Posts filed under ‘Papers’
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…)
An Organizational Routines Bloffer
| Nicolai Foss |
Here is a blog offer: Teppo Felin and I have written “Organizational Routines: Historical Drift, A Course Correction, and Future Directions,” and if you mail me at njf.smg@cbs.dk, I will be happy to send you a copy. Here is the abstract:
Organizational routines and capabilities have become key constructs not only in evolutionary economics, but more recently also in business administration, specifically strategic management. In this essai we discuss the historical origins of the notion of routines, and highlight some of the theoretical and definitional drift associated with the notion of routines over time. In parallel we also explicate some of the underlying theoretical problems of routines (and related concepts); problems such as the lack of clarity on the origins of routines, and the more general need for micro-foundations. We argue that individual-level considerations deserve more attention in extant work — we in effect call for a course–correction in work on organizational routines — and we argue that evolutionary economics and strategic management should aim to build micro-foundations related to understanding the origins of routines.
Foss, Klein, Kor, and Mahoney on Entrepreneurship
| Nicolai Foss |
As readers of O&M will know, Peter and I are highly sympathetic to subjectivist economics, mainly Austrian economics, and both take an interest in entrepreneurship and the theory of the firm. Yasemin Kor is an expert on the RBV and top management, and former O&M guest blogger Joe Mahoney is, of course, an expert on the RBV and the theory of the firm. This makes, we think, for an excellent author team. Thus, we have collaborated in writing a paper, “Entrepreneurship, Subjectivism, and the Resource-based View: Towards a New Synthesis.” Here is the abstract:
This paper maintains that the consistent application of subjectivism helps to reconcile contemporary entrepreneurship theory with strategic management research in general, and the resource-based view in particular. The paper synthesizes theoretical insights from Austrian economics and Penrose’s (1959) resources approach, arguing that entrepreneurship is inherently subjective and firm specific. This new synthesis describes how entrepreneurship is manifested in teams, and is driven by both heterogeneity of managerial mental models and shared team experiences.
Enjoy!
Factions in Evolutionary Economics
| Nicolai Foss |
Evolutionary economics has emerged as the perhaps most successful modern heterodox approach. One possible reason for this relative success is that modern EE, in contrast to Austrian economics, old institutional economics, and (partly) post Keynesian economics, embraces formal model building and econometrics. Like the so-called orthodox economics that modern EE is a self-styled alternative to, EE is by no means monolithic. Although evolutionary economists go (roughly) to the same conferences and publish in pretty much the same journals, several factions are discernible within the overall EE community — such as
- the”Italo-Wharton-Columbia” faction (Dosi, Marengo, Malerba, Orsenigo, Levinthal, Winter, Nelson);
- the “old institutionalist-realist-evolutionists” (Hodgson, Lawson), mainly located in UK and US, and strong in economic geography; and
- the German evolutionists, nowadays primarily represented by Ulrich Witt, the Director of the Evolutionary Economics Group at the Max-Planck-Institut für Ökonomik in Jena.
One thing that differentiates the the third group from the two other ones is a stronger commitment to methodological individualism (at least the second group seems to explicitly reject MI). The overriding emphasis on routines and habits that characterizes groups 1) and 2) cannot be found in the works of the German evolutionists. Entrepreneurship is much more strongly emphasized here. There is a suspicion of biological analogies. Economic evolution is conceptualized in terms of the emergence and dissemination of novelty, rather than in terms of the evolutionary triad of variation, heredity and selection. It is an approach that is closer to Austrian economics; hence, here at O&M, we are sympathetic to German evolutionism. For a nice sampling, check out the Papers on Economics and Evolution series that is published by the MPI in Jena.
Beauty and Politics
| Nicolai Foss |
Most of us classical liberals tend to think of politics as largely ugly. But apparently beauty is more important in politics than competence, intelligence, likability, or trustworthiness (not that it is surprising that these may not be that important ….). Check this fascinating new paper.
Ghoshal on Economics — Cont’d
| Nicolai Foss |
Frequent readers of this blog will know that we have often posted on the bashing of economics that is going on in the management field (e.g., here and here). The bashing has been cumulating lately. A recent high point of management econ-bashing is the conferment of the AoM Prize for best paper in Academy of Management Review to Ferraro, Pfeffer, and Sutton’s adaptation of extreme and unqualified sociology of knowledge arguments in their “Economics Language and Assumptions: How Theories Can Become Self-Fulfilling.” (more…)
Lachmann Paper
| Nicolai Foss |
Giampaolo Garzarelli (University of Witwatersrand) and I have just had our paper on Ludwig Lachmann, “Institutions as Knowledge Capital: Ludwig M. Lachmann’s Interpretive Institutionalism,” accepted by the Cambridge Journal of Economics. Mail me at njf.smg@cbs.dk if you want a copy. Here is the abstract:
This paper revisits the socioeconomic theory of the Austrian School economist Ludwig M. Lachmann. By showing that the common claim that Lachmann’s idiosyncratic (read: eclectic and multidisciplinary) approach to economics entails nihilism is unfounded, it reaches the following conclusions. (1) Lachmann held a sophisticated institutional position to economics that anticipated developments in contemporary new institutional economics. (2) Lachmann’s sociological and economic reading of institutions offers insights for the problem of coordination. (3) Lachmann indirectly extends contemporary new institutional theory without simultaneously denying the policy approach of comparative institutional analysis.
Simon on Hierarchy
| Nicolai Foss |
I have always been surprised and somewhat disturbed by the tendency in Herbert A Simon’s work to elevate hierarchy and organization over markets. Of course, Simon was a liberal democrat — but he was also a great scientist.
The most visible expression of this tendency is probably Simon’s heavily cited 1991 paper in the Journal of Economic Perspectives, “Organizations and Markets.” Another manifestation of the tendency is Simon’s even more (in fact, much more) famous 1962 paper, “The Architecture of Complexity,” in which hierarchical structure is seen as the master-principle for understanding “the architecture of complexity.”
In an interesting paper, “Hierarchy and History in Simon’s ‘Architecture of Complexity’,” UCLA professor Philip Agre argues that Simon’s paper arose as a critique of general systems theory and its attempt to elevate self-organization over any hierarchical principles. He furthermore sees Simon’s argument as very strongly reflecting the general tenor of the times, what may be called McNamaraism (tellingly, Chandler’s Strategy and Structure was also published in 1962); thus, “… the patterns that Simon discerned became visible within the larger context of the time.”
Paper on Freedom and Entrepreneurship
| Nicolai Foss |
With Christian Bjørnskov I have written “Economic Freedom and Entrepreneurial Activity: Some Cross-Country Evidence. Here is the abstract:
While much attention has been devoted to analyzing how the institutional framework and entrepreneurship impact growth, how economic policy and institutional design affect entrepreneurship appears to be much less analyzed. We try to explain cross-country differences in the level of entrepreneurship by differences in economic policy and institutional design. Specifically, we use the measures of economic freedom to ask which elements of economic policy making and the institutional framework that are responsible for the supply of entrepreneurship (our data on entrepreneurship are derived from the Global Entrepreneurship Monitor). The combination of these two datasets is unique in the literature. We find that the size of government is negatively correlated with entrepreneurial activity but that sound money is positively correlated with entrepreneurial activity. Other measures of economic freedom are not significantly correlated with entrepreneurship.
Drop me a mail if you want a copy.
Assets versus Activities
| Richard Langlois |
At the risk of injecting some substance into my posts, let me raise an issue in the economics of organization that I have been thinking about recently.
There has been much discussion in the literature about the differences between the transaction-cost and capabilities views of organization, something that Nicolai and I, among many others, have written about. But another division might be between asset theories and activity theories. Asset theories are of course the province of the mainstream economics of organization. In this literature, one typically defines vertical integration as joint ownership of productive assets, and integration typically arises because of hazards from cooperating without joint ownership. Activity theories come from the literatures on product design and modularity. Here the issue is how tasks (or activities) ought to be designed given the structure of the production process. In this literature, the logic of integrality versus modularity provides clues to which activities out to be “outsourced.” Perhaps the best example of this kind of thinking is by Baldwin and Clark. I have also tried to think about the issues in a paper that will be coming out in Organization Studies. In many ways, this approach harkens back to Adam Smith. (more…)
The New Growth Theory
| Nicolai Foss |
I am reading David Warsh’s Knowledge and the Wealth of Nations: A Story of Economic Discovery. Although the book contains little that will be new to those with some knowledge of the history of economics and recent growth theory, it is worth reading because it is beautifully written, contains some juicy gossip, and has a clear storyline. In other words, excellent Summer reading.
A notable feature of the book is portraying the development of new growth theory as a remarkable instance of scientific discovery. Eight years ago, I published a paper in the Journal of Economic Methodology, “The New Growth Theory: Some Intellectual Growth Accounting” (here is an earlier paper version) that took issue with this claim. My argument was that the NGT was successful for purely heuristic reasons. The argument may have been over the top, or the NGT may have changed since 1998. Anyway, here is the abstract:
This paper discusses the reasons for the success of the New Growth Theory. Given that the NGT does not appear to say much new about empirical reality, that its essential ideas have been known for a long time, and that it does not really make contact with a large literature on institutions and economic change, its strong success may arguably be seen as surprising. Or, at least, its success may appear peculiar to Lakatosian methodologists, and others who emphasize notions such as “novel facts”. The reason for the success of the NGT is argued to lie in its constituting a case of strong heuristic progress: it brought growth through knowledge accumulation within the confines of neoclassical economics, and thus demonstrated the continued viability of this research tradition.
Interesting New Paper by JC Spender
| Nicolai Foss |
One of the puzzles of business administration/management is that the fields of entrepreneurship and strategic management have existed, and continue to exist, in such relative separation. Intuitively, one would think of entrepreneurship — the identification and seizure of new opportunities for profit — as constituting the core of the strategic management field. This, however, is not the case. However, there are various indications that strategic management scholars are about to develop interest in entrepreneurship (e.g., work by Kim and Mahoney, Alvarez and Barney).
One specific indication is an excellent and highly recommended recent paper by JC Spender, “The RBV, Methodological Individualism, and Managerial Cognition: Practising Entrepreneurship.” Here is the Abstract:
If we consider Schumpeter’s methodological individualism and entrepreneurship, the ‘managerial cognition’ arguments can contribute new insights to the RBV discourse. I open by examining the links between resource inputs and firm outputs , and argue the types of rents implied by the RBV cannot arise or be sustained if these links are logical and explainable. The only rents then available are Marshallian quasi-rents arising from information asymmetry or the Ricardian rents from initial allocation, i.e., those of Porter’s analysis. Today’s RBV lacks the components necessary to create and manage the value at the core of Barney’s VRIO model. Causal ambiguity or uncertain inimitability might imply sustainable rents but clearly do not explain how the arise, any more than asserting the firm has dynamic capabilities does. To illustrate how value might be created and brought into the analysis, I look at Penrose’s model of managerial learning, primarily as an accessible instance of the epistemological approach proposed by Austrian economists such as Hayek, Kirzner, and Schumpeter. This concept of value creation parallels the sense-making concepts of the managerial cognition literature. I conclude that an alliance of BPS and MOC approaches can complement and so complete the RBV, synthesizing notions of value creation, heterogeneous and immobile resources, and endogenous growth into a dynamic theory of the firm. It balances rational choice and Schumpeterian entrepreneurship. To wrap this argument up, I discuss the theoretical and practical implications of the amended RBV.
New Issue of Industry and Innovation
| Nicolai Foss |
Now in its 13 year of publication, Industry and Innovation is a journal dedicated to "scholarship on the dynamics of industries and innovation". (It was originally launched as the Journal of Industry Studies).
Its closest competitors are arguably journals such as Industrial and Corporate Change and Research Policy. In terms of intellectual affiliation, I&I serves the communities that are organized in the Schumpeter Society, attend the DRUID conferences, and the like. In other words, I&I is taken up with research in evolutionary economics, dynamic capabilities stuff, parts of economic geography, technology studies and so on. Its editorial board includes Anita McGahan, Richard Nelson, and yours truly. The editor is my CBS colleague, Mark Lorenzen (check his photo!).
Usually, there may not be much of interest for the readers of O&M in I&I. However, the latest issue — guest edited by my former PhD student, Volker Mahnke (CBS, Informatics Dept.) and Serden Ozcan (CBS, Dept of Industrial Economics and Strategy)– features a set of papers that are clearly relevant to those with an interest in organization and organizational strategy.
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
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…)
New Foss-Foss-Klein working paper
| Peter Klein |
A new item has just been added to our working papers page, “Original and Derived Judgment: An Entrepreneurial Theory of Economic Organization,” by Kirsten Foss, Nicolai J. Foss, and Peter G. Klein. This is an early draft, and comments are most welcome. Here’s the abstract: (more…)
Organizations and Markets 
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