Showing papers in "Strategic Management Journal in 1999"

Use of partial least squares (PLS) in strategic management research: a review of four recent studies

Abstract: Advances in causal modeling techniques have made it possible for researchers to simultaneously examine theory and measures. However, researchers must use these new techniques appropriately. In addition to dealing with the methodological concerns associated with more traditional methods of analysis, researchers using causal modeling approaches must understand their underlying assumptions and limitations. Most researchers are well equipped with a basic understanding of LISREL-type models. In contrast, current familiarity with PLS in the strategic management area is low. The current paper reviews four recent studies in the strategic management area which use PLS. The review notes that the technique has been applied inconsistently, and at times inappropriately, and suggests standards for evaluating future PLS applications. Copyright © 1999 John Wiley & Sons, Ltd.

Network location and learning: the influence of network resources and firm capabilities on alliance formation

Abstract: This paper presents a dynamic, firm-level study of the role of network resources in determining alliance formation. Such resources inhere not so much within the firm but reside in the interfirm networks in which firms are placed. Data from extensive fieldwork show that by influencing the extent to which firms have access to information about potential partners, such resources are an important catalyst for new alliances, especially because alliances entail considerable hazards. This study also assesses the importance of firms’ capabilities with alliance formation and material resources as determinants of their alliance decisions. I test this dynamic framework and its hypotheses about the role of time-varying network resources and firm capabilities with comprehensive longitudinal multi-industry data on the formation of strategic alliances by a panel of firms between 1970 and 1989. The results confirm field observations that accumulated network resources arising from firm participation in the network of accumulated prior alliances are influential in firms’ decisions to enter into new alliances. This study highlights the importance of network resources that firms derive from their embeddedness in networks for explaining their strategic behavior. Copyright © 1999 John Wiley & Sons, Ltd.

Ambiguity and the process of knowledge transfer in strategic alliances

Abstract: This research examines the role played by the ‘causally ambiguous’ nature of knowledge in the process of knowledge transfer between strategic alliance partners. Based on a cross-sectional sample of 147 multinationals and a structural equation methodology, this study empirically investigates the simultaneous effects of knowledge ambiguity and its antecedents—tacitness, asset specificity, prior experience, complexity, partner protectiveness, cultural distance, and organizational distance—on technological knowledge transfer. In contrast to past research that generally assumed a direct relation between these explanatory variables and transfer outcomes, this study’s findings highlight the critical role played by knowledge ambiguity as a full mediator of tacitness, prior experience, complexity, cultural distance, and organizational distance on knowledge transfer. These significant effects are further found to be moderated by the firm’s level of collaborative know-how, its learning capacity, and the duration of the alliance. Copyright © 1999 John Wiley & Sons, Ltd.

Bridging ties: a source of firm heterogeneity in competitive capabilities

Abstract: What explains differences in firms’ abilities to acquire competitive capabilities? In this paper we propose that a firm’s embeddedness in a network of ties is an important source of variation in the acquisition of competitive capabilities. We argue that firms in geographical clusters that maintain networks rich in bridging ties and sustain ties to regional institutions are well-positioned to access new information, ideas, and opportunities. Hypotheses based on these ideas were tested on a stratified random sample of 227 job shop manufacturers located in the Midwest United States. Data were gathered using a mailed questionnaire. Results from structural equation modeling broadly support the embeddedness hypotheses and suggest a number of insights about the link between firms’ networks and the acquisition of competitive capabilities. Copyright © 1999 John Wiley & Sons, Ltd.

Strategy research: governance and competence perspectives

Abstract: Business strategy is a complex subject and is usefully examined from several perspectives. This paper applies the lenses of governance and competence to the study of strategy. Both the governance and the competence perspectives have had the benefit of distinguished antecedents. They have also had to deal with tautological reputations. I begin with the governance perspective, with emphasis on the six key moves through which it has been operationalized. I then examine the competence perspective in these same six respects. Governance challenges the competence perspective to apply itself more assiduously to operationalization, including the need to choose and give definition to one or more units of analysis (of which the ‘routine’ is a promising candidate). The research challenges posed by competence to which governance can and should respond include dynamic transaction costs, learning, and the need to push beyond generic governance to address strategy issues faced by particular firms (with their distinctive strengths and disabilities). A lively research future for these two perspectives, individually and in combination, is projected.Copyright © 1999 John Wiley & Sons, Ltd. Business strategy is an expansive enterprise. Not only do all of the functional areas in the business school relate, but strategy is, by nature, interdisciplinary. All of the social sciences— especially economics and organization theory— plus contract law are implicated. Indeed, in the high technology arena where some of the most difficult strategy issues reside, engineering and the law on intellectual property rights also have a bearing. Of the various approaches to the study of strategy, this paper focuses on the governance and competence perspectives. Both perspectives combine economic reasoning with organization theory. As between these two, the governance

The leveraging of interfirm relationships as a distinctive organizational capability: a longitudinal study

Abstract: In this paper we present a study of the structure of three lead firm-network relationships at two points in time. Using data on companies in the packaging machine industry, we study the process of vertical disintegration and focus on the ability to coordinate competencies and combine knowledge across corporate boundaries. We argue that the capability to interact with other companies—which we call relational capability—accelerates the lead firm’s knowledge access and transfer with relevant effects on company growth and innovativeness. This study provides evidence that interfirm networks can be shaped and deliberately designed: over time managers develop a specialized supplier network and build a narrower and more competitive set of core competencies. The ability to integrate knowledge residing both inside and outside the firm’s boundaries emerges as a distinctive organizational capability. Our main goal is to contribute to the current discussion of cooperative ties and dynamic aspects of interfirm networks, adding new dimensions to resource-based and knowledge-based interpretations of company performance. Copyright © 1999 John Wiley & Sons, Ltd.

The impact of stocks and flows of organizational knowledge on firm performance: an empirical investigation of the biotechnology industry

Abstract: The knowledge-based view of the firm is a recent approach to understanding the relationship between firm capabilities and firm performance. Specifically, this approach suggests that knowledge generation, accumulation and application may be the source of superior performance. Other research has conceptualized organizational knowledge in terms of stocks of accumulated knowledge in the firm and flows of knowledge into the firm. This paper tests the relationship between stocks and flows of organizational knowledge and firm performance in the biotechnology industry. We suggest that a firm’s geographic location, alliances with other institutions and organizations and R&D expenditures are representative of knowledge flows, while products in the pipeline, firm citations and patents are indicative of knowledge stocks. Through factor analysis, we develop an aggregated measure of location from several variables. A regression model suggests that location is a significant predictor of firm performance as are products in the pipeline and firm citations. A major contribution of this investigation is the operationalization of geographic location and its statistically significant link to firm performance. Copyright © 1999 John Wiley & Sons, Ltd.

The relationship between corporate entrepreneurship and strategic management

Abstract: This study examines the relationship between corporate entrepreneurship intensity and five specific strategic management practices in a sample of 169 U.S. manufacturing firms. The five strategic management practices include: scanning intensity, planning flexibility, planning horizon, locus of planning, and control attributes. The results of the study indicated a positive relationship between corporate entrepreneurship intensity and scanning intensity, planning flexibility, locus of planning, and strategic controls. The fine-grained nature of these results may be of practical use to firms that are trying to become more entrepreneurial and may help researchers better understand the subtleties of the interface between strategic management and corporate entrepreneurship. Copyright © 1999 John Wiley & Sons, Ltd.

To be different, or to be the same? It’s a question (and theory) of strategic balance

Abstract: This paper addresses the performance consequences of firm-level strategic similarity. Past research observed that firms face pressures to be different and to be the same. By differentiating, firms reduce competition. By conforming, firms demonstrate their legitimacy. Both reduced competition and legitimacy improve performance. This paper begins building a theory of strategic balance by synthesizing the differentiation and conformity perspectives. The theory directs attention to intermediate levels of strategic similarity where firms balance the pressures of competition and legitimation. Empirical support for the theory is found in a longitudinal study of commercial banks. Several suggestions for developing a theory of strategic balance conclude the paper. The theory’s major implication is that firms should be as different as legitimately possible. Copyright © 1999 John Wiley & Sons, Ltd.

Value co-production: intellectual origins and implications for practice and research

Abstract: This paper surveys the history of an alternative view of value creation to that associated with industrial production. It argues that technical breakthroughs and social innovations in actual value creation render the alternative - a value co-production framework - ever more pertinent. The paper examines some of the implications of adopting this framework to describe and understand business opportunity, management, and organizational practices. In the process, it reviews the research opportunities a value co-production framework opens up.

Top management team diversity, group process, and strategic consensus

Abstract: This study integrated concepts from upper echelons, group process and social cognition theories to investigate how demographic diversity and group processes influence strategic consensus within the top management team (TMT), where strategic consensus is defined as the degree to which individual mental models of strategy overlap. Data from 76 high-technology firms in the United States and Ireland were used to examine three alternative models. The results showed that while demographic diversity alone did have effects on strategic consensus the overall fit of the model was not strong. Adding two intervening group process variables, interpersonal conflict and agreement-seeking, to the model greatly improved the overall relationship with strategic consensus. For the most part, TMT diversity had negative effects on strategic consensus. The model with superior fit showed both direct and indirect effects of diversity on strategic consensus. Copyright © 1999 John Wiley & Sons, Ltd.

The long‐term performance of horizontal acquisitions

Abstract: This paper examines how value is created in horizontal mergers and acquisitions. More specifically, it examines the impact of post-acquisition asset divestiture and resource redeployment on the long-term performance of horizontal acquisitions. The data come from a detailed survey of acquiring firm managers and cover 253 horizontal mergers and acquisitions that were initiated by European and U.S. firms in manufacturing industries for the period 1988–1992. This study incorporates insights from the cost efficiency and resource-based theories to propose a model of the effects of asset divestiture and resource redeployment on long-term acquisition performance. Overall, our results show that both asset divestiture and resource redeployment can contribute to acquisition performance, with, however, a significant risk of damaging acquisition performance when the divested assets and redeployed resources are those of the target. Copyright © 1999 John Wiley & Sons, Ltd.

Explaining interfirm cooperation and performance: toward a reconciliation of predictions from the resource-based view and organizational economics

Abstract: Interfirm cooperation and its performance implications are examined in the context of two widely cited theoretical approaches to organizations. Broadly speaking, the resource-based view suggests that firms seek to capitalize on and increase their capabilities and endowments, whereas organizational economics asserts that firms focus on minimizing the costs of organizing. Although these perspectives agree on managers’ likely actions in many areas, their predictions diverge when interfirm cooperation is considered. We take a step toward reconciling these differences by positing that firms place resource-based concerns in front of considerations from organizational economics when deciding whether or not to engage in interfirm cooperation. We examined this prediction using data from 94 publicly held restaurant chains. The results support our integrated view, but also suggest that giving primacy to resource concerns detracts from the performance of some firms. We derive several implications of these findings in an effort to guide subsequent inquiry. Copyright © 1999 John Wiley & Sons, Ltd.

Constructing competitive advantage: The role of firm-constituent interactions

Abstract: Current models of competitive advantage emphasize economic factors as explanations for a firm’s success but ignore sociocognitive factors. This paper integrates economic and cognitive perspectives, and shows how firms and constituents jointly construct the environments in which firms compete. We argue that competitive advantage is a systemic outcome that develops as firms and constituents participate in six processes that entail, not only use and exchange of resources, but also communication about and interpretations of those exchanges. The interpretations that firms and constituents make of competitive interactions affect decisions about how to exchange and use resources. As interpretations and evaluations of a given firm fluctuate, so do the resources the firm has access to and its competitive advantage in the marketplace. The actions and interpretations of constituents and rivals produce the shifting terrain on which competition unfolds. We illustrate these dynamics with a discussion of IBM’s changing competitive advantage in the computer industry in the 1980s. Copyright © 1999 John Wiley & Sons, Ltd.

Product innovation, product–market competition and persistent profitability in the U.S. pharmaceutical industry

Abstract: Increasingly, strategy scholars are exploring the relationships between innovation, competition, and the persistence of superior profits. Sustained high profitability may result when a firm repeatedly introduces valuable innovations that service previously unmet consumer demands. While the returns to the firm from each innovation may erode over time, innovation ensures that, overall, the firm maintains a high performance position. At the same time, sustained high profitability may also accrue to firms that innovate less often, but effectively avoid the competition that otherwise erodes high returns. This paper elaborates these relationships before presenting an empirical analysis of the effects of differential innovative propensities and differential rates of competition on pharmaceutical firms’ abilities to sustain profit outcomes that are above those earned by competing firms. The analysis, which is situated within the U.S. pharmaceutical industry, finds support for the expected relationship between high innovative propensity and sustained superior profitability, but no support for a link between persistence and the ability to avoid competition. Copyright © 1999 John Wiley & Sons, Ltd.

Creating value through mutual commitment to business network relationships

Abstract: A structural model of business relationship development in a business network context is formulated and tested on delta from the European International Marketing and Purchasing (IMP) project. The e ...

Rethinking research methods for the resource‐based perspective: isolating sources of sustainable competitive advantage

Abstract: An exploration of traditional perspectives and contemporary propositions regarding sustainable competitive advantage points to the conclusion that the locus of advantage is located specifically within organizational effects. The key issue emerges that research investigating sources of sustainable competitive advantage must be done not only on organizations but also in organizations. The fallout from this conclusion is, however, that the research methodologies traditionally used in strategy research will not unambiguously uncover these sources of sustainable advantage. Using organizational culture as an example of a possible source of sustainable advantage within a resource-based paradigm, a four-step research framework is suggested for isolating these organizational effects. Copyright © 1999 John Wiley & Sons, Ltd.

Shared knowledge, “glitches,” and product development performance

Abstract: Much recent thought in strategy has stressed the importance of organizational integration for competitive advantage. Empirical studies of product development have supported this emphasis by correlating integrating practices and superior performance. We propose, from a resource-based or capability view, that this correlation results from integration leading to patterns of shared knowledge among firm members, with the shared knowledge constituting a resource underlying product development capability. To explore this connection, we examine the product development efforts of a scientific software company. We define the ‘glitch’ as a costly error possible only because knowledge was not shared, and measure the influence of glitches on firm performance. At this company, gaps in shared knowledge did cause the company to incur significant excess costs. We also identify a set of ‘syndromes’ that can lead to glitches, and measure the relative importance of these syndromes. The glitch concept may offer a general tool for practical measurement of the marginal benefits of shared knowledge. Copyright © 1999 John Wiley & Sons, Ltd.

Corporate political strategies and firm performance: indications of firm-specific benefits from personal service in the U.S. government

Abstract: Firms employ a variety of political strategies (e.g., lobbying, contributions) in an attempt to gain influence or access to the public policy process. A variety of benefits may accrue to firms that are successful in creating a linkage with the government: information, access, influence, reduced uncertainty and transaction costs, etc. However, the direct benefits of such strategies are difficult to observe. One political strategy is studied here—personal service (having a firm representative serve in a political capacity). Event-study methodology results show that such linkages with the government positively affect firm value. These findings indicate that firm-specific benefits may result from political strategies. Copyright © 1999 John Wiley & Sons, Ltd.

Ownership strategy of Japanese firms: transactional, institutional, and experience influences

Abstract: We compare the effects of transactional, institutional, and experience influences on the ownership strategies of Japanese investors. Our theoretical development suggests that the equity position of a foreign investor should increase as the specificity of the assets transferred to the foreign affiliate increases, but a lower equity position should be assumed when the foreign investor requires complementary assets to establish a foreign entry. International experience and a strong institutional environment also should lead to increases in the equity position of the foreign investor. These relationships were tested with data on more than 1000 Japanese investments in nine countries of East and South-East Asia. The results demonstrate that experience and institutional factors were the most important influences on the ownership position taken in the foreign investment, while transactional factors had a much less important and a more ambiguous role. Copyright © 1999 John Wiley & Sons, Ltd.

Geographic scope, product diversification, and the corporate performance of Japanese firms

Abstract: The study extends research on the geographic scope, product diversification, and performance relationship by exploring both the antecedents and consequences of geographic scope. In so doing, it addresses a fundamental criticism of the geographic scope–performance relationship; namely, that the observed positive relationship between geographic scope and performance is spurious because it is the possession of proprietary assets that is the foundation of superior performance, not expansion into international markets per se. We tested the research model with data on the corporate performance of 399 Japanese manufacturing firms. In the partial least squares analyses used to examine the study’s six main hypotheses, we demonstrate that geographic scope was positively associated with firm profitability, even when the competing effect of proprietary assets on firm performance was considered. Further, we find that performance was not related to the extent of product diversification, although investment levels in rent-generating, proprietary assets were related to the extent of product diversification. Copyright © 1999 John Wiley & Sons, Ltd.

Decoupling risk taking from income stream uncertainty: a holistic model of risk

Abstract: This paper builds and tests a holistic model of risk in organizations. Using structural equations modeling, we disaggregated risk into two distinct components, managerial risk taking and income stream uncertainty, or organizational risk. This allowed us to identify an array of organizational and environmental antecedents that have either been examined in isolation or neglected in previous studies about risk. Our results suggest that both organizational and environmental factors promote risk taking. Further, we found strong support for behavioral theory of the firm and agency theory on risk but not upper echelons theory. Our data also suggest that environmental characteristics have a negligible direct effect on organizational risk. Instead, the environment’s impact on risk occurs primarily through managerial choices. Copyright © 1999 John Wiley & Sons, Ltd.

A decade of corporate women: some progress in the boardroom, none in the executive suite

Abstract: This study examines the extent to which women have circumvented the glass ceiling by empirically examining whether there has been an increase in women’s representation on corporate boards and CEO positions over the 10-year period from 1987 to 1996. Results indicate greatly increased representation on corporate boards. There is, however, no evidence of progress in, or towards, the CEO suite. Moreover, there is no evidence of that circumstance abating in the next several years. The number of female inside directors, an intermediate, and requisite, position in the succession to CEO, is astonishingly small, only 0.006 percent. Notably, there has been no increase in that proportion over the last decade. Copyright © 1999 John Wiley & Sons, Ltd.

Market‐oriented is more than being customer‐led

Abstract: Connor, in ‘Customer-led and market-oriented: A matter of balance’, argues, among other things, that we propose that market oriented businesses focus on future customer needs to the neglect of current customer needs, that market oriented businesses over-emphasize marketing activities in their value chains, that market oriented businesses emphasize generative learning to the neglect of adaptive learning, and that only large companies have the resources to become market oriented. These arguments are largely unfair extrapolations of our position and reflect a superficial understanding of the nature and benefits of being market oriented. We use this response to clarify our position on these issues. Copyright © 1999 John Wiley & Sons, Ltd.

Learning to plan and planning to learn: resolving the planning school/learning school debate

Abstract: This paper resolves the long-standing debate between the two dominant process schools in strategy. Analysis of the planning practices of 656 firms shows that formal planning and incrementalism both form part of ‘good’ strategic planning, especially in unstable environments. Environment neither moderates the need for formal planning nor the direction of the planning/performance relationship, but does moderate firm planning capabilities and planning flexibility. In unstable environments planning capabilities are far better developed and formal plans more amenable to change. The planning/performance relationship is, however, moderated by planning duration: at least four years of formal planning are required before external performance associations are noted. Copyright © 1999 John Wiley & Sons, Ltd.

A revealed preference study of management journals' direct influences

Abstract: Our study develops and uses a new methodology for analyzing journal citations to recent publications to determine which management journals now have the greatest influence on the field of management. It analyzes the 23637 academic journal references cited in the 1275 articles published in 17 key management journals during 1993 and 1994, focusing on citations to references published up to the modal vintage of 4 years earlier. Most cited as a percentage of all these references was Strategic Management Journal (11%), followed by Academy of Management Journal, Journal of Applied Psychology, Organizational Behavior and Human Decision Processes, Academy of Management Review, Administrative Sciences Quarterly, and Journal of Management—accounting in total for 51 percent of all citations. Strategic Management Journal, whose subfield of strategic management has become a major concern of management in general, has developed as the predominant academic journal influencing the field of management. Our measures of journal influence provide information which can aid management scholars, practitioners, department heads, and university libraries to decide on efficient choices of journals for research and for manuscript submissions, for evaluation, and for subscriptions. Just seven management and social science journals, led by Strategic Management Journal, contain more than half of the cited articles published recently. Copyright © 1999 John Wiley & Sons, Ltd.

An empirical analysis of sustained advantage in the U.S. pharmaceutical industry: impact of firm resources and capabilities

Abstract: The authors test a model of the relationships among firm resources, firm capabilities, and sustained competitive advantage between 1971 and 1989. Sustained comparative advantage was captured by two variables: therapeutic differentiation and global NCEs. The results show that R&D and salesforce expenditures have indirect and direct effects, respectively, on sustained competitive advantage. Firm capabilities were differentiated into component and integrative capabilities. Component capabilities were captured by the firm’s internal R&D efforts and therapeutic market focus, while integrative capabilities were concerned with the firm’s ability to obtain FDA approvals and to develop radical new drugs. Findings on each of these four capabilities on therapeutic differentiation and global NCEs are mixed. The direct and indirect effects of these resources and capabilities on therapeutic differentiation and global NCEs suggest important managerial implications in the way firms coordinate and combine their assets so as to achieve sustained competitive advantage. Copyright © 1999 John Wiley & Sons, Ltd.

People matter: commitment to employees, strategy and performance in Korean firms

Abstract: The human element of enterprise is argued to be a vital resource for strategy execution. We show in a study of Korean businesses how an organization’s commitment to its employees’ well-being (OCE) can aid in the profitable execution of its positioning strategies. We found that OCE, by itself, sometimes has a weakly positive association with return on assets (ROA). But far more important, we found that ROA is strongly and positively influenced by the interaction between OCE and the dedicated pursuit of Porter’s (1980) strategies for achieving competitive advantage: these are cost leadership, marketing differentiation and innovative differentiation. In short, dedicated positioning strategies appear to be executed more effectively where organizations exhibit a high level of commitment to their employees; and conversely, OCE is apt to have a strong impact on ROA only in the context of a dedicated, that is intensive and thorough, positioning strategy. Copyright © 1999 John Wiley & Sons, Ltd.

Breaking the frame: an analysis of strategic cognition and decision making under uncertainty

Abstract: This paper reports the findings of two experimental investigations into the efficacy of a causal cognitive mapping procedure as a means for overcoming cognitive biases arising from the framing of strategic decision problems In Study 1, final year management studies undergraduate students were presented with an elaborated strategic decision scenario, under one of four experimental conditions: positively vs negatively framed decision scenarios, with prechoice vs postchoice mapping task orders (ie, participants were required to engage in cognitive mapping before or after making a decision) As predicted, participants in the postchoice mapping conditions succumbed to the framing bias whereas those in the prechoice mapping conditions did not Study 2 replicated and extended these findings in a field setting, on a sample of senior managers, using a decision scenario that closely mirrored a strategic dilemma currently facing their organization Taken together, the findings of these studies indicate that the framing bias is likely to be an important factor in strategic decision making, and suggest that cognitive mapping provides an effective means of limiting the damage accruing from this bias Copyright © 1999 John Wiley & Sons, Ltd

Dynamics of dyadic competitive interaction

Abstract: In this study of firms’ entries into and exits from each other’s markets, we link research on multipoint competition to the emerging action-oriented, dyadic approach to interfirm rivalry by specifying market interdependencies between pairs of firms that condition their potential for rivalry over time. Our dynamic analysis of competitive interactions between pairs of commuter airlines in California reveals the idiosyncratic and asymmetric market microstructures that characterize dyadic competitive relationships and helps explain why firms grapple vigorously with some of their competitors while being passive toward others. We show that there is an inverted U-shaped relationship between firms’ rates of entry into and exit from each other’s markets and the level of multimarket contact in competitor dyads. We also show how this basic curvilinear effect varies from dyad to dyad as a function of relative levels of multimarket contact with competitors in other dyads and the relative sizes of competitors in a focal dyad. Copyright © 1999 John Wiley & Sons, Ltd.