Knowledge‐based resources,entrepreneurial orientation,and the performance of small and medium‐sized businesses

While theory suggests that management has discretion in manipulating resources in order to build competitive advantage, resource‐based research has focused on the characteristics of resources, paying less attention to the relationship between those resources and the way firms are organized. In explaining performance, entrepreneurship scholars have focused on a firm's entrepreneurial strategic orientation (EO), leaving its interrelationship with internal characteristics aside. We argue that EO captures an important aspect of the way a firm is organized. Our findings suggest that knowledge‐based resources (applicable to discovery and exploitation of opportunities) are positively related to firm performance and that EO enhances this relationship. Copyright © 2003 John Wiley & Sons, Ltd.     

Firm resources,competitive actions and performance: investigating a mediated model with evidence from the in‐vitro diagnostics industry

Building on the resource‐based view (RBV) and competitive dynamics literatures, this paper proposes that considering resources or actions independently offers an incomplete understanding of the drivers of superior performance. Instead, we hypothesize that resources enable competitive actions and that when these actions leverage the firm's resources, superior performance results. We tested these hypotheses with panelized data on the technological resources and competitive actions of firms in the in‐vitro medical diagnostic substance manufacturing industry. The results provide substantial support for our hypotheses, specifically with respect to mediation. Our theory and results underscore how the integration of the competitive dynamics and RBV literatures can significantly improve our understanding of firm performance. Copyright © 2011 John Wiley & Sons, Ltd.     

Firm‐specific knowledge resources and competitive advantage: the roles of economic‐ and relationship‐based employee governance mechanisms

The resource‐based view of the firm emphasizes the role of firm‐specific resources, especially firm‐specific knowledge resources, in helping a firm to achieve sustainable competitive advantage. However, the deployment of firm‐specific knowledge often requires key employees to make specialized human capital investments that are not easily redeployable to other settings. Thus, in the absence of effective safeguards and trust building devices, employees with foresight may be reluctant to make such specialized investments. This study explores both economic‐ and relationship‐based governance mechanisms that might mitigate this underinvestment problem. Effective use of these governance mechanisms enables a firm to obtain greater performance from its efforts to deploy firm‐specific knowledge resources. Empirical results further support these key arguments. Copyright © 2009 John Wiley & Sons, Ltd.     

A competition‐based explanation of collaborative invention within the firm

Existing literature shows that collaborative invention within the firm enhances innovativeness by facilitating knowledge recombination. Despite such benefit, firms vary in their use of collaborative invention when drawing on their individual inventors' knowledge. In addressing this puzzle, we argue that competition from rival products building on similar knowledge compels firms to favor search depth over exploratory search and respond expeditiously, thus reducing a firm's inclination toward collaborative invention. In contrast with prior research's focus on how upstream resources influence a firm's position in downstream markets, this study shows that downstream competition drives heterogeneity across firms in their utilization of upstream resources. Copyright © 2013 John Wiley & Sons, Ltd.     

Competition network structure and product market entry

This study proposes and tests a theory of the effects of competition network structure on product market entry. Competition networks are defined as the patterns of interdependence between rivals that emerge from direct competition. Studying networks based on competitive interdependence allows us to extend social network theory to new territory and to enhance our understanding of product market entry. We propose that the size, interconnectedness and diversity of competition networks influence subsequent product market entry in a systemic way. We test our hypotheses in a unique dataset drawn from the aircraft modification industry. Copyright © 2014 John Wiley & Sons, Ltd.     

Comparing the resource‐based and relational views: knowledge transfer and spillover in vertical alliances

We compare resource‐based and relational perspectives to examine competitive advantages within the context of vertical learning alliances. Previous research has shown that through such alliances suppliers acquire knowledge to forge new capabilities and attain performance improvements. We ask whether such improvements are exclusive to the learning partnership, or are available in other average partnerships of this supplier. We posit that the extent to which such performance improvements are partnership exclusive depends on whether the newly forged capabilities lie entirely within the supplier firm's boundaries, or at the learning dyad level. As such, we untie two forms of performance improvements arising from learning dyads. While the resource‐based view helps explain the performance gains learning suppliers deploy across average partners, the relational view reveals the additional performance edge that remains exclusive to the learning partnership. Based on empirical evidence from a survey of 253 suppliers to the equipment industry, we find that partnership exclusive performance (i.e., ‘relational performance’), the true source of learning dyads' competitive advantage, is a function of suppliers acquiring know‐how within the dyad, developing dyad‐specific assets and capabilities, and structuring buyer‐supplier relational governance mechanisms. We discuss implications for research and practice. Copyright © 2008 John Wiley & Sons, Ltd.     

Explaining post‐IPO venture performance through a knowledge‐based view typology

We extend the knowledge‐based view with a new typology and its application to post‐IPO firm performance. The typology categorizes knowledge development activity along the dimensions of familiarity (whether the firm has experience with the knowledge or it is new) and source (whether the firm creates it independently or with partners). We use this typology to determine direct and interaction effects of knowledge development activity on survival, RoA, and Tobin's q of newly public firms. Using a sample of 1,056 high‐technology manufacturing IPOs in 1990–2005, we find that focused, internal knowledge development correlates with higher performance. We also find a positive interaction effect in combining focused, internal and diversifying, alliance‐based knowledge development, and a negative interaction effect in combining diversifying, internal and alliance‐based knowledge development. Copyright © 2013 John Wiley & Sons, Ltd.     

Rivalry within strategic groups and consequences for performance: the firm‐size effects

Our study examines how, in a given industry, rivalry functions within strategic groups defined according to the size of their member firms and how this rivalry affects performance. We hypothesize that, owing to several forms of group‐level effects including market power, efficiency, differentiation, and multimarket contact, strategic groups that comprise smaller firms will exhibit both increased rivalry and decreased performance compared with strategic groups that comprise larger firms. We test our hypotheses by estimating the effect of group‐level strategic interactions (i.e., conjectural variations) on firm performance. Ultimately, our analysis of empirical data on loans in the Spanish banking industry demonstrates that increased rivalry and decreased performance indeed characterizes firms belonging to a strategic group that comprises smaller firms. Copyright © 2011 John Wiley & Sons, Ltd.     

A Bayesian operationalization of the resource‐based view

This paper argues that the gap between the theoretical utility and the practical utility of the resource‐based view (RBV) may be narrowed by operationalizing the theory more consistently with Penrose's original framework. The operationalization proposed here is a twofold approach. First, the RBV may be enhanced by the explicit recognition of Penrose's two classes of resources, namely, administrative resources and productive resources. This distinction suggests a focus on the administrative decisions of managers that lead to economic performance. Second, we argue that the RBV is a theory about extraordinary performers or outliers—not averages. Therefore, the statistical methods used in applying the theory must account for individual firm differences, and not be based on means, which statistically neutralize firm differences. We propose a novel Bayesian hierarchical methodology to examine the relationship between administrative decisions and economic performance over time. We develop and explain a measure of competitive advantage that goes beyond comparisons of economic performance. This Bayesian methodology allows us to make meaningful probability statements about specific, individual firms and the effects of the administrative decisions examined in this study. Copyright © 2004 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.     

Boundary management in an ICT‐enabled project‐based organising context

This paper explores the boundaries that emerge and exist within an information and communication technology (ICT)‐enabled project‐based organising context and the ways knowledge workers manage these boundaries through the use of technology. This is done through an exploratory qualitative case study of an early instance of the phenomenon in a knowledge‐intensive professional services organisation. Through the experiences of a group of knowledge workers who started to work in project‐based ways that were highly mediated by ICT, this study aims to understand the boundaries that they faced and the practices they undertook to manage these boundaries. In so doing, this study contributes to the existing literature on new forms of work and organisation, particularly on the issue of boundaries where ICT‐enabled project teams are used. In particular, this study extends our current understanding of boundaries through expanding the lens of investigation beyond a predominant focus on work–home boundaries and considers boundaries within the work sphere.     

Corporate governance and IPO underpricing in a cross‐national sample: A multilevel knowledge‐based view

Prior studies of IPO underpricing, mostly using agency theory and single‐country samples, have generally fallen short. In this study, we employ the knowledge‐based view (KBV) to explore underpricing across 17 countries. We find that agency indicators are insignificant predictors, board of director knowledge limits underpricing, and external knowledge both substitutes for and complements internal board knowledge. This third finding suggests that future KBV studies should consider how internal and external knowledge states interact with each other. Our study offers new insights into the antecedents of underpricing and extends our understanding of comparative governance and the KBV of the firm. Copyright © 2014 John Wiley & Sons, Ltd.     

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.     

Value,rareness, competitive advantage,and performance: a conceptual‐level empirical investigation of the resource‐based view of the firm

The resource‐based view of the firm (RBV) hypothesizes that the exploitation of valuable, rare resources and capabilities contributes to a firm's competitive advantage, which in turn contributes to its performance. Despite this notion, few empirical studies test these hypotheses at the conceptual level. In response to this gap, this study empirically examines the relationships between value, rareness, competitive advantage, and performance. The results suggest that value and rareness are related to competitive advantage, that competitive advantage is related to performance, and that competitive advantage mediates the rareness‐performance relationship. These findings have important academic and practitioner implications which are then discussed. Copyright © 2008 John Wiley & Sons, Ltd.     

Value creation and value capture with frictions

We use a formal value‐based model to study how frictions—incomplete linkages in the industry value chain that keep some parties from meeting and transacting—affect value creation and value capture. Frictions arise from search and switching costs and moderate the intensity of industry rivalry and the efficiency of the market. We find that firms with a competitive advantage prefer industries with less, but not zero, frictions. We show that rivalry interacts nontrivially with other competitive forces to affect industry attractiveness. Firm heterogeneity emerges naturally when we introduce resource development. Heterogeneity falls with frictions, but the sustainability of competitive advantage increases. Overall, we show that introducing frictions makes value‐based models very effective at integrating analyses at the industry, firm, and resource levels. Copyright © 2011 John Wiley & Sons, Ltd.     

Rethinking research methods for the resource‐based perspective: isolating sources of sustainable competitive advantage

An exploration of traditional perspectives and contemporary propositions regarding sustainable competitive advantage points to the conclusion that the locus of advantage is located specifically within organizational effects. The key issue emerges that research investigating sources of sustainable competitive advantage must be done not only on organizations but also in organizations. The fallout from this conclusion is, however, that the research methodologies traditionally used in strategy research will not unambiguously uncover these sources of sustainable advantage. Using organizational culture as an example of a possible source of sustainable advantage within a resource‐based paradigm, a four‐step research framework is suggested for isolating these organizational effects. Copyright © 1999 John Wiley & Sons, Ltd.     

Firm heterogeneity in complex problem solving: A knowledge‐based look at invention

Research summary : The knowledge‐based view suggests that complex problems are best solved under hierarchical (within‐firm) governance. We examined why firms assumed to be in general alignment with this theory might nonetheless produce solutions of varying usefulness. We theorize that a firm's internal knowledge variety (IKV) is associated with its capacity to support cross‐domain knowledge flows during search, and its ability to identify and explore promising areas on the solution landscape. We further theorize that partner knowledge in familiar (unfamiliar) domains can offset specific weaknesses in searching rugged landscapes, inherent with low or high (moderate) IKV. We find support for these ideas in the context of drug discovery, extending KBV's focus on governance alignment to explain variation in problem‐solving effectiveness within hierarchy. Managerial summary : Firms that concentrate their inventive efforts in a few technological domains, but also dabble in several others, have problem‐solving advantages: they can better support knowledge transfer and recombination across domains. Firms that focus too narrowly or spread their inventive efforts thinly across many domains lose these advantages, but might compensate through alliance partnerships. Our study of drug discovery shows that while firms with very low or high knowledge variety tend to produce weaker solutions than firms in the moderate range, their inventive performance improves when alliance partners afford them access to additional knowledge in familiar domains. We explain how the combination of firm and partner knowledge enables firms to better identify, evaluate, and implement alternative solutions to complex problems. Copyright © 2016 John Wiley & Sons, Ltd.     

Customer‐specific synergies and market convergence

We use an analytical model to study the effects of customer‐specific synergies, i.e., synergies that arise when firms sell multiple products to the same customers. At the firm level, we show that the profitability of a customer‐specific synergy depends upon cross‐market correlation of customer preferences, differs when the synergy is cost‐based versus differentiation‐based, and can even be negative when the synergy is kept proprietary to a single firm. We also show that returns to imitating such a synergy may decline as it strengthens. At the industry level, we find that exploiting customer‐specific synergies causes endogenous market convergence at a point that depends upon whether the synergy is cost‐based or differentiation‐based and whether it is imitated. Copyright © 2015 John Wiley & Sons, Ltd.     

Demand‐side strategy,relational advantage,and partner‐driven corporate scope: The case for client‐led diversification

Research Summary: We advance research on corporate diversification by joining insights from the demand‐side and relational views in strategy to offer a novel theory of client‐led diversification. We propose that client‐led diversification results from a combination of the customer‐driven opportunities emphasized in the demand‐side view and the creation of added value through relational assets that is a central tenet of the relational view. Furthermore, we hypothesize that suppliers’ client‐specific knowledge, clients’ relational commitment to suppliers, and growth opportunities in clients’ markets (relative to the suppliers’ own markets) will magnify the client‐led diversification effect. We test our hypotheses using a longitudinal dataset on patent law firms and their diversification into new domains of patent prosecution work for their corporate clients. Managerial Summary: Explanations of why firms diversify into new lines of business have largely concerned the redeployment of underutilized resources, with little regard to opportunities or influences stemming from firms’ existing customers. In our article, we show how the changing scope of business needs from a knowledge‐based supplier firm's set of existing clients is a central driver of supplier‐firm diversification, and this is especially the case when the level of relational assets shared between a supplier and its clients is higher. In a competitive landscape where suppliers compete intensively for the business of clients, our results show how managers can increase the likelihood of capturing additional business from its existing exchange relationships rather than bearing the risks of seeking new exchange relationships.     

Knowledge worth having in ‘excess’: The value of tacit and firm‐specific human resource slack

Whether holding resources in excess of what is needed to sustain routine operations (i.e., having slack) increases or decreases firm performance is a question of ongoing interest to management scholars. We contribute to existing theory by arguing that human resource slack generally decreases a firm's performance but that holding excess numbers of employees who possess important tacit knowledge that is specific to firms may benefit the firm. We find that the value of these excess resources increases as firms face competitive pressures and decreases when firms' operational choices facilitate the standardization of workflows. We obtain initial empirical evidence for our predictions by testing them on a novel dataset comprising six years of data for 4,070 manufacturing plants in Mexico. Copyright © 2013 John Wiley & Sons, Ltd.