Posts filed under ‘Management Theory’
Crowdsourcing Blog
| Peter Klein |
Crowdsourcing — discussed here and here — is getting big. How do we know? It now has its own blog. (HT: NMM)
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.
More on Economics and the Contiguous Disciplines
| Peter Klein |
Monday’s post on the accusation that contemporary economists focus too heavily on “puzzles,” rather than real problems, elicited a number of interesting responses. Tom Schenk alludes to Coase’s suggestion that economists are shying away from their traditional areas of interest because they can’t solve the standard problems. Coase is worth quoting in full:
Economists are extending the range of their studies to include all of the social sciences. . . . What is the reason why this is happening? One completely satisfying explanation . . . would be that economists have by now solved all of the major problems posed by the economic system, and, therefore, rather than become unemployed or be forced to deal with the trivial problems which remain to be solved, have decided to employ their obviously considerable talents in achieving a similar success in the other social sciences. However, it is not possible to examine any area of economics with which I have familiarity without finding major puzzles for which we have no agreed solutions, or, indeed, questions to which we have no answers at all. The reason for this movement of economists into neighbouring fields is certainly not that we have solved the problems of the economic system; it would perhaps be more plausible to argue that economists are looking for fields in which they can have some success.
Steve Sailer, who has gained a reputation as Steve Levitt’s most vocal critic (1, 2), suggests that the problem is not the application of economic analysis to neighboring disciplines per se, but rather economists’ tendency to apply their tools to subjects in which they lack the necessary background knowledge and expertise. “My objection to Levitt’s work is not that he’s wasting his vast analytical powers on trivial subjects, but that his analytical powers have too often been found inadequate for the magnitude of his subjects.” (more…)
A Brief History of Time (in Management)
| Peter Klein |
My colleague Allen Bluedorn, Professor of Management at the University of Missouri, recently published an interesting book, The Human Organization of Time: Temporal Realities and Experience (Stanford University Press, 2002). The book explores a number of philosophical, sociological, and cultural issues related to time and our perception of time and develops applications for business administration. Of course, attention to time, process, and history is a hallmark of the Austrian, evolutionary, and dynamic capabilities approaches to economics and management featured frequently on this blog.
For a short introduction to these issues check out the June 2006 issue of the Academy of Management Learning and Education, which features “Time and the Temporal Imagination” by Bluedorn and Rhetta Standifer. Here is the abstract:
Time has been one of the most challenging and elusive concepts in human thought, and it is only now beginning to receive the attention it deserves in organizational scholarship. To this growing scholarly attention we present the case for including material about this most universal of phenomena in our teaching, just as we are beginning to do in our theoretical and empirical investigations. We argue for developing a temporal imagination, a concept we proposed recently, and then describe reasons for teaching about time as well as present first principles that provide a foundation for the teaching of time and temporal phenomena. These reasons and principles are then illustrated in a discussion of temporal depth (time horizons) and how it might be taught.
More on Family Firms
| Peter Klein |
Recent posts here at O&M and at orgtheory.net have discussed the nature and consequences of family ownership. Today’s Wall Street Journal ($) profiles Fiat’s John Elkann, great-great-grandson of founder Giovanni Agnelli and next in line for the top spot, and discusses the challenges of family capitalism more generally. Excerpts:
[A]s Mr. Elkann is poised to move into the driver’s seat at the 107-year-old icon, the European model of family capitalism espoused by his clan is struggling to endure. Financial markets have become impatient with family-dominated companies, which sometimes put dynastic interests first and occasionally have murky corporate-governance practices. There is also increased skepticism that companies controlled by Europe’s grand families can produce top-flight managers. . . .
Some argue that the model has served Europe poorly. “The sooner we get rid of family capitalism the better off we all are,” says Umberto Mosetti, a corporate-governance expert at the University of Siena and president of shareholder adviser Deminor.
When markets were regional, says Mr. Mosetti, families could finance their businesses through cash flow and loans from friendly local banks. As markets went global, large companies needed to go to capital markets to fuel expansion. Family-controlled firms were often ill-prepared. Something similar happened at Fiat. When competitors from Asia entered the European market, Fiat was caught flat-footed and lost market share; it has been trying to recover ever since.
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.
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
“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).
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).
Was Taylor a Taylorite?
| Peter Klein |
Speaking of scientific management, one of Frederick W. Taylor's biographers tells us that Taylor himself was no Taylorite. Yesterday I was looking for an article by Gavin Wright and stumbled upon Wright's review of Daniel Nelson's 1980 book Frederick W. Taylor and the Rise of Scientific Management. (JSTOR subscribers can read the review here.) According to Nelson, Taylor was primarily an engineer — a very creative and successful one — with little interest in labor management. His inventions revolutionized the machine-tool industry, and he later ventured into "popular" management writing as a PR gimmick, to enhance his personal reputation and build his consulting practice. (We also learn that Taylor was a champion lawn tennis player, inventor of a spoon-shaped tennis racket and a two-handled golf club that was later banned, and the son of a radical feminist and abolitionist mother.)
The Management Myth?
| Peter Klein |
Lots of chatter on the net about an article in the June 2006 Atlantic, “The Management Myth,” by Oxford-trained philosopher and former consultant Matthew Stewart. (Online version for magazine subscribers only.)
Most of management theory is inane, writes our correspondent, the founder of a consulting firm. If you want to succeed in business, don’t get an M.B.A. Study philosophy instead.
Most commentators (1, 2, 3) seem to find the article challenging and profound. Paul Kedrosky demurs, saying Stewart “accomplished the impossible. He made me like management theory, MBAs, and consultants more, while liking philosophy (and Oxford philosophers) less.” Kedrosky calls the article “disjointed, dull, obvious, smug, poorly written, and full of falsely-elevated faux philosophy chatter.” Hmmmm, sounds like a perfect candidate for Academy of Management Review! (Note to AMR editors and referees: just kidding.)
Update: Lynne Kiesling likes Stewart’s book on Spinoza and Leibnitz.
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
Another New Buzzword: Adjacencies
| Peter Klein |
From today's WSJ feature on Time-Warner we learn that "synergies" are out. Now it's all about "adjacencies."
In deal after deal, [Time-Warner] executives promised to create a well-oiled, "vertically integrated" profit machine. Books and magazines and music would feed television and movie and Internet empires, each strengthening the others. But this vision never panned out. . . . Now divisions are encouraged to cooperate only if they can't get a better deal on the open market. The company's units are expected to be "best in class" — corporate-speak for being an industry leader — and those that fall short are threatened with being sold.
A return to the 1960s and "management by the numbers"? (We do know, for instance, that the conglomerates weren't so bad after all — see this, this, and this.)
Who will write the first RBV paper on adjacencies?
Crowdsourcing
| Peter Klein |
Combine increasingly thick markets for key inputs, rapidly declining costs of producing these inputs, and low transaction costs of organizing suppliers, and what do you get? Crowdsourcing, in which individual web users, mostly amateurs, compete to supply cheap inputs. Tim Swanson offers links and commentary at the Mises Blog. (A "wisdom of crowds" reference gives me a chance to plug the extremely interesting book by my college classmate Jim Surowiecki, The Wisdom of Crowds.)
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…)
A Fruity Response
| Peter Klein |
Much of the resistance to markets and “market-like” mechanisms within firms seems to flow from a belief that market exchange is somehow crass, profane, and uninspiring, at least compared to communal or family relationships. An example is the horrified reaction of many bioethicists to economists’ proposals to allow markets for cadaveric organs, particularly kidneys.
I’ve avoided commenting on the organ-market controversy, though I’ve been using it as an example in my introductory courses for years. I have little to add to the excellent discussions by Kaserman and Barnett, Epstein, Mankiw, Becker, etc. (not to mention this observation from Robin Hanson). But I can’t resist pointing to a letter in today’s Wall Street Journal by one Charles Fruit, chairman of the National Kidney Foundation. Responding to Richard Epstein’s earlier op-ed in favor of markets, Mr. Fruit declares himself “among the millions of other ‘high-minded moralists’ who oppose treating life-saving organs as commodities.” Closing his letter with a presumed coup-de-grâce, Fruit adds: “We moralists can only pray that [Epstein’s] proposed market mechanism for the transaction of hearts, lungs, kidneys and other life-saving human organs would work a little better than it does for the nation’s consumers of gasoline.”
Cute. But how exactly should gasoline be allocated to consumers? (more…)
Natural and Artificial States, and Firms
| Peter Klein |
Among the last published papers of the libertarian polymath Murray N. Rothbard — one of my intellectual heroes — is his 1994 article “Nations by Consent: Decomposing the Nation-State.” Here Rothbard distinguishes sharply between the state, as a political entity, and the nation, a “complex and varying constellation of different forms of communities, languages, ethnic groups, or religions.” He goes on to develop a theory of appropriate national boundaries, based on the principle of volunary association and the empirical claim that people tend to associate with particular familial, linguistic, cultural, and religious groups. “One goal for libertarians should be to transform existing nation-states into national entities whose boundaries could be called just, in the same sense that private property boundaries are just; that is, to decompose existing coercive nation-states into genuine nations, or nations by consent.”
A March 2006 working paper by Alberto Alesina, William Easterly, and Janina Matuszeski, “Artificial States,” proposes several measures of the degree to which state boundaries are “natural” — corresponding roughly to Rothbard’s nations — or “artificial.” One measure identifies state borders that split ethnic groups into separate states, while another uses fractal geometry to characterize borders as straight or squiggly, assuming that straight borders are more likely to be articifially drawn and not corresponding to natural geographic or ethnic boundaries. The authors show that their measures are closely correlated with the usual measures of national economic performance (the more natural, the better).
What does all this have to do with organizations? The capabilities literature distinguishes between firm boundaries that are “natural,” or organic, and those that are artificially constructed. (more…)
Capabilities as Compensation
| Peter Klein |
Lots of blogospheric buzz today about this paper on local production externalities and researcher compensation (Mankiw, Caplan). The paper examines output and pay for economics and finance professors and concludes that the productivity effect of being at an “elite” university — i.e., having daily personal contact with top-notch colleagues and students — has fallen sharply over the last three decades. (Advances in information technology are seen as the likely cause.) Moreover, as compensation theory would predict, these spillover effects and faculty salaries appear to be substitutes; as the intangible benefits of co-location decrease, universities must increase wages to retain top staff.
The empirical approach used in the paper has obvious applications to the knowledge-management and capabilities literatures more generally. To the extent that the firm’s capabilities are consumed by employees — XYZ Company is an exciting, dynamic, enjoyable place to work — the firm should be able to pay lower wages, other things equal. Using panel data and fixed effects it should be possible, econometrically, to estimate firm-specific capabilities that are reflected in below-market wages. I’m not aware of any capabilities or knowledge-management papers that utilize this approach, however. Am I wrong?
Those Right-Wing Economists
| Peter Klein |
Several posts below allude to arguments by Jeffrey Pfeffer, Sumantra Ghoshal, and others that economic models and concepts (agency problems, transaction costs, opportunism, and the like) are taking management theory in the wrong direction and are harmful to management practice. A subtext of these arguments is that economists are ideologically biased toward the free market, against community and informal social ties, and toward cynical, atomistic, and even “reactionary” views of human nature. (Even if we’re not actually dismal.)
Surveys of economists’ political preferences reveal a more complex picture, however. A forthcoming article in Public Choice by Daniel Klein and Charlotta Stern analyzes a 2003 American Economic Association member survey:
The responses show that most economists are supporters of safety regulations, gun control, redistribution, public schooling, and anti-discrimination laws. They are evenly mixed on personal choice issues, military action, and the minimum wage. Most economists oppose tighter immigration controls, government ownership of enterprise and tariffs. In voting, the Democratic:Republican ratio is 2.5:1.
A Democratic-to-Republican ratio of only 2.5 to 1 may seem shockingly low to our colleagues in sociology or cultural studies, but hardly seems to indicate pervasive “right-wing” bias.
Myths and Fallacies in Strategic Management – Part II
| Nicolai Foss |
Why has the notion of firm-level “capabilities” become so incredibly popular in strategic management research during the last 10-15 years?
This is a puzzle because — as Teppo Felin and I have argued in a series of recent papers (most of which can be accessed from www.nicolaifoss.com) — firm-level capabilities is a highly problematic concept. Thus, there are no theories of the emergence or origin of capabilities and the connection between the level of capabilities and the level of individual agents is at best unclear and perhaps more realistically non-existent. Partly because of these difficulties, there simply aren’t any clean definitions of capabilities around. (more…)
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