Posts filed under ‘Strategic Management’
Brilliant But Neglected II
| Peter Klein |
Some suggestions for Nicolai’s list:
John G .Matsusaka, “Corporate Diversification, Value Maximization, and Organizational Capabilities,” Journal of Business 74 (July 2001): 409-31. Offers a novel and provocative “match-seeking” theory of diversification in which firms do not know their own capabilities but must discover them by experimenting with various combinations of business units. A diversified firm may be valued at a discount relative to more specialized firms because its current lines of business include some not consistent with its capabilities, but such conglomeration is necessary, and value-creating in the long run, if the firm is to discover where it should eventually refocus. 85 hits on Google Scholar. Possibly neglected because it appeared in the Journal of Business near the end of its run.
Robert C. Ellickson, “A Hypothesis of Wealth-Maximizing Norms: Evidence from the Whaling Industry,” Journal of Law, Economics, and Organization 5, no. 1 (Spring 1989): 83-97. A nice example of the emergence of private law, focusing on the rules governing property rights in whales prior to the twentieth century. Without a central authority the whaling community — a small, close-knit group with shared characteristics and frequent interaction — developed a complex set of norms enforced by community sanction and the threat of ostracism. Just 25 Google Scholar hits. (more…)
Management R&D Blog
| Peter Klein |
Luke Froeb and Brian McCann, whose book we discussed earlier, have a new blog, Management R&D. It looks good, so check it out.
Strategic Entrepreneurship Review
| Peter Klein |
In case you missed it, Steve Phelan mentioned in one of the comment threads that he has started a new e-journal, the Strategic Management Review. Writes Steve:
Philosophically, the journal is focused on publishing articles that “contribute to the ongoing conversation in strategic management” and intends to be theoretically, methodologically, and geographically neutral. We also aim to have quick reviewer turnaround times and ongoing (instant) publication of accepted articles. There is no reason an article could not be reviewed and published in 30-60 days (if it is deemed to make a contribution). Initially, we anticipate a 35% acceptance rate but the traditional “space considerations” of a paper journal will not be a reason for rejecting articles or lowering the acceptance rate.
The journal is also intended to be a resource for the strategic management community. For example, there is an area for doctoral students to post their dissertation abstracts and there is a “Comments” area for all published articles. Google Scholar will also start indexing the journal and improving the chances that an article will be read. With 269 BPS accepted papers (from 653 submissions) at the upcoming AOM meeting, I think that many articles could benefit from the timely exposure that SMR offers.
To date, the journal has published one issue but has averaged about 250 article downloads per month for the last three months. This is a very positive sign that people want to read online academic content in strategic management.
Consider sending your stuff his way. The journal website contains all the necessary info.
Empirical Research in the RBV
| Peter Klein |
Empirical work in transaction cost economics has been examined in several detailed reviews. Joskow (1988), Shelanski and Klein (1995), Klein (2005), and Macher and Richman (2006) are sympathetic to TCE while David and Han (2004) and Carter and Hodgson (2006) find the evidence less convincing. The critics of TCE raise some good points but do not, in my judgment, show that any rival theory has greater explanatory power. How about the resource-based view?
Surprisingly, while the RBV is central to much recent empirical work in strategy and organization, its empirical track record has not been scrutinized systematically as has TCE’s. Strategic Organization published a paper last year, “Tests of the Resource-Based View: Do the Empirics Have Any Clothes?” by Richard Arend, that begins to fill this gap. (more…)
Routines or Practices?
| Nicolai Foss |
I am growing increasingly skeptical of the extremely popular and influential notion of routines, a central construct in large parts of management, notably organization and strategic management, and in evolutionary economics. My problems with the construct are these (among others):
1) There are still no clean definitions around of “routine.” Proponents of the routine notion sometimes delight in pointing out that it took transaction cost economics almost 4 decades to arrive at its unit of analysis, dimensionalize it, etc. However, with respect to TCE it was only when the unit was finally decided on, defined and dimensionalized that real progress beyond Coase (1937) began to take place. Those who work with routines have not been so patient, and have not hesitated to introduce all sorts of derived concepts. Thus, capabilities are often defined in terms of routines, so that something undefined is defined in terms of something badly defined.
2) Although no clean definitions seem to exist, different views of routines are proffered in the literature. Indeed, there has a notable drift in the dominant conception of routines, from the standard operating procedures of Cyert and March to the emergent/undesigned, collectively held, largely tacit routines of Nelson and Winter.
3) Routines are (partly because of 1)) too often used as a catch-all category that aims at capturing everything (at any level of analysis) about an organization that has some degree of stability/permanence. For example, the much cited “organizational learning” paper by Levitt and March (it has a whopping 1,655 hits on Google scholar) includes everything from individual-level heuristics (“rules of thumb”) to corporate strategy under the routine heading. (more…)
Estimating the Value of Creative Invention
| Chihmao Hsieh |
One final bit of shameless self-promotion, as I soon head off into the figurative sunset from all this blogging: an empirically-oriented working paper of mine entitled “The Identification of Opportunities and the Value of Invention” can now be found here at SSRN. Any comments or suggestions are absolutely welcomed! Description of the research lies below. (more…)
The Costs of SOX
| Peter Klein |
“Sarbanes-Oxley and Corporate Risk-Taking” by Leonce Bargeron, Kenneth Lehn, and Chad Zutter:
Many policymakers and corporate executives have argued that the Sarbanes-Oxley Act of 2002 (“SOX”) has had a chilling effect on the risktaking behavior of U.S. corporations. This paper empirically examines this proposition. Using a large sample of U.S. and U.K. companies, we find that compared with their U.K. counterparts U.S. firms have significantly reduced their R&D and capital expenditures and significantly increased their cash holdings since SOX. We also find that the equity of U.S. companies has become significantly less risky vis-à-vis U.K. companies since SOX. Finally, using a large sample of U.S. and U.K. initial public offerings (“IPOs”), we find that the likelihood that an IPO was conducted in the U.K. increased significantly after SOX and that this effect was especially high for firms in high R&D industries. Taken together, the results support the view that SOX has had a chilling effect on risk-taking by publicly traded U.S. corporations.
Lehn is a former chief economist at the US Securities and Exchange Commission, a founding editor (along with my former colleagues Jeff Netter and Annette Poulsen) of the Journal of Corporate Finance, and former director of CORI‘s predecessor organization CRCSE (Center for Resarch on Contracts and the Structure of Enterprise).
Here is a nice critique of SOX within a broader regulatory perspective. And check out the Mises Institute’s anti-SOX archive.
Entrepreneurs are Both Born and Made, in the Interactional Sense
| Chihmao Hsieh |
Well, I’ve coddled this paper long enough, perhaps I should begin to set it free amidst that bit of shameless self-promotion. In a manuscript entitled “Cognition and the interaction between traits and training: the entrepreneur is both born and made,” I argue and provide evidence that an individual’s intelligence and the mode by which they train in multiple domains interact to determine the probability of self-employment. Not yet inclined to throw this up on SSRN just yet, but certainly happy to forward along a copy to interested parties (in hopes of receiving comments!). Just email me at hsiehc at umr dot edu… Below is the long abstract. (more…)
Do We Need a Project Project?
| Steven Postrel |
A peculiar fact about business schools (at least in the USA) is that project management is not part of the regular MBA curriculum. Why is this peculiar? Only because a huge percentage of the work managers do is organized into projects, the success or failure of strategies often rests on the quality of execution of projects, and many of the principles and techniques of good project management are not immediately obvious. But hey, if anyone needs to know about this trivial stuff they can always go to a two-day workshop and get a certificate (probably from an engineering department). (more…)
Color Me Beautiful
| Peter Klein |
The most popular colors on national flags are white and red, followed by blue, green, and black. Click here to see how the analysis was done, and to play a fun game of “identify the flag” (click on the pie charts to reveal the flags). (HT: SMCISS blog.)
I wonder how much of this clustering is explained by path dependence? The flags of many former European colonies are, of course, based on the mother country’s flag.
Here’s another interesting example of chromatic clustering: corporate logos. The graphic below (click to enlarge) ran in the June 2003 issue of Wired, in a feature called “The Battle for Blue.” This blurb accompanied the graphic:
Companies spend millions trying to differentiate from others. Yet a quick look at the logos of major corporations reveals that in color as in real estate, it’s all about location, location, location. The result is an ever more frantic competition for the best neighborhood.
I use this example in class to illustrate Hotelling’s law.
Core Economics for Managers
| Peter Klein |
Previously I’ve noted the new managerial economics texts by Dwight Lee and Richard McKenzie and Luke Froeb and Brian McCann. Joshua Gans was kind enough to send me a copy of his Core Economics for Managers (Thomson, 2005) and it looks like a good option as well.
The first thing one notices about the book is its brevity and clean, minimalist design: just 206 pages, no fancy graphics, and few sidebars or mini-cases. The book focuses on the “core” areas of pricing, competitive strategy, incentives, and contracts, omitting corporate strategy, human resource management, and peripheral areas like ethics. As its main pricing model, the book features not the increasingly irrelevant perfectly competitive (general or partial) equilibrium model, but a negotiation framework like that in Brandenburger and Nalebuff’s 1996 book Co-opetition. That is, unlike the typical strategy text, cooperative game theory gets as much attention as its more familiar noncooperative counterpart.
Part IV of the book, on contracting, looks particularly good. It favors the property-rights approach to the firm (in my judgment, the correct approach) over the nexus-of-contracts approach, and features a section on relational contracting, a topic usually omitted from introductory managerial texts.
Joshua will be revising the text in the coming months for a new edition and would appreciate suggestions for improvement.
Scientific Progress in Strategic Management?
| Nicolai Foss |
OK, I persist in using O&M for the purpose of shameless self-promotion: I have written “Theory of Science Perspectives on Strategic Management Research: Debates and a Novel View” (I know — not an elegant title) for The Elgar Handbook of Research on Competitive Strategy, edited by Giovanni Battista Dagnino. I will be happy to send you a copy if you drop me a mail at njf.smg@cbs.dk. (more…)
O&M at the AoM
| Peter Klein |
O&M will be well represented at the Academy of Management annual meeting in Philadelphia, 3-8 August 2007. Former guest blogger (and Philly native) Joe Mahoney is president-elect and program chair for the Business Policy and Strategy Division, so you know the program will be good.
I am chairing a Professional Development Workshop (PDW) titled “The Austrian School of Economics: Applications to Organization, Strategy, and Entrepreneurship” featuring former guest bloggers Mahoney and Dick Langlois along with Elaine Mosakowski, Yasemin Kor, Nicolai, and myself. Teppo of orgtheory.net has put together a session on “Entrepreneurship and Strategic Organization: Taking Stock, Problems, and Future Directions” which includes Jay Barney, Todd Zenger, Kirsten Foss, Mosakowski, Nicolai, and me. Other sessions of note include a PDW on the fifth anniversary of the excellent Strategic Organization (Nicolai is in that one too, along with O&M favorite and guest blogger Chihmao Hsieh’s mentor Jackson Nickerson); a session on the philosophical and epistemological foundations of strategy and organization theory, organized by Teppo and featuring regular O&M commentator J. C. Spender; a session on cognitition in organizational economics; and many other interesting workshops, lectures, and sessions on organization, strategy, entrepreneurship, and the market process.
PS: Before you go, be sure to study this article on Philadelphia dining from the current issue of Food and Wine Magazine.
Foss & Foss Paper on Opportunity Discovery and the RBV
| Nicolai Foss |
With my frequent co-author, Kirsten Foss, I have written “New Value Creation in the Resource-based View: How Knowledge and Transaction Costs Shape Opportunity Discovery.” (more…)
Economizing and Strategizing
| Nicolai Foss |
In a much-cited 1991 paper in the Strategic Management Journal, “Strategizing, Economizing, and Economic Organization,” Oliver Williamson introduced the distinction alluded to in the title of the paper between “economizing,” that is, economizing with transaction costs, and “strategizing,” that is, the exercise of market power (in the standard sense of setting p above mc and imposing a deadweight welfare loss on society). Whereas strategizing is only available to relatively few, large players, Williamson argued, any firm can engage in economizing. Thus, “… economy is the best strategy. That is not to say that strategizing efforts to deter or defeat rivals with clever ploys and positioning are unimportant. In the long run, however, the best strategy is to organize and operate efficiently.”
However, in a certain sense, economizing and strategizing are made of the same stuff, and the distinction may, for this reason, be somewhat overdrawn. (more…)
Alfred D. Chandler, Jr. (1918-2007)
| Peter Klein |
Alfred D. Chandler, Jr., passed away last Wednesday at the age of 88. Chandler was an inspiration and informal mentor to my own dissertation adviser, Oliver Williamson, so I feel like I’ve lost a grandparent. Essential reading on Chandler (besides Strategy and Structure and The Visible Hand) includes Williamson’s 1981 The Modern Corporation: Origins, Evolution, Attributes, David Teece’s review essay of Chandler’s Scale and Scope, and former guest blogger Dick Langlois’s Vanishing Hand project. Chandler’s 2006 paper on the technology sector turned out to be (I think) his last published paper. Chandler’s father, by the way, may have been a closet Misesian.
Congratulations to Drs. Chambers, Chapman, and Xue
| Peter Klein |
Three PhD students whose dissertation committees I chaired or co-chaired completed their work this semester. Molly Chambers (University of Missouri) studied the emergence of “new generation” cooperatives in Renville County, Minnesota and developed a conceptual model of team or “collective” entrepreneurship. The new generation cooperative is a patron-owned firm characterized by closed membership, appreciable and partially transferable equity shares, binding delivery obligations, and an emphasis on value creation, rather than the protection of existing rents — a model designed to mitigate the problems of vaguely defined property rights that characterize traditionally organized cooperative. Molly used a survey and structured interviews to compare the effects of transaction costs, ownership costs, and spawning conditions on the development of the Renville cluster during the 1990s. (more…)
Design for the Bottom of the Pyramid
| Peter Klein |
C. K. Prahalad’s “Bottom-of-the-Pyramid” approach to development gets mixed reviews. This firm takes it seriously: Paul Polak’s International Development Enterprises, which develops and markets low-cost, low-tech tools and implements for farmers in the developing world. Here is the web version of a Smithsonian exhibition, “Design for the Other 90%,” highlighting such products and services. “The majority of the world’s designers focus all their efforts on developing products and services exclusively for the richest 10% of the world’s customers,” says Polak. “Nothing less than a revolution in design is needed to reach the other 90%.”
Some designs, like the Q Drum, are breathtakingly simple, while others, like the Aquastar Plus! and Portable Light Project, are more sophisticated. The One Laptop Per Child project is also featured.
Hat tip to Fast Company, which provides additional information.
Colin Camerer on Strategic Management
| Nicolai Foss |
Strategic management researchers are, as a rule, practically oriented folks who typically do not have much patience with lofty debates in the theory of science. Say the word “ontology” and you will have eyes rolling in the audience (yes, I have tried it!).
I am currently working on a chapter on methodological/philosophy-of-science discussions in strategic management for Giovanni Battista Dagnino’s forthcoming Handbook of Research on Competitive Strategy and, given the above characterization, I have actually been surprised by the number of published papers on meta-theoretical issues in strategic management. (more…)
The Hotelling Effect, Wi-Fi Edition
| Peter Klein |
A cafe without free wi-fi is as rare these days as, well, your neighborhood Starbucks. Indeed, in my town virtually every coffee shop where students, professors, and townspeople hang out provides free wireless to its patrons. The only exception is Starbucks, which offers pricey metered service through T-Mobile.
Strategic response by an upstart wireless provider? Give routers and access points to homes and businesses next to a Starbucks. This is the strategy employed by FON, an Argentine startup backed by Skype, Google, and other heavies.
The routers, which usually cost $40, split an Internet broadband connection into two wireless signals — one for personal Internet use and the second for public use, which can be accessed by anyone within range for $2 per day. The routers’ owners get to pocket half of the sign-on fee, and FON takes home the rest.
Read about it here. Thank goodness for Hotelling effects!
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