Learning by hiring and change to organizational knowledge: Countering obsolescence as organizations age

Research summary: This paper investigates the relationship between hiring and the ability of organizations to evolve their capabilities as they age. While prior research establishes that organizations become rigid to change as they age, it underemphasizes measures that they may take to renew their adaptive potential. I address this gap by investigating whether hiring stimulates change to the knowledge organizations possess. Learning by hiring, I argue, helps organizations to evolve their knowledge as they age by disrupting routine, introducing distant knowledge, and facilitating socialization. I test the effectiveness of these mechanisms using 38 years (1970–2007) of data from the U.S. biotechnology industry, and find that hiring stimulates more change as organizations age, enabling them to renew their knowledge and counter the effects of obsolescence. Managerial summary: As organizations age, they become less responsive to the needs of their environment, resulting in a trend for them to become technologically obsolete. Little is known as to how they may reverse this trend and counter obsolescence. I provide evidence that hiring may be used to stimulate change to organizational knowledge and capabilities as they age by disrupting routine activity, introducing new‐to‐the‐firm knowledge, and inducing incumbent members to learn. Copyright © 2015 John Wiley & Sons, Ltd.     

Market-focused strategic flexibility: Conceptual advances and an integrative model

This article develops the concept of market-focused strategic flexibility. It begins with a review of the historical perspectives of strategic flexibility. To support the conceptualization, the authors offer a theoretical schema that considers market-focused strategic flexibility as conceptually rooted in capabilities theory, resource-based views of the firm, and options. With the conceptualization in place, the authors propose an integrative model that explicates the mediating role of market-focused strategic flexibility in marketing strategy frameworks. Propositions are developed relating market-driven and driving orientations to market-focused strategic flexibility with consideration for how turbulent macro environments modify the relationship. In addition, the authors offer propositions regarding outcomes of market-focused strategic flexibility under conditions of macro environmental turbulence. Jean L. Johnson is an associate professor of marketing at Washington State University. Her research includes partnering capabilities development in, and management of, interfirm relationships and management of international strategic alliances. Her research appears in journals such as theJournal of Marketing, theJournal of International Business Studies, theJournal of the Academy of Marketing Science, and theInternational Journal of Research in Marketing. She serves on the editorial boards of theJournal of Marketing and theJournal of the Academy of Marketing Science and reviews for others. She spent several years in the advertising industry and has lived, taught, and conducted research in France and Japan. Ruby Pui-Wan Lee is a doctoral candidate in the marketing department at Washington State University. Her areas of research include interfirm relationships marketing strategy, and international marketing. She has presented papers at major conferences. In addition, her research has appeared in the theJournal of Advertising Research and theJournal of International Consumer Marketing. Amit Saini is a doctoral candidate in marketing at Washington State University. He conducts research in the area of marketing strategy implementation, technology-marketing interface, e-commerce strategy, and customer relationship management. He has presented papers at major conferences, and his research appears in theAmerican Marketing Association—Marketing Educator's Conference Proceedings. His industry experience includes sales management and quantitative market research. Bianca Grohmann is an assistant professor in the John Molson School of Business at Concordia University. She received her Ph.D. from Washington State University in 2002. Her research focuses on consumer behavior issues such as gift giving, selfprophecy, and consumer response to sensory stimuli in purchase situations. She has made numerous presentations at major conferences such as those of the Association for Consumer Research and the Society for Consumer Psychology.     

Financial market frictions and diversification

We find new facts that relate the evolution of firm scope to the changing frictions in external capital markets over the last three decades. We find that large, diversified publicly traded firms increase their scope during times of high external capital market frictions, such as in the recent Great Recession. Moreover, during these times firms diversify their investment needs and cash flow across industries. We also find similar phenomena outside diversified public firms. Examining the mergers and acquisitions activity of stand-alone and diversified private firms, we uncover similar patterns. In aggregate data, we find that the composition of mergers shifts from focused to diversifying and back with changes in external market conditions. Our evidence is broadly consistent with the notion that firms diversify their scope in response to tightening in external capital markets.     

How Do Foreign Banks Affect Private Credit Flows? A Global and Emerging Markets Perspective

This study examines how foreign banks affect private credit flows in 135 nations, including 57 emerging markets for 1995–2013. Employing different econometric techniques, I find both higher share of foreign banks and foreign assets to significantly reduce credit flows. Such decline in credit is highest in nations with more than 50 percent foreign banks. The findings support the view that foreign banks face informational asymmetries that hamper them from lending to the more informationally opaque firms. The results call for strengthening accounting standards, disclosure rules in host markets and for prospective foreign banks to modify their credit risk evaluation methods.     

Public–private partnerships and collective action in high value fruit and vegetable supply chains

Accessing developed country food markets entails meeting stringent food safety requirements. Food retailers impose protocols relating to pesticide residues, field and pack house operations, and traceability. To enable smallholders to remain competitive in such a system, new institutional arrangements are required. In particular, public–private partnerships can play a key role in creating farm to fork linkages that can satisfy market demands for food safety, while retaining smallholders in the supply chain. Furthermore, organized producer groups monitoring their own food safety standards through collective action often become attractive to buyers who are looking for ways to ensure traceability and reduce transaction costs. This paper compares the ways in which small producers of fruits and vegetables in Kenya and India have coped with increased demands for food safety from their main export markets.     

Determinants and impacts of subcontracting: evidence from India’s unorganized manufacturing sector

There are two divergent perspectives on the impact of subcontracting on firms in the informal sector. According to the benign view, formal sector firms prefer linkages with relatively modern firms in the informal sector, and subcontracting enables capital accumulation and technological improvement in the latter. According to the exploitation view, formal sector firms extract surplus from stagnant, asset-poor informal sector firms that use cheap family labour in home-based production. However, direct, firm-level evidence on the determinants and impact of subcontracting is thus far lacking in the literature. We apply a modified Heckman selection model to Indian National Sample Survey data on informal manufacturing enterprises (2005–2006). We find that home-based, relatively asset-poor, and female-owned firms are more likely to be in a subcontracting relationship. Further, we perform selectivity-corrected Oaxaca-Blinder Decomposition and calculate treatment effects to show that subcontracting benefits smaller firms, firms in industrially backward states and rural firms; it is harmful for larger firms, firms in industrially advanced states, and urban firms. Our results suggest that the effects of subcontracting are more complex than those predicted by the divergent perspectives. Policy-makers need to engage with this complexity.     

Bayesian inference and prediction in the single server Markovian queue

The use of stochastic models and performance measures for the analysis of real life queuing scenarios are based on the fundamental premise that parameters values are known. This is a rarity since more often than not, parameters are usually unknown and require to be estimated. This paper presents techniques for the same from Bayesian perspective. The queue we intend to deal with is the M/M/1 queuing model. Several closed form expressions on posterior inference and prediction are presented which can be readily implemented using standard spreadsheet tools. Previous work in this direction resulted in non-existence of posterior moments. A way out is suggested. Interval estimates and tests of hypothesis on performance measures are also presented.     

On the dynamics of profit-led and wage-led growth

This paper examines how variable output and profit share jointlydetermine investment and saving, while the difference betweeninvestment and saving drives the changes in output and profitshare. Analysis of the resulting pair of differential equationsyields novel implications for the multiplier process. In thismore general framework a number of separate strands of the Keynesian-inspiredliterature can be understood. In particular, the model incorporatesboth forced saving and profit squeeze to analyse the stabilityof the dynamical system, and brings out the complex relationbetween in and out-of-equilibrium profit-led and wage-led regimes.     

Affiliated firms and financial support: Evidence from Indian business groups

We investigate the functioning of internal capital markets in Indian Business Groups. We document that intragroup loans are an important means of transferring cash across group firms and are typically used to support financially weaker firms. Evidence suggests that an important reason for providing support may be to avoid default by a group firm and consequent negative spillovers to the rest of the group. Consistent with such spillovers, the first bankruptcy in a group is followed by significant drops in external financing, investments and profits of other firms in the group and an increase in their bankruptcy probability.