EXPLAINING FIRM CAPITAL STRUCTURE: THE ROLE OF AGENCY THEORY VS. TRANSACTION COST ECONOMICS

The study of capital structure has increasingly gained importance in strategic management research. Paradigms derived from organizational economics have also gained popularity in explaining firm actions. Agency theory and transaction cost economics represent two such paradigms that rely on the notion of market imperfections. Notwithstanding the similarities between them, these two offer different explanations of the role of debt and equity in a firm. The governance abilities of the financing structures and the nature of assets of the firm provide two key sources of differences. Viewing capital structure from transaction cost economics gives rise to predictions that are contradictory to those presented by agency theory. It is argued that the extant evidence mainly supports the transaction cost viewpoint. Two organizational phenomena—leveraged buyouts and product diversification—are used to highlight the comparison.     

Transaction cost analysis of strategy-structure choice

Using a transaction cost approach this paper analyzes the relationship between strategy, structure and organizational performance. It addresses three related questions. First, what determines the limit to growth through internalization for a firm pursing a particular strategy? Second, why does a firm pursue different strategies for achieving growth? Third, what determines changes in the strategy and structure used by the firm over time? This analysis serves to integrate work in strategic management and provides a framework for analyzing corporate strategy choice.     

Marketing metrics' usage: Its predictors and implications for customer relationship management

This research aims to determine the conditions that foster use of marketing metrics in customer relationship management (CRM) and identify the organizational factors that strengthen/weaken the impact of usage of marketing metrics on CRM performance. Based on the customer value-based theory of the firm and the contingency perspective, a research framework was developed to shed light on the predictor roles of customer value-based organizational culture and processes in determining usage of marketing metrics, and foster an understanding of the moderating roles of marketing-supply chain conflict, and innovative value proposition on the marketing metric-performance relationships. Empirical evidence from a sample of 209 business firms confirmed the main effect that customer value-based organizational culture and processes support a firm's use of marketing metrics that in turn enhance its CRM performance. Notable moderating effects were also identified. Although marketing-supply chain conflict weakens the impact of marketing metrics usage in achieving superior CRM performance, innovative value proposition strengthens the conversion of marketing-metric-related knowledge into superior CRM performance.     

有限外部化:技术进步对企业边界的影响

本文从技术进步的角度动态地研究企业组织边界的变动。通过理论上论证快速的技术进步对内部组织治理与外部交易活动的影响，我们认为快速的技术进步既增大了企业内部化的不确定性，也导致了市场交易费用的降低。但是，由于技术进步并不能完全消除市场交易活动中的不确定性，所以，我们提出了在快速的技术变革条件下，企业边界变动是有限外部化的理论假设。并选择了1998—2002年间我国各省市区高新技术产业发展与外包活动作为一个分析案例，验证的结果有力地支持了我们提出的理论假设。     

竞争战略的产权观点

产权理论认为，不完备的产权不仅影响利用资产创造价值的程度，也使得人们花费资源用于攫取和保护产权。本文把交易成本看做是与攫取、保护和转移产权相联系的成本。由于攫取和保护行为会耗散企业的价值，企业可以凭借影响攫取和保护的成本来创造价值。本文在产权理论的基础上构建了竞争战略的产权分析框架，并且比较了这一观点与其他竞争战略观点的区别与联系。     

Dynamic capability and IJV performance: The effect of exploitation and exploration capabilities

Drawing on the dynamic capabilities perspective as the overarching theoretical underpinning in the context of IJVs, this study investigates (1) how exploitation capability and exploration capability as two critical building blocks of dynamic capabilities are independently and interactively associated with IJVs’ financial and competitive outcomes in an emerging economy, and (2) how the two context variables (IJV autonomy and organizational culture distance of IJV partners) moderate the effect of exploitation capability and exploration capability on IJV performance. Using a sample of 102 IJVs in an emerging economy, this study finds general support for the theoretical model. Results suggest that IJVs in a foreign emerging economy tend to perform better when they possess greater abilities to exploit current resources as well as by dynamically renewing their competitive advantage. Moreover, exploitation capability and exploration capability interact in such a way that they “reinforce” each other. Lastly, the contribution of exploitation capability and exploration capability to IJV performance is stronger when IJVs enjoy greater autonomy and when the organizational culture distance between partners of IJVs is small. Theoretical and managerial contributions are discussed and limitations and future research are explored.     

Strategic frameworks for understanding employer participation in school‐to‐work programs

The knowledge and skills inherent in human capital are increasingly recognized as the essence of competitive advantage. Extending the emerging literature on capability building, this paper explores the strategic decision of participating in school‐to‐work programs from the transaction cost and resource‐based view of the firm. Using data from a national sample, we find that both strategic perspectives help to explain decisions to participate in school‐to‐work activities. Our findings indicate that school‐to‐work programs and activities may be understood as interorganizational strategies from a transaction cost view and evidence of a firm's motivation to develop human capital to build competitive advantage from a resource‐based view. Implications for school‐to‐work public policy development in the United States and future research are identified. Copyright © 2005 John Wiley & Sons, Ltd.     

Flying or dying? Organizational change,customer participation,and innovation ambidexterity in emerging economies

In emerging economies, organizational change is both a difficult challenge and a common phenomenon for high-tech firms. Change can enhance adaptability and leverage knowledge based on dynamic capability perspective, but it can also increase coordination costs and—according to the organizational inertia perspective—prompt conflict. Existing findings about the effect of organizational change on firm performance are inconsistent. Accordingly, this survey study of 213 firms in the Chinese high-tech industry investigates the curvilinear and differential effects of technical and administrative organizational change, as moderated by customer participation and innovation ambidexterity. The results reveal that the effects of technical and administrative change are both U-shaped. At a low level of change, increasing technical or administrative change hinders firm performance, but as the levels increase beyond a critical point, the effect of change becomes positive. Although customer participation strengthens the effect of technical change on firm performance, both customer participation and innovation ambidexterity attenuate the effect of administrative change on firm performance.     

CAPABILITIES,TECHNOLOGICAL DIVERSIFICATION AND DIVISIONALIZATION

This paper develops and tests the hypothesis that greater R&D diversification is associated with less divisionalization in multidivisional firms. It argues, from transaction cost theory, that the extent of divisionalization of a large firm is indicative of its emphasis on interdivisional coordination, since fewer divisional boundaries reduce interdivisional bargaining costs. Also, greater interdivisional coordination is required to pursue strategies which exploit R&D undertaken in diverse but complementary fields, that is, strategies aimed at broadening technological capabilities. Conversely, less interdivisional coordination is required for more specialized R&D, that is, for strategies aimed at deepening existing capabilities. The hypothesis finds support in patent and organizational data.     

Organizational boundaries and economic performance: An empirical study of entrepreneurial computer firms

This research examines the relationship between the organizational boundaries of entrepreneurial firms and their economic performance. The theoretical basis for this work is transaction cost economics research regarding when internalizing certain activities will be preferred over contracting. To consider the conditions under which contracting is costly we compare across three functional areas and three firm strategies. The results of a longitudinal analysis of 122 entrepreneurial firms in the computer industry show that performance effects are associated with contracting activities and that product market strategies moderate the performance effects of contracting. The results are mixed in their support for the predictions of transaction cost economics.     

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

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

Reconceptualizing competitive dynamics: A multidimensional framework

Competitive dynamics research, despite progress, lacks a conceptual framework that can extend the field's reach to address today's environment. Increasing stakeholder power and globalization are but two of the organizational and economic forces compelling a broader conceptualization of competition. Our framework expands competitive dynamics along five dimensions—aims of competition, mode of competing, roster of actors, action toolkit, and time horizon of interaction—that prove useful for contrasting the rivalrous and competitive‐cooperative modes and a new approach we call relational competition. We draw conjectures about the moderators, such as industry and culture, that determine the appropriateness of these forms of interaction, and conclude by relating our method to three discrete perspectives: the configurational, transaction cost, and stakeholder views. Copyright © 2014 John Wiley & Sons, Ltd.     

Micro-determinants of vertical integration: Evidence from China

The state-of-the-art literatures, industrial economics, transaction cost theory, and real options theory explain vertical integration (VI) from the perspective of industrial characteristics. However, even within the same industry, VI greatly differs from firm to firm. This indicates that there may be firm-level (micro) determinants in VI. In an effort to probe into firm-level (micro) determinants of VI, we analyze data on the publicly listed firms of the electronics industry in China from 1998 to 2008. We find that between the two micro determinants, firm-oriented determinants consist of three groups of factors of value—profitability, growth, and risk—but insider-oriented determinants do not significantly impact VI.     

Motivations for selecting cross-border e-commerce as a foreign market entry mode

This article is an in-depth case study examining a foreign firm deploying Cross-border E-commerce as an entry mode to the Chinese market, integrating services provided by a major technology provider and a leading marketplace platform. Selecting which foreign market entry mode is an important internationalization strategic decision of firms and could have a considerable impact on the firm's performance. The CBEC mode emerges as a plausible choice: e-commerce has grown rapidly in many markets, particularly in China. Additionally, foreign firms face high transaction costs due to unfamiliar consumer behavior and institutional barriers. It is especially difficult for SMEs.This study deploys transaction cost theory as the underpinning framework to explain the motivations for selecting a CBEC entry mode. The findings suggest that CBEC could reduce uncertainties and opportunistic behaviors, while increasing trust. Foreign firms could lower their asset investment in physical shops, staff requirements and training, logistics and warehousing: these supports are provided by marketplace platforms. This new entry mode also takes advantage of the involvement and the dependency of intermediaries. In addition to providing market knowledge, technology providers help to build trust and reduce risks and thereby transaction costs, despite the high transaction frequency of e-commerce.     

Realized absorptive capacity and entrepreneurial universities’ organizational change: the role of process innovation practices

Although essential to all institutions, organizational change is a complex and high risk activity. In this paper, we examine how organizations develop and implement capabilities to facilitate organizational change. Drawing on the dynamic capability perspective and a ‘resourcing’ synergy view, we investigate how realized absorptive capacity in terms of transformation and exploitation capability directly affects organizational change, and how process innovation practices act as an effective mechanism that link transformation and exploitation capability with organizational change. To distinguish our analysis, we focus on both an emerging organizational form and an emerging economy context. Specifically, on the basis of a questionnaire survey of 316 academics from entrepreneurial universities in Malaysia, we find that both transformation and exploitation capability are facilitators of organizational change. However, the relationship of transformation capability with organizational change is fully mediated by process innovation practices, while the relationship between exploitation capability and organizational change is partially mediated by process innovation practices. Our research therefore contributes to the dynamic capability perspective of organizational change and absorptive capacity by highlighting the importance of integrating organizational transformation and exploitation capability with process innovation practices in different ways to facilitate organizational change. Our findings and accompanying discussion on how process innovation practices can generate moves towards universities that are more entrepreneurial will also be of interest to university managers and policy makers.     

Strategic planning: valuing and managing portfolios of real options

This article presents a value-based strategic planning framework suitable for valuing and managing portfolios of corporate real options. The proposed framework combines insights from strategic management theory with novel quantitative valuation tools from finance. Strategic planning is viewed as a process of actively developing and managing portfolios of corporate real options in the context of competitive interactions. As such, the expanded valuation framework recognizes that future growth opportunity value deriving from the firm's resources and capabilities must explicitly account for uncertainty, adaptability, and competitive responsiveness. The resulting expanded valuation framework is able to capture the value of the adaptive resources and capabilities that enable a firm to adapt and re-deploy assets, develop and exploit synergies, and gain competitive advantage via time-to-market and first- or second-mover advantages. We show how two basic metrics in this value-based framework, current profitability of assets in place and future growth option value, can be obtained from financial market data and how they can be used in active portfolio planning.     

Mutual commitment to support exchange: relation‐specific IT system as a substitute for managerial hierarchy

This paper examines the effects of information technology (IT) on the governance of vertically related firms. We propose that a highly relation‐specific IT system in inter‐firm transactions plays a key role in the resulting inter‐firm governance as a mutual sunk‐cost commitment, in terms of leading to both less vertical integration (i.e., a change in governance mode as a first‐order effect) and a smaller number of suppliers (i.e., a change within a governance mode as a second‐order effect). As a result, this highly relation‐specific IT system (bilateral investment) can be an alternative governance mode of electronic integration that acts as a substitute for managerial hierarchy and vertical financial ownership. From a strategic management perspective, this paper provides transaction costs and resource‐based explanations on IT systems' impact on the organizational boundary decision and its impact on the likelihood of the firm achieving sustainable competitive advantage. Copyright © 2006 John Wiley & Sons, Ltd.     

Firm growth,adaptive capability,and entrepreneurial orientation

Research summary: This paper posits adaptive capability as a mechanism through which a firm's prior growth influences the exhibition of future entrepreneurial action. Defined as the firm's proficiency in altering its understanding of market expectations, increased adaptive capability is a consequence of the new resource combinations that result from expanding organizational boundaries. Increased adaptive capability in turn corresponds to expansion of entrepreneurial activity, as firms increase their entrepreneurial orientation as the strategic mechanism to capitalize on their improved understanding of market conditions. We find support for our research model in a two‐study series conducted in South Korea and the United Kingdom. Managerial summary: Most would agree that entrepreneurially oriented firms—being innovative, entering new markets, and taking risk—grow faster. But how a firm becomes entrepreneurial is a complicated question. In this study, we flipped the growth relationship around and found support for growth contributing to a firm's entrepreneurial orientation. But between growth and being more entrepreneurial is the firm's ability to recognize changes in market expectations. We argue that as a firm grows, it acquires new resources and new knowledge of how to use those resources. These new resource combinations increase its ability to recognize changes in market expectations—its adaptive capability. This capability uncovers new entrepreneurial opportunities for value creation. To capture this potential value, firms expand their entrepreneurial orientation. Copyright © 2016 John Wiley & Sons, Ltd.     

Configurations of Innovations across Domains: An Organizational Ambidexterity View

How do firms balance explorative and exploitative innovation for superior firm performance? While most prior studies have approached this issue by focusing on technology‐related innovation, the role of balancing exploration and exploitation in other important organizational domains, i.e., marketing, and the interaction effect of ambidexterity across different domains have been overlooked. This study contributes to this line of research by investigating how firms simultaneously balance exploration and exploitation across two critical domains, namely technology innovation and market innovation. The study distinguishes four types of configurations: market leveraging (technology exploration and market exploitation), technology leveraging (technology exploitation and market exploration), pure exploitation (technology exploitation and market exploitation), and pure exploration (technology exploration and market exploration). From an organizational ambidexterity perspective, the current work investigates whether and how these different combinations exert distinctive effects on firm performance. Specifically, the article posits that (a) technology exploration and market exploitation complement each other, and (b) technology exploitation and market exploration also complement each other, such that both market leveraging and technology leveraging strategies have positive effects on firm performance. The article also maintains that such positive relationships are fully mediated by differentiation and low cost advantages. Conversely, it is argued that (c) technology exploration and market exploration conflict with each other, and (d) so do technology exploitation and market exploitation, such that both pure exploration and pure exploitation have negative effects on firm performance. Hypotheses were tested using survey data collected from 292 manufacturing and service firms in China. The results supported most of the hypotheses, except that pure exploration demonstrated no significant relationship with firm performance.     

Firm performance,rent appropriation,and the strategic resource divestment capability

Dynamic capabilities manifest the organizational capacity to purposefully create or modify the firm's resource base. In this paper, we consider resource divestment an important firm‐level resource management capability that manifests a two‐step organizational change routine. Firms must first be motivated to engage in resource divestment, and then decide which resources should be ‘sold off.’ In exploring this firm‐level capability, we employ factor market theory to consider the ‘seller side’ of the market, and provide a useful framework for conceptualizing how firms generate competitive advantage through resource divestment. We test our model of the resource divestment capability with a dataset of professional baseball franchises during the period 1969–83. Copyright © 2007 John Wiley & Sons, Ltd.