Posts filed under ‘Strategic Management’
Interview with Richard Rumelt
| Peter Klein |
This interview with UCLA strategy giant Dick Rumelt appeared in the McKinsey Quarterly in November 2007 (free registration required). My old classmate Dan Lovallo is one of the interviewers. I’m sure Steve Postrel, David Hoopes, and others from the UCLA crowd can provide some Rumelt stories.
Off to Boot Camp
| Peter Klein |
I’ll be in Utah this week for the Society for Entrepreneurship Scholars conference, also known as “Manuscript Boot Camp.” It’s a sort of cross between a regular academic conference and a professional development workshop, with an interesting and unusual format. The conference is organized around a set of competitively selected working papers written by PhD students and junior faculty, who will be paired with a rotating series of senior scholars for one-on-one mentoring sessions designed to improve the quality of the papers for publication. These sessions, combined with plenary roundtables and lots of informal interaction, should make for a fun and professionally valuable event, for all concerned. I wish more workshops were organized this way.
The set of senior scholar-mentors includes many of the biggest names in entrepreneurship and strategy research, people like Rajshree Agarwal, David Deeds, Greg Dess, Jeff Dyer, Bill Hesterly, Bob Hoskisson, Jeff Reuer, Harry Sapienza, Bill Schulze, Dave Whetten, and your humble correspondent. More important, the participant list includes several bloggers — me and orgtheory’s Teppo Felin among the mentors, Brian McCann of Management R&D and former O&M guest blogger Chihmao Hsieh among the mentees — so expect good during- and post-conference reporting in the blogosphere.
My only concern, expressed to co-organizer Bill Shulze yesterday, is fitting that many egos into a single room. His solution: “free beer.”
Organizational Economics versus Strategy
| Peter Klein |
Brayden has a nice post at our good-twin blog on the differences between organization theory and strategy research. Writing from the perspective of an organizational sociologist, Brayden argues that organization theory is a higher-status, “purer” discipline, but that strategy research asks better questions and is providing more insight into organizations than organization theory.
I think much of Brayden’s analysis carries over to economics as well. Organizational economics (referring to people like Tirole, Hart, Gibbons, Holmström, Baker, Zingales, Aghion, Garicano, Bolton, etc.) has a much higher status than the kind of work published in the Strategic Management Journal or the strategy papers in Organization Science, the Academy of Management Review, or Management Science. (If by “strategy” we mean simply game theory, then strategy research would have the same status as organizational economics.) The explanation is simple: economic theory is a high-status discipline while sociology and applied economics, sociology, and psychology are not. A prominent economist who does some work that could be considered strategy once told me, when asked about SMJ, that its authors “ask good questions, but don’t know how to answer them.” He said it with a knowing smile and a slight shake of the head, the way a Southerner might say “bless their hearts.” Still, one would have to admit that some terrific work has come out of the strategy journals in recent years, particularly (ahem) as economics has become a more foundational discipline in that field.
New Issue of Strategic Entrepreneurship Journal
| Peter Klein |
Volume 2, number 3 of the Strategic Entrepreneurship Journal, a special issue edited by Sharon Alvarez and Jay Barney on “Opportunities, Organizations, and Entrepreneurship,” is now out. It features my paper “Opportunity Discovery, Entrepreneurial Action, and Economic Organization,” Nicolai’s paper with Kirsten Foss, “Understanding Opportunity Discovery and Sustainable Advantage: The Role of Transaction Costs and Property Rights,” and several others of interest. The abstracts from my paper and the Foss & Foss paper are below the fold. (more…)
Nair, Trendowski, and Judge on Penrose
| Peter Klein |
The October 2008 AMR features an essay by Anil Nair, Joseph Trendowski, and William Judge on Edith Penrose’s seminal Theory of the Growth of the Firm (1959), written in the form of a book review. The essay is gated, but you can get a flavor from the conclusion:
Many economists call the unexplained variance in a regression equation the “Penrose effect.” According to Barney, it was left to strategy scholars to propose that the Penrose effect comprises the intangible resources and capabilities that are the source of sustained competitive advantage, and while these phenomena may be difficult to measure directly, the implications of these phenomena for firms’ operations and performance could be tested. After reviewing the passionate and prolific research that has attributed its intellectual roots to Penrose’s book, it is clear to us that her work was successful in rallying scholars who sought an alternative to the standard structure-conduct-performance model within strategy. However, scholars should be careful that Penrose’s theory (and the book) does not become a Rorschach blot on which they impose their own biases.
Here is a paper that links Penrose to Austrian concepts of subjectivism and capital heterogeneity. Penrose was of course a student of Fritz Machlup, himself a student of Mises. Apparently at one point the book was to be a joint project with Machlup; in Murray Rothbard’s papers is a memo Rothbard wrote for the Volker Fund evaluating a 1953 grant proposal by Machlup and Penrose for a “Growth of the Firm” project. (Rothbard’s assessment was unfavorable; he was, however, a fan of Penrose’s earlier paper on “Biological Analogies in the Theory of the Firm,” which he cites favorably in “The Mantle of Science.”)
JOM Special Issue on the Resource-Based Theory of the Firm
| Peter Klein |
Jay Barney, Dave Ketchen, and Mike Wright are editing a special issue of the Journal of Management on “Resource-Based Theory: Twenty Years of Accomplishments and Future Challenges.” Proposals should be submitted between 1 March and 1 April 2009 for an issue to appear in 2011, the 20th anniversary of the 1991 special issue of JOM that helped establish the field (particularly with Barney’s paper, “Firm Resources and Sustained Competitive Advantage,” which has 9,889 cites on Google Scholar as of this posting). The full call for papers is below the fold. (more…)
Organizational Economics and International Trade
| Peter Klein |
New NBER paper from Pol Antràs and Esteban Rossi-Hansberg, “Organizations and Trade” (ungated here). Surveys “an emerging literature at the intersection of organizational economics and international trade,” arguing that “a proper modelling of the organizational aspects of production provides valuable insights on the aggregate workings of the world economy.” Indeed, “certain predictions of standard models . . . are affected or even overturned when organizational decisions are brought into the analysis.”
A valuable survey, but the focus is quite narrow; an older and broader literature seeking to apply transaction cost economics to issues in international business, going back to Teece (1977), should also be consulted. (Joanne Oxley’s research page is a good place to start.)
CBS Microfoundations Conference: Knowledge and HRM
| Nicolai Foss |
As O&M readers may know I am the Director of Copenhagen Business School’s Center for Strategic Management and Globalization. As the name indicates we do SIM (strategic and international management), but with a twist: We are specifically interested in the governance dimensions of knowledge processes (knowledge sharing, integration, creation, etc.), and we are specifically interested in micro-foundations for the firm-level concepts that we routinely apply in strategic management and IB (see here for a more detailed characterization). These two themes come together in a conference organized next week (18-19 September) by Dr. Dana Minbaeva, “HRM, Knowledge Processes, and Organizational Performance: In Search of Micro-Foundations.” The papers are online, and many of them should be of potential interest to readers of O&M. I particularly recommend the paper by Joshua Tomsik, Todd Zenger and Teppo Felin (of orgtheory.net fame), “The Knowledge Economy: Emerging Organizational Forms, Micro-Foundations, and Key Human Resource Heuristics.”
Westgren to Missouri
| Peter Klein |
I’m delighted to announce that Randy Westgren, organizational scholar, academic entrepreneur, bon vivant, and all-around great guy — and, most important, former O&M guest blogger — has been named McQuinn Professor of Entrepreneurial Leadership at the University of Missouri. I’ve greatly enjoyed interacting with Randy over the years from his perch in Urbana-Champaign and am looking forward to having him just down the hallway.
As McQuinn Professor Randy will also direct the McQuinn Center, which was launched in 2004 under the leadership of Bruce Bullock. The Center is creating an innovative and unusual program to research and teach the “functional” aspects of entrepreneurship, with particular emphasis on firm organization and strategy and applications to food, agriculture, biotechnology, natural resources, and rural development.
Please join me in congratulating Randy on his new post!
“El Pulpo”
| Peter Klein |
A few years ago I read, and enjoyed, Stephen Schlesinger and Stephen Kinzer’s Bitter Fruit: The Story of the American Coup in Guatemala. (Kinzer also has a nice book on the CIA’s role in Iran.) So when I saw Peter Chapman’s Bananas!: How The United Fruit Company Shaped the World in a local bookstore — yes, the bright-yellow cover caught my eye — I snapped it up. United Fruit — “El Pulpo” (the Octopus) to its detractors — is a fascinating company, the history of which should be required reading for students of international business. Bananas is a disappointment, unfortunately. I wasn’t expecting a scholarly treatment but, even by journalistic standards, the book is weak, substituting breathy clichés for facts and analysis. And Chapman’s unfamiliarity with even the most basic concepts of economics doesn’t help. (Spend your money on Bananas instead — my favorite Woody Allen movie.)
Today I learned of at least one scholarly treatment of United Fruit, focusing on its Colombian operations: Bananas and Business: The United Fruit Company in Colombia, 1899-2000 by Marcelo Bucheli (New York University Press, 2005). Alan Dye makes some interesting points about knowledge transfer in his review for EH.Net:
One important contribution is the story the book tells of how United Fruit eventually decided to abandon its initial policy of creating barriers to competition and accept fair dealing with rivals to its core business. Although its early history was one of raising barriers to competition and exploiting the weakness of unstable governments to establish its monospony position, he argues that in the long run the presence of this, or another multinational, was necessary for the development of a commercial banana industry in Colombia. United Fruit had pioneered techniques for how to commercialize a fragile and highly perishable product. Regardless of unethical practices when dealing with locals in the producing countries, the importation of the marketing techniques that such pioneers in the industry developed were of substantial value to local industry. (more…)
Random Thoughts from the AoM
| Peter Klein |
Back now from the AoM conference in Anaheim. Random thoughts:
1. The Critical Management Studies Division (yes, it really exists) featured, as a keynote speaker, none other than Ward Churchill, former professor of ethnic studies at the University of Colorado (fired in 2007 for professional misconduct). His talk: “On the Banality of Managerial Efficiency: The ‘Eichman Question’ Revisited.” Apparently the Late Unpleasantness (1, 2) did not disqualify him from this eminent academic honor. I did not attend the talk but was told he was “impressive.”
BTW, if you’re wondering about this division of the Academy, look no farther than the CMS website:
The Critical Management Studies Division is a forum within the Academy for the expression of views critical of unethical management practices and exploitative social order. Our premise is that structural features of contemporary society, such as the profit imperative, patriarchy, racial inequality, and ecological irresponsibility often turn organizations into instruments of domination and exploitation. Driven by a shared desire to change this situation, we aim in our research, teaching, and practice to develop critical interpretations of management and society and to generate radical alternatives. Our critique seeks to connect the practical shortcomings in management and individual managers to the demands of a socially divisive and ecologically destructive system within which managers work.
2. You know how all stereotypes are based on elements of truth? I noticed that the receptions hosted by groups and organizations dominated by economists (such as the BPS Division) tended to have cash bars, while those dominated by psychologists and sociologists (e.g., anything to do with organizational behavior) tended to have open bars. (more…)
A Note to My Undergraduate Students
| Peter Klein |
From a former student:
I was in your Managerial Economics back in Spring 2005. I guess I actually learned something and remembered it. I am going back to school for my MBA and I was able to test out of my basic economics class using the knowledge I gained in your class. Since I actually paid attention to you talking about game theory, I was able to save myself from taking an extra graduate class.
Pay attention now, save $$$ later!
Robust Competitive Advantage
| Peter Klein |
Rich Makadok, during an AoM session on “Real Options and Competitive Advantage,” made an interesting point about the concept of sustained competitive advantage (SCA). The modifier sustained is typically taken to mean “persisting over a long period of time.” As Rich noted, however, the initial formulation of SCA in Barney (1991) doesn’t include a temporal dimension at all. It refers, instead, to imitability: “a firm is said to have a sustained competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy” (Barney, 1991, p. 102). Sustained competitive advantage, in other words, refers to value-creating activities that cannot be imitated. The key is entry barriers, not time.
Rich suggested replacing SCA with some other term, like “hard-to-duplicate competitive advantage,” for greater clarity. Here’s my suggestion: robust competitive advantage. What do you think?
Megawatt Ghemawat
| Peter Klein |
Five things you didn’t know about Pankaj Ghemawat:
1. He entered Harvard College at age 16 and graduated in three years.
2. He entered Harvard Business School’s PhD program at age 19 and graduated in three years.
3. After a year at McKinsey he was hired by Michael Porter into the HBS strategy group and later became, at age 31, the youngest full professor in HBS history.
4. He has authored or co-authored more than 50 HBS cases.
5. He looked about the same at age 19 as he looks today. (I have seen the photographic evidence).
This was discussed yesterday at an AoM session honoring Pankaj with the BPS Division 2008 Irwin Outstanding Educator Award. Jan Rifkin and Anita McGahan hosted a semi-roast in his honor, at which they revealed that Pankaj’s college nickname was “Megawatt Ghemawat” (the authenticity of this story could not be verified, however). Pankaj explained that he started writing his own cases out of fear, lacking the confidence to teach other people’s cases to demanding Harvard MBAs. Eventually he decided that cases were interesting in themselves and led to new research questions and new answers to old questions.
His website is ghemawat.org. He now lives in Spain where he holds the Anselmo Rubiralta Chair of Strategy and Globalization at the IESE Business School, University of Navarra. He blogs at the HBS Discussion Leader site. His Foreign Policy article “Why the World Isn’t Flat” gained a lot of attention when it appeared last year.
Organizational Structure and the Diversification Discount
| Peter Klein |
Do diversified conglomerates trade at a discount relative to more specialized firms? A huge literature in strategy and corporate finance emerged over the last couple of decades devoted to this question. Early studies claimed to find a substantial diversification discount, though more recent papers claim that the observed discount is due to measurement error, self-selection, and other characteristics, not a harmful effect of diversification per se. (For a good overview of this literature, now slightly dated, see this roundtable report edited by Belén Villalonga. Some of my own contributions are here and here.)
Seemingly lost in the search for a diversification discount, however, is a related question: What is being discounted? Potential benefits of diversification, according to the literature, include access to internal capital markets and more efficient redeployment of distressed assets; potential costs include inefficient rent-seeking, bargaining problems, and bureaucratic rigidity. But these benefits and costs have little to do with industry or geographic diversification per se — they apply to the management of any multi-unit organization, even if its activities do not span different industries or regions.
In a new paper, “Organizational Structure and the Diversification Discount: Evidence from Commercial Banking,” Marc Saidenberg and I try to distinguish the effects of diversification and organiztaional complexity by studying multi-unit firms within a single industry, commercial banking. (more…)
O&M at the AoM
| Peter Klein |
Ah, Los Angeles . . . land of “tattoos, breast implants, bleached hair, and vacuous egos,” as Nicolai recently wrote on Facebook. And then there are the people not in town for the Academy of Managment meeting!
As readers may know, the AoM is meeting this week in Anaheim. The O&M crowd is well represented, as usual. You can search the online program for your favorite person, subject, or interest area. Below are some of the sessions involving O&Mers, past and present: (more…)
Substitutes in Creating Complementarities
| Lasse Lien |
I have just been reading the Porter and Siggelkow paper in the most recent issue of Academy of Mgmt. Perspectives. The paper summarizes the status of the “complementarity/NK-modelling/activity systems” perspective in competitive strategy. I am anything but an expert in this theory, but I thought I would share one reflection, mainly because it allows me to use the fancy title above.
As many O&M readers will know, a main take-away from this perspective is that an activity system with strong complementarities may enjoy protection against imitation. Some choices in an activity system will presumably be unobservable for outsiders, and getting everything right at once is less likely the more linkages there are between activities. Furthermore, the penalty for failing to get everything right increases with the strength of the complementarities.
My problem is that more and stronger complementarities should presumably speed up learning, because there are more and stronger feedback mechanisms putting pressure to move each activity in the beneficial direction. An increasing number of complementary activities presumably imply that each individual activity is encouraged to move in the “right” direction by many other activities, and stronger complementarities imply stronger pressure from each of them.
So while many and strong complementarities reduce the likelihood of perfect imitation and increase the penalty for imperfection, the rapid learning produced by an improved feedback mechanism may conceivably make the road to perfection rather short. Couldn’t these effects conceivably cancel each other out, or the latter effect even dominate the former? Or in other words — forgive the pun — aren’t these two mechanisms (precise imitation and rapid learning) substitutes in the pursuit of complementarity?
Top Management Scholars, Journals, and Universities
| Peter Klein |
Rankings, rankings, more rankings. . . . If you like to bibliometric analysis of individual researchers, journals, and universities you’ll find more than you can handle in “Scholarly Influence in the Field of Management: A Bibliometric Analysis of the Determinants of University and Author Impact in the Management Literature in the Past Quarter Century” by Philip Podsakoff, Scott MacKenzie, Nathan Podsakoff, and Daniel Bachrach (Journal of Management 34, no. 4 (2008): 641-720). Over 25,000 individual scholars are reviewed, their institutions evaluated, journal impact factors computed, and numbers crunched hither and yon. Some qualitative conclusions:
The findings showed that (a) a relatively small proportion of universities and scholars accounted for the majority of the citations in the field; (b) total publications accounted for the majority of the variance in university citations; (c) university size, the number of PhDs awarded, research expenditures, and endowment assets had the biggest impact on university publications; and (d) total publications, years in the field, graduate school reputation, and editorial board memberships had the biggest effect on a scholar’s citations.
São Paulo Workshop on Institutions and Organizations
| Peter Klein |
See below for information on the Third Research Workshop on Institutions and Organizations, 13-14 October 2008 at Fundação Getúlio Vargas in Brazil. Session topics include “Organizations, law and corruption,” “Institutions and development,” “Institutions and environment,” “Psychological issues and organization strategies,” and “Industrial and competition policy.”
I participated in last year’s conference and enjoyed it tremendously. There is a growing network of Brazilian researchers working on various topics in the New Institutional Economics. It is a good group to be involved with. (more…)
Resort-Town Pricing
| Peter Klein |
Like other members of the O&M community in the Northern Hemisphere I’m enjoying the lazy days of summer. This week I’ve been on an extended-family vacation in Destin, Florida — heart of the “Redneck Riviera” — reading mindless fiction, drinking piña coladas, and showing off my Body by InBev. One thing that surprises me is that prices at the local grocery store, and the local Wal-Mart (sorry, Walmart >|<), are no higher than the prices back home, even though the price elasticity of demand is surely lower. Why don’t resort-town stores price like stores in airports or at ski resorts? Demand isn’t quite that inelastic, but presumably less elastic than demand in year-round communities. Likewise, one would expect Walmart prices to be significantly lower in retirement communities or other areas populated by price-sensitive shoppers.
I asked my colleague Emek Basker, a Walmart expert, and she says that while there’s plenty of anecdotal evidence of variation in price (and product selection) across Walmart stores, she doesn’t know any empirical studies explaining these differences systematically in terms of price elasticities, income, labor costs, etc. Anybody know of such studies?
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