The dynamics of product innovation and firm competences

This study examines how product innovation contributes to the renewal of the firm through its dynamic and reciprocal relation with the firm's competences. Field research in five high‐tech firms of varying age, size, and level of diversification is combined with analysis of existing theory to develop the findings of the study. Based on the notion that new products are created by linking competences relating to technologies and customers, a typology is derived that classifies new product projects based on whether a new product can draw on existing competences, or whether it requires competences the firm does not yet have. Following organizational learning theory, these options are conceptualized as exploitation and exploration. These organizational learning concepts are used to gain a dynamic and path‐dependent view of product innovation and firm development, and to reveal the unique nature and challenges of different types of product innovation. Copyright © 2002 John Wiley & Sons, Ltd.     

Discourse revisited: Dimensions and employment of first‐order strategy discourse during institutional adoption

Despite decades of research on strategy, we still know little about what the concept of strategy means to actual strategists and how they use it in practice. Working at the intersections of institutional and practice theories, we use exploratory interviews with strategy directors and a longitudinal case study to uncover four dimensions of first‐order strategy discourse: functional, contextual, identity, and metaphorical. We also reveal three phases in the interrelation between first‐order strategy discourse and institutional work: shaping, settling, and selling and a differential emphasis (selective focusing) on dimensions of the first‐order strategy discourse during the institutional adoption process. We contribute to a deeper understanding of the concept of strategy in practice, the process of institutional adoption, and of the role of discourse in this process. Copyright © 2013 John Wiley & Sons, Ltd.     

Knowledge relatedness and the performance of multibusiness firms

This study examines corporate performance effects of cross‐business knowledge synergies in multibusiness firms. It synthesizes the resource‐based view of diversification and the economic theory of complementarities to conceptualize cross‐business knowledge synergies in terms of the relatedness and the complementarity of knowledge resources across business units of the multibusiness firm. The study hypothesizes that corporate performance is improved when the firm simultaneously exploits a complementary set of related knowledge resources across its business units. In a sample of 303 multibusiness firms, the study finds that synergies arising from product knowledge relatedness, customer knowledge relatedness, or managerial knowledge relatedness do not improve corporate performance on their own. Synergies arising from the complementarity of the three types of knowledge relatedness significantly improve both market‐based and accounting‐based performance of the multibusiness corporation. Copyright © 2004 John Wiley & Sons, Ltd.     

Product‐market strategy and the marketing capabilities of the firm: impact on market effectiveness and cash flow performance

We report on two studies (a single and a multi‐industry) that empirically investigate a nomological network of relationships between strategic business unit product‐market strategy (differentiation, cost‐focus, and product‐market scope), marketing capabilities (architectural and specialized capabilities, as well as their integration), and business unit performance (market effectiveness and subsequent one‐year objective cash flow), along with a series of controls. Addressing important lacunae in the resource‐based view our main research objective is to augment understanding of how critical firm‐level marketing capabilities enable the realization of strategy, thus, further advancing both the resource‐based view and more recent capabilities theorizing. Specifically, we test seven hypotheses and find strong evidence that both architectural and specialized marketing capabilities, and their integration, positively mediate the product‐market strategy and derived business unit performance relationship. In contrast to many extant studies, both survey and objectively measured data are combined, and because the secondary data collected contains both resource‐level (input) data and subsequent one‐year financial data, a higher level of confidence may be attributable to our findings. Copyright © 2009 John Wiley & Sons, Ltd.     

A rational‐expectations revision of Makadok's resource/capability synthesis

Makadok has recently developed a mathematical model aimed at synthesizing the resource‐based and dynamic‐capabilities views of the rent creation process. One unstated implicit assumption in that model is that each bidding firm in the resource market is ignorant not only of the content of rival firms' private information, but also of the quality (i.e., the noisiness or reliability) of that information. Consequently, that model does not qualify as a rational‐expectations Bayesian Nash equilibrium—a fact that both generates questionable results (e.g., the possibility of negative expected profits) and impedes any effort to extend the model. The rational‐expectations critique in economics points out that this sort of nonrational assumption becomes increasingly implausible as economic actors learn more about each other's patterns over time through repeated interactions (in this case, as bidders repeatedly compete against each other to buy different resources over time). So, over the long run, the only truly stable, viable, and robust assumption would be rational‐expectations behavior. The primary purpose of this paper is to put Makadok's model on the firmer methodological footing of rational‐expectations Bayesian Nash equilibrium, so that it will no longer generate questionable results, and so that future researchers can more easily extend it. The secondary purpose of this paper is to demonstrate that this shift to rational‐expectations assumptions has little substantive impact on the testable hypotheses generated by Makadok's original model. Copyright © 2002 John Wiley & Sons, Ltd.     

Revisiting the role of the environment in the capabilities–financial performance relationship: A meta‐analysis

Within the capabilities‐based view of the firm, there is debate about the relative importance of ordinary and dynamic capabilities for firm performance and about the extent to which their performance effects are contingent on environmental conditions. We meta‐analyze 115 studies to investigate the relationship between both ordinary and dynamic capabilities and the financial performance of firms in relatively stable versus changing environments. The results suggest that the performance effects of both types of capabilities are positive and similar in magnitude. Environmental dynamism reinforces the effects of both ordinary and dynamic capabilities. Furthermore, the two types of capabilities are closely associated. Our findings provide support for a moderate capabilities‐based view of the firm, rather than one that considers dynamic capabilities as superior to ordinary ones. Copyright © 2015 John Wiley & Sons, Ltd.     

A resource‐based view of manufacturing strategy and the relationship to manufacturing performance

This paper examines manufacturing strategy from the perspective of the resource‐based view of the firm. It explores the role of resources and capabilities in manufacturing plants that cannot be easily duplicated, and for which ready substitutes are not available. Such resources and capabilities are formed by employees' internal learning based on cross‐training and suggestion systems, external learning from customers and suppliers, and proprietary processes and equipment developed by the firm. Based on data from 164 manufacturing plants, the paper empirically demonstrates that competitive advantage in manufacturing (as measured by superior plant performance) results from proprietary processes and equipment which, in turn, is driven by external and internal learning. The implication is that resources such as standard equipment and employees with generic skills obtainable in factor markets are not as effective in achieving high levels of plant performance, since they are freely available to competitors. The paper also demonstrates the important role of internal and external learning in developing resources that are imperfectly imitable and difficult to duplicate. Copyright © 2002 John Wiley & Sons, Ltd.     

How dynamic can organizational capabilities be? Towards a dual‐process model of capability dynamization

The recent discussion in the field of strategic management broadly favors the idea of dynamic capabilities in order to overcome potential rigidities of organizational capability building. The major question addressed in this paper is whether capabilities can actually be conceived as being in flux—and if so, to what extent and in which way? After briefly recapitulating the distinguishing features of organizational capabilities, path dependency, structural inertia, and commitment are identified as the main capability‐rigidity drivers causing a managerial dilemma. In the search for a resolution of this dilemma different approaches of dynamic capabilities are identified and discussed. The analysis shows that the approaches suffer from inherent conceptual contradictions: the dynamization runs the risk of dissolving the original idea and strength of organizational capability building. Ultimately, capabilities would lose the strategic power attributed to them in the resource‐based view. The last section of this paper therefore aims to develop an alternative approach, which aims at preserving the original merits of organizational capability and solving the rigidity issue not by integrating a dynamic dimension into the capability construct but rather by establishing a separate function (‘capability monitoring’). The suggestions mount up to a tier solution. Its logic builds on the dynamics of countervailing processes and second‐level observation. Copyright © 2007 John Wiley & Sons, Ltd.     

Growing pains: Pre‐entry experience and the challenge of transition to incumbency

We examine how entrepreneurial entry by diversifying and de novo firms in new industries leads to different levels of performance. We propose that these types of firms differ in dynamic capabilities, which help them overcome growth impediments and transition to incumbency in the industry. Growth impediments arise at larger size, older tenure levels in industry, and after technological discontinuities. Because of their prior experience, diversifying firms are better equipped to handle the challenges of impediments to growth. Meanwhile, de novo firms, ostensibly tailor‐made for the targeted industry, are more likely to stumble over these growth challenges, and eventually lag behind diversifying firms. We find support for our hypotheses using a near census of firms in the U.S. wireless telecommunications industry over the 1983–2004 period. Copyright © 2011 John Wiley & Sons, Ltd.     

Fast‐mover advantages: Speed capabilities and entry into the emerging submarket of atlantic basin LNG

Entry timing benefits and costs typically vary with firms' capabilities. In this study, we empirically examine the entry timing implications of firms' intrinsic speed capabilities, which refer to the ability to execute investment projects faster than competitors. We hypothesize that firms with intrinsic speed capabilities face low preemption risks and, thus, can afford to wait longer for uncertainty resolution before deciding to enter new markets. This hypothesis is more applicable when investment is associated with higher levels of commitment and, thus, greater option value of waiting. A direct implication is that late entrants with intrinsic speed capabilities should have greater expected post‐entry performance. We find support for these hypotheses in the Atlantic Basin liquefied natural gas (LNG) industry from 1996 to 2007. Copyright © 2013 John Wiley & Sons, Ltd.     

Testing metric equivalence in cross‐national strategy research: an empirical test across the United States and Japan

We propose a conceptual and analytical framework for assessing metric equivalence in cross‐national strategy research. We illustrate this framework by testing the equivalence of measurement models for a set of strategy constructs across the United States and Japan. Results of a two‐group LISREL analysis conducted on a data set of 447 interorganizational relationships reveal that some constructs have strong cross‐national equivalence, while others need content respecification or reconceptualization. We discuss implications and offer suggestions about how to conduct empirical strategy research in cross‐national settings. Copyright © 1999 John Wiley & Sons, Ltd.     

How dynamics,management, and governance of resource deployments influence firm‐level performance

To help understand how firms develop and maintain dynamic capabilities, we examine the effects of the dynamics, management, and governance of R & D and marketing resource deployments on firm‐level economic performance. In a sample of technology‐based entrepreneurial firms, we find that a history of increased investments in marketing is an enduring source of competitive advantage. We also find that managers' firm‐specific experience positively moderates the relationship between R & D deployment intensity and economic returns. In addition, institutional ownership boosts economic returns from marketing deployments by subjecting these deployments to increased scrutiny and by sending positive signals to the market about the firm. Copyright © 2005 John Wiley & Sons, Ltd.     

Environment–strategy co‐evolution and co‐alignment: a staged model of Chinese SOEs under transition

Economic reform in China has attracted growing attention from around the world owing to its significance for theory and practice. What has been largely missing in the literature is the temporal dimension, i.e., the changes over time in key variables such as organizational environment, firm strategic adaptations, and the performance implications. In this study, we investigate environment and strategic adaptations 12 years after Tan and Litschert examined these issues in 1990. Following a staged model, the study found that (1) organizational environment and firm strategic adaptations have co‐evolved over time, (2) a new configuration has emerged and is related to improved performance, and (3) such a relationship is moderated by the stage during transition in which firms were founded. Specifically, firms founded since 1990 are more proactive and innovative than firms that had existed in the previous stage. Copyright © 2004 John Wiley & Sons, Ltd.     

Firm non‐market capabilities and the effect of supranational institutional safeguards on the location choice of international investments

Research Summary : We investigate the extent to which firms rely on supranational institutional safeguards versus their non‐market capabilities to offset the risks of investing abroad. We argue that firms with non‐market capabilities are insensitive to supranational institutional safeguards when choosing the location of their international investments. We show that supranational agreements between an investor's home and host nation, operationalized as bilateral investment treaties (BITs), increase the likelihood of investment, but there is substantial firm heterogeneity with respect to this relationship. Firms with various forms of non‐market capabilities are not sensitive to BITs, whereas other firms are more likely to invest under BITs. We advance the understanding of how firm non‐market capabilities can substitute for supranational institutional arrangements in addressing risks associated with host country institutional weaknesses. Managerial Summary : The risk of expropriation is one of the main concerns companies have when investing abroad. Because of this, many countries implement bilateral investment treaties (BITs) to safeguard foreign investments, alleviate foreign investor concerns, and promote investments. We show that only those companies without political competence or political connections favor countries with BITs when choosing where to invest. Companies with political competence or political connections, on the other hand, ignore BITs and apparently rely on their ability to influence governments whenever their foreign investments face expropriation threats. As a result, politically connected or competent companies can enter markets most of their competitors lacking these capabilities shy away from. They can, therefore, do business in environments in which they face less competition.     

Online,on call: the spread of digitally organised just‐in‐time working and its implications for standard employment models

This article questions whether the dominant policy discourse, in which a normative model of standard employment is counterposed to ‘non‐standard’ or ‘atypical’ employment, enables us to capture the diversity of fluid labour markets in which work is dynamically reshaped in an interaction between different kinds of employment status and work organisation. Drawing on surveys in the UK, Germany, Sweden and the Netherlands that investigate work managed via online platforms (‘crowdwork’) and associated practices, it demonstrates that crowdwork represents part of a continuum. Not only do most crowd workers combine work for online platforms with other forms of work or income generation, but also many of the ICT‐related practices associated with crowdwork are widespread across the rest of the labour market where a growing number of workers are ‘logged’. Future research should not just focus on crowdworkers as a special case but on new patterns of work organisation in the regular workforce.     

Value creation and value capture under moral hazard: Exploring the micro‐foundations of buyer– supplier relationships

We combine the formalism of a principal–agent framework with a value‐based analysis in order to investigate the micro‐foundations of business partner selection and the division of value in contracting relationships. In particular, we study how the key contracting parameters such as efficiency, transactional integrity, incentive alignment, and gaming affect outcomes when buyers face competing suppliers. We show that integrity and efficiency increase value creation and capture for all parties and are complements. While incentive gaming is unambiguously bad for value creation, and reduces buyers' value capture, it can benefit some suppliers. For alignment, we find that neither party has an incentive to use fully aligned performance measures that maximize total value creation. We conclude by analyzing buyers' and suppliers' incentives to invest in integrity. Copyright © 2014 John Wiley & Sons, Ltd.     

The relationship between product and international diversification: the effects of short‐run constraints and endogeneity

We examine the relationship between growth along the product and international dimension in the short run. We argue that while the presence of fungible intangible resources and economies of scope may create opportunities for a firm to expand along both dimensions, the effect of short‐ run constraints may lead to a trade‐off and a negative association between the two dimensions. In addition, we suggest that rather than being independent, decisions concerning the extent of growth along the two dimensions are likely to be made simultaneously and endogenously by firms after taking into consideration the availability of various resources. We test these propositions by observing a sample of 1,299 firms over the period of 1993–1997. Our results show strong evidence of endogeneity and a negative association between growth along the two dimensions. These findings provide important support for theories of firm growth that have long held that firms are limited in the number of opportunities they can exploit in the short run by various constraints. Copyright © 2008 John Wiley & Sons, Ltd.