Showing papers in "Strategic Management Journal in 1996"
TL;DR: In this paper, the authors explore the coordination mechanisms through which firms integrate the specialist knowledge of their members, which has implications for the basis of organizational capability, the principles of organization design, and the determinants of the horizontal and vertical boundaries of the firm.
Abstract: Given assumptions about the characteristics of knowledge and the knowledge requirements of production, the firm is conceptualized as an institution for integrating knowledge. The primary contribution of the paper is in exploring the coordination mechanisms through which firms integrate the specialist knowledge of their members. In contrast to earlier literature, knowledge is viewed as residing within the individual, and the primary role of the organization is knowledge application rather than knowledge creation. The resulting theory has implications for the basis of organizational capability, the principles of organization design (in particular, the analysis of hierarchy and the distribution of decision-making authority), and the determinants of the horizontal and vertical boundaries of the firm. More generally, the knowledge-based approach sheds new light upon current organizational innovations and trends and has far-reaching implications for management practice.
11,779 citations
TL;DR: In this article, the authors analyze the internal stickiness of knowledge transfer and test the resulting model using canonical correlation analysis of a data set consisting of 271 observations of 122 best-practice transfers in eight companies.
Abstract: The ability to transfer best practices internally is critical to a firtn's ability to build competitive advantage through the appropriation of rents from scarce internal knowledge. Just as a firm's distinctive competencies tnight be dificult for other firms to imitate, its best prczctices could be dfficult to imitate internnlly. Yet, little systematic attention has been pcrid to such internal stickiness. The author analyzes itlterrzal stickiness of knowledge transfer crnd tests the resulting model using canonical correlation analysis of a data set consisting of 271 observations of 122 best-practice transfers in eight companies. Contrary to corzverztiorzrzl wisdom that blames primarily motivational factors, the study findings show the major barriers to internal knowledge transfer to be knowledge-related factors such as the recipient's lack oj absorptive capacity, causal anzbiguity, and an arciuous relationship between the source and the recipient. The identification and transfer of best practices cally are hindered less by confidentiality and legal is emerging as one of the most important and obstacles than external transfers, they could be widespread practical management issues of the faster and initially less complicated, all other latter half of the 1990s. Armed with meaningful, things being equal. For those reasons, in an era detailed performance data, firms that use fact- when continuous organizational learning and based management methods such as TQM, bench- relentless performance improvement are needed to marking, and process reengineering can regularly remain competitive, companies must increasingly compare the performance of their units along resort to the internal transfer of capabilitie~.~ operational dimensions. Sparse but unequivocal Yet, experience shows that transferring capaevidence suggests that such comparisons often bilities within a firm is far from easy. General reveal surprising performance differences between Motors had great difficulty in transferring manuunits, indicating a need to improve knowledge facturing practices between divisions (Kerwin and utilization within the firm (e.g., Chew, Bresnahan, Woodruff, 1992: 74) and IBM had limited suc
6,805 citations
TL;DR: A multitype epistemology is begun which admits both the pre- and subconscious modes of human knowing and, reframing the concept of the cognizing individual, the collective knowledge of social groups, to help managers discover their place in the firm as a dynamic knowledge-based activity system.
Abstract: Knowledge is too problematic a concept to make the task of building a dynamic knowledge-based theory of the firm easy. We must also distinguish the theory from the resource-based and evolutionary views. The paper begins with a multitype epistemology which admits both the pre- and subconscious modes of human knowing and, reframing the concept of the cognizing individual, the collective knowledge of social groups. While both Nelson and Winter, and Nonaka and Takeuchi, successfully sketch theories of the dynamic interactions of these types of organizational knowledge, neither indicates how they are to be contained. Callon and Latour suggest knowledge itself is dynamic and contained within actor networks, so moving us from knowledge as a resource toward knowledge as a process. To simplify this approach, we revisit sociotechnical systems theory, adopt three heuristics from the social constructionist literature, and make a distinction between the systemic and component attributes of the actor network. The result is a very different mode of theorizing, less an objective statement about the nature of firms ‘out there’ than a tool to help managers discover their place in the firm as a dynamic knowledge-based activity system.
4,224 citations
TL;DR: In this article, a bibliometric study was performed on the publication records of 96 doctorates in the field whose first post-degree job was in academics, finding that the number of papers published was related to the likelihood of receiving tenure, despite the fact that they had produced more papers during the first 5 years than male faculty members and had higher citation rates.
Abstract: To better define levels of accomplishment for publishing journal articles in strategic management, a bibliometric study was performed on the publication records of 96 doctorates in the field whose first post-degree job was in academics. By examining 20 journals that are outlets for research in strategic management, publication records were developed for each individual for the first 5-10 years following receipt of the doctoral degree. Two factors influenced the publication records of these new faculty. Having publications prior to receiving the doctorate and getting a first job at an institution with a graduate program in management were associated with more frequent publishing after an academic career began. As expected, the number of papers published was related to the likelihood of receiving tenure. However, despite the fact that they had produced more papers during the first 5 years than male faculty members and had higher citation rates, female faculty members were less likely to receive tenure. The findings are discussed in terms of institutional policy for hiring and evaluating new faculty.
4,016 citations
TL;DR: In this paper, a measure of changes in alliance partners' technological capabilities, based on the citation patterns of their patent portfolios, is used to analyze changes in the extent to which partner firms' technological resources overlap as a result of alliance participation.
Abstract: This paper examines interfirm knowledge transfers within strategic alliances. Using a new measure of changes in alliance partners' technological capabilities, based on the citation patterns of their patent portfolios, we analyze changes in the extent to which partner firms' technological resources ‘overlap’ as a result of alliance participation. This measure allows us to test hypotheses from the literature on interfirm knowledge transfer in alliances, with interesting results: we find support for some elements of this ‘received wisdom’—equity arrangements promote greater knowledge transfer, and ‘absorptive capacity’ helps explain the extent of technological capability transfer, at least in some alliances. But the results also suggest limits to the ‘capabilities acquisition’ view of strategic alliances. Consistent with the argument that alliance activity can promote increased specialization, we find that the capabilities of partner firms become more divergent in a substantial subset of alliances.
3,355 citations
TL;DR: In this paper, the authors present a model, grounded in a study of the world disk drive industry, that charts the process through which the demands of a firm's customers shape the allocation of resources in technological innovation.
Abstract: Why might firms be regarded as astutely managed at one point, yet subsequently lose their positions of industry leadership when faced with technological change? We present a model, grounded in a study of the world disk drive industry, that charts the process through which the demands of a firm's customers shape the allocation of resources in technological innovation—a model that links theories of resource dependence and resource allocation. We show that established firms led the industry in developing technologies of every sort—even radical ones—whenever the technologies addressed existing customers' needs. The same firms failed to develop simpler technologies that initially were only useful in emerging markets, because impetus coalesces behind, and resources are allocated to, programs targeting powerful customers. Projects targeted at technologies for which no customers yet exist languish for lack of impetus and resources. Because the rate of technical progress can exceed the performance demanded in a market, technologies which initially can only be used in emerging markets later can invade mainstream ones, carrying entrant firms to victory over established companies.
2,489 citations
TL;DR: Analysis of 45 published strategy studies reveals that the implementation of cluster analysis has been often less than ideal, perhaps detracting from the ability of studies to generate knowledge.
Abstract: Cluster analysis is a statistical technique that sorts observations into similar sets or groups. The use of cluster analysis presents a complex challenge because it requires several methodological choices that determine the quality of a cluster solution. This paper chronicles the application of cluster analysis in strategic management research, where the technique has been used since the late 1970s to investigate issues of central importance. Analysis of 45 published strategy studies reveals that the implementation of cluster analysis has been often less than ideal, perhaps detracting from the ability of studies to generate knowledge. Given these findings, suggestions are offered for improving the application of cluster analysis in future inquiry.
2,108 citations
TL;DR: Firms are distributed knowledge systems in a strong sense: they are decentered systems, iacking an overseeing 'mind'; the knowledge they need to draw upon is inherently indeterminate and continually emerging.
Abstract: The organizational problem firms face is the utilization of knowledge which is not, and cannot be, known by a single agent. Even more importantly, no single agent can fully specify in advance what kind of practical knowledge is going to be relevant, when and where. Firms, therefore, are distributed knowledge systems in a strong sense: they are decentered systems, iacking an overseeing 'mind'. The knowledge they need to draw upon is inherently indeterminate and continually emerging; it is not self-contained. Individuals' stock of knowledge consists of (a) role-related normative expectations; (b) dispositions, which have been formed in the course of past socializations; and (c) local knowledge of particular circumstances of time and place. A firm has greater-or-lesser control over normative expectations, but very limited control over the other two. At any point in time, a firm's knowledge is the indeterminate outcome of individuals attempting to manage the inevitable tensions between normative expectations, dispositions, and local contexts.
2,080 citations
TL;DR: In this article, the authors investigate the ability of strindicated interfcices between components in product design to embed coordination of product development processes and develop concepts of modularity in product and organization designs based on nearly decoffnposable systems.
Abstract: This pczper investigcztes irzterrelationslzi~~s of product design, orgcznization design, processes for leartlirzg and managing knowledge, arzd competitive strategy. This paper uses the principles of nearly decotnposable systems to investigate the ability of strind(irdized interfcices between components in cz product design to embed coordination of product development processes. Embedded coordination creates 'hierczrchical coordination' without the need to continually exercise authority-erzcrblirlg effective coordination of processes without the tight coupling of orgcznizationczl structures. We develop concepts of modularity in product and organization designs based orz smndcirdized component and organization interjczces. Modular product architec- tures create information structures that provide the 'glue' that holds together the loosely coupled parts of a modular orgatzizatiorz design. By fczcilitriting loose coupling, modularity can czlso reduce the cost and dyficulty of adaptive coordination, thereby incrensing the strategic flexibility of firms to respond to erzvironmentnl change. Modularity in product and organizcztion designs therefore etznbles cz new strcitegic approach to the management of knowledge based on cztz irztentionczl, carefully mcznaged loose coupling of (I firm's learning processes czt architec- tural cznd comporzent levels of product crecztiorz processes.
2,047 citations
TL;DR: In this article, the authors examined the longevity of foreign entries and developed hypotheses on the mode (start-ups vs. acquisitions) and ownership structure (wholly owned vs. joint ventures) in relation to cultural distance.
Abstract: This paper examines the longevity of foreign entries. Hypotheses are developed on the mode (start-ups vs. acquisitions) and ownership structure (wholly owned vs. joint ventures) in relation to cultural distance. The hypotheses are tested within a framework of organizational learning, using data on 225 entries that 13 Dutch firms carried out from 1966 onwards. Results show that the presence of cultural barriers punctuates an organization's learning. Cultural distance is a prominent factor in foreign entry whenever this involves another firm, requiring the firm to engage in ‘double layered acculturation.’ We also identify locational ‘paths of learning.’ The longevity of acquisitions is positively influenced by prior entries of the firm in the same country. Similarly, the longevity of foreign entries, in which the firm has a majority stake, improves whenever the expanding firm engaged in prior entries in the same country and in other countries in the same cultural block.
1,660 citations
TL;DR: In this paper, the authors examined the relationship between interfirm asset specificity and performance in the auto industry and found a positive relationship between human asset cospecialization and both quality and new model cycle time.
Abstract: This study examines the relationship between interfirm asset specificity and performance in the auto industry. More specifically, I examine the extent to which differences in supplier–automaker asset specialization may explain performance differences between Japanese automakers (Nissan and Toyota) and U.S. automakers (Chrysler, Ford, General Motors). The findings indicate a positive relationship between supplier–automaker specialization and performance. In particular, the data suggest a positive relationship between interfirm human asset cospecialization and both quality and new model cycle time. Moreover, site specialization is found to be positively associated with lower inventory costs. The findings suggest that in the auto industry a tightly integrated production network characterized by proximity and a high level of human cospecialization will outperform a loosely integrated production network characterized by low levels of interfirm specialization.
TL;DR: The explosion of interest in knowledge and its management reflects the trend towards 'knowledge work' and the Information Age, and recognition of knowledge as the principal source of economic rent as mentioned in this paper.
Abstract: The explosion of interest in knowledge and its management reflects the trend towards ‘knowledge work’ and the Information Age, and recognition of knowledge as the principal source of economic rent The papers in this Special Issue represent an attempt by strategy scholars (and some outside our traditional field) to come to terms with the implications of knowledge for the theory of the firm and its management They are the product of a convergence of several streams of research which have addressed management implications of knowledge, including the management of technology, the economics of innovation and information, resource-based theory, and organizational learning At the theoretical level, knowledge-centered approaches of Penrose, Arrow, Hayek and others have been enriched by contributions from evolutionary economists (notably Nelson and Winter) and epistemologists (notably M Polanyi) At the empirical level, research into innovation and its diffusion originated by Mansfield, Griliches and others has been extended through studies which investigate tacit as well as explicit knowledge, and explore knowledge transfer within as well as across firms
TL;DR: The authors argue that firms have particular institutional capabilities that allow them to protect knowledge from expropriation and imitation more effectively than market contracting, and they argue that it is these generalized institutional capabilities which allow firms to generate and protect the unique resources and capabilities that are central to the strategic theory of the firm.
Abstract: This paper argues that firms have particular institutional capabilities that allow them to protect knowledge from expropriation and imitation more effectively than market contracting. I argue that it is these generalized institutional capabilities that allow firms to generate and protect the unique resources and capabilities that are central to the strategic theory of the firm.
TL;DR: The authors argue that firms have particular institutional capabilities that allow them to protect knowledge from expropriation and imitation more effectively than market contracting, and they argue that it is these generalized institutional capabilities which allow firms to generate and protect the unique resources and capabilities that are central to the strategic theory of the firm.
Abstract: This paper argues that firms have particular institutional capabilities that allow them to protect knowledge from expropriation and imitation more effectively than market contracting. I argue that it is these generalized institutional capabilities that allow firms to generate and protect the unique resources and capabilities that are central to the strategic theory of the firm.
TL;DR: It is found that the knowledge used in innovation by foreign subsidiaries in U.S. regions is predominantly local (at the regional and country level).
Abstract: Do multinationals go abroad to acquire technological knowledge? Do they also contribute knowledge locally? We investigate the learning and contribution patterns of multinational firms in the U.S. semiconductor industry through the analysis of citations to their patents and through field interviews. We find that the knowledge used in innovation by foreign subsidiaries in U.S. regions is predominantly local (at the regional and country level). In fact, foreign firms use regional knowledge significantly more than similar domestic firms. In the case of European and Korean firms, foreign investment is directed towards offsetting home country technological weaknesses. The study finds that foreign firms also contribute to local technological progress—a significant proportion of the citations to their patents are local. Local learning without contributing may not be possible.
TL;DR: In this paper, the authors present results from a study of 319 business units that addresses the gap between human resource management practices and firm-level performance outcomes and find that human resource planning, recruitment, and selection strategies have positive and significant effects on labor productivity.
Abstract: Despite the consistency with which the theoretical and normative connections between human resource management practices and firm-level performance outcomes are made, empirical studies that link the two are sparse. This paper presents results from a study of 319 business units that addresses this gap. Hypotheses are derived from a resource-based perspective on strategy. Positive and significant effects on labor productivity are found for organizations that utilize more sophisticated human resource planning, recruitment, and selection strategies. These effects are particularly pronounced in the case of capital-intensive organizations.
TL;DR: In this article, the authors identify groups of firms with similar generic knowledge strategies, determine how these strategies change over time, and compare profit margins of the groups, and find that firms in the "Innovator" and "Explorer" groups tend to be more profitable than the firms in 'Exploiter' and 'Loner' groups.
Abstract: The purpose of this study is to identify groups of firms with similar generic knowledge strategies, determine how these strategies change over time, and compare profit margins of the groups. Knowledge strategies of 21 U.S. pharmaceutical firms are analyzed from 1977 to 1991. Cluster analysis is used to group firms over different time periods based on: (a) balance between internal and external learning, (b) preference for radical or incremental learning, (c) learning speed, and (d) breadth of knowledge base. Our findings indicate that there are four generic knowledge strategy groups: ‘Explorers’, ‘Exploiters’, ‘Loners’, and ‘Innovators’. Most firms remain in the same knowledge group over time. The firms in the ‘Innovator’ and ‘Explorer’ groups tend to be more profitable than the firms in the ‘Exploiter’ and ‘Loner’ groups.
TL;DR: The findings indicate that there are four generic knowledge strategy groups: ‘explorers’, ‘Exploiters”, “Loners“, and ‘Innovators”; most firms remain in the same knowledge group over time.
Abstract: The purpose of this study is to identify groups of firms with similar generic knowledge strategies, determine how these strategies change over time, and compare profit margins of the groups. Knowledge strategies of 21 U.S. pharmaceutical firms are analyzed from 1977 to 1991. Cluster analysis is used to group firms over different time periods based on: (a) balance between internal and external learning, (b) preference for radical or incremental learning, (c) learning speed, and (d) breadth of knowledge base. Our findings indicate that there are four generic knowledge strategy groups: ‘Explorers’, ‘Exploiters’, ‘Loners’, and ‘Innovators’. Most firms remain in the same knowledge group over time. The firms in the ‘Innovator’ and ‘Explorer’ groups tend to be more profitable than the firms in the ‘Exploiter’ and ‘Loner’ groups.
TL;DR: In this article, the authors examined the relationship between duality and firm performance and found that the market is indifferent to changes in a firm's duality status and there is little evidence of operating performance changes around changes in duality.
Abstract: Rising shareholder activism following poor corporate performance and a subsequent drop in shareholder value at many major U.S. corporations had rekindled interest in duality and corporate governance. Despite limited empirical evidence, duality (chairman of the board and CEO are the same individual) has been blamed, in many cases, for the poor performance, and failure of firms to adapt to a changing environment. In examining the relationship between duality and firm performance, this study considers the announcement effects of changes in duality status, accounting measures of operating performance for firms that have changed their duality structure, and long-term measures of performance for firms that have had a consistent history of a duality structure. Our results suggest that : (1) the market is indifferent to changes in a firm's duality status ; (2) there is little evidence of operating performance changes around changes in duality status ; and (3) there is only weak evidence that duality status affects long-term performance, after controlling for other factors that might impact that performance.
TL;DR: This paper examined whether corporate restructuring resulted in increased specialization at the industry level during the 1980s and found that aggregate industry specialization declined very slightly at both the four-digit and two-digit level between 1981 and 1989.
Abstract: It has been widely argued that the purpose of corporate restructuring during the 1980s was to produce a population of more industry-specialized, competitive firms in response to intensifying global competition. A number of studies show that corporate restructuring resulted in increased corporate focus during the 1980s. However, no study has yet examined whether corporate restructuring resulted in increased specialization at the industry level during the 1980s. This study examines this issue. First, we examine whether or not aggregate industry specialization increased during the 1980s. That is, we ask: did the average firm in any given U.S. industry become more or less specialized to that industry during the 1980s? Second, we examine whether corporate restructuring was a significant determinant of change in aggregate industry specialization during the 1980s. Using a sample of 686 four-digit SIC industries and 64 two-digit industry groups, this study finds that aggregate industry specialization declined very slightly at both the four-digit and two-digit level between 1981 and 1989. This study also finds that sell-offs of establishments through corporate control transactions or interfirm asset sales had no significant effect on aggregate industry specialization.
TL;DR: Analysis of knowledge sharing patterns in the semiconductor industry shows that public sources of technical data play a larger role in knowledge diffusion in Japan than in the United States and in semiconductors relative to steel.
Abstract: Although knowledge spillovers between firms play a critical role in the evolution of technology, we know little about such spillovers. How does knowledge flow across company boundaries? How do industry characteristics and national institutions shape knowledge diffusion? To what extent do companies direct knowledge flows? This study seeks answers to these questions by examining knowledge sharing patterns in the semiconductor industry. The research shows that public sources of technical data play a larger role in knowledge diffusion in Japan than in the United States and in semiconductors relative to steel. By understanding the mechanisms and determinants of knowledge flows, company managers and public policy makers can influence knowledge diffusion more effectively.
TL;DR: In this article, the authors test three competing hypotheses by including differences among institutions in their ability to influence firms and conclude that institutions do not foster short-term orientation; instead they may influence firms to increase innovation.
Abstract: There is much debate about the effect of institutional investors on firm innovation. This paper tests three competing hypotheses by including differences among institutions in their ability to influence firms. Results using an outcome-based measure of innovation indicate that institutions do not foster short-term orientation; instead they may influence firms to increase innovation.
TL;DR: In this article, the authors evaluate and test the widely stated but little-tested argument that interfirm collaboration is usually beneficial and find that firms using development-oriented and marketing-oriented collaborative relationships in the hospital software systems industry are less likely to shut down than businesses that follow independent approaches when the environment changes gradually, but businesses using collaborative relationships are sometimes susceptible to being acquired by other firms.
Abstract: Authors with many theoretical and managerial perspectives argue that businesses commercializing technologically complex goods benefit when they collaborate closely with other businesses. Collaboration is viewed as a means for businesses to overcome competency limitations and to achieve the close configuration of components required for complex goods. We predict that collaborative relationships often assist businesses to produce complex goods, but that the relationships might also cause problems for the collaborating businesses. We find that firms using development-oriented and marketing-oriented collaborative relationships in the hospital software systems industry are less likely to shut down than businesses that follow independent approaches when the environment changes gradually, but businesses using collaborative relationships are sometimes susceptible to being acquired by other firms. Following a sudden environmental shock, businesses with collaborative relationships for activities central to the shock became more likely to shut down, while businesses with collaborative relationships for activities outside the focus of the shock became more likely to survive. The study critically evaluates and tests the widely stated but little-tested argument that interfirm collaboration is usually beneficial. The results address the issue of whether organizational choices affect comparative business performance.
TL;DR: In this article, the authors extend upper echelon theory to the international business arena and test the hypothesis that the foreign experience of top management team (TMT) members is associated with international diversification strategies.
Abstract: This paper extends upper echelon theory to the international business arena and tests the hypothesis that the foreign experience of top management team (TMT) members is associated with international diversification strategies. Regression analyses indicate that TMTs with a higher mean, greater heterogeneity, and a higher proportion of managers with foreign experience in 54 U.S. multinational corporations were significantly associated with the firm's international involvement.
TL;DR: In this article, the authors compare the two sets of explanations on make-or-buy decisions made by a large firm and find that in some cases asset specificity alone is determinant, but in others capabilities and combinations of considerations are explanatory.
Abstract: The capabilities approach to the firm postulates that firms vertically integrate activities for which they possess capabilities that are superior to potential suppliers'. The comparative contracting approach, in contrast, emphasizes high asset specificity as leading to vertical integration. This paper compares the two sets of explanations on make-or-buy decisions made by a large firm. It finds that in some cases asset specificity alone is determinant, but in others capabilities and combinations of considerations are explanatory. Analysis of the data also provides insights about the mechanisms through which capabilities operate. In particular, the similarity of the knowledge bases associated with various activities, and the time required to acquire knowledge, appear as important indicators of the importance of capabilities to vertical integration decisions.
TL;DR: In this article, the strategic reference point (SRP) matrix is developed, and a theory is developed which posits an optimal SRP structure, and propositions are offered which articulate the expected relationships between the SRP, strategic choice behavior, and firm performance.
Abstract: How can executives achieve a match between expected external environmental conditions and internal organizational capabilities that facilitates improved performance? This paper argues that a firm's choice of ‘reference points’ can help achieve strategic alignment capable of yielding improved performance and potentially even a sustainable competitive advantage. Building upon prospect theory and other relevant theoretical perspectives, the strategic reference point (SRP) matrix is developed. A firm's SRP consists of three dimensions: internal capability, external conditions, and time. A theory is developed which posits an optimal SRP structure, and propositions are offered which articulate the expected relationships between the SRP, strategic choice behavior, and firm performance. The paper closes with some suggestions for using strategic reference points in both research and practice.
TL;DR: In this article, the relative degree of variance in ROA accounted for by industry, corporate, and SBU effects while controlling for the business cycle and the interaction between the business cycles and industry is addressed.
Abstract: This study addresses the issue of the relative degree of variance in ROA accounted for by industry, corporate, and SBU effects while controlling for the business cycle and the interaction between the business cycle and industry. Two key articles, Schmalensee (1985) and Rumelt (1991), are discussed in detail. Research results on a recent data base (COMPUSTAT), using variance components analysis (VARCOMP) are presented that not only confirm most of the Rumelt (1991) findings, but also suggest the existence of a corporate effect, heretofore undetected.
TL;DR: In this paper, the authors explore the notion of competitive simplicity, a tendency of some firms to concentrate intensely on just a few central activities, and argue that competitive simplicity is largely a function of organizational and environmental properties that attenuate managerial search or restrict knowledge of competitive alternatives.
Abstract: This research explores the notion of competitive simplicity: a tendency of some firms to concentrate intensely on just a few central activities. Our focus here is the simplicity inherent in the repertoire of concrete, market-oriented actions used by companies to compete: these actions include product introductions, pricing or advertising decisions, and changes in market scope. The simplicity of a competitive repertoire can be assessed by its range of actions and its degree of concentration on one or a few dominant types of actions. We argue that competitive simplicity is largely a function of organizational and environmental properties that attenuate managerial search or restrict knowledge of competitive alternatives. These properties include good performance, munificent, homogeneous or certain markets, a lack of breadth in competitive experiences, and the complacency that may accompany age and size. Paradoxically, although good past performance may contribute to simplicity, simplicity can hurt subsequent performance, especially during periods of uncertainty and growth. Many of these ideas were borne out in a study of the major carriers of the post-deregulation domestic airline industry.
TL;DR: In this paper, the authors proposed a theoretical perspective that firms engage in continuous search and selection activities in order to improve their knowledge base and thereby improve their performance, and applied this general framework to the context of corporate evolution.
Abstract: This study proposes a theoretical perspective that firms engage in continuous search and selection activities in order to improve their knowledge base and thereby improve their performance. This general framework is applied to the context of corporate evolution. Entry and exit activities are understood as search and selection undertaken by the firm to improve their performance. One of the compelling features of this framework is that firms learn from their past entry experience and approach the next entry in a more focused and directed manner over time. Also, firms acquire additional knowledge from each entry event while applying their existing knowledge base. With a longitudinal (1981-89) data base on entry and exit activities of all publicly traded manufacturing firms in the United States, this study shows that applicability of the firm's knowledge base plays an important role in predicting which businesses a firm enters or exits. Finns sequentially enter businesses of similar human resource profiles and firms are more likely to divest lines of business of different profiles. Corporate-level analysis shows that such well-directed entry and exit contribute to the improvement of a firm's profitability.
TL;DR: In this paper, the authors examined the investment timing and intensity conditions under which advantages may exist for first movers in environmental investments and found a positive relationship between timing of investments and profit growth.
Abstract: This paper examines the investment timing and intensity conditions under which advantages may exist for first movers in environmental investments. The potential advantages on which the paper focuses are timing and intensity of investments in recent pollution-reducing manufacturing technologies that produce salable product at the same time that they reduce pollution. The data come from 50 chemical bleached paper pulp manufacturers in eight countries. The model measures the impact of the independent variables on growth in profits from the mid-1980s to the early 1990s, controlling for national differences in environmental regulations, among other variables. Results indicate a positive relationship between timing of investments and profit growth. There is also evidence that more intense investment patterns, when not tempered by sufficient time to absorb the investments, may lead to lower profit growth.