Showing papers by "London Business School published in 1998"

Social Capital, Intellectual Capital, and the Organizational Advantage

Abstract: Scholars of the theory of the firm have begun to emphasize the sources and conditions of what has been described as “the organizational advantage,” rather than focus on the causes and consequences of market failure. Typically, researchers see such organizational advantage as accruing from the particular capabilities organizations have for creating and sharing knowledge. In this article we seek to contribute to this body of work by developing the following arguments: (1) social capital facilitates the creation of new intellectual capital; (2) organizations, as institutional settings, are conducive to the development of high levels of social capital; and (3) it is because of their more dense social capital that firms, within certain limits, have an advantage over markets in creating and sharing intellectual capital. We present a model that incorporates this overall argument in the form of a series of hypothesized relationships between different dimensions of social capital and the main mechanisms and proces...

Social Capital and Value Creation: The Role of Intrafirm Networks

Abstract: Using data collected from multiple respondents in all the business units of a large multinational electronics company, we examined the relationships both among the structural, relational, and cogni...

Strategic decision-making processes: the role of management and context

Abstract: This paper investigates the relationship between the process of strategic decision-making and management and contextual factors. First, drawing on a sample of strategic decisions, it analyzes the process through which they are taken, into seven dimensions: comprehensiveness/rationality, financial reporting, rule formalization, hierarchical decentralization, lateral communication, politicization, problem-solving dissension. Second, these process dimensions are related to (1) decision-specific characteristics, both perceived characteristics and objective typologies of strategic decisions, (2) top management characteristics, and (3) contextual factors referring to external corporate environment and internal firm characteristics. Overall, the results support the view that strategic decision processes are shaped by a multiplicity of factors, in all these categories. But the most striking finding is that decision-specific characteristics appear to have the most important influence on the strategic decision-making process, as decisions with different decision-specific characteristics are handled through different processes. The evident dominance of decision-specific characteristics over management and contextual factors enriches the traditional ‘external control’ vs. ‘strategic choice’ debate in the area of strategic management. An interpretation of results is attempted and policy implications are derived. © 1998 John Wiley & Sons, Ltd.

Technology development mode: a transaction cost conceptualization

Abstract: Technology alliances have emerged in the past decade as a significant mode for the development of innovation. The present research assesses the factors explaining whether firms will engage in such technology alliances or utilize the more traditional mode of internal R&D. The hypotheses stem from a transaction cost conceptualization. Results suggest that firms which pursue technology alliances are likely to have less commitment to product category-specific assets, to face higher technological uncertainty, to be more capable at measuring innovation performance, to have more successful technology alliance experiences, and to compete in lower growth product categories. © 1998 John Wiley & Sons, Ltd.

When Groups Consist of Multiple Nationalities: Towards a New Understanding of the Implications

Abstract: International companies are rapidly increasing their use of multinational groups (MNGs), sometimes with great success and sometimes severe frustration. The purpose of this paper is to establish a conceptual understanding of the implications of multinational composition for group functioning. Moving across units of analysis, we focus first on the individual group member's characteristics as a reflection of his or her nationality, then on the effects of multinational diversity on group functioning and performance, and finally on the association between corporate policies and the use of MNGs. We close the paper with a proposed research agenda on multinational groups.

Resilience in natural and socioeconomic systems

Abstract: We, as a society, find ourselves confronted with a spectrum of potentially catastrophic and irreversible environmental problems, for which conventional approaches will not suffice in providing solutions. These problems are characterized, above all, by their unpredictability. This means that surprise is to be expected, and that sudden qualitative shifts in dynamics present serious problems for management. In general, it is difficult to detect strong signals of change early enough to motivate effective solutions, or even to develop scientific consensus on a time scale rapid enough to allow effective solution. Furthermore, such signals, even when detected, are likely to be displaced in space or sector from the source, so that the motivation for action is small. Conventional market mechanisms thus will be inadequate to address these challenges.

Organisation and expertise: An exploration of knowledge bases and the management of accounting and consulting firms☆

Abstract: Existing theories have recognised the importance of expert knowledge in the formation and survival of professional service firms (PSFs), such as accounting and consulting firms, but have not fully explained its role. We argue that knowledge is a key determinant of the organisational structure and performance of PSFs. We examine forms of knowledge and knowledge management strategies within PSFs and develop a framework linking the firm's knowledge base and organisational structure. Two contrasting case studies are presented to illustrate these arguments. The paper concludes with a set of propositions to guide further research.

Redefining industry structure for the information age

Abstract: We are entering a new competitive age in which the basis of competition is being fundamentally altered through the introduction of advanced information technologies and public communication infrastructures, such as the Internet. In these environments, the nature and locus of competition will radically alter, as information becomes an increasingly important resource. This paper develops ideas around the strategic characteristics of information—information separability and information specificity. Moreover, it attempts to redefine the nature of industry structure in such a competitive environment by examining what constitutes the real boundaries of competition, industry concentration, related diversification, and innovation for firms competing in the Information Age. © 1998 John Wiley & Sons, Ltd.

Murphy's Law and Market Anomalies

Abstract: Many researchers have uncovered empirical regularities in stock market returns. If these regularities persist, investors can expect to achieve superior performance. Unfortunately, nature can be perverse. Once an apparent anomaly is publicised, only too often it disappears or goes into reverse. The latter seems to have happened to the small firm premium. After the UK size premium was documented and disseminated, a historical small-cap premium of six percent was followed by a small-cap discount of around six percent. This study presents evidence of and some explanations for the disappearance of the small firm premium.

The European Business Interest and the Nation State: Large-firm Lobbying in the European Union and Member States

Abstract: Firms are legitimate political actors, but few empirical studies examine how firms have re-structured their political organisation to maximise the political options in the constantly evolving European public policy system — or assessed the impact of these changes on the member states' industrial relations. Based on a study of Europe's largest firms, this article explores the degree to which the creation of the single market and the strengthening of European institutions has harmonised the firms' political activity across borders, sectors and issues. It concludes that multinationals have established a sophisticated political capacity that allows them to develop new multilevel and ad hoc political alliances and that this new political co-ordination has standardised political responses across issues and altered national public policy systems.

A brief history of market efficiency

Abstract: Every finance professional employs the concept of market efficiency. The theory, evidence and counterevidence focus on a couple of dozen highly influential articles published during the twentieth century. We summarise the origins of and interlinkages between these contributions to the history of finance.

Do Inventories Matter in Dealership Markets? Evidence from the London Stock Exchange

Abstract: Using London Stock Exchange data, we test the central implication of the canonical model of Ho and Stoll (1983) that relative inventory differences determine dealer behavior. We find that relative inventories explain which dealers obtain large trades and show that movements between best ask, best bid, and straddle are highly correlated with both standardized and relative inventory changes. We show thalt the mean reversion in inventories is highly nonlinear and increasing in inventory levels. We show that a key determinant of variations in interdealer trading is inventories and that interdealer trading plays an important role in managing large inventory positions. SUBSTANTIAL EMPIRICAL PROGRESS has been made in market microstructure literature in analyzing the components of the bid-ask spread and in analyzing information-based models of the bid-ask spread, but little progress has been made in the empirical analyses of inventory models of dealership markets. This is somewhat surprising given that the early theoretical work in the market microstructure area due to Garman (1976), Amihud and Mendelson (1980), and Ho and Stoll (1980, 1981, 1983) dealt primarily with the inventory hypothesis. In fact, Ho and Stoll's (1983) model makes strong predictions about the distribution of inventories and about the relationship between inventories and quote placement behavior.1

Patent Renewals and R&D Incentives

Abstract: In a model with moral hazard and assymmetric information, we show that it can be welfare-improving to differentiate patent lives when firms have different R&D productivities. A uniform patent life provides excessive R&D incentive to low-productivity firms, and too little to high ones. The optimally differentiated patent scheme can be implemented through a menu of patent lives (or renewals) and associated fees. We characterize the optimal mechanism, and use simulation analysis to compare it with existing patent renewal systems and to illustrate the potential welfare gains from the optimal policy.

Employee involvement and the middle manager: evidence from a survey of organizations

Abstract: Summary Although the literature on employee involvement suggests that some organizations experience significant benefits to employee attitudes and productivity, the results from individual studies vary widely. This study focuses on those factors that may mediate the success or failure of employee involvement practices, especially the role played by middle managers. A postal survey of 155 organizations examined the perceived outcomes of different employee involvement practices and the support or resistance attributed to middle managers. Hypothesized correlates of middle management resistance to employee involvement were examined. As hypothesized, positive outcomes of employee involvement were lower in organizations that experienced middle management resistance. The study supports the view that middle managers may resist employee involvement practices in response to threats to self interest (managerial job loss and delayering). However, lack of congruence between organizational systems and structures and the goals of EI and divided or unclear senior management support for EI were also found to be strongly related to middle management resistance. ? 1998 John Wiley & Sons, Ltd.

Social Capital, Intellectual Capital, and the Organizational Advantage

Abstract: This research focuses on creating a theory of the "organizational advantage," a new concept identified within business and management. Using social capital research as a foundation for this theory, three of the study's objectives are identified: 1) incorporate different aspects of social capital to identify three common dimensions; 2) explain the role of each dimension in the process of creating and exchanging knowledge; and 3) maintain the belief that organizations are capable of creating extraordinary amounts of social capital on all three dimensions. Additionally, the relationship between social capital and intellectual capital is explored, as is the impact of this relationship upon a firm's perceived organizational advantage. In order for exchange and combination of resources to occur as a means of creating value, the research identifies three necessary conditions, including the opportunity for exchange and combination to occur, the expectation that exchange and combination generates value, and the motivation that exchange and combination in some way will be productive. This research further identifies a fourth condition, combination capability, as a significant factor in value creation. Due to social capital's influence upon the conditions needed for exchange and combination, social capital aids in the creation of intellectual capital. The research further hypothesizes that a firm's ability to create and utilize social capital contributes to performance differences among firms. Several limitations are identified, including omission of the negative impact of social capital upon a firm and the costs associated with creating and preserving a firm's social capital. The findings of the study are generalized to other institutional situations, and areas for future research are identified. (AKP)

An Applied Econometrician's View of Large Company Performance

Abstract: This paper contains a brief survey of recent empirical work on the performance of large companies. It tries to pull together the literature in the form of six stylized facts, illustrating them with data drawn from a single sample. The paper concludes by highlighting the issues which are thrown up for future work. These are: accounting for persistent heterogeneities between firms, accounting for the apparently erratic performance of many firms and, finally, moving away from hypothesis testing driven empirical agendas.

Political economy of the Kyoto Protocol

Abstract: The Kyoto Protocol, negotiated in December 1997, is the first international treaty to limit emissions of greenhouse gases. But Kyoto does not mark the conclusion to international cooperation on climate change. It is really just a beginning. This paper shows that, in the aggregate, the benefits of undertaking the Kyoto reductions should exceed the corresponding costs-provided these are achieved cost-effectively. But, although Kyoto seeks to promote cost-effectiveness, it may yet prove very costly. Moreover, the agreement may not even achieve the reductions that it promises, either because emissions will relocate to the countries that are not required to stay within Kyoto-prescribed ceilings or because "paper" trades will be promoted by the protocol's mechanisms. More fundamentally, Kyoto does not deter non-compliance, and it only weakly deters non-participation. These flaws need to be mended, but the nature of the problem makes that an especially difficult task. Copyright 1998 by Oxford University Press.

How hardwired is human behavior

Abstract: Time and time again managers have tried to eliminate hierarchies, politics, and interorganizational rivalry--but to no avail. Why? Evolutionary psychologists would say that they are working against nature--emotional and behavioral "hardwiring" that is the legacy of our Stone Age ancestors. In this evolutionary psychology primer for executives, Nigel Nicholson explores many of the Science's central tenets. Of course, evolutionary psychology is still an emerging discipline, and its strong connection with the theory of natural selection has sparked significant controversy. But, as Nicholson suggests, evolutionary psychology is now well established enough that its insights into human instinct will prove illuminating to anyone seeking to understand why people act the way they do in organizational settings. Take gossip. According to evolutionary psychology, our Stone Age ancestors needed this skill to survive the socially unpredictable conditions of the Savannah Plain. Thus, over time, the propensity to gossip became part of our mental programming. Executives trying to eradicate gossip at work might as well try to change their employees' musical tastes. Better to put one's energy into making sure the "rumor mill" avoids dishonesty or unkindness as much as possible. Evolutionary psychology also explores the dynamics of the human group. Clans on the Savannah Plain, for example, appear to have had no more than 150 members. The message for managers? People will likely be most effective in small organizational units. As every executive knows, it pays to be an insightful student of human nature. Evolutionary psychology adds another important chapter to consider.

Bank control, takeovers and corporate governance in Germany

Abstract: This paper examines the three cases of hostile takeovers in Germany in the post Second World War period It describes the important role played by banks in affecting the outcome of the bids: bank representatives were chairmen of the supervisory board in all three cases and banks voted a large number of proxies in important decisions affecting the bids The paper reports that low returns were earned by shareholders of two of the target firms and offers an explanation in terms of bank control and the regulatory regime operating in Germany

The Stakeholder Corporation

Abstract: The stakeholder debate continues unabated in Britain in various arenas of public life and activity. “While recognising the societal holism of the stakeholder concept this article concentrates on the debate at a business level, discussing whether stakeholding is ethical, attainable, or even appropriate to business corporations”. The author is completing his MBA at London Business School and has a background of consulting in organisational and IT analysis.

The chief executive officer as corporate champion of technological innovation: aii empirical investigation

Abstract: Research on innovation has engoged the attention of many scientific disciplines over the past few decades. But while some categories of determining factors (mainly organizational and environmental) are at the centre of this research, others, such as the role and significance of strategic leadership, seem to have received much less empirical attention. Using evidence from a sample of 97 manufacturing enterprises, the present study tests a model of the impact of strategic leadership and corporate context on technological innovatin (TT). The personality and demographic characteristics of chief executive officers (CEis') are used to measure strategic leadership. A number of environmental and internal organizational variables measure the broader context. Four dimensions of TI are measured. Results suggest that CEO characteristics significantly influence TI, but the structural and environmental context is on aggregate more influential. Interestingly though, in new product introductions, CEIs' characteristics ou...

Promotion to Partner in Professional Service Firms

Abstract: A shift away from "up-or-out," the conventional promotion system in professional service firms, has been explained as part of a wider set of changes in internal labor market arrangements and management methods. This is investigated empirically in a sample of large partnerships in one profession. Up-or-out was used by less than one-third of the sample of firms but is common among the largest firms. Internal reforms to the professional firm do not fully explain its rarity; up-or-out appears to be adaptable to new forms of management and internal labor market policies. This raises a number of questions about the utility of theoretical explanations of how professional service firms work or are changing.

Beyond strategic planning to organization learning: Lifeblood of the individualized corporation

Abstract: People are innately curious and, as social animals, are naturally motivated to interact and learn from one another. Over thousands of years, families, clans, and communities have evolved as teaching and learning groups, with individuals sharing information and synthesizing knowledge as a central part of their binding social interchange and as a key engine of their collective progress. Yet, somehow, modern corporations have been constructed in a way that constrains, impedes, and sometimes kills this natural human instinct. Focused on maximizing short‐term static efficiency, most have been designed to extract as much value as possible from all their assets, including people. In that process, however, they have sacrificed the long‐term dynamic efficiencies that come from continuously enhancing and upgrading the capabilities of individuals so as to enable them to create new value.