Penrose's Resource-Based Approach: The Process and Product of Research Creativity

As this paper documents, Edith Tilton Penrose's (1959) classic The Theory of the Growth of the Firm is one of the most influential books of the second half of the twentieth century bridging economics and management. Yet, there is little understanding of the process by which this classic came about and the lessons to be learned concerning research creativity. This paper explores Penrose's (1959) 'resources approach' to the growth of the firm as an iterative process of scientific discovery via induction and scientific justification by deductive reasoning. We focus on: (1) the research process that led to Penrose's (1959) classic; (2) the book's contributions to management; (3) the generative nature of Penrose'sresearch for current resource-based theory; and (4) future research building on Penrose's 'resources approach'.     

Property rights theory,transaction costs theory,and agency theory: an organizational economics approach to strategic management

Property rights theory has common antecedents with contractual theories of the firm such as transaction costs and agency theories, and is yet distinct from these theories. We illustrate fundamental theoretical principles derived from these three theories by analyzing the business case of oil field unitization. Theoretical principles and application of theory to oil field unitization are each summarized. From this, it is possible to see how property rights theory is well suited to explain business situations where inefficient economic outcomes persist. Additionally, property rights theory forges new theoretical connections with other branches of organizational economics, in particular, resource‐based theory. Copyright © 2005 John Wiley & Sons, Ltd.     

An ‘upside‐down’ view of rural health care

Access to high quality health care services plays an important part in the health of rural communities and individuals. This fact is reflected in efforts by governments to improve the quality of such services through better targeting of funds and more efficient management of services. In Australia, the difficulties experienced by rural communities in attracting and retaining doctors has long been recognized as a contributing factor to the relatively higher levels of morbidity and mortality in rural areas. However, this paper, based on a study of two small rural communities in Australia, suggests that resolving the health problems of rural communities will require more than simply increasing the quality and accessibility of health services. Health and well‐being in such communities relates as much to the sense of community cohesion as it does to the direct provision of medical services. Over recent years, that cohesion has diminished, undermined in part by government policies that have fuelled an exodus from small rural communities to urban areas. Until governments begin to take an ‘upside‐down’ perspective, focusing on building healthy communities rather than simply on building hospitals to make communities healthy, the disadvantages faced by rural people will continue to be exacerbated.     

Why firms make unilateral investments specific to other firms: the case of OEM suppliers

This study examines why and under what conditions firms will make unilateral relationship‐specific investments to their transaction partners. We propose that firms are more likely to make such investments when the investment yields positive economic spillover values for other transactions with the same exchange partners as well as for third‐party transactions. We also model two types of positive inter‐project spillover effects that a transaction may generate: knowledge spillovers and reputation spillovers. We find empirical support for our developed theory in the context of Taiwanese suppliers of original equipment manufacturers. Copyright © 2008 John Wiley & Sons, Ltd.     

THE ADOPTION OF THE MULTIDIVISIONAL FORM OF ORGANIZATION: A CONTINGENCY MODEL*

This article examines the proposition that the multidivisional structure is determined by both power and efficiency imperatives. It is theorized that combining the coalitional power and information-processing perspectives of organizational choice enables us to explain and predict organizational form. The theory is tested on 291 Fortune 500 firms. The results largely confirm theoretical expectations. It is submitted that the multidivisional paradigm illustrates the central premises of the article: (1) a synthesis of efficiency and power perspectives is a viable research programme; and (2) theoretical pluralism increases empirical content and should be valued by those concerned with progress in the emerging field of strategic management.     

The resource-based view within the conversation of strategic management

The resource-based approach is an emerging framework that has stimulated discussion between scholars from three research perspectives. First, the resource-based theory incorporates traditional strategy insights concerning a firm's distinctive competencies and heterogeneous capabilities. The resource-based approach also provides value-added theoretical propositions that are testable within the diversification strategy literature. Second, the resource-based view fits comfortably within the organizational economics paradigm. Third, the resource-based view is complementary to industrial organization research. The resource-based view provides a framework for increasing dialogue between scholars from these important research areas within the conversation of strategic management. Resource-based studies that give simultaneous attention to each of these research programs are suggested.     

Risk Management of Correlation Products

Trading units within the banking and dealer community that trade exotic instruments are well aware of the hazards of using traditional tools in analysing the risks resulting from positions taken in their specialised markets. The global risk management systems within these organisations have been slower to recognise the new risk profiles created by more recently traded exotic instruments. For traditional risks that are separable , the evaluation of risk at the individual trading units and the subsequent aggregation of risk across trading units captures the risks inherent in the portfolio. However, with non-traditional, non-separable risks, this division (by trading unit) and subsequent aggregation (by risk managers) of risks may obscure an increasing amount of risk found in the firm's trading operation.     

The effects of corporate antitakeover provisions on long-term investment: empirical evidence

This paper's empirical results indicate that the average effect of antitakeover provisions on subsequent long‒term investment is negative. The interpretation of these results depends on whether one thinks that there was too much, too little, or just the right amount of long‒term investment prior to the antitakeover provision adoption. We use agency theory to devise more refined empirical tests of the effects of antitakeover provision adoption by managers in firms with different incentive and monitoring structures. Governance variables (e.g. percentage of outsiders on corporate boards, and separate CEO/chairperson positions) have an insignificant impact on subsequent long‒term investment behavior. However, consistent with agency theory predictions, managers in firms with better economic incentives (higher insider ownership) tend to cut subsequent long‒term investment less than managers in firms with less incentive alignment. Furthermore, managers in firms with greater external monitoring (due to higher institutional ownership) also tend to cut subsequent long‒term investment less than managers in firms with less external monitoring. Thus, the decrease in subsequent long‒term investment is significantly less for firms where the managers have greater incentives to act in shareholders' interests. Finally, there are interesting effects of the control variables. First, high book equity/market equity firms cut total long‒term investment more. Second, firms that were takeover targets or rumored to be takeover targets cut long‒term investment more. These results suggest that inefficient firms cut long‒term investment more when an antitakeover provision is adopted. © 1997 John Wiley & Sons, Ltd.