Experience and scale and scope economies: trade‐offs and performance in development

This paper examines how knowledge created by firm experience (learning economies) and scale and scope economies affect performance in firms' development activities. The empirical results suggest that each factor has a significant effect on development performance. Moreover, knowledge that results from greater experience within a particular technological area, when combined with knowledge spillovers from greater scope in other technological areas, significantly improves development performance. The results suggest that experience shapes and facilitates firms' abilities to absorb knowledge spillovers. Our empirical findings thus provide a more nuanced examination of the drivers of performance and have implications for the management of firms' development activities. Copyright © 2006 John Wiley & Sons, Ltd.     

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.     

Strategic factor markets,scale free resources,and economic performance: The impact of product market rivalry

This paper analyzes how scale free resources, which can be acquired by multiple firms simultaneously and deployed against one another in product market competition, will be priced in strategic factor markets, and what the consequences are for the acquiring firms' performance. Based on a game‐theoretic model, it shows how the impact of strategic factor markets on economic profits is influenced by product market rivalry, preexisting competitive (dis)advantages, and the interaction of acquired resources with those preexisting asymmetries. New insights include the result that resource suppliers will aim at (and largely succeed in) setting resource prices so that the acquiring firms earn negative strategic factor market profits—sacrificing some of their preexisting market power rents—by acquiring resources that they know to be overpriced. Copyright © 2014 John Wiley & Sons, Ltd.     

Toward greater understanding of market orientation and the resource‐based view

Connor's commentary offers a series of thoughtful comments on the ideas presented in Hult, Ketchen, and Slater (2005). We focus on two of his contentions in our response. First, we argue that the theory underlying our study—the resource‐based view—is not tautological. This is because resources and performance are not directly related. Instead, realizing the potential value of resources depends on those resources being exploited through a firm's strategic actions. Second, we disagree with Connor's contention that market‐oriented and customer‐led firms lie along a continuum. We propose a richer conceptualization centered on a two‐by‐two matrix that contains market‐oriented firms, customer‐led firms, and two additional types. Copyright © 2007 John Wiley & Sons, Ltd.     

Does market orientation matter?: a test of the relationship between positional advantage and performance

A recent series of articles in the Strategic Management Journal has discussed the potential value of an organization developing a market orientation in its quest to achieve success. We posit that market orientation can enhance success, but that its potential value should not be considered in isolation. Specifically, we draw on the resource‐based view of the firm to suggest that four capabilities—market orientation, entrepreneurship, innovativeness, and organizational learning—each contribute to the creation of positional advantages for some firms. The data used are drawn from 181 large multinational corporations (MNC). The results indicate that positional advantages arising from the confluence of market orientation, entrepreneurship, innovativeness, and organizational learning have a positive effect on MNC performance (five‐year average change in ROI, income, and stock price). Overall, the results support the contention that market orientation can enhance success, albeit within the context of other important phenomena. Copyright © 2001 John Wiley & Sons, Ltd.     

The power of the vegetable patch: How home-grown food helps large rural households achieve economies of scale & escape poverty

This paper explores how the household’s capacity to grow food impacts their ability to achieve economies of scale in food consumption and how this impacts the geographic distribution of poverty across rural and urban areas. An accurate understanding of consumption economies of scale is vital for comparing poverty levels across households of varying size. Using Sri Lankan data on home-grown food consumption, we empirically confirm that such economies of scale exist and that large households tend to consume relatively more home-grown food than smaller households. The magnitude of these scale economies are found to be larger than those in market purchased food, but smaller than those found in housing expenditure. Consuming more home-grown food is also found to be positively correlated with per-capita calories consumed. Taking these effects into account in poverty estimates leads to a 15 per cent decline in the number of household who fall below the poverty line in rural regions.     

Similarities and contradictions in the core logic of three strategy research streams

The logical foundations shaping three prominent streams of strategic management thought are summarized and then compared and contrasted. The intent is to determine whether these research streams are restatements of a single core logic using different terms to describe the same phenomena and relationships, or whether they provide alternate, and potentially competing, explanations for effective strategic action. Analysis reveals some concordant assertions, some similarities across pairs of frameworks, and some fundamental contradictions among the various logic sets. Since key elements in the fundamental premises of each research stream present logical contradictions with each of the other two, a strategy derived from an integration of these perspectives creates inconsistencies in a firm’s enacted context, its assumptions about strategy making, and its administrative arrangements. As circumstances change, a firm may be required to undergo a ‘core logic shift’ to maintain consistency between its strategy and its strategic context. When a shift becomes necessary, a firm needs to overcome structural inertia, competitive inertia, organizational momentum, and its current management logic to maintain internal consistency. Additional implications of the comparison of these three logics for both theory and practice are discussed. Copyright © 1999 John Wiley & Sons, Ltd.     

Reassessing the fundamentals and beyond: Ronald Coase,the transaction cost and resource‐based theories of the firm and the institutional structure of production

In this paper, three points are argued. The first is that Ronald Coase, best known as the forefather of transaction cost theory, foresaw many of the critical questions that proponents of the resource‐based view are concerned with today. The second is that resource‐based theory plays a potentially much more critical role in economic theory and in explaining the institutional structure of production than even many resource‐based scholars recognize. The last point is that a more complete understanding of the organization of economic activity requires a greater sensitivity to the interdependence of production and exchange relations. The arguments presented in this paper highlight important, but relatively ignored, elements in Coase's work that inform strategy research. More importantly, this paper makes the case for a triangular alignment between the triumvirate of governance structure, transaction, and resource attributes and demonstrates how the identity and strategy of a particular firm influences how its resources interact with the transaction and how the firm chooses to govern it. The general argument is then applied to the context of interfirm collaborative relations, where the key focus is broadened from just cost to also include skills/knowledge and the interdependence between cost and skills with respect to firm boundaries, both in terms of choice and nature. Such a broadening of focus enables us to additionally examine the transacting process as a productive endeavor, which underpins the co‐evolution of the competencies of partner firms. Copyright © 2002 John Wiley & Sons, Ltd.     

Economies of Scope,Resource Relatedness,and the Dynamics of Corporate Diversification

Research summary: The dominant view has been that businesses that are more related to each other are more often combined within diversified firms. This study uses a dynamic model to demonstrate that, with inter‐temporal economies of scope, diversified firms are more likely to combine moderately related businesses than the most‐related businesses. That effect occurs because strong relatedness reduces redeployment costs and makes firms redeploy all resources to better performing businesses. The strength of that effect depends on inducements for redeployment measured as the current return advantage of one business over another business, volatilities of business returns, and correlation of those returns. This study develops hypotheses for those relationships and suggests empirical operationalizations, encouraging empiricists to retest the implications of relatedness for the dynamics of corporate diversification. Managerial summary: It is believed that diversified firms are more likely to combine more‐related businesses because relatedness enables sharing of resources between businesses. Indeed, a firm can apply knowledge created in one business to another business, avoiding costly duplication in knowledge development. Resource sharing also adds value when a firm offers several products, adding the convenience of one‐stop shopping and charging higher prices. However, resource sharing is not the only motivation for corporate diversification. In environments where profitability of businesses changes frequently, firms diversify by redeploying part of resources from an underperforming business to a better performing business. This study uses a dynamic model to demonstrate that, with that second motivation for corporate diversification, firms end up combining moderately related businesses rather than the most‐related businesses. Copyright © 2017 John Wiley & Sons, Ltd.     

More thinking on research methods for the resource‐based perspective

We re‐examine the benefits of using a broader set of research methods to address key questions associated with the resource‐based view (RBV) of the firm. In responding to Levitas and Chi, we consider how research inside organizations can complement and augment research relying on secondary data. Copyright © 2002 John Wiley & Sons, Ltd.     

First mover advantages in international business and firm‐specific political resources

While the currently prevailing conceptual framework of first mover advantages (FMAs) specifies various market mechanisms through which first movers can gain pioneering benefits, it is incomplete by failing to consider the role of political resources in creating FMAs. In this context, this article aims to add the political mechanism to the current classification of FMA mechanisms. The article further serves as a window to an understanding of the long‐term process of acquiring, sustaining, and exploiting firm‐specific political resources in international business, which has been neglected in prior studies on business–government relations. Detailed analysis of three case studies suggests that the causal relationship between political resources and FMAs is a complex one; while non‐market strategies can be used successfully by first movers, they can also be used by late movers to neutralize FMAs. The article proposes a model for understanding the link between FMAs and political resources. Copyright © 2006 John Wiley & Sons, Ltd.     

Growing with the market: How changing conditions during market growth affect formation and evolution of interfirm ties

Research Summary: Market conditions are known to matter for firm performance and growth. This study explores how changing levels of uncertainty and competition affect interfirm ties of entrepreneurial firms as markets transition from nascent to growth stage. Tracing six entrepreneurial game publishers during the growth stage of the U.S. wireless gaming market, the findings reveal that in a growth stage market, as uncertainty decreases, certain ties of entrepreneurial firms are terminated. First, existing partners may cut ties and become competitors after entering the market directly. This is a “winner's curse” as more successful firms are more likely to entice their partners to enter the market directly. Second, ties may be terminated as prominent firms that are “overwhelmed” with too many partners cut ties with low to mediocre performance, while their remaining partners enter a positive spiral of tie strength and performance. Finally, as uncertainty decreases, new firms may enter the market as competitors to prominent firms. While entrepreneurial firms with high‐ and low‐performing ties to prominent partners may find ties with these new entrants attractive, those with mediocre ties to few prominent partners find this move too risky and wait for a first mover to legitimate it. Overall, the findings show that changing levels of uncertainty and competition in growth stage markets can have different consequences for firms due to heterogeneity in their ties and power relative to partners. The findings provide several contributions to literature regarding the relationship among interfirm ties, firm performance, and market evolution. Managerial Summary: Based on interviews at six entrepreneurial game publishers in the United States and their partners, this study shows how changing levels of uncertainty and competition in growing markets can have different consequences for firms based on the different types of alliances in their portfolio and their power relative to partners. The findings highlight the importance of managing partners differently based on alliance type and goal of the partner. They advocate remaining flexible in alliance management as information asymmetries, intentions and bargaining power of partners can change and lead to abrupt alliance dissolution. They show that alliance portfolio management goes beyond a firm's capability of managing individual alliances, and provide a tool for managers to evaluate their alliance portfolios and take the necessary precautions.     

Empirical research on the resource‐based view of the firm: an assessment and suggestions for future research

The resource‐based view (RBV) is one of the most widely accepted theories of strategic management. However, to date no systematic assessment of the RBV's level of empirical support has been conducted. In response, a sample of RBV‐grounded empirical articles was analyzed from which it was found that the RBV has received only modest support overall and that this support varies considerably with the independent variable and theoretical approach employed. It is therefore suggested that scholars avoid the tendency to test models reflecting early incarnations of the RBV and instead test those that incorporate its more contemporary theoretical extensions. Copyright © 2007 John Wiley & Sons, Ltd.     

Technological diversity,related diversification,and firm performance

Previous findings that related diversification creates value have been called into question over concerns about methodology and measures. Reviewing existing theory to consider how a firm's knowledge base interacts with its product market activity, I address several of these concerns by creating a measure of technological diversity based on citation‐weighted patents. The measure indicates a firm's opportunity for corporate diversification based on economies of scope in valuable knowledge assets, is defined for both single‐ and multibusiness firms, and is not correlated with more fundamental aspects of diversification, such as the number of businesses in the corporate portfolio. Evidence from a large sample of firms shows the positive relationship between diversification based on technological diversity and market‐based measures of performance, controlling for R&D intensity and capital intensity as further indicators of the type of assets underlying diversification. Results hold when controlling for the endogeneity of diversification and performance in a cross‐sectional sample or when controlling for unobserved factors using panel data. Copyright © 2006 John Wiley & Sons, Ltd.     

Innovative productivity and returns to scale in the pharmaceutical industry

This study shows that firms in the pharmaceutical industry experience decreasing returns to scale in R & D as the level of R & D expenditures rises. The paper presents the results of our study of the innovative output of 16 pharmaceutical firms over a 19 year period. Given the strong correlation between R & D budgets and firm size, our study suggests the wave of mergers in the industry may yield less innovative productivity than managers expect.     

Strategic resources and performance: a meta‐analysis

Resource‐based theory (RBT) has emerged as a key perspective guiding inquiry into the determinants of organizational performance. Since the early 1990s, numerous studies have examined RBT's assertion that the extent to which organizations possess strategic resources is positively related to performance. Although many studies appear to support this assertion, there is no consensus regarding how strongly strategic resources relate to performance. To help resolve this issue, we meta‐analyze 125 studies of RBT that collectively encompass over 29,000 organizations. Our conservative estimate is that the effect size of the strategic resources–performance relationship is r?_c = 0.22. Moderator tests suggest that the resources‐performance link is stronger (1) when resources meet the criteria laid out in RBT and (2) for those performance measures that are not affected by potential value appropriation. When resources meet RBT's criteria and when performance measures are not affected by potential appropriation, the strength of the relationship grows to r?_c = 0.29. This suggests that the identification, development, and distribution of value from strategic resources should be a primary consideration for scholars, managers, and shareholders. Copyright © 2008 John Wiley & Sons, Ltd.     

Media substitution and economies of scale in advertising

Two important issues in the economics of advertising are media substitutability in generating sales and scale economies in advertising. If media are substitutes then partial bans, e.g., broadcast bans on cigarettes or alcoholic beverages, may be ineffective; and mergers among radio and TV firms, currently widespread in the U.S. and Mexico, are unlikely to result in market power in setting advertising rates. If there are scale diseconomies in advertising, concerns that advertising increases entry barriers may be unfounded. Using U.S. beer firm data over 1983:Q1–1993:Q4 for three media categories, we find evidence of high substitutability and diseconomies of scale.     

Firms' technological resources and the performance effects of diversification: a longitudinal study

While agency theory claims managerial self‐interest creates a diversification discount, strategic theory explains that firms with certain kinds of resources should diversify. Longitudinal data on 227 firms that diversify between 1980 and 1992 reveal that the sample firms invest less in R&D and have greater breadth of technology (based on patent citations) than their industry peers prior to the diversification event. Also, acquiring firms may appear to have lower performance because of accounting conventions and because firms that use internal growth rather than acquisition pursue less extensive diversification. These findings help explain how diversification and financial performance are endogenous. Copyright © 2004 John Wiley & Sons, Ltd.     

Acquisition of organizational capabilities and competitive advantage of IJVs in transition economies: The case of Vietnam

Using Vietnam as the context, the study empirically examines how the competitive advantage of international joint ventures (IJVs) in transition economies is affected by the acquisition of resources from foreign partners and of local market-based resources. Our study contributes to the nascent literature on IJVs in transition economies by producing several novel and interesting findings. First, it demonstrates the need to modify certain arguments of the resource-based view (RBV) when applied to IJVs in transition economies. This paper shows that the peculiar market characteristics of transition economies serve as an imitation barrier turning even property-based resources into sources of sustainable competitive advantage. Second, the positive impact of knowledge-based resources on the IJV’s competitiveness seems to be significantly enhanced as the ownership by the foreign parent increases. Lastly, competitive advantage of IJVs appears to be strengthened when the transfer of property-based resources is complemented by that of knowledge-based resources, and when the transfer of internal, firm-specific resources is complemented by that of external, market-based ones. We believe that these findings make significant, incremental theoretical and empirical contributions to both the RBV and IJV literatures.

The resource‐based theory: dissemination and main trends

Papers published on the resource‐based theory (RBT) have made clear its widespread application, heterogeneity, and usefulness as a strategic approach. This paper empirically analyzes the assumptions underlying the theory from an inductive perspective. The paper differs from previous works by identifying the main trends within the theory and by noting their diffusion among the leading management‐oriented journals. Three main trends are shown to coexist within RBT: the resource‐based view, the knowledge‐based view, and the relational view. Copyright © 2006 John Wiley & Sons, Ltd.