Showing papers in "Strategic Management Journal in 2013"
TL;DR: In this article, the authors argue that greater regulatory and normative pressures concerning environmental issues positively influence companies' propensity to engage in environmental innovation, and they find that this effect is stronger when asset specificity is high, and that the availability of resources plays different roles depending on the type of pressures.
Abstract: Drawing on institutional theory and innovation literature, we argue that greater regulatory and normative pressures concerning environmental issues positively influence companies' propensity to engage in environmental innovation. Analysis of environment-related patents of 326 publicly traded firms from polluting industries in the United States suggests that institutional pressures can trigger such innovation, especially in those firms displaying a greater deficiency gap (i.e., firms polluting relatively more than their industry peers). Moreover, we find that this effect is stronger when asset specificity is high, and that the availability of resources plays different roles depending on the type of pressures (regulatory vs. normative).Copyright © 2012 John Wiley & Sons, Ltd.
855 citations
TL;DR: In this paper, the authors provide the first formal model of business model innovation and show that an entrant needs to strategically choose whether to reveal its innovation by competing through the new business model, or conceal it by adopting a traditional business model.
Abstract: This paper provides the first formal model of business model innovation. Our analysis focuses on sponsor-based business model innovations where a firm monetizes its product through sponsors rather than setting prices to its customer base. We analyze strategic interactions between an innovative entrant and an incumbent where the incumbent may imitate the entrant's business model innovation once it is revealed. The results suggest that an entrant needs to strategically choose whether to reveal its innovation by competing through the new business model, or conceal it by adopting a traditional business model. We also show that the value of business model innovation may be so substantial that an incumbent may prefer to compete in a duopoly rather than to remain a monopolist. Copyright © 2012 John Wiley & Sons, Ltd.
646 citations
TL;DR: The results suggest that platform competition is shaped by important strategic trade-offs and that the WTA approach will not be universally successful, and that a differentiation strategy based on distinctive positioning improves a platform's performance only when a platform system is highly distinctive relative to its rivals.
Abstract: Because the literature on platform competition emphasizes the role of network effects, it prescribes rapidly expanding a network of platform users and complementary applications to capture entire markets. We challenge the unconditional logic of a winner-take-all (WTA) approach by empirically analyzing the dominant strategies used to build and position platform systems in the U.S. video game industry. We show that when platform firms pursue two popular WTA strategies concurrently and with equal intensity (growing the number and variety of applications while also securing a larger fraction of those applications with exclusivity agreements), it diminishes the benefits of each strategy to the point that it lowers platform performance. We also show that a differentiation strategy based on distinctive positioning improves a platform's performance only when a platform system is highly distinctive relative to its rivals. Our results suggest that platform competition is shaped by important strategic trade-offs and that the WTA approach will not be universally successful.
481 citations
TL;DR: In this article, the authors explore the reasons for this, using author cocitation analysis to inform their analysis, and show that there are ways to unify the field that rely, paradoxically, on integrating the two contradictory views, while still preserving the assumptions that led to their differences.
Abstract: A critical issue has been absent from the conversation on dynamic capabilities: the two seminal papers represent not only different but contradictory understandings of the construct’s core elements. Here, we explore the reasons for this, using author cocitation analysis to inform our analysis. Our findings suggest that the field is being socially constructed on the basis of two separate domains of knowledge and that underlying structural impediments have impeded dialog across the domains. In light of this evidence, then, we take up the challenge to find a solution to this dilemma. By employing a contingency-based approach, we show that there are ways to unify the field that rely, paradoxically, on integrating the two contradictory views, while still preserving the assumptions that led to their differences. Copyright 2013 John Wiley & Sons, Ltd.
427 citations
TL;DR: This paper develops theory about the distributed nature of efforts for organizational renewal where CEO's dynamic managerial capabilities in concerto with senior executive managerial capabilities will drive top management's ability to revitalize the firm's dominant logic and to achieve evolutionary fit.
Abstract: This paper contributes to the understanding of the executive team dynamic managerial capabilities by developing theory about the interplay between the firm's dominant logic and dynamic managerial capabilities (including managerial human capital, social capital, and cognition). We underscore the criticality of the two key CEO-level functions: configuration and orchestration of senior executive team dynamic capabilities. We develop theory on how these functions create and sculpt the management team's absorptive capacity, which in turn shapes the team's adaptive capacity. We present theory about the distributed nature of efforts for organizational renewal where CEO's dynamic managerial capabilities in concerto with senior executive managerial capabilities will drive top management's ability to revitalize the firm's dominant logic and to achieve evolutionary fit. Copyright © 2012 John Wiley & Sons, Ltd.
421 citations
TL;DR: In this article, the authors provide new evidence that patents confer dual advantages in strategic factor markets, improved access and terms of trade, above and beyond their added product-market protection, and have important implications for empirical tests of resource-based theory and the measurement of resource value.
Abstract: Why and how do resources provide sources of competitive advantage? This study sheds new light on this central question of resource-based theory by allowing a single resource—entrepreneurial-firm patents—to play distinctive roles in different competitive arenas. As rights to exclude others, patents serve a well-known role as legal safeguards in product markets. As quality signals, patents also could improve access and the terms of trade in factor input markets. Based on the financing activities of 370 venture-backed semiconductor start-ups, we provide new evidence that patents confer dual advantages in strategic factor markets, improved access and terms of trade, above and beyond their added product-market protection. The study has important implications for empirical tests of resource-based theory and the measurement of resource value. Copyright © 2013 John Wiley & Sons, Ltd.
402 citations
TL;DR: In this paper, the similarity of different industries' human capital or skill requirements is quantified by using information on cross-industry labor flows, which can be used to identify skill relatedness, because individuals changing jobs will likely remain in industries that value the skills associated with their previous work.
Abstract: Because of the importance of human capital, a firm's choice of diversification targets will depend on whether these targets offer opportunities for leveraging existing human resources. We propose to quantify the similarity of different industries' human capital or skill requirements, that is, the industries' skill relatedness, by using information on cross-industry labor flows. Labor flows among industries can be used to identify skill relatedness, because individuals changing jobs will likely remain in industries that value the skills associated with their previous work. Estimates show that firms are far more likely to diversify into industries that have ties to the firms' core activities in terms of our skill-relatedness measure than into industries without such ties or into industries that are linked by value chain linkages or by classification-based relatedness. Copyright (C) 2012 John Wiley & Sons, Ltd.
384 citations
TL;DR: It is found that nationality diversity is positively related to performance; and this effect is stronger in (a) longer tenured teams, (b) highly internationalized firms, and (c) munificent environments.
Abstract: This research reexamines the equivocal relationship between top management team (TMT) diversity and firm performance. Combining upper echelons theory with insights from institutional theory, we establish a new, timely dimension of TMT diversity—nationality diversity—and develop an integrated multilevel framework explaining how its performance implications vary across contextual settings. We find that nationality diversity is positively related to performance; and this effect is stronger in (a) longer tenured teams, (b) highly internationalized firms, and (c) munificent environments. More generally, our research demonstrates that the consequences of TMT diversity depend on the (1) specific attributes of diversity being considered and (2) firm and industry conditions under which strategic decisions take place. Copyright © 2012 John Wiley & Sons, Ltd.
376 citations
TL;DR: Analysis of a double-respondent survey involving 536 Danish firms shows that the use of external knowledge sources is positively associated with opportunity exploitation, but the strength of this association is significantly influenced by organizational designs that enable the firm to access external knowledge during the process of exploiting opportunities.
Abstract: Research highlights the role of external knowledge sources in the recognition of strategic opportunities but is less forthcoming with respect to the role of such sources during the process of exploiting or realizing opportunities. We build on the knowledge-based view to propose that realizing opportunities often involves significant interactions with external knowledge sources. Organizational design can facilitate a firm's interactions with these sources, while achieving coordination among organizational members engaged in opportunity exploitation. Our analysis of a double-respondent survey involving 536 Danish firms shows that the use of external knowledge sources is positively associated with opportunity exploitation, but the strength of this association is significantly influenced by organizational designs that enable the firm to access external knowledge during the process of exploiting opportunities. Copyright © 2013 John Wiley & Sons, Ltd.
369 citations
TL;DR: In this paper, the authors examine how hospitals' decisions to invest in new imaging technologies are shaped by their governance modes with physicians and with managed care organizations (MCOs), primary distributors of hospital and physician services.
Abstract: We consider firms in the context of their business ecosystems and explore how governance choices with respect to complementors and distributors shape their competitive behavior—i.e., investments in new technologies. We argue that, in addition to creating differences in incentives, governance choices play an important role in the firm’s ability to coordinate accompanying changes in interdependent activities so as to create value from the new technology. We test our predictions in the U.S. healthcare industry from 1995-2006. We examine how hospitals’ decisions to invest in new imaging technologies are shaped by their governance modes with physicians—key complementors to hospitals, and with managed care organizations (MCOs)— primary distributors of hospital and physician services. We find that hospitals pursuing alliances with physicians are more likely to invest in new technologies than hospitals pursuing arm’slength or integrated modes, and the likelihood of investment is increasing in the scope of alliance. Finally, hospitals pursuing tapered integration with downstream MCOs are more likely to invest in new technologies than hospitals pursuing arm’s-length relationships. Overall, the study argues for extending research on organizational forms to explore the link between coordination mechanisms and competitive behavior, and to consider such choices in the context of business ecosystems.
358 citations
TL;DR: Although constraints lead to a broader but shallower search, external knowledge is associated with the breadth and the depth of the search in a U-shaped relationship.
Abstract: Laursen and Salter (2006) examined the impact of a firm's search strategy for external knowledge on innovative performance. Based on organizational learning and open innovation literature, we extend the model hypothesizing that the search strategy itself is impacted by firm context. That is, both ‘constraints on the application of firm resources’ and the ‘abundance of external knowledge’ have a direct impact on innovative performance and a firm's search strategy in terms of breadth and depth. Based on a survey of Swiss-based firms, we find that constraints decrease and external knowledge increases innovative performance. Although constraints lead to a broader but shallower search, external knowledge is associated with the breadth and the depth of the search in a U-shaped relationship. Copyright © 2013 John Wiley & Sons, Ltd.
TL;DR: The authors' analyses indicate that factors that favor recombinant creation generally hinder recombinant reuse and vice versa; however, combining an integrated collaboration network and a diverse knowledge base may concurrently enhance both recombinant capabilities.
Abstract: A firm's innovativeness is driven by its ability to recombine existing technologies. Elaborating on this argument, we contend that there exist two distinct types of recombinant capabilities. First, firms may innovate through recombinant creation, i.e., by creating technological combinations new to the firm. Second, they may innovate through recombinant reuse; i.e., by reconfiguring combinations already known to the firm. We study what drives each type of capability by examining two factors: the degree of integration of a firm's intraorganizational network and the diversity of its knowledge base. We test our theoretical predictions using data on 126 semiconductor firms between 1984 and 2003. Our analyses indicate that factors that favor recombinant creation generally hinder recombinant reuse and vice versa; however, combining an integrated collaboration network and a diverse knowledge base may concurrently enhance both recombinant capabilities. Copyright © 2013 John Wiley & Sons, Ltd.
TL;DR: This study suggests an inverted-U shaped relationship between ACAP and financial performance, and finds that entrepreneurial orientation (EO) moderates the ACAP-performance relationship, enhancing financial gains at lower levels ofACAP and mitigating the decline in financial performance at higher levels of ACAP.
Abstract: Absorptive capacity (ACAP) refers to a firm's ability to acquire, assimilate, transform, and exploit new knowledge. Research has yet to acknowledge the possibility of limits to the financial returns of this important strategic construct. This study suggests an inverted-U shaped relationship between ACAP and financial performance. Based on data from 285 technology-based small and medium enterprises, we observe gains within three prospective, secondary measures of growth to diminish beyond lower levels of ACAP, even turning negative and becoming harmful beyond intermediate levels. We find that entrepreneurial orientation (EO) moderates the ACAP-performance relationship, enhancing financial gains at lower levels of ACAP and mitigating the decline in financial performance at higher levels of ACAP. Further, with higher EO, higher ACAP can be achieved before financial returns diminish.Copyright © 2012 John Wiley & Sons, Ltd.
TL;DR: It is found that decision makers are more likely to make cost-estimation errors given increasing configuration and task complexity in captive offshoring and offshore outsourcing, respectively, and it is shown that experience and a strong orientation toward organizational design in the Offshoring strategy reduce the cost-ESTimation errors that follow from complexity.
Abstract: This study investigates estimation errors due to hidden costs—the costs of implementation that are neglected in strategic decision-making processes—in the context of services offshoring. Based on data from the Offshoring Research Network, we find that decision makers are more likely to make cost-estimation errors given increasing configuration and task complexity in captive offshoring and offshore outsourcing, respectively. Moreover, we show that experience and a strong orientation toward organizational design in the offshoring strategy reduce the cost-estimation errors that follow from complexity. Our findings contribute to research on the effectiveness of sourcing and global strategies by stressing the importance of organizational design and experience in dealing with increasing complexity.
TL;DR: The authors argue that family CEOs will outperform in smaller firms with more concentrated ownership and underperform in larger firms having more dispersed ownership; they will do neither where firms are smaller and ownership is more dispersed or firms are larger and ownership more concentrated.
Abstract: There has been much debate concerning the performance of family firms and the drivers of their performance. Some scholars have argued that family management is to blame when family firms go wrong; others claim that family management removes costly agency problems and encourages stewardship. Our thesis is that these disagreements can only be resolved by distinguishing among different types of family firms. We argue that family CEOs will outperform in smaller firms with more concentrated ownership and underperform in larger firms with more dispersed ownership; they will do neither where firms are smaller and ownership is more dispersed or firms are larger and ownership is more concentrated. Copyright © 2012 John Wiley & Sons, Ltd.
TL;DR: This article investigated the relationship between corporate political activity and financial returns on a set of 943 S&P 1500 firms between 1998 to 2008 and found that firms' political investments are negatively associated with market performance and cumulative political investments worsen both market and accounting performance.
Abstract: Although many believe that companies' political activities improve their bottom line, empirical studies have not consistently borne this out We investigate the relationship between corporate political activity (CPA) and financial returns on a set of 943 S&P 1500 firms between 1998 to 2008 We find that firms' political investments are negatively associated with market performance and cumulative political investments worsen both market and accounting performance Firms placing former public officials on their boards experienced inferior market performance and similar accounting performance than firms without such board members We find, however, that CPA is positively associated with market performance for firms in regulated industries Our results challenge the profit-maximizing assumptions underlying CPA research and focus on agency theory to better understand CPA Copyright © 2012 John Wiley & Sons, Ltd
TL;DR: It is shown that the human capital losses (voluntary turnover rates)-workforce performance relationship takes the form of an attenuated negative relationship when HRM investments are high, and stronger curvilinear effects of voluntary turnover rates on financial performance via workforce productivity under these conditions.
Abstract: Reversing the focus on human capital accumulations in the resource-based literature, the authors examine the issue of human capital losses and organizational performance. They theorize that human capital losses markedly diminish the inimitability of human capital stores initially, but that the negative effects are attenuated as human capital losses increase. They argue further that these effects are more dramatic when human resource management (HRM) investments are substantial. As predicted, Study 1 shows that the human capital losses (voluntary turnover rates)-workforce performance relationship takes the form of an attenuated negative relationship when HRM investments are high. Study 2 shows stronger curvilinear effects of voluntary turnover rates on financial performance via workforce productivity under these conditions. Implications for resource-based theory and strategic HRM are addressed.
TL;DR: In this article, the authors argue that there exists a negative relationship between financial resource availability and CSR expenditures for firms in Ghana, a sub-Saharan African emerging economy, and use lagged data from the Ghana Investment Promotion Centre and find that Return on Sales, Return on Equity, and Net Profitability were consistently associated with lower CSR expenditure.
Abstract: Studies done in developed economies have demonstrated a positive relationship between financial resource availability and CSR. Arguments that we term the Institutional Difference Hypothesis (IDH) drawn from the institutional literature, however, suggest that institutional differences between developed and developing economies are likely to result in different CSR implications. Integrating the logic of IDH with insights from slack resources theory, we argue that there exists a negative relationship between financial resource availability and CSR expenditures for firms in Ghana, a sub-Saharan African emerging economy. We use lagged data from the Ghana Investment Promotion Centre and find that Return on Sales, Return on Equity, and Net Profitability were consistently associated with lower CSR expenditures. We highlight the implications of our findings for research and managers.
TL;DR: Both competitive uncertainty and institutional support were found to shape top management team decision making processes and their outcomes in both competitive and institutional environments within a transition economy.
Abstract: While conflicts (cognitive and affective) have been considered as important process variables to better understand the mixed findings on the relationship between top management team functional diversity and organizational innovation, such an input-process-outcome model is still incomplete without considering the environmental factors. This study was formulated to assess the importance of both competitive and institutional environments in moderating such upper echelon effects within a transition economy. The chief executive officers and chief technology officers of 122 Chinese firms were surveyed and both competitive uncertainty and institutional support were found to shape top management team decision making processes and their outcomes. Copyright © 2012 John Wiley & Sons, Ltd.
TL;DR: In this paper, the authors developed a contingency approach to explain how firm ownership influences the monitoring function of the board, measured as the magnitude of external audit fees contracted by the board.
Abstract: We develop a contingency approach to explain how firm ownership influences the monitoring function of the board—measured as the magnitude of external audit fees contracted by the board—by extending agency theory to incorporate the resource dependence notion that boards have distinct incentives and abilities to monitor management. Analyses of data on Continental European companies reveal that while board independence and audit services are complementary when ownership is dispersed, this is not the case when ownership is concentrated—suggesting that ownership concentration and board composition become substitutes in terms of monitoring management. Additional analysis shows that the relationship between board composition and external audit fees is also contingent upon the type of the controlling shareholder. Copyright © 2013 John Wiley & Sons, Ltd.
TL;DR: Based on bibliometric data from four major social science disciplines (economics, sociology, psychology, and management), this article presented a "global view" of the field by combining longitudinal and structural perspectives.
Abstract: Innovation is becoming increasingly popular as a concept as well as a field of research. As a field, it has accumulated a significant amount of scientific knowledge. Based on bibliometric data from four major social science disciplines—economics, sociology, psychology, and management—this study presents a ‘global view’ of the field by combining longitudinal and structural perspectives. It identifies major research traditions in the field, determines the content and disciplinary composition of each tradition, and maps the changes in the intellectual structure of the field over time. The study suggests that innovation research is becoming increasingly compartmentalized between economics and management disciplines and each segment is becoming increasingly self-contained. A strategy along with a framework is suggested for making research contribution to the field. Copyright © 2012 John Wiley & Sons, Ltd.
TL;DR: In this paper, the authors establish the microfoundations of strategic problem formulation by developing a theory that predicts a core set of impediments to formulation that arise when complex, ill-structured problems are addressed by heterogeneous teams.
Abstract: Before a strategy can be developed, the problem it is supposed to address needs to be formulated. We establish the microfoundations of strategic problem formulation by developing a theory that predicts a core set of impediments to formulation that arise when complex, ill-structured problems are addressed by heterogeneous teams. These impediments fundamentally constrain and narrow problem formulation, thereby limiting solution search and potential value creation. We establish these impediments as a set of design goals, which, if remedied by an appropriately constructed mechanism, can expand problem formulation to be more comprehensive. Finally, we consider how organizations can improve problem formulation by creating a structured process that satisfies the theoretically derived design goals and detail a specific example of this mechanism (collaborative structured inquiry). Copyright © 2012 John Wiley & Sons, Ltd.
TL;DR: Analysis of Fortune 500 firms from 1996 to 2006 shows that leader characteristics at both the senior management and director levels affect corporate philanthropic contributions, and finds that organizational structure constrains the philanthropic influence of board members, but not of senior managers.
Abstract: We examine how organizational structure influences strategies over which corporate leaders have significant discretion. Corporate philanthropy is a strategic activity commonly managed through a specific, differentiated organizational structure—the corporate foundation—that formalizes and constrains the influence of individual senior managers and directors on corporate strategy. Our analysis of Fortune 500 firms from 1996 to 2006 shows that characteristics of senior management and directors affect corporate philanthropic contributions. We also find that organizational structure constrains the philanthropic influence of board members, but not of senior managers, a result contrary to what existing theory would predict. We discuss how these findings advance understanding of how organizational structure and corporate leadership interact and how organizations can more effectively realize the strategic value of corporate social responsibility activities.
TL;DR: The findings using disaggregated measures of PSP and ESP indicate negativity bias in that PSP weakness has a stronger negative impact on firm performance compared to PSP strength.
Abstract: Corporate social performance (CSP) consists of actions in different domains that vary in the information they provide stakeholders, and hence, in their effect on firm performance. To demonstrate this, the authors examine the impact of CSP on firm performance in two areas—the product and the environment, referred to as product social performance (PSP) and environmental social performance (ESP), respectively. PSP has a stronger positive impact on firm performance compared to ESP. The findings using disaggregated measures of PSP and ESP indicate negativity bias in that PSP weakness has a stronger negative impact on firm performance compared to PSP strength. Copyright © 2013 John Wiley & Sons, Ltd.
TL;DR: It is proposed that the level of diversification will be positively related to the CSP of firms, however, when diversified firms have a strong focus on short-term profit, it may discourage firm response to stakeholder demands and investment in social issues, thereby negatively moderating the positive relationship between the levelof diversification and CSP.
Abstract: Does diversification affect firm response to stakeholder demands and social issues? Despite extensive interest in corporate diversification in the strategy literature, the relationship between diversification and corporate social performance (CSP) remains largely unexplored. In this study, I propose that the level of diversification will be positively related to the CSP of firms. However, when diversified firms have a strong focus on short-term profit, it may discourage firm response to stakeholder demands and investment in social issues, thereby negatively moderating the positive relationship between the level of diversification and CSP. Empirical testing on a sample of U.S. firms generally supports my predictions. Copyright © 2012 John Wiley & Sons, Ltd.
TL;DR: In this article, the principal-principal perspective was tested and extended in the context of corporate takeovers of Chinese publicly listed firms from 1998 to 2007, and it was found that this resistance weakens when target firms are located in regions with more institutional development, where the minority shareholders' interests are better protected.
Abstract: The principal-principal perspective is tested and extended in the context of corporate takeovers of Chinese publicly listed firms from 1998 to 2007. The resistance of a target firm's controlling shareholder toward potential takeovers reflects the conflict between the principal and minority shareholders. It was found that this resistance weakens when target firms are located in regions with more institutional development, where the minority shareholders' interests are better protected. The resistance also decreases for target firms with CEOs who are politically connected, as these CEOs may be more interested in their own political careers than in representing the interests of the controlling shareholders.Copyright © 2012 John Wiley & Sons, Ltd.
TL;DR: In this paper, the authors argue that a network's structure (feasibility of transactions, centrality of members, structural holes, network ties, the number of roles each member plays) and its conduct (opportunistic behavior, reputation signaling, perceptions of trust) also have significant impacts on the network's value to users and to network providers.
Abstract: Rooted in neoclassical economics, network effects research has revolved around size, arguing that the more users a network has, the more valuable that network will be to each user. I argue that a network's structure (feasibility of transactions, centrality of members, structural holes, network ties, the number of roles each member plays) and its conduct (opportunistic behavior, reputation signaling, perceptions of trust) also have significant impacts on a network's value to users and to network providers. Network research that neglects structure and conduct and focuses only on size can lead to wrong strategies or a misleading research agenda. Copyright © 2012 John Wiley & Sons, Ltd.
TL;DR: Examining institutional effects in the context of semiglobalization by considering the influences of three formal institutions of countries and geographic regions shows that MNEs' degree of internationalization into a country is influenced by both country and regional institutional environments.
Abstract: Traditional research suggests a relationship between country-level institutions and the location choices of MNEs. However, more recent theory suggests MNEs also focus on regions (semiglobalization). Therefore, this study examines institutional effects in the context of semiglobalization by considering the influences of three formal institutions (i.e., regulatory control, political democracy, capital investments) of countries and geographic regions on MNEs' location choices of internationalization. We use a sample of Japanese MNEs operating in 45 countries within eight regions. The results show that their degree of internationalization into a country is influenced by both country and regional institutional environments. Additionally, a semiglobalization perspective provides better explanatory power than does the country-level perspective. These results present a new perspective on how MNEs consider institutional environments in their international strategy. Copyright © 2013 John Wiley & Sons, Ltd.
TL;DR: In this article, the authors examine the consequences of alliance portfolio configuration by focusing on contingencies that affect the impact of the alliance portfolio size on innovation and financial performance, and propose that, at high levels of innovation of the focal firm, increasing portfolio size dampens financial performance.
Abstract: We examine the consequences of alliance portfolio configuration by focusing on contingencies that affect the impact of alliance portfolio size on innovation and financial performance. While increasing alliance portfolio size is expected to positively impact innovation and financial performance, we propose that, at high levels of innovation of the focal firm, increasing alliance portfolio size dampens financial performance. We also propose that firm boundaries moderate the impact of alliance portfolio size on innovation and financial performance differently. Specifically, vertically integrated firms benefit less (more) than their vertically specialized counterparts in leveraging higher innovation (financial) performance with increasing alliance portfolio size. Our analysis suggests that both vertical scope and innovation levels of the firm play an important role in understanding how alliance portfolios impact performance. Copyright © 2013 John Wiley & Sons, Ltd.
TL;DR: There is strong evidence that converted wholly owned subsidiaries outperform continuing joint ventures in industries characterized by high levels of intangible assets such as technology or brand, after controlling for factors that may affect the conversion decision.
Abstract: This study explores when wholly owned subsidiaries outperform joint ventures with local partners In order to avoid the endogeneity problem inherent in foreign subsidiaries' operating mode decisions that might confound performance measurement, we employ the propensity score matching method, along with the difference-in-differences approach, and compare the performances of joint ventures turned wholly owned subsidiaries vis-a-vis continuing joint ventures Based on foreign subsidiaries' financial data in China for 1998–2006, we find strong evidence that converted wholly owned subsidiaries outperform continuing joint ventures in industries characterized by high levels of intangible assets such as technology or brand, after controlling for factors that may affect the conversion decision This finding is consistent with the prediction of transaction cost theory Copyright © 2012 John Wiley & Sons, Ltd