Announcing Guest Blogger Joe Mahoney
| Nicolai Foss |
Peter and I are extremely pleased and proud to announce our new guest blogger, Joseph Mahoney. Joe is a Professor of Strategy at the Dept. of Business Administration, College of Business, University of Illinois at Urbana-Champaign. His first blog entry will appear later today.
Many readers of this blog will know Joe’s work. For those who don’t, suffice it to say that Joe is one of the most prolific and influential scholars in strategic management. While perhaps most often associated with the resource-based view, Joe has also done important work on transaction cost economics (indeed, his knowledge of TCE is encyclopedic) and on entrepreneurship, drawing on Austrian economics. His paper with Ron Sanchez on modularity (SMJ, 1996) and another with J.R. Pandian (SMJ, 1992) are among the most cited and influential SMJ papers. He has recently published a nice volume on Economic Foundations of Strategy with Sage.
Welcome, Joe!
Academic Insults
| Nicolai Foss |
I was once told by a prominent German economist over (an otherwise pleasant) dinner: “Nicolai, you have the potential to become a rigorous scientist” (a colleague dryly commented that “at least he said you had the potential”). Well, I ended up doing muzzy management stuff, and, hence, never realized any such potential.
Does anyone out there have any good stories of academic insults that you want to share with the readership of O&M? Perhaps with a little effort we may end with something akin to George Stigler’s Conference Handbook.
Update 1: Here is nice poisonous comment that I received only yesterday but forgot to mention: “Nicolai, you are the master of academic economies of scope” (i.e., excessive recycling).
Update 2: Joe Mahoney reminded me of this classic: “No one can think higher of Professor Z’s paper than I do — and I think the paper is a complete mess.”
Update 3: I just recalled that the German economist mentioned above at a later occasion, a conference dinner, told me: “You know, Nicolai, it is actually really funny, but it turns out — giggle, giggle — that you have more citations than I have, heh-heh-heh.” Oh, the absurdities of this world.
Government Did Invent the Internet, Sort Of
| Peter Klein |
Here is a short general-interest piece on the history and significance of government involvement with the internet. The article is based on a talk I gave over ten years ago, and I have to admit the basic argument has held up rather well. As Hal Varian says in the preface to Information Rules, "technology changes, economic laws do not."
Hart on Ex-Post Governance
| Peter Klein |
Nicolai, Joe Mahoney, and I had the pleasure of lunching yesterday with Oliver Hart, who was in Copenhagen to attend our PhD course and learn something about the theory of the firm. (Ha ha, just checking to see if you're paying attention; actually he was in town for a workshop.)
Hart is writing a new paper (with John Moore), currently titled "Partial Contracts," responding to the charge that incomplete-contracting models of the firm ignore the temporal, sequential processes of coordination that characterize the firm. Robert Gibbons, characterizing the asset-specificity approaches of Williamson (1971, 1979, 1985) and Klein, Crawford, and Alchian (1978) as rent-seeking theories of the firm, calls the Grossman-Hart-Moore property-rights approach
the inverse of the rent-seeking theory. Specifically, where the rent-seeking theory envisions socially destructive haggling ex post, the property-rights theory assumes efficient bargaining, and where the rent-seeking theory is consistent with contractible specific investments ex ante, the property-rights theory requires non-contractible specific investments. These distinctions should already make it clear that the property-rights theory in no sense formalizes the rent-seeking theory (i.e., Grossman-Hart did not formalize Williamson….).
Williamson puts it thusly: "GHM vaporize ex post maladaptation by their assumptions of common knowledge and costless ex post bargaining." (more…)
“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).
PhD Course on the Theory of the Firm
| Peter Klein |
This week I join Nicolai and Joe Mahoney for a four-day PhD Course, "Theories of the Firm and Their Application in Business Administration," at the Copenhagen Business School. The course outline, reading list, and notes for some lectures are available here. (More notes will be added as we go.) No webcast or live-blogging, but if anything exciting happens during the week, O&M readers will be the first to know.
How Heterogenous is Economics, Really?
| Nicolai Foss |
At seminars and conferences, I have often heard management scholars make the following kind of remark: "The economists think that management is fragmented, but look at economics itself. Economists disagree about virtually everything."
It easy to argue that this argument is entirely shallow, and is reflective of reading in the newspaper that this chief economist disagrees with that chief economist and generalizing this to the whole econ profession, while not understanding that economists hold a strong disciplinary core in common, and that disagreements tend to be over application and interpretation rather than about the most fundamental principles. Seen in that light, economics is not fragmented, while management is, even absurdly so. (In fact, some of the management critics of economics that we routinely blast here at O&M (i.e., Ghoshal, Pfeffer et al.) have a correct understanding of the unity of economics, even though their view of economics is entirely outdated).
However, increasingly the argument is being made by economists themselves, albeit mainly so-called "heterodox" economists that economics is changing from a situation in which a single paradigm held uncontested sway to a much more differentiated picture with multiple fundamentally different approaches. (more…)
Has Corporate Corruption Increased?
| Peter Klein |
Teppo Felin asks an important question: has corporate malfeasance — earnings manipulation, information distortion, and outright fraud — increased systematically in recent decades, or are Enron, WorldCom, Global Crossing, and their ilk just a few bad apples?
Despite all the sound and fury over this question, the evidence appears to be surprisingly thin. First, there is the obvious methodological problem that we don't observe corruption per se, but only responses to alleged or actual corrpution. We know when firms restate their earnings, but not when firms should have restated their earnings and didn't. We observe SEC investigations and enforcement actions, but not the (presumably many) instances of Type I or II error.
Second, the time-series evidence on even these proxies is slim. Several descriptive studies document an increase in earnings restatements over the past 20 years (especially the last 5-7 years), though as far as I know there are no studies looking at longer time periods. (more…)
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.)
Cliometrica
| Peter Klein |
We already have Econometrica and Psychometrika, so it was only a matter of time before the economic historians — whose Cliometric Society has been around since 1983 — started a new quantitative economic history journal, Cliometrica. I received an announcement today, which included this description:
The journal encourages the methodological debate, the use of economic theory in general and model building in particular, the reliance upon quantification to buttress the models with historical data, the use of the more standard historical knowledge to broaden the understanding and suggesting new avenues of research, and the use of statistical theory and econometrics to combine models with data in a single consistent explanation.
I'm not sure how this is supposed to distinguish the journal from the Journal of Economic History or Explorations in Economic History; perhaps they are not quantitative enough? (more…)
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
Wicksteed on “Economic Man”
| Peter Klein |
As an economist, I'm continually frustrated by complaints from my fellow social scientists that economics falsely conceives human beings as narrow, selfish, greedy materialists — a canard refuted in even the most elementary textbooks. Economics is a theory of preference and action; it assumes nothing whatsoever about the content of people's preferences, whether they be noble or base, pure or vile, or whatever.
The proper conception of economics as a general theory of action has been around for, I don't know, about a hundred years, at least. I recently came across this nice statement from Lionel Robbins, introducing the 1933 edition of Philip Wicksteed's Common Sense of Political Economy (1910).
Before Wicksteed wrote, it was still possible for intelligent men to give countenance to the belief that the whole structure of Economics depends upon the assumption of a world of economic men, each actuated by egocentric or hedonistic motives. For anyone who has read the Common Sense, the expression of such a view is no longer consistent with intellectual honesty. Wicksteed shattered this misconception once and for all. . . .
[Modern value theory has] thrown the whole corpus of economic science into an entirely new light — a light in which Economics is seen to be a discussion not of the nature of certain kinds of behavior arbitrarily separated off from all others, but of a certain aspect of behavior viewed as a whole. . . . [W]hen [the] final history [of modern economics] comes to be written, I think it will be found that Wicksteed's exhaustive examination of the "economic relationship," and his insistence that there can be no logical dividing line between the operations of the market and other forms of rational action, are by no means among the least important or least original." (pp. xxi-xxii)
I wonder how much of the current contretemps over economic methods in organization and management is simply a re-hash of controversies already covered by Wicksteed, Clark (1, 2), Robbins, etc.
Working Papers and Paper Submissions
| Nicolai Foss |
I have noted that people who present papers at conferences here in DK or at the research center I direct increasingly refuse to have their papers uploaded. This is more prevalent among US presenters (than Euro presenters) and more prevalent among management presenters (than econ presenters).
Unlike this blogger (but certainly like my co-blogger) some people will upload only brilliant, perfectly polished papers. Depending on the job market situation, people may be more or less reluctant to upload papers that may not contribute to their reputation for producing high quality, highly polished research. However, that is arguably only part of the explanation. (more…)
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.)
Nudity, Law, and Social Norms
| Peter Klein |
From Bryan Caplan I learn that Berkeley's "Naked Guy," a campus fixture during my graduate-school years there in the early 1990s, committed suicide last week. Bryan, then a Berkeley undergraduate, adds this astute observation: "At the time, I often pointed out that the Naked Guy was proof that social norms, not the law, were the foundation of civility: Even if nudity were legalized, only one student out of tens of thousands would take it all off."
The importance of informal norms and social conventions is increasingly recognized in economics (and law). The literature in this area goes back at least to Menger's (1883) analysis of institutions, and includes contributions from Schelling (1960), Ullman-Margalit (1977), Schotter (1981), Sugden (1986), Benson (1990), and Ellickson (1991). Recent work by Baker, Gibbons, and Murphy (2002) on relational contracting, focusing on the narrower question of firm boundaries, belongs on this list as well. This literature interprets social norms as equilibrium solutions to the kinds of coordination games popularized by Schelling (1960). Credible threats of reciprocity are the key. In these models agents abide by informal rules not out of a sense of moral duty, or from a process of unconscious socialization, but because it is in their rational self-interest to do so.
My sense is that management theory, and organizational behavior in particular, has yet to grapple with the insights from this strand of literature. Am I wrong?
Axel Leijonhufvud and a Bit of Autobiography
| Nicolai Foss |
As blogging is an inherently narcissistic undertaking, I hope I will be excused for the following piece of autobiographical indulgence.
I began studying economics at the University of Copenhagen in 1983. The three first years essentially followed a micro and macro division (with a strong dominance of macro stuff). The macro part, particularly in my second year, was positively awful. The intention clearly was that macro should lead directly to econometrics, so all teaching and reading material centered on analyzing the causal structure of one silly Keynesian model after another.
The indoctrination with Tinbergen-style Keynesianism was rather massive, but there was one paper in the syllabus that dealt with monetarist and new classical critiques of Keynesianism. Naturally, this paper (though dismissive of the critics of Keynesianism) triggered my interest in those writers who were somehow in opposition to the tedious Keynesianism that we were taught. Hunting expeditions to the library ensued.
In this way, I discovered a book by a Henry Hazlitt, called The Failure of the New Economics, which was virulently anti-Keynes, and somewhat primitive in its reasoning. Some further search uncovered a book in distinguished blue binding, and an intriguing title in golden letters, On Keynesian Economics and the Economics of Keynes: A Study in Monetary Theory by an author with a familiar Scandinavian name, Axel Leijonhufvud. I was completely captivated by this book, and it became my economics bible until I graduated from the University of Copenhagen. (more…)
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