(Thom’s blog entry also alerts me to Henry Manne’s “Hayek, Virtual Markets, and the Dog that Did Not Bark,” which I hadn’t seen before, and which seems to deal with market-based management.)
In Which I Rise to the Bait
| Steven Postrel |
So I’m browsing some old posts on orgtheory.net, and I see a little discussion about whether organization theory has done much since 2000, and it mentions neo-institutionalism. And since neo-institutionalism kind of gives me the hives, I toss in a little comment about how what little I know about it seems to have been falsified by an empirical paper by Kraatz and Zajac.
What do I get for my troubles? Not exactly a gauntlet to the face, but since their post has such tempting flaws, I’ll bite. (more…)
The Canon of Management Thought
| Peter Klein |
Gordon Smith points us to David Kennedy and William W. Fisher’s edited volume The Canon of American Legal Thought (Princeton, 2006). The volume features the “twenty most important works of American legal thought since 1890.” Click Gordon’s link for the list, which includes a few items familiar to O&M readers (Coase’s 1960 “The Problem of Social Cost”; Calabresi and Melamed’s 1972 “Property Rules, Liability Rules, and Inalienability”; and possibly Macaulay’s 1963 “Non-Contractual Relations in Business”). The more recent stuff is mostly “critical legal theory” (pomo alert!).
So, what are your selections for the canon of management thought? Both books and articles are fair game. (I imagine the after-1890 constraint won’t be binding.) You can include works in organizational economics if you like.
It’s Built to Last, But Is It Made to Stick?
| Peter Klein |
Chip and Dan Heath’s Made to Stick: Why Some Ideas Survive and Others Die (Random House, 2007) is being touted as the Next Big Thing in the popular management literature. Here is the Amazon link. Here is Guy Kawasaki’s interview with the authors. Here are words of praise from Bob Sutton. And yes, of course, the authors have a blog.
How Does Management Affect Capabilities?
| Steven Postrel |
What contribution does management make toward producing output? If you watch Federal Express commercials, or read Dilbert, or listen to many technical workers when they talk to each other, the answer is “nothing.” Management is seen as purely an obstruction to the accomplishment of useful work.
If we take “management” as a sociological category, denoting a set of pointy-haired individuals disconnected from actual technical problem solving, then one could perhaps defend this position. But if we think of “management” as a collection of activities and practices, those practices seem essential, and many people, from computer programmers to chemists to special effects wizards, engage in them. But just how does management increase output? (more…)
Call for Papers: Putting Social Capital to Work
| Peter Klein |
Those of you studying networks, clusters, and social capital may find this Call for Papers of interest:
Doing business is a profoundly social process. Social capital and its dynamics, therefore, are inescapable components of every interaction. Among other things, they affect group cohesiveness and functionality, and they give advantages or disadvantages to some individuals and groups relative to others. This special issue of Business History will explore the research and analytical opportunities in putting social capital to work.
Full details: (more…)
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