going the distance the pros and cons of expanding employees global knowledge reach while some scholars have suggested mnes to be superior to markets for managing knowledge across geographically distant boundaries how they actually accomplish this has not been fully considered we address this void by developing and testing a model that highlights the critical role of organizational incentives in enhancing employees internal search and use of knowledge data from 166 knowledge intensive projects support our argument that in contrast to process based incentives that influence more local search outcome based incentives motivate employee teams to reach well beyond their immediate location which in turn enhances performance at the same time we demonstrate that expanded reach also increases the likelihood of accessing more codifiable knowledge which can hurt performance our model examines the contradictory and previously unknown effects of global knowledge reach

enhancing socio ecological value creation through sustainable innovation 2 0 moving away from maximizing financial value capture abstract there is considerable consensus that a key to addressing the serious socio ecological crises facing the world is for organizations to implement innovations that foster sustainable development drawing from the sustainability innovation and resource based view literature this paper aims to examine the organizational capabilities associated with promoting a particular sustainable innovation conservation agriculture among small scale farmers in low income countries findings suggest that a paradigm shift is needed to what we call sustainable innovation 2 0 sustainable innovation 2 0 is associated with a double bottom line approach to sustainability that seeks to enhance positive socio ecological externalities while maintaining financially viable organizations i e financial well being is subservient to socio ecological well being we describe how sustainable innovation 2 0 is associated with i making rare sustainable innovations commonplace ii making inimitable emerging sustainable innovations transferable and iii developing institutional infrastructures and bundles of resources that counteract the non substitutability of sustainable innovations we discuss the implications of these ideas for the associated literature and for future research

entrepreneurial rents and the theory of the firm abstract the creation of entrepreneurial rents occurs under conditions of uncertainty yet current theories of rent appropriation such as transactions cost theories of the firm focus their efforts primarily on how quasi rents rents that have already been created are appropriated by parties to that exchange entrepreneurs face a dual challenge that of creating entrepreneurial rents and appropriating some of these rents moreover this challenge usually exists at a time when the entrepreneurial rents that might be created are not known or anticipatable indeed entrepreneurs not only concern themselves with ensuring that they are able to appropriate at least some of the rents that might be eventually created but in fact they may not create any rents or potentially lose value understanding the dual nature of the rent creation and the rent appropriation problem has a variety of implications for the study of entrepreneurial organizations and generally for theory of the firm discussions

the firm as an epistemic community the knowledge based view revisited based on a social constructivist conceptualization of knowledge as residing in groups of practitioners epistemic communities this paper proposes a new perspective on the knowledge based view of the firm and sketches the outline of a new research agenda it argues that the cost of governing knowledge processes depends as much on the cognitive background of the exchange partners as on the tacitness of the knowledge firms exist because they may form epistemic communities in their own right with enabling and motivational properties superior to those of markets in the governance of knowledge processes across epistemic boundaries establishing a firm as an epistemic community requires transaction specific investments that are difficult to realize under market forms of governance

testing alternative theories of the firm transaction cost knowledge based and measurement explanations for make or buy decisions in information services firms boundary choices have undergone careful examination in recent years particularly in information services while transaction cost economics provides a widely tested explanation for boundary choice more recent theoretical work advances competing knowledge based and measurement cost explanations similar to transaction cost economics these theories examine the impact of exchange attributes on the performance of markets and hierarchies as institutions of governance these theories however offer alternative attributes to those suggested by transaction cost economics or offer alternative mechanisms through which similar attributes influence make buy choices traditional empirical specifications of make buy models are unable to comparatively test among these alternative theories by developing and testing a model of comparative institutional performance rather than institutional choice we examine the degree of support for these competing explanations of boundary choice hypotheses are tested using data on the governance of nine information services at 152 companies our results suggest that a theory of the firm and a theory of boundary choice is likely to be complex requiring integration of transaction cost knowledge based and measurement reasoning 1998 john wiley sons ltd

understanding corporate coherence theory and evidence abstract multiproduct firms are perceived to be coherent in their scope yet there is no strong theoretical foundations to explain coherence in modern industrial organization theory this paper shows that as u s manufacturing firms grow more diverse they maintain a constant level of coherence between neighboring activities this finding runs counter to the idea that firms with many activities are generally more incoherent a framework is then presented which appeals to the nature of enterprise learning path dependencies and the nature of the selection environment to explain the ubiquity of coherent diversifiers

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

a framework of economic analysis for tapered technology manufacturing alliances abstract globalization of production has altered the configuration of supply chains in many industries besides outsourcing joint ventures and strategic alliances are increasingly established to create competitive production organizations this paper addresses a case of tapered technology manufacturing alliance between a process technology firm with captive manufacturing capability and an efficient manufacturing firm in an asset heavy industry a framework of economic analysis is first developed for fusing the factors of technology licensing manufacturing efficiency risk sharing and demand uncertainty analysis methods of capacity economics are next described for participation analysis capacity allocation and contract term tradeoffs finally we demonstrate the utility of the methods by numerical examples with stylized industry data and by an analysis of alliance stability when facing potential new entrants

opportunism is not the only reason why firms exist why an explanatory emphasis on opportunism may mislead management strategy the object of the present essay is neither to overturn transaction cost economics nor to deny the reality of opportunism instead it is to question the explanatory role of the concept of opportunism in the transaction cost analysis of oliver williamson and his followers williamson has suggested that potential or actual opportunism emerges as the source of the transaction costs involved in monitoring and enforcing contracts on the contrary it is shown here that there are several additional and likely sources of contract default or incomplete performance williamson s explanatory concentration on opportunism thus misidentifies the reasons for different hierarchical governance structures in the real world as these additional sources are ignored the emphasis on opportunism can impair a true understanding of the inner workings of the firm and be a misleading guide for practical questions of organizational design and corporate strategy

strategy research governance and competence perspectives 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

explaining the university run enterprises in china a theoretical framework for university industry relationship in developing countries and its application to china this paper explains and evaluates the evolution of the ures university run enterprises in china by building a new theoretical framework on the university industry relationship unlike the triple helix or the new economics of science that advocates a certain type integration or separation of university industry relationship we take a contingent or context specific perspective on the relationship having the context of developing countries in mind the framework developed in this paper explains in what condition universities would keep distance from industry or become entrepreneurial to take a part in the functions of industry i e setting up and running their own business enterprises in this typology the basic determinants are internal resources of university absorptive capacity of industrial firms and existence of intermediary institutions as well as the propensity of university for ures the paper has argued that the chinese universities since the market oriented reform had strong propensity to pursue economic gains and strong internal r d and other resources to launch start ups and thus established their own firms i e ures given the low absorptive capacity of industrial firms and the underdeveloped intermediary institutions the recent adjustment of the ures in china can also be understood in terms of changes in the above three factors such as universities weakened propensity to pursue economic gains relative decline of superiority of university resources and improved external environment

asset specificity and economic organization abstract this paper examines the optimization problem of firm and market organization in which both production cost and transaction cost differences are expressed as a function of asset specificity in general markets enjoy advantages by aggregating the demands of many buyers thereby realizing economies of scale or scope such production cost savings need to be assessed in relation to the transaction cost advantages that internal organization sometimes enjoys over markets in adapting to changed circumstances as it turns out both production cost economies and the transaction cost differences between firm and market organization vary systematically with the characteristics of the investments this paper employs a unified framework to assess the choice of organization form the condition of asset specificity is featured

disentangling the theories of firm boundaries a path model and empirical test theories on the motivation underlying firm boundaries have recently sparked renewed debate what best explains whether a firm relies on market control or hierarchical control to secure required resources how do the characteristics of the resources come into play in this study we consider a comprehensive path model of the governance mode decision for sourcing technological know how by integrating different perspectives on firm boundaries including transaction cost economics a resource based view and an options perspective we link characteristics of the technology i e uniqueness barriers to imitation commercial uncertainty technological dynamism to the perceived threat of opportunism the potential for sustainable advantage and the pursuit of a licensing agreement vis a vis the outright acquisition of the firm that possesses the desired know how we use structural equation modeling to analyze 127 sourcing arrangements our results show that technological dynamism and barriers to imitation indirectly influence the governance mode decision by increasing the perceived threat of opportunism commercial uncertainty directly influences the governance mode and decreases the likelihood of an acquisition vis a vis a licensing agreement although uniqueness and barriers to imitation are also positively associated with the perceived potential for sustainable advantage the potential for sustainable advantage had no direct effect on governance mode implications and suggestions for further research are offered

asset stock accumulation and sustainability of competitive advantage given incomplete factor markets appropriate time paths of flow variables must be chosen to build required stocks of assets that is critical resources are accumulated rather than acquired in strategic factor markets barney barney j 1986 strategic factor markets expectations luck and business strategy management sci october 1231 1241 sustainability of a firm s asset position hinges on how easily assets can be substituted or imitated imitability is linked to the characteristics of the asset accumulation process time compression diseconomies asset mass efficiencies inter connectedness asset erosion and causal ambiguity

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

star power colleague quality and turnover in this article we argue that the existence of greater organizational resources in the form of higher quality colleagues acts as a retention mechanism we test our hypotheses using a panel data set of securities analysts in 24 securities firms over a 9 year period results show that analysts working with higher quality colleagues are less likely to turnover analyst turnover is affected by the performance of two types of colleagues colleagues within one s group and colleagues in the client facing role this colleague effect applies to analyst turnover to competitor firms and not to analysts who exit the securities analysts industry copyright 2010 the author 2010 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

repatriating knowledge variables influencing the transfer process because of the strategic importance of organizational learning in a global economy the knowledge that repatriates acquire during international assignments is a valuable resource few multinational enterprises however actively harvest this knowledge and little quantitative empirical research on this topic exists to date we propose an original model and propositions that delineate the facilitative and inhibiting factors affecting repatriate knowledge transfer to work units we conclude with suggestions for future research and practical implications

the function of authority in transaction cost economics abstract this paper questions the transaction cost characterization of observed authority relations as efficient governance structures various inadequacies in the transaction cost account of work organization and the limits of firm size are traced to its neglect of the possibility that authority may be abused opportunistically this exemplifies a more general propensity in the transaction cost literature that of explaining economic organization in functionalist terms with little attention to the causal mechanisms through which efficient governance structures might actually arise three such mechanisms are considered but none is found to provide an adequate rationale for the imputation of efficiency to observed structures

on the opportunism independent theory of the firm previous developments in the opportunism independent theory of the firm are either restricted to special cases or are derived from the capabilities or resource based perspective however a more general opportunism independent approach can be developed based on the work of demsetz and coase which is nevertheless contractual in nature this depends on direction that is deriving economic value by permitting one set of actors to direct the activities of another and of non human factors of production direction helps to explain not only firm boundaries and organisation but also the existence of firms without appealing to opportunism or moral hazard the paper also considers the extent to which it is meaningful to speak of contractual theories in the absence of opportunism and whether this analysis can be extended beyond the employment contract to encompass ownership of assets by the firm the author 2005 published by oxford university press on behalf of the cambridge political economy society all rights reserved

rationality vs ignorance the role of mne headquarters in subsidiaries innovation processes it has been recognized that innovation processes in multinational enterprises mnes are largely context specific local activities carried out at the subsidiary level e g andersson forsgren holm 2007 asakawa 2001 birkinshaw hood 1998 doz prahalad 1981 ghoshal bartlett 1988 hedlund 1986 rugman verbeke 2001 as a consequence the ability of corporate headquarters hq to influence these widely dispersed processes has become a major issue in contemporary research on mnes what is the role of hq in these processes to what extent can it participate in and play an active role in specific innovation processes what are the performance implications when it gets involved these questions which have not yet established answers warrant further research in addition studies aimed at finding the answers have not yet debated the validity of alternative perspectives related to the knowledge asymmetry between the potential participants in innovation processes

broadening the foreign market entry mode decision separating ownership and control this paper argues that the ownership and control dimensions of foreign market entry mode choice should be separated and that foreign market entry mode decisions should be expanded to business activities beyond production and distribution empirical results from the global hotel industry indicate that the transferability of the entrant s competitive advantages the local market s absorptive capacity and the availability of trustworthy local partners differentially affect the ownership and control dimensions of the entry mode decision

overcoming export manufacturers dilemma in international expansion learning and acquiring local market knowledge from foreign distributors are central to manufacturers export market performance drawing from the resource based view we propose that manufacturers need to develop stronger local market competence while simultaneously minimizing the costs of distributor opportunism in order to compete successfully in the export market cultural distance and other barriers however may hinder the development of local market competence for the manufacturer while contributing to the occurrence of distributor opportunism in order to overcome these barriers we examine the impact of three alternative forms of manufacturer governance trust knowledge sharing and contract based relationship in export channels findings suggest that all three governance mechanisms contribute to enhancing the manufacturer s competence to exploit local market opportunity however of the three trust seems to be the only effective way to curtail distributor opportunism

explaining ijv survival in a transitional economy through social exchange and knowledge based perspectives in this study we combine social exchange and knowledge based perspectives to develop a general path model of ijv survival we further refine our expectations by considering the transitional economic context of our study and the somewhat unique managerial values resulting from the legacy of marxist ideology results from structural equation modeling suggest that an imbalance in the management control structure between the parents leads to parental conflict and an increased likelihood of ijv failure an imbalance in the ownership control structure however had no influence on conflict or survival in general support from the foreign parent is positively related to ijv learning and ijv survival however higher levels of technical support provided by the foreign parent to the ijv reduced the level of parental conflict whereas management support had no effect on conflict our results suggest some dilemmas for firms pursuing ijvs in transitional economies although the foreign parent often contributes critical resources to the ijv providing it with bargaining power and a high level of influence an imbalance in management control between the partners may ultimately be detrimental to ijv survival copyright 2000 john wiley sons ltd

a knowledge based theory of the firm the problem solving perspective in this paper we develop a knowledge based theory of the firm while existing knowledge based theory focuses on the efficiency of hierarchy in economizing on knowledge exchange we develop a theory of the firm that focuses on the efficiency of alternative organizational forms ingenerating knowledge or capability our theory begins with the problem as the basic unit of analysis arguing that a problem s complexity influences the optimal method of solution search and the optimal means of organizing that search the distinguishing feature that differentiates among organizational alternatives is the different way each resolves conflict over the selection of solution trials that is the way it chooses the path of search our theory predicts that efficiency demands that these governance alternatives be matched in a discriminating way to problems based on their associated benefits and costs in governing solution search thus our theory is among the first to simultaneously treat both the boundary choice i e internal versus external and the choice among alternative internal approaches to organizing

knowledge creates markets the influence of entrepreneurial support and patent rights on academic entrepreneurship we use an exogenous change in german federal law to examine how entrepreneurial support and the ownership of patent rights influence academic entrepreneurship in 2002 the german federal government enacted a major reform called knowledge creates markets that set up new infrastructure to facilitate university industry technology transfer and shifted the ownership of patent rights from university researchers to their universities based on a novel researcher level panel database that includes a control group not affected by the policy change we find no evidence that the new infrastructure resulted in an increase in start up companies by university researchers the shift in patent rights may have strengthened the relationship between patents on university discovered inventions and university start ups however it substantially decreased the volume of patents with the largest decrease taking place in faculty firm patenting relationships

bounded rationality and tacit knowledge in the organizational capabilities approach an assessment and a re evaluation the famous three chapters in nelson and winter s an evolutionary theory of economic change 1982 that focus on firm routines and capabilities are often taken to be solidly founded on an assumption of bounded rationality i argue that in actuality bounded rationality plays a rather limited role in nelson and winter 1982 that the very different assumption of tacit knowledge is much more central and that the links between bounded rationality and routines capabilities are not clear i then argue that the absence in nelson and winter of a clear methodological individualist foundation for notions such as routines capabilities competencies etc has resulted in certain explanatory difficulties in the modern organizational capabilities approach that has taken so much inspiration from their work copyright 2003 oxford university press

transaction cost determinants and ownership based entry mode choice a meta analytical review entry mode choice is a critical ingredient of international entry strategies and has been voluminously examined in the field the findings however are very mixed especially with respect to transaction cost related factors in determining the ownership based entry mode choice this study conducted a meta analysis to quantitatively summarize the literature and empirically generalize more conclusive findings based on the 106 effect sizes of 38 empirical studies the meta analysis shows that the findings of the existing studies are moderated to varying degrees by both study setting factors and statistical artifacts although the combined overall effects of transaction cost based determinants are consistent with the predictions of transaction cost economics we extensively discuss the implications of meta analytical results especially moderating effects of location country of origin industry type and statistical artifacts highlight the measurement adequacy equivalence and multidimensionality of transaction cost determinants and present our suggestions to improve theoretical inquiries and empirical verifications on entry mode choice

the ethics of the complete management buyout cycle a multi perspective analysis management buyouts occur when incumbent managers typically in association with third party investors purchase all of a firm s outstanding stock and remove it from public trading prior ethical analyses of such activities have ignored the fact that large numbers of such buyouts return to public trading the ethical implications of management buyout activity can be more fully understood if the entire buyout process is considered beginning with the time the firm is taken private until it is returned to public trading using a widely employed strategic management ethical framework developed by hosmer 1994 this paper examines the ethics of the complete buyout cycle

an integrated anti opportunism system in international exchange building on economic and social exchange theories this study develops an integrated model in which curtailing opportunism in international joint ventures ijvs requires four interrelated sets of suppressing forces 1 contractual ordering contractual inclusiveness and contractual obligatoriness 2 structural ordering managerial governance and equity captiveness 3 relational ordering interparty attachment and boundary spanner ties and 4 justice ordering procedural justice and distributive justice using a sample of 192 ijvs in an emerging market this study finds general support for our theoretical model our research validates that countering opportunism involves a system wide effort that integrates economic and social mandates unifies ex ante and ex post mechanisms controls both egoistic and non egoistic motivations and combines organizational level and individual level forces for partners from individualist cultures economic ordering forces contractual and structural are stronger than social ordering forces relational and justice in relation to opportunism resistance whereas for partners from a collectivistic culture social ordering forces are relatively stronger than economic ordering forces for this end

the content of freedom in resources the open source model today we are facing the rising of new needs for the firms especially for the small ones they find themselves acting in a context characterized by the great content of information technology this paper wants to analyse some aspects tied to the use of some particular kinds of resources such as knowledge and organizational culture it s necessary especially in the new economy to add another attribute to the four set by barney as elements able to make the resources sustainable competitive advantage sources in 1991 this attribute is freedom essentially as freedom of reaching and using resources this attribute more than coming along with the four already set can be considered in many cases as a pre condition to the other ones in existence

from security to mobility generalized investments in human capital and agent commitment this paper considers the impacts of different investments in human capital firm specific versus generalized investments on employee commitment to the firm the resource based literature has stressed that only firm specific human capital is likely to generate organizational rents since those assets are more likely to be inimitable rare and therefore a better basis for sustained competitive advantage generalized investments in human capital i e investments in capabilities that people can transfer and deploy to other firms or settings are to be avoided however observing lessons from the literature on psychological contracts and organizational commitment we argue that generalized investments may have value for the firm through their effects on worker commitment to the firm the gain in worker commitment is valuable to firms given the fragile state of the contemporary employment relation in which the lack of job security is likely to breed diminished employee commitment this is particularly a concern for employment relations consisting of externalized labor i e contract work or selfemployed professionals operating as agents of the firm in which agent commitment is vital but likely to be more scarce in this paper we focus on the externalized workers independent agents of two insurance firms in addressing these issues a sample of 237 agents shows support for the benefits of generalized investments on agent commitment questioning conventional wisdom that such investments should be avoided we also examine the impact of relation specific investments and other key antecedents on agent commitment concluding that a mixture of strategic investments in human capital should be considered taking into account their impacts on the firm worker psychological contract we also examine the impact of agent commitment on agent performance in this context finding committed agents do provide greater value to the insurer

the global configuration of a speculative trading operation an empirical study of foreign exchange trading this paper proposes a theory of firm boundaries based on fore knowledge development and exploitation in speculative or informed trading foreign exchange trading provides this study s empirical context from research on information economics we suggest optimal speculative trading operations are multiunit and globally dispersed alternatively transaction cost economics suggests atomistic actors prevail in the market for fungible commodities like currencies we also develop competing hypotheses about information technology s effects on foreign exchange trading operations speculation arguments predict that the global scope of trading operations will expand after the introduction of generic information technologies transaction cost economics proposes that when atomistic actors do not prevail trading operations will contract after this introduction we test competing predictions with models of the expansion contraction and net change in a firm s global dispersion we estimate these models with data from the population of banks worldwide engaged in interbank foreign exchange currency fx trading from 1974 to 1993 our results uncover two types of firms those that approach the atomistic actor of transaction cost economics and those that resemble the globally dispersed multiunit configuration from our speculation discussion these results encourage reflection on how the theory of the firm differs when firms trade to produce versus speculate

resource constraints as triggers of radical innovation longitudinal evidence from the manufacturing sector abstract despite the significant role of radical innovation as a driver of firm growth and performance the consequences of resource constraints for radical innovation outcomes remain unknown our paper addresses this gap we combine arguments from entrepreneurship theory and the theory of recombinative innovation to construct an overarching theoretical framework that argues why resource constraints can promote rather than impede radical innovation we then build hypotheses on two specific resource constraints knowledge and financial and test these by a lagged variable random effects tobit model with longitudinal data from an exceptionally large and detailed innovation survey controlling for absorptive capacity firm age and firm growth we find full support for the hypothesis that knowledge constraints spur radical innovation and partial support for the hypothesis that financial constraints spur radical innovation we discuss the theoretical significance of these findings and point to managerial implications and paths for future research

the determinants of expatriate staffing by japanese multinationals in asia control learning and vertical business groups we empirically examine the determinants of the decision whether or not to appoint an expatriate as the managing director of overseas affiliates for a sample of 844 japanese manufacturing affiliates operating in asia in 1995 confirmation is found for hypotheses derived both from a control and coordination perspective on expatriation and from a knowledge creation and learning perspective strategic dependence of the parent on the affiliate increases the propensity to appoint expatriates whereas localisation of the affiliate reduces it organisational experience in the country both by the affiliate and by the firm increases the probability that host country nationals will be appointed inter firm relationships within vertical keiretsu groups impact on expatriation policies through inter organisational knowledge exchange in host countries and the mitigation of localisation requirements owing to intra group transactions

economic theories of the firm past present and future we explore the current state of the theory of the firm with attention to its historical origins answers to the crucial theoretical question of why an organization controlled by a central authority cannot always duplicate the performance of a decentralized organization are presented finally we describe some important current directions in the theory of the firm and point out promising avenues for continuing research

competencies and firm performance examining the causal ambiguity paradox resource based theory argues that resources must be valuable rare inimitable and lack substitutes to confer competitive advantage inimitability is a lynchpin of resource based theory and central to understanding the sustainability of competitive advantage although scholars recognize a positive relationship between causal ambiguity and inimitability the relationship among critical resources called competencies causal ambiguity and firm performance remains an unresolved conundrum one perspective suggests that causal ambiguity regarding competencies and performance is necessary among internal and external managers for sustainable competitive advantage because it severely limits imitation causal ambiguity therefore enhances firm performance another view holds that causal ambiguity places a constraint on the transfer and leveraging of these competencies within a firm in this case causal ambiguity may adversely influence firm performance this paper takes a resource based view to develop and test hypotheses that relate managers perceptions of causal ambiguity to their firm s performance the hypotheses examine relationships between firm performance and 1 causal ambiguity regarding the link between competencies and competitive advantage and 2 causally ambiguous characteristics of competencies research involving 224 executives in 17 organizations provides valuable insights into the relationships between causal ambiguity and firm performance a model is then developed based on these findings particular consideration is given to the differing ways top and middle managers in a firm may experience causal ambiguity and to how these differences may be understood and managed copyright 2001 john wiley sons ltd

markets false hierarchies and the evolution of the modern corporation transaction cost economics or the markets and hierarchies framework has emerged in recent years as an important new approach for dealing with a variety of problems in industrial organisation although coase 1937 provided an early statement of the role of costs of using the market in encouraging firm organisation to replace market exchange in certain circumstances the development of transaction cost economics as a coherent and systematic industrial organisation framework did not take place until the 1970s the rediscovery development and refinement of transaction costs as a possible analytical tool is due in large part to oliver williamson whose outline of the framework is contained in three works the initial statement markets and hierarchies 1975 henceforth mh henceforth eic has further extended the boundaries of transaction cost economics remaining broadly consistent with mh henceforth eo is a selected set of essays some in transaction cost economics and some from an earlier period in williamson s work for our purposes eic may be taken as a definitive and current statement of williamson s approach to economics though both of the other works extend the analysis in significant respects

a resource based theory of the firm knowledge versus opportunism this paper develops a resource based knowledge based theory of the firm its thesis is that the organizational mode through which individuals cooperate affects the knowledge they apply to business activity we focus on the polar cases of organization within a firm as compared to market contracting there will be a difference in the knowledge that is brought to bear and hence in joint productivity under the two options thus as compared to opportunism based transaction cost theory we advance a separate yet complementary answer to the question why do firms exist our aim is to develop an empirically relevant and complementary theory of why firms are formed a theory based on irreducible knowledge differences between individuals rather than the threat of purposeful cheating or withholding of information we assume limited cognitive abilities on the part of individuals bounded rationality and assume that opportunistic behavior will not occur the latter allows us to determine whether resource based

crossroads the organization of economic activity transaction costs firm capabilities and the nature of governance in a recent 1993 paper in organization science hennart discussed the underlying logic based on transaction cost and agency theory for explaining the choice between firms and markets and the reason why most transactions have both firm like and market like properties relying on williamson s comparative institutional approach which studies economic organization from a transaction cost minimizing point of view under the assumption of opportunism the argument was made that transaction cost tc logic provides a complete theory of the organization of economic activity in this paper i argue that with its purely incentive based logic governed by assumptions of opportunism tc economics is fundamentally incapable of being a complete theory of economic organization the notion of the firm as a bundle of transactions or contracts is an inadequate and shallow basis for a theory of the firm since it basically ignores the essential notion of the firm as a bundle of knowledge and the underlying processes there

evidence on how academics manage their portfolio of knowledge transfer activities abstract the purpose of this paper is to explore whether six broad categories of knowledge transfer activities undertaken by academics the creation and diffusion of knowledge through publications transmission of knowledge through teaching informal knowledge transfer patenting spin off formation and consulting activities are complementary substitute or independent as well as the conditions under which complementarities substitution and independence among these activities are likely to emerge this investigation relied on data regarding 1554 researchers funded by the natural sciences and engineering research council of canada contrary to prior studies which have examined complementarities and the determinants of knowledge transfer activities in separate models this study relied on a multivariate path model to reflect the fact that in practice academics consider simultaneously whether or not to undertake multiple knowledge transfer activities overall the results point to the existence of three very different types of knowledge transfer portfolios of activities a first portfolio made up of complementary activities which are interdependent and reinforce each other this portfolio includes publications patenting spin off creation consulting and informal knowledge transfer a second portfolio includes teaching activities and publication outputs which are substitute for each other a third portfolio comprises teaching activities and other activities independent from teaching namely patenting spin off creation consulting and informal knowledge transfer each of these three portfolios of knowledge transfer activities emerged under different conditions implications are derived for managerial practice and future research

knowledge based approaches to the theory of the firm some critical comments it is argued that kogut and zander kogut b u zander 1992 knowledge of the firm combinative capabilities and the replication of technology organ sci 3 383 397 and conner conner k r 1991 a historical comparison of resource based theory and five schools of thought within industrial organization economics do we have a new theory of the firm j management 17 121 154 erred in the specific way in which they claimed that a distinct theory of the multi person firm can be constructed on the basis of a theory of organizational knowledge or from resource based insights it is not possible to tell very much of a story about why there should be firms in lieu of notions such as opportunism or moral hazard however properly interpreted knowledge based theories may help shed light on issues relating to the boundaries and internal organization of the firm

the transaction costs theory of joint ventures an empirical study of japanese subsidiaries in the united states this paper offers the first large sample empirical study of the factors which influence the choice of japanese firms between full or partial ownership of their u s manufacturing subsidiaries it studies for the first time the ownership policies of investors of a single home country in a single host country thus keeping variations within home and host countries constant one methodological improvement over previous studies is the use as independent variables of the relevant characteristics of the investing firms these had been proxied in previous studies by data on u s industries entered the results suggest that the degree of ownership taken by japanese manufacturing investors in their american subsidiaries is driven by the same general transaction costs variables that determine the choices made by their u s counterparts japanese parents joint venture when they need to combine with other firms intermediate inputs which are subject to high market transaction costs an intriguing result however is the lack of significance of two variables which in the u s case strongly push towards full control of foreign subsidiaries in this study neither the japanese parent s r d nor its advertising intensities had any significant impact on their ownership policies

how vertical integration affects firm innovation quasi experimental evidence although it is well established that vertical integration decisions have important consequences for firms direct evidence on how vertical integration matters to firm innovation has been scarce th

organizing rent generation and appropriation toward a theory of the entrepreneurial firm abstract why firms exist and how their boundaries should be drawn are central issues in several academic disciplines the field of entrepreneurship continues to struggle with a theory of the firm this paper suggests a theory of the entrepreneurial firm grounded in organizational economics and bounded by the rent generation and appropriation of entrepreneurial knowledge

dynamic capabilities what are they this paper focuses on dynamic capabilities and more generally the resource based view of the firm we argue that dynamic capabilities are a set of specific and identifiable processes such as product development strategic decision making and alliancing they are neither vague nor tautological although dynamic capabilities are idiosyncratic in their details and path dependent in their emergence they have significant commonalities across firms popularly termed best practice this suggests that they are more homogeneous fungible equifinal and substitutable than is usually assumed in moderately dynamic markets dynamic capabilities resemble the traditional conception of routines they are detailed analytic stable processes with predictable outcomes in contrast in high velocity markets they are simple highly experiential and fragile processes with unpredictable outcomes finally well known learning mechanisms guide the evolution of dynamic capabilities in moderately dynamic markets the evolutionary emphasis is on variation in high velocity markets it is on selection at the level of rbv we conclude that traditional rbv misidentifies the locus of long term competitive advantage in dynamic markets overemphasizes the strategic logic of leverage and reaches a boundary condition in high velocity markets copyright 2000 john wiley sons ltd

achieving demand side synergy from strategic diversification how combining mundane assets can leverage consumer utilities we explore the overlooked issue of how certain strategic level interindustry diversification options might increase consumer utility discussions of inter industry diversification typically focus on producer synergies obtainable from economies of scope or from skill transfer across business units discussions of intra industry product diversification generally the province of marketing typically focus on synergies obtainable from product bundling which lowers producer costs or provides convenience for consumers we take a different tack by linking interindustry diversification and consumer utility we first separately examine two possible consumer benefits of interindustry diversification 1 facilitating consumers accomplishment of two tasks simultaneously or 2 attracting diverse consumer groups to a common platform when intergroup externalities exist we then assess a simple empirical context that shows potential for simultaneous consumer utilities and two sided market utility together we analyze this context and concurrently develop a mathematical model showing how these demand side synergies can create unique business value we next introduce asymmetric preferences among consumer subgroups and we refine our arguments by comparing their conclusions with the empirical data we learn that combinations of otherwise mundane i e commonplace assets can create consumer value superior assets are not necessary moreover common ownership is necessary for the pricing flexibility required to deliver and capture maximum value through interindustry diversification especially when consumer groups preferences may change the negotiations and settling up required for cooperation through alliances will without common ownership increase costs and reduce responsiveness we discuss the sustainability of demand side advantages and the implications of these ideas for future research and practice

resource and capability constraints to innovation in small and large plants in an attempt to enhance firm s competitiveness policy initiatives have sought to encourage more firms to innovate with a particular focus on small firms the success of such initiatives however depends on a clear understanding of the factors that are constraining innovation activity and whether these differ for firms of different sizes this paper examines those resources and capabilities that firms identify as constraining their innovation activity the difference in these for small and larger plants and the actual impact of these perceived constraints on the probability of innovating and the degree of innovation success drawing on longitudinal data the paper demonstrates that innovation is an evolutionary process with the constraints to innovation being different for small and larger plants from a policy perspective initiatives to overcome constraints to innovation in small plants should extend beyond those of finance to include greater networking opportunities cost reduction programmes and marketing strategies to increase the profit margin on new products human resource management practices on implementing change and easier access to information about new technologies in contrast policies to promote innovation in larger plants should focus on minimising the risk of development and enhancing access to specialist expertise

interfirm cooperation in strategic relationships the role of formal contract in this paper we use a large database of more than 3 700 strategic relationships in force between french firms in 2003 to study the way they achieve cooperation we find that cooperation is enhanced by a partner s reputation and the perceived balance of the relationship our results also suggest that while formal contracts have a negative impact on ex post cooperation when relationships are simple contracts are an enhancing factor of cooperative behaviors as soon as the intrinsic hazards of the relationship require higher ex ante contractual safeguards to secure agreements as a result formal contracts can on the one hand have a pernicious effect on the willingness of firms to implement cooperative behaviors and on the other and under precise circumstances appear a prerequisite allowing the emergence of ex post interfirm cooperation

intangible resources tobin s q and sustainability of performance differences this paper tests empirically the hypothesis that the greater the intangibility of a firm s resources the greater the sustainability of its competitive advantage resource intangibility is measured by 1 tobin s q and 2 the predicted value from a hedonic regression of q on several accounting measures of intangibles sustainability is measured by the persistence of firm specific profits using a dynamic panel data regression model i find that intangibles play an effective role in sustaining a firm s competitive advantage as predicted by the resource based view of the firm however the results suggest that intangibles can also lock firms into persistent disadvantages

technology and oliver williamson s transaction cost economics abstract oliver williamson has greatly contributed to refining neoclassical economics by incorporating transaction costs and internal organization yet his new institutional economics too easily dismisses the role of technology in doing so he has replaced the determinism of technological production efficiencies with the determinism of transaction cost efficiencies a review shows that williamson s new institutionalism has evolved through three stages in terms of the focus of his analysis and his views of transactions throughout this evolution however his proposed solutions to organizational failures have actually continued to rely heavily upon technology

retrieving and transferring embodied data implications for the management of interdependence within organizations this research helps to link theories of sticky information with organizational design and governance it suggests that information embodied in process material can allow downstream tasks to uncover information about upstream tasks it shows that downstream operators can use this information to negotiate interdependence problems with upstream operators data presented in this article begin to uncover when such information retrieval and exchange occurs and how managers can encourage it finally the article discusses implications for theories of operational design and governance

using transaction cost economics to explain outsourcing of accounting this study explores whether smes involved in the outsourcing of accounting tasks differ in terms of transactional and personal ceo characteristics from others that perform the same tasks within the company we rely on the transaction cost economics tce model while controlling for age educational background and trust of the sme executive in the external accountant a survey was developed to investigate the outsourcing by belgian smes both of routine entry of invoices interim reporting and non routine period end accounting preparation of financial statements accounting tasks for the routine accounting tasks frequency was significantly associated with outsourcing meanwhile for non routine accounting tasks asset specificity and frequency were significantly associated high frequency tasks were associated with lower levels of outsourcing similarly higher asset specificity was associated with lower levels of outsourcing furthermore the educational background of the ceo as well as the ceo s level of trust in the external accountant was significantly associated with outsourcing confirming the upper echelon theory having a more educated ceo was associated with lower levels of outsourcing both for routine and non routine accounting tasks

outsourcing suppliers as downstream competitors biting the hand that feeds abstract in this paper we highlight an aspect of supplier opportunism in the outsourcing paradox that has largely been ignored by extant research the supplier as a direct competitor of the buyer firm in light of this paradox we offer a game theoretic framework in which we identify conditions under which firms could alleviate or mitigate this outsourcing problem our results show that apart from transaction costs firm level capabilities both ordinary and dynamic play important roles in determining the make only buy only or make and buy options a firm could exercise in countering the threat of the supplier as a potential competitor in the downstream marketplace

the contractual nature of the firm for their helpful comments i am grateful to armen a alchian yoram barzel keith leffler john s mcgee and dean worcester 1 ronald h coase the nature of the firm 4 economica 386 1937 the paper however was written several years earlier see note 3 infra 2 the social sciences citation index provides the following information breaking down the period of 1966 80 into three five year periods the total citations of coase s firm paper for each subperiod are 1966 70 17 citations 1971 75 47 citations and 1976 80 105 citations

knowledge and competitive advantage the coevolution of firms technology and national institutions this issue of jibs offers reviews of two books that analyse the dynamic interaction between the business environments and business strategies in very different ways the institutional underpinnings for business strategies are a major research topic for comparative management aiming to explain why in different contexts firms pursue different strategies and with different implications for performance j peter murman in knowledge and competitive advantage takes a historical perspective focusing on the co evolutionary processes between national innovation systems business strategies and performance this books thus adds to the industry level longitudinal research reviewed in jibs no 4 2003 tom murtha et al s managing new industry creation and david mckendrick et al s from silicon valley to singapore

transaction cost economics in real time this paper attempts to place the theq of the boundaries of thejirm within the context of the passage of time more precisely it resurrects and places in a modem frame some of the insights of the chsical and marshallian theories of organization the modem reinterpretation of those theories centers around the capabilities view of the jirm taken together with governance costs the capabilities ofjirm and market determine the boundaries of the jirm in the short run ovw time capabilities change as firms and markets learn which implies a kind of information or knowledge cost the cost of trandewing the firm s capability to the market w vice versa these dynamic governance costs are the costs of persuading negotiating and coordinating with and teaching others they arise in the face of change notably txchnological and organizational innovation in fit they are the costs of not having the capabilities you need when you need them dynamic transaction costs provide an explanation for vertical integration that is arguably more general than those dominant in the literature in the face of uncertainty and divwgent views ofthe future common ownership of multiple stages of production is a supwior institutional arrangement for coordinating systemic change asset specrfity is neither necessary nor suffient for this to be true dynamic governance costs may also affit internal organization it may sometimes be costly in 3 terms of persuasion negotiation and teaching to create within the firm capabilities readily available on the market indeed in cases in which systemic coordination is not 4 the issue the market may turn out to be the superior institution of coordination in e 2 genwal the capabilities view of the jirm suggests that we look atfim2 and market as alternative and sometimes overlapping institutions of learning 1 transaction costs in the long rzln and the short 9 x classical and neoclassical perspectives

strategic alliance based sourcing and market performance evidence from foreign firms operating in china although foreign multinational firms from the triad regions increasingly use mainland china as both a sourcing and a marketing location no study has directly examined the sourcing strategy performance linkage using resource complementarity and resource dependence theory we extend the sourcing literature and apply these perspectives to an important transitional economy china these two theoretical perspectives suggest that product and uncertainty factors moderate the relationship between strategic alliance based sourcing sa sourcing of major components and market performance we find that at low levels of product innovativeness and technological uncertainty the use of sa sourcing is positively related to market performance however the effects of product differentiation and demand uncertainty on the sourcing performance relationship are insignificant journal of international business studies 2005 36 187 208 doi 10 1057 palgrave jibs 8400120

product complementarities capabilities and governance a dynamic transaction cost perspective the organization and governance of the transactions that comprise a bundling arrangement depend on the distribution of capabilities among firms and the amount of time during which the window of opportunity for earning rents is expected to remain open firms engaged in inter firm collaboration must undertake support transactions related to billing marketing customer support and product repair these support transactions differ from the core transactions that have traditionally been perceived as sufficient to provide a product bundle since support transactions create costs of their own the market may turn out to be an expensive means of governing collaborative arrangements undertaken for bundling purposes the telecommunications service sector provides an illustration copyright 1997 by oxford university press

more critical comments on knowledge based theories of the firm this paper continues the critique of knowledge based theories of the firm that was undertaken in foss foss n j 1996a knowledge based approaches to the theory of the firm some critical comments organ sci 7 5 470 476 specifically criticizing the reasoning in kogut and zander kogut b u zander 1996 what firms do coordination identity and learning organ sci 7 5 502 518 and conner and prahalad conner k r c k prahalad 1996 a resource based theory of the firm knowledge versus opportunism organ sci 7 5 477 501 i argue that kogut and zander kogut b u zander 1996 what firms do coordination identity and learning organ sci 7 5 502 518 attempt to explain firm organization in terms of a preference for such organization a distinctly non economic mode of explanation and that conner and prahalad fail to sufficiently characterize the nature of the firm because they identify firm organization with the employment contract and neglect asset ownership

the born global firm an entrepreneurial and capabilities perspective on early and rapid internationalization our 2004 journal of international business studies article innovation organizational capabilities and the born global firm provided a framework for the phenomenon of early and rapid internationalization among young entrepreneurial firms this work can be characterized as an integration of marketing entrepreneurial and capability based thinking around exporting positioned as the born global exporter the article also reported findings from a national study of start up firms that expanded abroad early in their evolution in the present commentary we reflect on the contributions of the 2004 article review the scholarship on the topic over the past decade and offer suggestions for future inquiry while the incidence of early internationalization by firms was a novel concept two decades ago today such firms are found in abundance in many countries yet many unresolved research questions remain including the crucial topic of what happens to born global firms as they grow and mature over time similarly the issue of why some firms internationalize early others late in their evolution and still others choose to remain local is a fundamental question for international business scholarship

the end of the opportunism vs trust debate bounded reliability as a new envelope concept in research on mne governance modern transaction cost economics tce thinking has developed into a key intellectual foundation of international business ib research but the williamsonian version has faced substantial criticism for adopting the behavioral assumption of opportunism in this paper we assess both the opportunism concept and existing alternatives such as trust within the context of ib research especially work on multinational enterprise mne governance case analyses of nine global mnes illustrate an alternative to the opportunism assumption that captures more fully the mechanisms underlying failed commitments inside the mne as a substitute for the often criticized assumption of opportunism we propose the envelope concept of bounded reliability brel an assumption that represents more accurately and more completely the reasons for failed commitments without invalidating the other critical assumption in conventional tce and internalization theory thinking namely the widely accepted envelope concept of bounded rationality brat bounded reliability as an envelope concept includes two main components within the context of global mne management opportunism as intentional deceit and benevolent preference reversal the implications for ib research of adopting the bounded reliability concept are far reaching as this concept may increase the legitimacy of comparative institutional analysis in the social sciences

looking for a theory of the firm future challenges in this paper we present the main developments of the theories of the firm rooted in coase s coase r h 1937 the nature of the firm economica new series 4 386 405 seminal article we show that the two important topics of the nature and boundaries of the firm as well as the internal organization of the firm give place to essential contributions we present those contributions and their limits and then their possible developments finally we introduce the papers of this issue

innovation organizational capabilities and the born global firm we investigate born global firms as early adopters of internationalization that is companies that expand into foreign markets and exhibit international business prowess and superior performance from or near their founding our explication highlights the critical role of innovative culture as well as knowledge and capabilities in this unique breed of international entrepreneurial firm case studies are analyzed to better understand the early internationalization phenomenon and reveal key orientations and strategies that engender international success among these innovative firms case findings are then validated in a survey based study despite the scarce resources typical of young firms our findings reveal that born global firms leverage a distinctive mix of orientations and strategies that allow them to succeed in diverse international markets findings have important implications for the internationalization of contemporary firms

a review of theories of the firm and their contributions to corporate sustainability corporate sustainability has arisen as an alternative to traditional short term profit oriented ap proaches to managing the firm by holistically balancing economic environmental and social issues in the present generation and for future ones although a number of theories of the firm have been pro posed within recent decades their application to corporate sustainability has been limited this paper presents an overview of the most widely used theories of the firm such as the stockholder theory the aggregate theory the contractual theory the resource based view and the stakeholder theory and analyses their contributions to corporate sustainability from an interpretative perspective the discus sion highlights the point that each of the theories on its own is limited in addressing sustainability s four dimensions i e the economic environmental social and time nonetheless each theory or group of theories has a particular perspective or principles that can contribute to one or more of the four dimensions the authors of this paper propose a sustainability oriented theory of the firm which is built upon elements of those theories as they relate to corporate sustainability this new theory can be useful in providing the firm s leaders and all of its stakeholders with a more complete vision of its ob ligations opportunities relations and processes that the firm should address as it engages in helping to make societies become more equitable and sustainable in the short and long terms

learning to compete in a transition economy experience environment and performance does organizational learning as measured by experience in a host country affect international expansion performance if so does such a relationship between experience and performance hold over time how do the environmental forces in the host country affect such a relationship focusing on organizational learning by multinational enterprises mnes operating in a transition economy this study answers these three critical questions by exploring the relationships among experience environment and performance at the subsidiary level based on a recent survey of 108 mne subunits operating in china we find that the intensity and diversity of host country experience is an important predictor of subunit performance while the positive effect of the intensity of experience on performance diminishes over time the impact of the diversity of experience on performance remains unchanged moreover for mnes experiencing greater environmental dynamism complexity and hostility there is a stronger positive relationship between experience and performance

resources access needs and capabilities as mediators of the relationship between vc firm size and syndication drawing from the resource based view and transaction costs economics we develop a theoretical framework to explain why small and large firms face different levels of resource access needs and resource access capabilities which mediate the relationship between firm size and hybrid governance employing a sample of 317 venture capital firms drawn across six european countries we empirically assess our framework in the context of venture capital syndication we estimate a path model using structural equation modeling and find consistent with our theoretical framework mediating effects of different types of resource access needs and resource access capabilities between vc firm size and syndication frequency these findings advance the small business literature by highlighting the trade offs that size imposes on firms that seek to manage their access to external resources through hybrid governance strategies