Modularity in organizational structure: the reconfiguration of internally developed and acquired business units

This paper explores changes in organizational structure and distinguishes between units' origins. Unit reconfiguration is the addition of units to, deletion of units from, and recombination of units within the firm. This study compares the reconfiguration of internally developed vs. acquired units, explores what forms of unit recombination are common, and observes whether firms pursue recombination before divestiture. Theoretical support is drawn from the dynamic capabilities perspective, research on modular organizational systems, and strategy–structure literature. The findings are that acquired and internally developed units serve different roles in the process of change, and that firms perceive reconfiguration to be beneficial. Copyright © 2006 John Wiley & Sons, Ltd.     

Mind the gap: The interplay between external and internal actions in the case of corporate social responsibility

Research summary : We explore the effect of the interplay between a firm's external and internal actions on market value in the context of corporate social responsibility (CSR). Specifically, drawing from the neo‐institutional theory, we distinguish between external and internal CSR actions and argue that they jointly contribute to the accumulation of intangible firm resources and are therefore associated with better market value. Importantly, though, we find that, on average, firms undertake more internal than external CSR actions, and we theorize that a wider gap between external and internal actions is negatively associated with market value. We confirm our hypotheses empirically, using the market‐value equation and a sample comprising 1,492 firms in 33 countries from 2002 to 2008. Finally, we discuss implications for future research and practice. Managerial summary : Companies often accumulate intangible assets by taking internally and externally oriented CSR actions. Contrary to popular beliefs, the data show that they undertake more internal than external ones: firms do more and communicate less. How does a potential gap (i.e., a misalignment) between internal and external CSR actions affect a firm's market value? We find that although together (the sum of) internal and external actions are positively associated with market value, a wider gap has negative implications. In other words, firms do not realize the full benefits of their internal actions when such actions are not externally communicated to key stakeholders, and to the investment community in particular. This negative association with market value is particularly salient in CSR‐intensive and the natural resources and extractives industries. Copyright © 2015 John Wiley & Sons, Ltd.     

Cultural differences and shareholder value in related mergers: Linking equity and human capital

Merger literature suggests that the relationship between shareholder gains and the relatedness of merging firms is contingent upon the compatibility of the two firms' top management cultures. This hypothesis is tested by surveying the perceptions of cultural differences of top management teams of recently acquired firms, and then relating these perceptions to related stock market gains to the buying firms. The findings suggest a strong inverse relationship between perceptions of cultural differences and shareholder gains, after controlling for perceptions of the buying firm's tolerance for multiculturalism and the relative size of the merging firms.     

The effects of strategic and market complementarity on acquisition performance: evidence from the U.S. commercial banking industry, 1989–2001

Most traditional research on mergers and acquisitions tends to focus on the role of similarity in explaining acquisition performance. While scholars have recently begun to examine acquisition complementarity, there is still little evidence concerning how complementarity influences acquisition performance. Further, previous research has not drawn the connections between related contexts and the potential benefits from complementarity. In this article, we move the study of acquisition complementarity forward by investigating the effects of strategic and market complementarity on acquisition performance in the context of related horizontal acquisitions. We also propose that two key attributes of acquirers—strategic focus and out‐of‐market acquisition experience—will moderate this relationship. We investigate our research questions in the context of all 2,204 acquisitions made by publicly traded U.S. commercial banks during the 12‐year period from 1989 to 2001. Our findings are generally supportive, suggesting complementarity is an important antecedent of acquisition performance, and raising important issues on the nature of acquisition research in general. Copyright © 2009 John Wiley & Sons, Ltd.     

Learning and product entry: How diversification patterns differ over firm age and knowledge domains in U.S. generic drug industry

This study uses learning theory to show how knowledge domains affect product extension decisions and how these product decisions change as firms age. Faced with the choice of new product‐markets, a firm might decide to introduce a similar product, by leveraging existing firm knowledge, or to experiment with a less familiar product, which requires new knowledge. Using data on new drug introductions in the US generic pharmaceutical industry, the analyses showed clear support for heterogeneous product‐market entry patterns across knowledge domains as the firm ages. Across time, the form of learning shifts from exploration to exploitation. Copyright © 2013 John Wiley & Sons, Ltd.     

Good learners: How top management teams affect the success and frequency of acquisitions

We develop new theory and hypotheses on how a firm's top management team learns from acquisition experience, why, in consequence, the composition of the team is crucial, and how this affects acquisition frequency and success. We focus on the diversity of the top team and argue that heterogeneous teams, as compared to homogenous ones, acquire less but benefit more from their acquisition experience and are more successful with their acquisitions because they avoid mis‐transferring their experiences. We tested our hypotheses on acquisition frequency and success using longitudinal data on more than 2,000 acquisitions by 25 Dutch companies over four decades (1966 to 2006). Copyright © 2013 John Wiley & Sons, Ltd.     

A multilevel framework of firm boundaries: firm characteristics,dyadic differences,and network attributes

Extending prior firm boundary research that tends to focus on economic explanations and rely on atomistic assumptions, we propose a multilevel framework by bridging the resource‐based view and the social network perspective, with their respective emphases on the importance of firms' internal resource endowments and external resource opportunities. Specifically, we argue that firms' boundary choices can be better understood by considering the tension between the need for external resources and the need for risk controls, affected by internal and external resource factors at three important levels: firm characteristics, dyadic differences, and network attributes. We also explore firms' boundary choices under two conditions: whether to initiate external relationships (non‐partnering vs. partnering) and whether to pursue either alliances or acquisitions if external relationships are needed. Our analyses of the United States computer industry over a nine‐year span largely support our theoretical framework and demonstrate the importance of unique factors at and across individual, dyadic, and network levels in understanding firms' boundary choices. Copyright © 2009 John Wiley & Sons, Ltd.     

Assessing the effects of mergers and acquisitions on firm performance,plant productivity,and workers: newl evidence from matched employer‐employee data

Empirical studies of mergers and acquisitions typically focus on firm‐level financial performance. In contrast, we use human capital theory to model these events as transactions that simultaneously have cross‐level, real effects on workers, plants, and firms. Our empirical analysis is based on longitudinal, linked employer‐employee data for virtually all Swedish manufacturing firms and employees. We find that mergers and acquisitions enhance plant productivity, although they also result in the downsizing of establishments and firms. Firm performance does not decline in the aftermath of these ownership changes. We conclude that such transactions constitute a mechanism for improving the sorting and matching of plants and workers to more efficient uses. Copyright © 2010 John Wiley & Sons, Ltd.     

From crisis to opportunity: environmental jolt,corporate acquisitions,and firm performance

This study incorporates the external environmental context into the study of corporate acquisitions by examining the performance implications of corporate acquisitions during an environmental jolt that alters the levels of environmental munificence. We posit that compared to the periods before and after an environmental jolt, corporate acquisitions during a jolt would be positively related to firm performance. Furthermore, we suggest that organizational slack would improve firm performance and accentuate the positive relationship between corporate acquisitions and firm performance during an environmental jolt; however, it would have negative impact on firm performance and make the acquisition‐performance relationship more negative before and after a jolt. Using the Asian Economic Crisis as a natural experiment, we found general support for our core arguments based on a sample of firms from Hong Kong and Singapore. Our work demonstrates that firms can capitalize on the opportunities created by the changes in an environmental jolt. Copyright © 2009 John Wiley & Sons, Ltd.     

Resource complementarity and value capture in firm acquisitions: The role of intellectual property rights

Extant literature holds that firm acquisitions create value through innovation if the knowledge bases of the acquirer and the target complement each other. Little is known about the value that patents associated with a target's knowledge convey to the acquirer, i.e., their value in securing market exclusion and freedom to operate in R&D. We argue that such property rights hold preemptive power allowing firms to capture the value from combining complementary technologies and to realize gains from trade in strategic factor markets. Our results for a sample of 1,428 acquisitions indicate that—controlling for technological value—acquired preemptive power is an important determinant of the acquisition price, particularly when the acquirer is technology intensive and acquired patents are highly related to the acquirer's knowledge base. Copyright © 2013 John Wiley & Sons, Ltd.     

Innovation and control in the multinational firm: A comparison of political and contingency approaches

This study focuses on control mechanisms used by multinational corporations (MNCs) to manage their extra‐national R&D units. Drawing on both the literature on organizational power and contingency theory, this study develops and empirically tests a set of hypotheses aimed at explaining how headquarters control their overseas R&D units. Data collected from 134 R&D units of German MNCs serve to test the hypotheses. Results highlight the importance of the units' R&D mandate and its interdependence in explaining control mechanisms. Moreover, they indicate a relatively weak predictive power of political approaches compared to contingency approaches. Copyright © 2007 John Wiley & Sons, Ltd.     

The perilous leap between exploration and exploitation

Research summary : R&D‐based exploration and exploitation are necessary in order for firms to have sustainable competitive advantage. Yet, transitioning between these orthogonal types of R&D is considered profound organizational change. Building on recent research showing that compact, significant changes in R&D expenditure is an antecedent to the transition between explorative and exploitative R&D, I show that this leap between exploration and exploitation is quite hazardous. The magnitude of changes in R&D expenditure, whether increases or decreases, is positively associated with organizational failure. Firms maintaining higher levels of absorptive capacity are more capable of surviving the leap from R&D‐based exploitation to exploration, and firms that do not use reductions in R&D expenditure to manipulate short‐term earnings performance are more likely to survive the leap from exploration to exploitation. Managerial summary : In order to survive and thrive, innovative companies must be able to exploit their existing competencies, and to explore for new ones once those current competencies decline in value. However, transiting from one form of innovation to the other is difficult because the skills required to explore are fundamentally opposed to those required to exploit. In this article, I describe how difficult this leap between exploration and exploitation can be. I show that the move between R&D‐based exploration and exploitation is related to organizational failure. In addition, firms that are superior learners are more likely to survive the leap from exploitation to exploration, and firms that are not cutting R&D expenditure to manipulate earnings are more likely to survive the leap from exploration to exploitation. Copyright © 2015 John Wiley & Sons, Ltd.     

The effect of compensation program and structure on sbu competitive strategy: A study of technology-intensive firms

In this paper we examine the impact various compensation programs have upon business-level strategy for technology-intensive firms. Similarly, we examine the effect of centralization of R&D and non-R&D decision-making, formality of procedures, and SBU size on competitive strategy. Analysis of data from 79 SBUs suggest that there is a resource trade-off between marketing-oriented strategies and R&D-oriented strategies, and that managers who operate under certain types of compensation programs will tend to favor R&D/innovation strategies and capital investment over other alternatives. Structure and competitive position also appear to play a significant role in determining technology and investment strategy.     

Entry mode,organizational learning,and R&D in foreign affiliates: evidence from Japanese firms

This paper develops hypotheses concerning the role of entry mode and experience‐based organizational learning as determinants of the R&D intensity of foreign affiliates and tests these hypotheses on a sample of 420 Japanese manufacturing affiliates abroad. Entry mode has a major impact on R&D activities: the R&D intensities of acquired affiliates substantially exceed those in wholly owned greenfield affiliates, while the R&D intensities of minority owned ventures are higher if Japanese parent firms lack strong R&D capabilities at home. For greenfield operations, support is found for an incremental growth pattern of foreign R&D as a function of organizational learning and affiliate capability building. The results are consistent with the view that part of the explanation for Japanese firms' relative lack of involvement in overseas R&D must be sought in their status as ‘latecomers’ in the establishment of overseas manufacturing networks. At the same time, a number of Japanese firms have actively used foreign acquisitions and joint ventures to gain access to overseas technology and to establish overseas R&D capabilities at a faster pace. Copyright © 2002 John Wiley & Sons, Ltd.     

股权结构与公司绩效的U型关系研究——1997～2000年上市公司的实证研究

本文通过对上市公司 1 997～ 2 0 0 0年的数据的实证分析 ,结果表明 :股权集中度、内部持股比例与公司绩效均呈显著性倒U型相关 ;第一大股东持股比例与公司绩效正相关 ;国家股比例、境内法人股与公司绩效呈显著性U型相关 ,这说明当国家或法人持股比例较低时 ,与公司绩效负相关 ,而在持股比例较高时 ,与公司绩效正相关 ;流通股比例与公司绩效呈U型关系 ,即在流通股比例高低的两端 ,公司绩效均表现出较高水平。     

Food industry structure in Norway and Denmark since the 1990s: Path dependency and institutional trajectories in Nordic food markets

Structural changes in Norwegian and Danish food industry since the 1990s is analysed as a path dependent response to the neo-liberal turn. Norway entered the 1990s as a protected market and Denmark as case of an export oriented industry. These developmental strategies are rooted in early 20th century industrialisation and influenced by institutional transformations in the 1990s, such as EU and WTO. Mergers and acquisitions (M&A) are studied in the context of changing political environments. Explaining two different trajectories, we combine path dependency theories and a Polanyi inspired ‘varieties of capitalism’ framework with corporate strategy theories on food industry M&As. We identify two different types of path dependent development, a self-reinforcing in Denmark and a transformative ‘breaking point’ in Norway.     

Toward an integrated theory of the firm: The interplay between internal organization and vertical integration

Research summary : Two central issues in strategic management are the determination of a firm's internal delegation and its vertical boundaries. Despite the importance of these issues, there is scant analysis concerning their interaction. Using a comprehensive database of the construction industry, we show that vertical integration positively influences the centralization decision and that the main mechanism driving this relationship is an improvement in the hierarchically coordinated adaptation of firm activities when complexity and uncertainty are high. We also observe that centralization is negatively related to the extent of relational contracts between principals and agents, and positively related to an exogenous increase in the cost of employee layoffs. Our results suggest that managers cannot consider firm boundaries and internal organization to be independent decisions. Managerial summary : We ask whether a firm's decision about vertically integrating or outsourcing its activities affects the choice of centralizing or delegating its internal decision‐making process. Our statistical analysis shows that firms with more vertical integration tend to centralize the decision‐making process and that firms that outsource more tend to decentralize more. Why? Vertical integration enables the use of centralized authority to coordinate activities that interact intensively. Accordingly, we found that the positive influence of vertical integration on centralization is especially significant in more complex and uncertain environments, when the need for coordination is higher. Thus, our results suggest that managers should choose vertical integration considering its effect on internal decision‐making processes, particularly when coordination is important. Copyright © 2015 John Wiley & Sons, Ltd.     

Market share,advertising, R&D,and profitability: An empirical analysis of leading industrial firms in Japan

This paper develops a dynamic model of a leader firm which chooses the time paths of R&D and advertising inputs so as to maximize the present value of expected profits. From this theoretical model simultaneous-equations system for market share, advertising, R&D, and profitability is derived and estimated using the data on the leading industrial firms in Japan. Our results show that, as far as top firms are concerned, market share and demand growth have significant positive effects on profitability, and an increase in the stock of goodwill increases market share as well as profitability.This study was financially supported by the Ministry of Education in Japan. Helpful comments were provided by H. Odagiri. Also I am indebted to an anonymous referee for advice and criticism on various points.     

Uncovering the hidden costs of offshoring: The interplay of complexity,organizational design,and experience

This study investigates estimation errors due to hidden costs—the costs of implementation that are neglected in strategic decision‐making processes—in the context of services offshoring. Based on data from the Offshoring Research Network, we find that decision makers are more likely to make cost‐estimation errors given increasing configuration and task complexity in captive offshoring and offshore outsourcing, respectively. Moreover, we show that experience and a strong orientation toward organizational design in the offshoring strategy reduce the cost‐estimation errors that follow from complexity. Our findings contribute to research on the effectiveness of sourcing and global strategies by stressing the importance of organizational design and experience in dealing with increasing complexity. Copyright © 2012 John Wiley & Sons, Ltd.