Showing papers in "Strategic Management Journal in 1992"
TL;DR: The nature of the core capabilities of a firm is examined, focusing in particular on their interaction with new product and process development projects, and two new concepts about core capabilities are explored here.
Abstract: This paper examines the nature of the core capabilities of a firm, focusing in particular on their interaction with new product and process development projects. Two new concepts about core capabilities are explored here. First, while core capabilities are traditionally treated as clusters of distinct technical systems, skills, and managerial systems, these dimensions of capabilities are deeply rooted in values, which constitute an often overlooked but critical fourth dimension. Second, traditional core capabilities have a down side that inhibits innovation, here called core rigidities. Managers of new product and process development projects thus face a paradox: how to take advantage of core capabilities without being hampered by their dysfunctional flip side. Such projects play an important role in emerging strategies by highlighting the need for change and leading the way. Twenty case studies of new product and process development projects in five firms provide illustrative data.
6,310 citations
TL;DR: The resource-based approach as discussed by the authors is an emerging framework that has stimulated discussion between scholars from three research perspectives: traditional strategy insights concerning a firm's distinctive competencies and heterogeneous capabilities.
Abstract: The resource-based approach is an emerging framework that has stimulated discussion between scholars from three research perspectives. First, the resource-based theory incorporates traditional strategy insights concerning a firm's distinctive competencies and heterogeneous capabilities. The resource-based approach also provides value-added theoretical propositions that are testable within the diversification strategy literature. Second, the resource-based view fits comfortably within the organizational economics paradigm. Third, the resource-based view is complementary to industrial organization research. The resource-based view provides a framework for increasing dialogue between scholars from these important research areas within the conversation of strategic management. Resource-based studies that give simultaneous attention to each of these research programs are suggested.
3,329 citations
TL;DR: In this paper, the authors address alternative forms of governance in cases where multiple organizations repeatedly cooperate and explore their characteristics and follow this with a discussion of criteria which they believe bear on the choice of governance: risk and reliance on trust.
Abstract: Alliances and similar cooperative efforts are receiving increased attention in the strategic management literature. These relationships differ in significant ways from those governed by markets or hierarchies, and pose very different issues for researchers and managers. In this paper we address alternative forms of governance in cases where multiple organizations repeatedly cooperate. We explore their characteristics and follow this with a discussion of criteria which we believe bear on the choice of governance: risk and reliance on trust. We offer propositions on relationships between these criteria and the choice of governance mechanisms. In the concluding section of the paper we explore the implications of our analysis for managers and scholars.
2,932 citations
TL;DR: In this article, the authors argue that the analysis of intangible resources should play a major role in the strategic management process, by means of both theoretical reasoning and empirical evidence, and argue that sustainable competitive advantage results from the possession of relevant capability differentials.
Abstract: Sustainable competitive advantage results from the possession of relevant capability differentials. The feedstock of these capability differentials is intangible resources which range from patents and licenses, to reputation and know-how. A framework of intangible resources has been produced which formed the basis for a national survey of chief executives in the U.K. Some of the more significant findings of the survey were that: employee know-how and reputation are perceived as the resources which make the most important contribution to business success; and that for most companies operations is the most important area of employee know how. This article argues, by means of both theoretical reasoning and empirical evidence, that the analysis of intangible resources should play a major role in the strategic management process.
2,625 citations
TL;DR: This article reviewed the strategic decision making literature by focusing on the dominant paradigms, i.e., rationality and bounded rationality, politics and power, and garbage can, and concluded that strategic decision makers are boundedly rational, that power wins battles of choice, and that chance matters.
Abstract: This article reviews the strategic decision making literature by focusing on the dominant paradigms–i.e., rationality and bounded rationality, politics and power, and garbage can. We review the theory and key empirical support, and identify emergent debates within each paradigm. We conclude that strategic decision makers are boundedly rational, that power wins battles of choice, and that chance matters. Further, we argue that these paradigms rest on unrealistic assumptions and tired controversies which are no longer very controversial. We conclude with a research agenda that emphasizes a more realistic view of strategic decision makers and decision making, and greater attention to normative implications, especially among profit-seeking firms in global contexts.
1,422 citations
TL;DR: This paper makes three suggestions to researchers for studying strategy process: define the meaning of process, clarify the theory of process and design research to observe strategy process in such a way that is consistent with one's definition and theory ofprocess.
Abstract: This paper makes three suggestions to researchers for studying strategy process. First, define the meaning of process. Process is often used in three ways in the literature: (1) a logic used to explain a causal relationship in a variance theory, (2) a category of concepts that refer to actions of individuals or organizations, and (3) a sequence of events that describe how things change over time. The second suggestion is to clarify the theory of process. An interdisciplinary literature review identifies four types of theories of process that can be drawn upon: life cycle, teleology, dialectics, and evolution. The third suggestion is to design research to observe strategy process in such a way that is consistent with one's definition and theory of process.
1,278 citations
TL;DR: In the successful company studied, organizational renewal is a continuous process of first and second order changes in cognitive maps, which contribute to long-term corporate strategy change.
Abstract: Organizational renewal requires that a firm's top managers make timely adjustments in their mental models following significant changes in the environment. Our initial propositions about the difference between renewal and decline focused on whether similar organizations in similar contexts differ in their ability to recognize significant changes in their environments. Analysis of longitudinal data from a matched pair of U.S. railroads suggested, however, that renewal hinges not so much on noticing new conditions, but on being able to link environmental change to corporate strategy and to modify that linkage over time. In the successful company we studied organizational renewal is a continuous process of first and second order changes in cognitive maps.
1,135 citations
TL;DR: The essay draws on a wide range of social science ideas to lay out a set of internally consistent insights and assumptions to guide thinking and empirical inquiry about the analysis of process issues in strategic management.
Abstract: This essay discusses the character and significance of strategy process research. Process research in strategic management is paradigmatically diverse and empirically complex. Strategy process research has been narrow in its focus and its undoubted contribution has sometimes been obscured by the lack of explicit discourse about its analytical foundations. The essay draws on a wide range of social science ideas to lay out a set of internally consistent insights and assumptions to guide thinking and empirical inquiry about the analysis of process issues in strategic management. The essay also provides a guide to the eight papers contained in this special issue.
1,103 citations
TL;DR: This paper synthesizes and critically reviews three intellectual traditions in the study of managerial elites and argues for the development of a complementary research tradition which combines a contextual and processual analysis of managerial elite.
Abstract: The study of managerial elites is one of the most important, yet neglected areas of social science research. This paper synthesizes and critically reviews three intellectual traditions in the study of managerial elites. These are: interlocking directorates and the study of institutional and societal power, the study of boards and directors, and the composition and correlates of top management teams. The paper concludes by arguing for the development of a complementary research tradition which combines a contextual and processual analysis of managerial elites.
994 citations
TL;DR: This paper used a managerial learning framework to build and test a model of the decision-making process that drives decisions to strategically reorient an organization, and found that poor past performance, environmental awareness, top management team heterogeneity, and CEO turnover increased the likelihood of reorientation.
Abstract: This study uses a managerial learning framework to build and test a model of the decisionmaking process that drives decisions to strategically reorient an organization. The model examines the effects of past performance, managerial interpretations, and top management team characteristics on the likelihood of strategic reorientation in two distinct environmental contexts. The results indicate that poor past performance, environmental awareness, top management team heterogeneity, and CEO turnover increased the likelihood of reorientation. There are some differences in the ways in which these variables affect reorientation across the two environmental contexts. Poor past performance was more strongly associated with reorientation in the stable environment than in the turbulent environment. The tendency to make external attributions for poor performance outcomes decreased the likelihood of reorientation in the turbulent environment, but not in the stable environment.
897 citations
TL;DR: In this paper, it is shown that some organizational alignments do produce supernormal profits, independent of the profits produced by traditional industry and strategy variables, which is consistent with the resource view of the firm: to the extent that alignments result from skill, it is reasonable to regard alignment skill as a strategic resource capable of generating economic rents.
Abstract: In explaining financial performance variance, strategic management researchers and industrial organization economists have emphasized industry factors, market share, generic strategy, and strategic group membership, whereas organizational contingency theorists have emphasized alignments involving environment and internal structure. This study integrates these perspectives, testing the financial performance consequences of organizational alignments, in context with the effects of industry, market share, and strategy. In an empirical study in two manufacturing industries, it is shown that some organizational alignments do produce supernormal profits, independent of the profits produced by traditional industry and strategy variables. The results are consistent with the resource view of the firm: to the extent that alignments result from skill rather than luck, it is reasonable to regard alignment skill as a strategic resource capable of generating economic rents. The article suggests that, by focusing on industry and competitive strategy variables, contemporary industrial organization and strategy research has understated the role of organizational factors in producing sustainable competitive advantage.
TL;DR: A strong inverse relationship is suggested between perceptions of cultural differences and shareholder gains, after controlling for perceptions of the buying firm's tolerance for multiculturalism and the relative size of the merging firms.
Abstract: Merger literature suggests that the relationship between shareholder gains and the relatedness of merging firms is contingent upon the compatibility of the two firms' top management cultures. This hypothesis is tested by surveying the perceptions of cultural differences of top management teams of recently acquired firms, and then relating these perceptions to related stock market gains to the buying firms. The findings suggest a strong inverse relationship between perceptions of cultural differences and shareholder gains, after controlling for perceptions of the buying firm's tolerance for multiculturalism and the relative size of the merging firms.
TL;DR: Three key themes for future research on internationalization as a process are suggested, dealing with major omissions and weaknesses identified in the review, are: the study of acquisition processes and internationalization, theStudy of dynamic processes in MNCs, and thestudy of internationalization processes in their outer contexts.
Abstract: This paper critically reviews the field of international business research. The field is characterized by considerable intellectual diversity, where theoretical focus is blurred by the multidisciplinary nature of the field. The review focuses on three themes that help shed light on internationalization as a strategy process; stage models of internationalization, studies of the link between strategy and structure in MNCs, and studies of administrative processes in MNCs and recent organizational models for MNCs. Sequential stages models are too deterministic and stress only early stages of internationalization. Conceptual contributions from research on structures following strategies have a very static character. Research on management processes in MNCs have a questionable empirical base and normative bent. Three key themes for future research on internationalization as a process are suggested. These themes, dealing with major omissions and weaknesses identified in the review, are: the study of acquisition processes and internationalization, the study of dynamic processes in MNCs, and the study of internationalization processes in their outer contexts.
TL;DR: A theoretical typology of middle management roles in strategy is developed, and measures for each role are derived, and the relationship between middle management strategic involvement and Miles and Snow's (1978) strategic type is examined.
Abstract: This paper reports the results of a study that investigated the strategic involvement of 259 middle managers in 25 organizations. Drawing from previous clinical research, a theoretical typology of middle management roles in strategy is developed. Measures for each role are derived, and the relationship between middle management strategic involvement and Miles and Snow's (1978) strategic type is examined. Results suggest the usefulness of these measures in assessing both the level and type of middle management strategic activity. In addition, the findings show that middle managers in Prospectors report significantly higher levels of upward and divergent forms of strategic involvement than those in Analyzers and Defenders. Traditionally, middle-level managers have not been considered part of the strategy process except in providing informational inputs and directing implementation. Contemporary theory and descriptions suggest, however, that middle managers regularly attempt to influence strategy and often provide the impetus for new initiatives (Burgelman, 1983a,b; Mintzberg and Waters, 1985). Bower (1970) was one of the first to recognize the contributions of middle managers: they '... are the only men [sic] in the organization who are in a position to judge whether [strategic] issues are being considered in the proper context' (297-298). More recently, empirical research has confirmed middle management's upward influence on strategic decisions (Schilit, 1987)
TL;DR: This article analyzed the influence of various factors on shareholder wealth creation in mergers and acquisitions using a multivariate framework and found that while the target firm's shareholders gain significantly from M&A, those of the bidding firm do not.
Abstract: This study analyzes the empirical literature concerning the influence of various factors on shareholder wealth creation in mergers and acquisitions using a multivariate framework. Overall, results indicate that while the target firm's shareholders gain significantly from mergers and acquisitions, those of the bidding firm do not. Findings also indicate that the use of stock financing has a significant impact on the wealth of both the target and bidding firms' shareholders. The presence of multiple bidders and the type of acquisition influence the bidders' return, while regulatory changes and tender offers influence the targets' returns. The paper also provides a comparison of our findings with that of previous narrative reviews and discusses their implications from the viewpoint of managers and researchers.
TL;DR: An understanding of the renewing organization based on the practice of product innovation is developed and three organizing principles which can sustain the ongoing development and exploitation of market-technology knowledge are described.
Abstract: Theories of organizational renewal and organizational design often bear little relationship to the complex, murky day-to-day realities people face. This paper develops an understanding of the renewing organization based on the practice of product innovation. The practice of product innovation is conceived of as the creation and exploitation of knowledge which links market and technological possibilities. Four clusters of market-technology knowledge are described and metaphors for their creation are developed. Then, three organizing principles which can sustain the ongoing development and exploitation of market-technology knowledge are described. The model provides a realistic understanding of the practice of product innovation and of the renewing organization. It also shows how innovation, strategy, and organizational design are inextricably linked.
TL;DR: In this article, the authors synthesize theoretical arguments and empirical findings from this literature to identify the underlying advantages and disadvantages of choosing vertical financial ownership relative to vertical contracts, and provide a framework for making this analysis based on a synthesis of agency and transaction costs perspectives.
Abstract: Vertical integration is a fundamental corporate strategy of interest to the fields of strategic management and organizational economics. This paper synthesizes theoretical arguments and empirical findings from this literature to identify the underlying advantages and disadvantages of choosing vertical financial ownership relative to vertical contracts. It then suggests that in the absence of agency and transaction costs, vertical financial ownership and vertical contracting are equivalent governance structures for achieving corporate objectives. However, given a world of positive agency and transaction costs, the key theoretic question then becomes predicting when market mechanisms are sufficient, when intermediate forms of vertical contracting become necessary, and when vertical financial ownership becomes the preferred governance structure. The concluding section of the paper provides a framework for making this analysis based on a synthesis of agency and transaction costs perspectives.
TL;DR: Event-history analysis of 262 large firms over a 29-year period indicates that the occurrence of mergers tends to increase the rate of merger of the same type (repetitive momentum), and organizational decentralization increases the rates of diversifying mergers (contextual momentum).
Abstract: This paper defines and examines three types of strategic momentum. Repetitive momentum occurs when organizations repeat previous strategic actions. Postitional momentum occurs when organizations take actions that sustain or extend existing strategic positions. Contextual momentum occurs when general traits, such as organizational structure, shape strategic action in a consistent fashion. Event-history analysis of 262 large firms over a 29-year period indicates that: (1) the occurrence of mergers tends to increase the rate of mergers of the same type (repetitive momentum), and (2) organizational decentralization increases the rate of diversifying mergers (contextual momentum). Product market diversification was found to increase the probability of product extension mergers but not conglomerate mergers, only partly confirming positional momentum. The results indicate that internal momentum can affect merger activity, and suggest the importance of continuing research on the role of inertia in organizational adaptation.
TL;DR: This paper proposes a four phase characterization of how organizations move between state sustaining renewal and the more radical reconceptualizations that significantly alter organization activity.
Abstract: Strategic renewal is accomplished in large and small ways. This paper proposes a four phase characterization of how organizations move between state sustaining renewal and the more radical reconceptualizations that significantly alter organization activity. The argument juxtaposes inertia (or commitment to current strategy) and stress, the dissatisfactions that signal the need for renewal. To explore the details of this interaction, and its implications for the evolution of strategy over time, a formal model is developed. Quite plausible organization paths of renewal are simulated via the model which help illustrate our main theoretic arguments.
TL;DR: The guest editors suggest that the future research in this subfieid should be more holistic, emphasize more team work, focus more on corporate managers and be more supportive of action research methodologies.
Abstract: In this introduction to the Special Issue on Strategy Process Research the guest editors suggest that the future research in this subfieid should be more holistic, emphasize more team work, focus more on corporate managers and be more supportive of action research methodologies. This introductory essay also reviews briefly the important contributions to date of strategy process research and provides a short summary of the papers that were selected for the special issue.
TL;DR: This paper seeks to help remedy the confusion in the literature by developing a comprehensive framework of change by organizations, built on various cycles: concentric to represent the contents and levels of change, circumferential to represents the means and processes ofchange, tangential to representing the episodes and stages of change.
Abstract: Much of the theory and research about change in organizations, by being presented free of rich context, creates a certain amount of confusion in the literature. This paper seeks to help remedy that situation by developing a comprehensive framework of change by organizations, built on various cycles: concentric to represent the contents and levels of change, circumferential to represent the means and processes of change, tangential to represent the episodes and stages of change, and spiraling to represent the sequences and patterns of change. This framework is fleshed out in conclusion by developing three models of change experienced by major world religions, labeled enclaving, cloning, and uprooting.
TL;DR: Empirical research was conducted to investigate retrenching as an integral component of the overall turnaround process, producing an empirical discrimination between retrenchment as a stand-alone response to financial decline and retrenchments as an initial phase of a turnaround strategy.
Abstract: Empirical research was conducted to investigate retrenchment as an integral component of the overall turnaround process. An industry study provided an anchored operational definition of a turnaround situation, indications of its internal and external causes, and an application of an absolute measure of its severity. The research further produced an empirical discrimination between retrenchment as a stand-alone response to financial decline and retrenchment as an initial phase of a turnaround strategy, and an identification of activities that can be used to classify entrepreneurial vs. efficiency emphases in a turnaround firm's recovery response.
TL;DR: In this article, the propensity of organizations to adopt technological innovations was examined in a sample of commercial banks and it was found that prior experience in information technology, in tandem with a variety of interfirm linkages, will affect the banks' decision to adopt this innovation.
Abstract: This paper examines the propensity of organizations to adopt technological innovations. Technological innovations evolve from the stock of skills which organizations have accumulated over time. Linkages with extramural sources of technology are presumed to be important as well. Hypotheses are tested on a sample of commercial banks. Findings show that prior experience in information technology, in tandem with a variety of interfirm linkages, will affect the banks' decision to adopt this innovation.
TL;DR: In this paper, the comparative advantage hypothesis is used to investigate whether market pioneers are more successful because they started with superior skills and resources than later entrants, and empirical results across 171 diversification entrants tend to support this hypothesis.
Abstract: Are market pioneers more successful because they started with superior skills and resources? The absolute pioneer advantage hypothesis is that because market pioneering is desirable, firms with superior skills and resources naturally choose to pioneer new markets. The comparative advantage hypothesis is that market evolution changes success requirements. Market pioneer skills and resources differ from, but are not superior to later entrants. Empirical results across 171 diversification entrants tend to support the comparative advantage hypothesis. Skill and resource profiles are provided for market pioneers, early followers, and late entrants.
TL;DR: This article argued that strategic planning does not satisfy the criteria for sustainable competitve advantage and that although it may produce economic value, it is easily imitated and may be substitutable.
Abstract: Since 1970, over forty empirical studies have examined the performance consequences of formal strategic planning. This line of research has drawn heavy criticism from reviewers on methodological grounds, and has produced confusing, apparently contradicatory results. This article reevaluates the planning-performance relationship from a resource perspective, arguing that strategic planning does not satisfy the criteria for sustainable competitve advantage-- although it may produce economic value, it is easily imitated and may be substitutable. The article suggests that previous studies produced inconsistent results because they did not account for the dissemination of strategic planning over time, or for industry differences in strategic planning factor markets. An empirical test in two industries funds that formal strategic planning and financial performance are unrelated in a 'planning equilibrium' industry, but positively related in an industry with strategic planning factor market imperfections.
TL;DR: The authors used Event History methodology to examine factors that may contribute to the instability of joint ventures between US multinationals and foreign companies, and found statistically significant support for hypotheses that joint ventures are more unstable when partners start out with uneven shares of equity and when the contracts have been renegotiated before.
Abstract: This study uses Event History methodology to examine factors that may contribute to the instability of joint ventures between US multinationals and foreign companies Using joint venture contract renegotiation as a proxy for instability, it finds statistically significant support for hypotheses that joint ventures are more unstable when partners start out with uneven shares of equity and when the contracts have been renegotiated before Contract renegotiation is also more likely in relatively open economies than in countries that impose restrictions on direct investment
TL;DR: In this article, a model of the internal corporate venturing process was developed to explore conditions under which entrepreneurs are likely to continue with a course of action despite experiencing negative outcomes, which runs counter to trial-and-error learning behavior.
Abstract: This paper develops a model of the internal corporate venturing process. The model explores conditions under which entrepreneurs are likely to continue with a course of action despite experiencing negative outcomes. Persisting with a course of action despite associated negative outcomes runs counter to trial-and-error learning behavior. We suggest that entrepreneurs are likely to continue with a course of action despite experiencing negative outcomes when the level of ambiguity is high and slack resources are available. In contrast, trial-and-error learning is likely to occur when either the level of ambiguity is low or when slack resources are not available. We examine these and other aspects of the venturing process with longitudinal data on the development of one venture. The data were collected over a 12-year period during the commercial development of cochlear implants within a large diversified corporation. The results support our core hypotheses on trial-and-error learning and action persistence while extending our understanding of associated processes.
TL;DR: In this paper, a taxonomy of business-level strategies in global industries is presented, which includes four broad strategies: domestic product niche, exporting high quality offerings, international product innovation, and quasi-global combination.
Abstract: This study presents a taxonomy of business-level strategies in global industries. Empirical data suggest there are four broad strategies: domestic product niche, exporting high quality offerings, international product innovation, and quasi-global combination. A discussion of the characteristics and performance differentials of each strategy type is provided as well.
TL;DR: Results confirm that restructuring activity focused on firms at intermediate levels of diversification which have a mixture of related and unrelated business units, and suggest a partial substitution between diversification and R&D activity.
Abstract: In the 1980s a number of large corporations restructured their diversified businesses through divestitures. It is hypothesized that restructuring activity focused on firms at intermediate levels of diversification (e.g., related-linked) which have a mixture of related and unrelated business units. Results confirm this hypothesis which explains that such mixed corporate strategies create organizational and control inefficiencies in managing both related and unrelated types of business units. Restructured firms were also found to move towards two types of different internal capital markets (related and unrelated). Most restructuring firms moved toward lower levels of diversification (e.g., related-constrained), although some moved toward higher levels of diversification (e.g., unrelated business). Also, this study finds restructuring firms that changed their corporate strategy by reducing diversified scope increased their R&D intensity. Firms that restructured and increased their diversified scope decreased R&D intensity. This result suggested a partial substitution between diversification and R&D activity.
TL;DR: Results generally support the notion that a firm's compensation strategies make a greater contribution to firm performance if these are attuned to extent and process of corporate diversification.
Abstract: This study tests six hypotheses on the extent to which a match between compensation and diversification strategies affects firm performance. Using both archival and survey data, results generally support the notion that a firm's compensation strategies make a greater contribution to firm performance if these are attuned to extent and process of corporate diversification. The paper concludes with a set of recommendations for future research on compensation-diversification strategy relations and their interactive effect on firm performance.