Do science and money go together? The case of the French biotech industry

Developing technological applications, entering exploitation alliances, and choosing between research‐ or service‐focused strategic orientations are decisions that high‐tech firms must manage concurrently. This article explores systematically the contrasting effects of these strategic determinants on rent generation and rent appropriation using the entire population of French biotech firms (1994–2002). Findings indicate that science and money do not unconditionally go together–the direct relationship between rent‐accruing resources (e.g., patents or articles) and rent appropriation varies depending on the type of resources and the strategic orientation. Moreover, the effects of strategic determinants differ for rent generation vs. rent appropriation: 1) technological application diversity undermines a firm's capacity to appropriate rents–in particular for research‐oriented firms; 2) exploitation alliances favor rent generation but hinder rent appropriation; 3) service‐oriented firms exhibit significantly better performance than research‐oriented firms. Such evidence challenges the emergence in the biotechnology industry of a ‘one‐best’ strategic trajectory, as represented by research‐intensive start‐ups funded by private money engaged in publishing and patenting races. Copyright © 2008 John Wiley & Sons, Ltd.     

网络参与者的租金来源与实现途径

网络合作虽然可以产生协同协应,但并非所有参与者都能够从中获取均等收益。本文从网络参与者的角度分析了其从网络合作中的获益,认为参与者的租金主要来源于共有租金和私有租金两个方面,具体细分为可占用的共有租金、内部准租金和溢入租金净值三种类型。这三类租金的实现与参与者所拥有的资源基础和资源属性密切相关,可占用的共有租金是网络参与者通过资源交换、联合、共享而创造的共有租金在不同参与者之间分配的结果;内部准租金和溢入租金净值是参与者的私有资源(或非共享资源)产生的独有的、不与其他参与者分享的私有租金,私有租金的实现也与网络合作密不可分。     

A demand‐based perspective on sustainable competitive advantage

We develop an approach to analyzing the sustainability of competitive advantage that emphasizes demand‐side factors. We extend the added‐value approach to business strategy by introducing an explicit treatment of how firms create value for consumers. This allows us to characterize how consumer heterogeneity and marginal utility from performance improvements on the demand side interact with resource heterogeneity and improving technologies on the supply side. Using this approach, we address a variety of questions including whether technology substitutions will be permanent or transitory; the sequence in which new technologies attack different market segments; how rents from different types of resources change over time; whether decreasing marginal utility and imitation give rise to similar rent profiles; the extent of synergies within a firm's resource portfolio; the emergence of new generic strategies; and the conditions that support strategic diversity in a market. Our focus on consumer utility and value creation complements the traditional focus in the strategy literature on competition and value capture. Copyright © 2006 John Wiley & Sons, Ltd.     

Insider trading as a vehicle to appropriate rent from R&D

While most insider trading is routine and legal, investors still treat it as new information about the firm's prospects—they assume that trades reflect managers' attempts to profit from their private information. This article explores insider trading as a mechanism to appropriate rent from R&D advances. We analyze stock price reactions to over 134,000 insider‐trading events and find that insider purchases generate larger positive stock price reactions for R&D‐intensive firms. Investors seem to assume that managers use insider trading to appropriate rent from R&D breakthroughs. We discuss how shareholders may prefer this rent appropriation mechanism over other forms of compensation that directly reduce the firm's income. Copyright © 2002 John Wiley & Sons, Ltd.     

网络组织下企业经济租金综合范式观

企业经济租金是解释企业价值创造和获取超额利润的重要工具。在网络组织的情境下,强调租金内生性或租金外生性的传统租金范式已经不能合理解释企业结网协作获取竞争优势的现实。这些范式的一元主义已经制约了对经济租金范式全面的理解和诠释。本文基于科学哲学和社会理论维度对经济租金进行理论分维,并提炼出知识租金这一综合范式观。知识租金认为企业内外部的异质性知识是经济租金的源泉,企业可以通过开放式创新来获取租金。通过开放式创新模式和封闭式创新模式下经济租金的对比分析,论证了知识租金的有效性。     

Rent appropriation of knowledge‐based assets and firm performance when institutions are weak: A study of Chinese publicly listed firms

Research summary : A firm's strategic investments in knowledge‐based assets through research and development (R&D) can generate economic rents for the firm, and thus are expected to affect positively a firm's financial performance. However, weak protection of minority shareholders, weak property rights, and ineffective law enforcement can allow those rents to be appropriated disproportionately by a firm's powerful insiders such as large owners and top managers. Recent data on Chinese publicly listed firms during 2007–2012 were used to demonstrate that the expected positive relationship between knowledge assets and performance is weaker in transition economies when a firm's ownership is highly concentrated and its managers have wide discretion. Moreover, rent appropriation by insiders was shown to vary with the levels of institutional development in which a firm operates. Managerial summary : Investing in knowledge‐based intangible assets (e.g., R&D) is an important value‐creation activity for the firm. Such value creation process can be facilitated by large shareholders and powerful managers, who can then take an advantageous position with critical insider information on these valuable intangible assets and therefore enjoy more opportunities to appropriate more value from them, leaving less value for other minority shareholders. The value distribution becomes increasingly skewed against minority shareholders when the institutional protection for them is weak. Indeed, in a large sample of Chinese publicly listed firms, we found that R&D investment becomes less positively associated with firm financial performance with the presence of large shareholders, high managerial equity, or CEO/Chairman duality, especially in Chinese provinces with weak institutional development. Copyright © 2016 John Wiley & Sons, Ltd.     

Strategic interaction in alliances

Research summary: This article studies strategic interactions between firms that form alliances to exploit synergistic benefits. Firms cooperate to create value, but they can also compete to capture value. Fundamental questions rarely addressed by strategy scholars relate to how the configuration of control over resources influences firms' strategies, the potential for termination, and the emergence of cooperation and trust. The formal results reveal crucial aspects of the interorganizational rent‐generating process and yield testable implications. With greater synergistic benefits, firms invest more, but they also compete more intensively to capture more value. With symmetric control, more value gets created, which limits the potential for termination, but also exacerbates the competition for value; from a relational perspective, this form of control augments the calculative rationale of cooperation and trust . Managerial summary: When forming an alliance to exploit synergies, firms engage in a complicated strategic interaction that is part cooperation and part competition. What happens when partner firms cooperate and invest to create value while competing and using costly adversarial tactics to capture value? The analysis reveals that with greater synergistic benefits, firms invest more in value creation, but the fear of opportunism pushes them to waste more resources on value capture tactics. The balance between value creation and value capture, and the possibility that the alliance is terminated depend on the configuration of control over resources. The analysis further reveals under what conditions there can be trust between the partners, such that they focus on value creation and avoid wasting resources in the competition for value . Copyright © 2016 John Wiley & Sons, Ltd.     

Dynamic capabilities,social capital,and rent appropriation: ties that split pies

Who reaps the fruits of a dynamic capability? We argue that while social capital is essential for the acquisition, integration, and release of resources at the core of a dynamic capability, actors can also use social capital for personal gain. Thus, social capital may be a key to understanding both rent generation and rent appropriation. Even when causal ambiguity obscures individual contributions, they may use their social capital to establish credible claims on the rent. Specifically, employees who occupy structural holes, span organizational boundaries, or who are highly central may be most able to appropriate rent because their social capital grants credibility to their claims. Rent that is appropriated in this way may be unobservable in performance measures that fail to distinguish normal compensation from rent. We contribute by identifying the specific role of social capital in a dynamic capability and linking social capital to rent appropriation patterns. Copyright © 2003 John Wiley & Sons, Ltd.     

企业治理之租金视角研究--一个理论框架及其在高科技企业中的应用

本文从租金的角度对企业治理进行了研究,指出组织租金创造与分配是现代企业治理的重要内容,企业家精神在其中占据着关键地位。文章提出一个关于治理的一般性分析框架,在此框架下结合企业生命周期对高科技企业治理进行了动态研究,并对中国高科技企业治理进行了分析。     

Which Service? How Industry Conditions Shape Firms’ Service‐Type Choices

This article studies the role of industry conditions as determinants of manufacturing and software firms’ decisions to offer services. It draws on the competence perspective on industry evolution and servitization to theorize and provide empirical evidence on how industry conditions affect firms’ choice to offer two distinct types of services—product‐oriented services and customer‐oriented services. It is argued that firms are likely to offer product‐oriented services in Schumpeterian industry environments to address high technological uncertainty by leveraging and reinforcing capabilities in the existing technology. In contrast, firms are likely to offer customer‐oriented services in non‐Schumpeterian industry environments to address value generation uncertainty by building competences in new technological or market areas. Based on longitudinal data on 410 public firms from manufacturing industries and the software industry, empirical evidence suggests that firms are indeed more likely to offer product‐oriented services in Schumpeterian industry environments, such as in the early stage of the industry life cycle and under conditions of high R&D intensity and competition, whereas they are more likely to offer customer‐oriented services in non‐Schumpeterian environments, such as in the later stages of the industry life cycle and in highly cyclical industries.     

The impact of market cycle on the performance of Singapore acquirers

In this paper, we hypothesize that acquisitions undertaken during low market cycles will exhibit better performance than other acquisitions for two key reasons: lower likelihood of overpayment due to hubris and ease in implementing restructuring initiatives such as retrenchment. We define performance as the cumulative abnormal returns surrounding the acquisition event and deploy a trend‐based measure for market cycle. Based on an analysis of 115 acquisitions by Singapore firms between 1990 and 1999, we find strong support for the hypothesized relationship. Copyright © 2004 John Wiley & Sons, Ltd.     

Retrenchment: Cause of turnaround or consequence of decline?

In a recent investigation of the turnaround attempts of 32 U.S. textile firms, Robbins and Pearce (1992) concluded that retrenchment is an integral component of successful recovery from decline. In this note we critique, replicate and provide an alternative explanation for their findings using data from the same sample of firms attempting turnarounds. Based on our analyses, we find that little evidence exists to support the assertion that retrenchment is integral to turnaround. We conclude by offering several recommendations for turnaround researchers.     

Linking joint value creation to the interplay of competition and cooperation: A fuzzy set approach

The aim of this paper is to explore the link between joint value creation and the varying nature of simultaneity. Joint value creation is a central concept in cooperative strategies and more broadly in the strategic management field. When cooperating with competitors firms have value creation intent, but face conflicting logics arising from the simultaneous pursuit of cooperation and competition. This study adopts a two continua approach to analyze coopetition at both the department level and the organizational level.We explore the conjunctural causality based on two multipartner alliances in the pharmaceutical industry. The fsQCA allows detecting multiple causal paths between different intensities of cooperation and competition at both the department and the firm levels (conditions) to joint value creation (outcome). A key contribution of this paper is the conceptualization and empirical demonstration of the relation between the joint value creation and the coopetition intensity. Different types of coopetition engagements generate different outcomes in terms of joint value creation. The results show that high intensity of cooperation combined with high intensity of competition is significant for joint value creation. Unbalanced intensities of both elements, as well as low coopetition intensity, do not lead to joint value creation.     

Managerial foresight and attempted rent appropriation: insider trading on knowledge of imminent breakthroughs

In order to establish a competitive advantage, firms must acquire or create resources at a price below their value in use. Absent pure luck, this requires managers to exercise foresight about a resource's future value and/or complementarities with pre‐existing capabilities. This foresight grants managers the opportunity to exploit information asymmetries for personal gain as well as building organizational capabilities. Nevertheless, there is limited research on the extent of foresight or how managers use it. In our study of insider trading, we found that managers purchase stock well before breakthrough patents are filed. We argue for further research on the extent of managerial foresight and how it affects rent generation and appropriation. Copyright © 2005 John Wiley & Sons, Ltd.     

In with the old,in with the new: capabilities,strategies, and performance among the Hollywood studios

An increased focus on turbulent environments has led to a growing interest among researchers in the concept of dynamic capabilities. In this study, we approach dynamic capabilities in a framework of two complementary processes. On one hand, firms can build upon existing capabilities in products and markets in which they have experienced recent success; on the other hand, they can also intentionally focus on other products and markets in which they seek to build capabilities to address their lack of recent success. We examine these two processes within project‐based industries and identify replication and renewal as two types of strategies that firms use to add a dynamic component to their capabilities. We also theorize that the success of each of these strategies is tied to differentiation from rivals, and to firm‐level resource availability and industry‐level demand characteristics. We test these propositions by focusing on the film genres that were offered by the Hollywood studios over a thirty‐year period. Copyright © 2009 John Wiley & Sons, Ltd.     

Hidden but in plain sight: The role of scale adjustment in industry dynamics

While much is understood about the general pattern of industry dynamics, a critical element underlying these dynamics, the rate of the expansion of individual firms, has been largely overlooked. We argue that the rate at which firms can reliably increase their scale of operations is a critical factor in understanding the structure of industries. Further, success at scaling‐up the firm's operations provides a dynamic‐isolating mechanism that insulates established firms from new competition. We show that the bases of profitability in the industry (monopoly‐like profits stemming from the restriction of output, efficiency rents based on firm‐specific productivity differences, or transitory Schumpeterian profits) can be traced to the scale adjustment process. We explore these issues in a computational model of industry dynamics. Copyright © 2013 John Wiley & Sons, Ltd.     

Vertical integration and product differentiation

We study a new channel of downstream rent extraction through vertical integration: competition for integration. Innovative downstream firms create value and profit opportunities through product differentiation, which however affects an upstream monopolist’s incentive to vertically integrate. By playing the downstream firms against each other for integration, the upstream firm can extract even more than the additional profits generated by the downstream firms’ differentiation activities. To preempt rent extraction, the downstream firms may then reduce differentiation, which reduces social welfare. We show that this social cost of vertical integration is more likely to arise in innovative and competitive industries, and that the competition for integration channel of downstream rent extraction is robust to upstream competition.     

Software firm turnarounds in the 1990s: An analysis of reversing decline in a growing,dynamic industry

Investigations into management actions that reverse organizational decline have produced inconsistent findings. Prior studies have focused on the value of retrenchment actions versus strategic actions to engineer a performance turnaround. These studies, however, have generally not controlled for the cause of firm decline, overlooking a major theoretical contingency. Examining prepackaged software firms in the 1990s, we test the association of strategic and retrenchment actions in facilitating turnarounds in a munificent industry. The results show that measures of strategic actions—new product introductions, strategic alliances, and acquisitions—were positively associated with turnarounds. Conversely, measures of retrenchment actions—layoffs, asset reductions, and product withdrawals—were negatively associated with performance recovery. Our results suggest declining firms in munificent industries cannot retrench their way back to prosperity. Copyright © 2013 John Wiley & Sons, Ltd.     

When do firms undertake R&D by investing in new ventures?

We explore the conditions under which firms are likely to pursue equity investment in new ventures as a way to source innovative ideas. We find that firms invest more in new ventures—commonly referred to as ‘corporate venture capital’—in industries with weak intellectual property protection and, to some extent, in industries with high technological ferment and where complementary distribution capability is important. Furthermore, we find that the greater a firm's cash flow and absorptive capacity, the more likely it is to invest. Our results suggest that in Schumpeterian environments incumbents may supplement their innovative efforts by tapping into the knowledge generated by new ventures. Copyright © 2005 John Wiley & Sons, Ltd.     

Toward a synthesis of the resource-based and dynamic-capability views of rent creation

Two distinct causal mechanisms—resource-picking and capability-building—have been proposed in the strategic management literature about how firms create economic rents. Under the resource-picking mechanism, managers gather information and analysis to outsmart the resource market in picking resources, similar to the way that a mutual fund manager tries to outsmart the stock market in picking stocks. Under the capability-building mechanism, managers design and construct organizational systems to enhance the productivity of whatever resources the firm acquires. These two rent-creation mechanisms are certainly not mutually exclusive, and it is likely that firms generally use both of them. It is therefore important to consider the interaction between these two rent-creation mechanisms: Do they complement each other? Or are they substitutes for each other? In other words, do they enhance each other's value, or detract from each other's value? Answering these questions is a necessary precondition to understanding how firms should allocate their time and effort between these two rent-creation mechanisms. The present paper develops a basic theoretical model to address these questions, and derives testable hypotheses from the model. The model predicts that the two rent-creation mechanisms are complementary in some circumstances but substitutes in others. Copyright © 2001 John Wiley & Sons, Ltd.