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Hugo Pinto and Manuel Fernández-Esquinas
This is an advance summary of a forthcoming article in the Oxford Research Encyclopedia of Business and Management. Please check back later for the full article.
In order to obtain competitive advantages, firms have to make use of knowledge as the main element of their capacities for innovation and management. Innovation is a complex and collective process, resulting from different contexts, socioeconomic aspects, and specificities of firms that create nuanced management and policy implications. Sources of knowledge are varied, as each firm interacts with multiple types of actors to pursue its mission: partners and strategic allies, suppliers, customers, competitors, specialized organizations such as knowledge intensive business services, universities, technology centers, public research organizations, innovation intermediaries, and public administration bodies.
Different kinds of knowledge are relevant for the firms, both tacit and codified knowledge. Knowledge needs to be translated into capacity to act. Knowledge generation and absorption can be understood as two sides of the same coin. It is necessary to take into account factors that shape both facets and the relationship between the production, transfer, and valorization of knowledge. Influential factors concerning knowledge characteristics are related to tacitness and to the existing knowledge base. Contextual factors, such as the economic sector, technological intensity, the local buzz, and the insertion in global value chains are essential as environmental enablers for generating and absorbing knowledge. Finally, the internal characteristics of the firm are of crucial relevance, namely the existing innovation culture, leadership, and also the size or internal R&D capacities. These factors reinforce the dynamic capacities of the firm and the decision to engage in open innovation strategies or to give more importance to strategies that protect and codify knowledge, such as industrial property rights.
Kathryn Rudie Harrigan
Concerns regarding strategic flexibility arose from companies’ need to survive excess capacity and flagging sales in the face of previously unforeseen competitive conditions. Strategic flexibility became an organizational mandate for coping with changing competitive conditions and managers learned to plan for inevitable restructurings. They learned to reposition assets and capabilities to suit their firms’ new strategic aspirations by overcoming barriers to change. Core rigidities flared up in the form of legacy costs, regulatory constraints, political animosity, and social resistance to adjusting firms’ strategic postures; managers learned that their firms’ past strategic choices could later become barriers to adapting corporate strategy.
Managerial insights concerning how to modify firms’ resources changed the way in which they were subsequently regarded. Enterprises saw assets lose their relative productivity and value as mastery of specific knowledge become less germane to success. Managers recognized that their firms’ capabilities were mismatched to market or value-chain relationships. They struggled to adapt by overcoming barriers to change.
Flexibility problems were inevitable. Even if competitive conditions were not impacted by exogenous change forces, sustaining advantage in a steady-state competitive arena became difficult; sustaining advantage in dynamic arenas became nearly impossible. Confronted with the difficulties of changing strategic postures, market orientations, and overall cost competitiveness, managers embraced the need to combat organizational rigidity in all aspects of their firms’ operations. Strategic flexibility affected enterprise assets, capabilities, and potential relationships with other parties within firms’ value-creating ecosystems; the need for strategic flexibility influenced investment choices made to escape organizational rigidity, capability traps and other forms of previously unrecognized resource inflexibility.
Where entry barriers once protected a firm’s strategic posture, flexibility issues arose when the need for endogenous changes occurred. The temporary protection afforded by imitation barriers slowed an organization’s responsiveness to changing its strategy imperatives—making the firm rigid when adaptiveness was needed instead. A firm’s own inertia to change sometimes created mobility barriers that had to be overcome when hypercompetitive conditions arose in their traditional market arenas and forced firms to change how they competed.
Where exogenous changes drove competitive conditions to become more volatile, attainment of strategic flexibility mandated the need to downsize the scope of a firm’s activities, shut down facilities, prune product lines, reduce headcount, and eliminate redundancies—as typically occurred during an organizational turnaround—while simultaneously increasing the scope of external activities performed by an enterprise’s value-adding network of suppliers, distributors, value-added resellers, complementors, and alliance partners, among others. Such structural value-chain changes typically exacerbated pressures on the firm’s internal organization to search more broadly for value-adding innovations to renew products and processes to keep up with the accelerated pace of industry change. Exploratory processes of self-renewal forced confrontations with mobility or exit barriers that were long tolerated by firms in order to avoid coping with the painful process of their ultimate elimination. The sometimes surprising efforts by firms to avoid inflexibility included changes in the nature of firms’ asset investments, value-chain relationships, and human-resource practices. Strategic flexibility concerns often trumped the traditional strengths accorded to resource-based strategies.
Briance Mascarenhas and Megan Mascarenhas
A strategic group is defined as a set of firms within an industry pursuing a similar strategy. The strategic group concept emerged with much promise over 40 years ago. Research on strategic groups over time in a broad variety of settings has sought to clarify their theoretical and empirical properties. These research findings are gradually being translated into practical managerial guidance, so that the strategic group concept can be understood, operationalized, and used productively by managers.
Two main approaches exist for identifying strategic groups—a ground-up approach, using disaggregated data, and a top-down, using cognition. Once identified, managerial insights can be derived from clarifying a strategic group’s profile. Firm membership in a group helps to uncover immediate and more distant types of competitors. Group profitability differences reveal the more rewarding and less attractive areas within an industry, as well as identify the lower-return groups from where firm exits are likely to occur. Group dynamics reflect competitive and cooperative behavior within and between groups. Several promising areas for future research on strategic groups to improve understanding and practice of strategy.
John Bryson and Lauren Hamilton Edwards
Strategic planning has become a fairly routine and common practice at all levels of government in the United States and elsewhere. It can be part of the broader practice of strategic management that links planning with implementation. Strategic planning can be applied to organizations, collaborations, functions (e.g., transportation or health), and to places ranging from local to national to transnational. Research results are somewhat mixed, but they generally show a positive relationship between strategic planning and improved organizational performance. Much has been learned about public-sector strategic planning over the past several decades but there is much that is not known.
There are a variety of approaches to strategic planning. Some are comprehensive process-oriented approaches (i.e., public-sector variants of the Harvard Policy Model, logical incrementalism, stakeholder management, and strategic management systems). Others are more narrowly focused process approaches that are in effect strategies (i.e., strategic negotiations, strategic issues management, and strategic planning as a framework for innovation). Finally, there are content-oriented approaches (i.e., portfolio analyses and competitive forces analysis).
The research on public-sector strategic planning has pursued a number of themes. The first concerns what strategic planning “is” theoretically and practically. The approaches mentioned above may be thought of as generic—their ostensive aspect—but they must be applied contingently and sensitively in practice—their performative aspect. Scholars vary in whether they conceptualize strategic planning in a generic or performative way. A second theme concerns attempts to understand whether and how strategic planning “works.” Not surprisingly, how strategic planning is conceptualized and operationalized affects the answers. A third theme focuses on outcomes of strategic planning. The outcomes studied typically have been performance-related, such as efficiency and effectiveness, but some studies focus on intermediate outcomes, such as participation and learning, and a small number focus on a broader range of public values, such as transparency or equity. A final theme looks at what contributes to strategic planning success. Factors related to success include effective leadership, organizational capacity and resources, and participation, among others.
A substantial research agenda remains. Public-sector strategic planning is not a single thing, but many things, and can be conceptualized in a variety of ways. Useful findings have come from each of these different conceptualizations through use of a variety of methodologies. This more open approach to research should continue. Given the increasing ubiquity of strategic planning across the globe, the additional insights this research approach can yield into exactly what works best, in which situations, and why, is likely to be helpful for advancing public purposes.
The Swiss watch industry has enjoyed uncontested domination of the global market for more than two decades. Despite high costs and high wages, Switzerland is the home of most of the largest companies in this industry. Scholars in business history, economics, management studies, and other social sciences focused on four major issues to explain such success.
The first is product innovation, which has been viewed as one of the key determinants of competitiveness in the watch industry. Considerable attention has been focused on the development of electronic watches during the 1970s, as well as the emergence of new players in Japan and Hong Kong. Yet the rebirth of mechanical watches during the early 1990s as luxury accessories also can be characterized as a product innovation (in this case, linked to marketing strategy rather than pure technological innovation).
Second, brand management has been a key instrument in changing the identity of Swiss watches, repositioning them as a luxury business. Various strategies have been adopted since the early 1990s to add value to brands by using culture as a marketing resource.
Third, the evolution of the industry’s structure emphasizes a deep transformation during the 1980s, characterized by a shift from classical industrial districts to multinational enterprises. Concentration in Switzerland, as well as the relocation abroad of some production units through foreign direct investment (FDI) and independent suppliers, have enabled Swiss watch companies to control manufacturing costs and regain competitiveness against Japanese firms.Fourth, studying the institutional framework of the Swiss watch industry helps to explain why this activity was not fully relocated abroad, unlike most sectors in low-tech industries. The cartel that was in force from the 1920s to the early 1960s, and then the Swiss Made law of 1971, are two major institutions that shaped the watch industry.
Tracking the Entrepreneurial Process with the Panel Study of Entrepreneurial Dynamics (PSED) Protocol
Paul D. Reynolds
In the early 1990s business creation was receiving a great deal of attention after it was clear that new firms were a major source of job creation. There was not, however, reliable data on the prevalence of persons participating in firm creation, what they would do to implement new ventures, or the proportion of start-up efforts that became profitable businesses. This hiatus led to the development of longitudinal studies of the entrepreneurial process; 14 projects have now been implemented in 12 countries.
The Panel Study of Entrepreneurial Dynamics (PSED) protocol was designed to provide estimates of the prevalence of individuals involved in business creation and the presence of pre-profit, start-up ventures; data on the major activities undertaken to implement a new firm; and track the proportion that completed the transition from start-up to profitable new firm. A number of challenges were involved in implementing the research program, including the development of efficient procedures for identifying representative samples of nascent entrepreneurs and criteria for determining the dates of entry into the start-up process, the transition to a profitable business, and disengagement from the initiative.
Data collection is a three-stage process. The initial stage is identifying nascent entrepreneurs in a representative sample of adults. The second are detailed interviews on the start-up team and activity related to creating a new venture. The third stage is follow-up interviews completed to determine the outcome of the start-up efforts. A large number of scholars have been involved in development of the interviews and the PSED data sets have considerable information on the perspectives, activities, and strategies of those involved in the start-up process.
Since the initial data sets were made available 15 years ago, there has been considerable research utilizing PSED data sets. One major finding, however, is that the firm creation process is much more diverse and complicated than had been expected. There are substantial research opportunities to be explored. A review of the major features of the PSED protocol and a summary of the existing data sets provides background that will facilitate additional analysis of the firm creation process. Four data sets (Australia, Sweden, and U.S. PSED I & II) are now in the public domain. Critical features of the start-up process have been consolidated and harmonized in a five-cohort, four country data set which is also available.
Mikko Ketokivi and Joseph T. Mahoney
Which components should a manufacturing firm make in-house, which should it co-produce, and which should it outsource? Who should sit on the firm’s board of directors? What is the right balance between debt and equity financing?
These questions may appear different on the surface, but they are all variations on the same theme: how should a complex contractual relationship be governed to avoid waste and to create transaction value? Transaction Cost Economics (TCE) is one of the most established theories to address this fundamental question.
Ronald H. Coase, in 1937, was the first to highlight the importance of understanding the costs of transacting, but TCE as a formal theory started in earnest in the late 1960s and early 1970s as an attempt to understand and to make empirical predictions about vertical integration (“the make-or-buy decision”). In its history spanning now over five decades, TCE has expanded to become one of the most influential management theories, addressing not only the scale and scope of the firm but also many aspects of its internal workings, most notably corporate governance and organization design. TCE is therefore not only a theory of the firm, but also a theory of management and of governance.
At its foundation, TCE is a theory of organizational efficiency: how should a complex transaction be structured and governed so as to minimize waste? The efficiency objective calls for identifying the comparatively better organizational arrangement, the alternative that best matches the key features of the transaction. For example, a complex, risky, and recurring transaction may be very expensive to manage through a buyer-supplier contract; internalizing the transaction through vertical integration offers an economically more efficient approach than market exchange.
TCE seeks to describe and to understand two kinds of heterogeneity. The first kind is the diversity of transactions: what are the relevant dimensions with respect to which transactions differ from one another? The second kind is the diversity of organizations: what are the relevant alternatives in which organizational responses to transaction governance differ from one another? The ultimate objective in TCE is to understand discriminating alignment: which organizational response offers the feasible least-cost solution to govern a given transaction? Understanding discriminating alignment is also the main source of prescription derived from TCE.
The key points to be made when examining the logic and applicability of TCE are:
(1) The first phenomenon TCE sought to address was vertical integration, sometimes dubbed “the canonical TCE case.” But TCE has broader applicability to the examination of complex transactions and contracts more generally.
(2) TCE could be described as a constructive stakeholder theory where the primary objective is to ensure efficient transactions and avoidance of waste. TCE shares many features with contemporary stakeholder management principles.
(3) TCE offers a useful contrast and counterpoint to other organization theories, such as competence- and power-based theories of the firm. These other theories, of course, symmetrically inform TCE.
Kathleen R. Allen
For decades researchers have studied various aspects of the technology transfer and commercialization process in universities in hopes of discovering effective methods for enabling more research to leave the university as technologies that benefit society. However, this effort has fallen short, as only a very small percentage of applied research finds its way to the marketplace through licenses to large companies or to new ventures. Furthermore, the reasons for this failure have yet to be completely explained.
In some respects, this appears to be an ontological problem. In their effort to understand the phenomenon of university commercialization, researchers tend to reduce the process into its component parts and study each part in isolation. The result is conclusions that ignore a host of variables that interact with the part being studied and frameworks that describe a linear process from invention to market rather than a complex system. To understand how individuals in the technology commercialization system make strategic choices around outcomes, studies have been successful in identifying some units of analysis (the tech transfer office, the laboratory, the investment community, the entrepreneurship community); but they have been less effective at integrating the commercialization process, contexts, behaviors, and potential outcomes to explain the forces and reciprocal interactions that might alter those outcomes.
The technology commercialization process that leads to new technology products and entrepreneurial ventures needs to be viewed as a complex adaptive system that operates under conditions of risk and uncertainty with nonlinear inputs and outputs such that the system is in a constant state of change and reorganization. There is no overall project manager managing tasks and relationships; therefore, the individuals in the system act independently and codependently. No single individual is aware of what is going on in any other part of the system at any point in time, and each individual has a different agenda with different metrics on which their performance is judged. What this means is that a small number of decision makers in the university commercialization system can have a disproportionate impact on the effectiveness and success of the entire system and its research outcomes.
Critics of reductionist research propose that understanding complex adaptive systems, such as university technology commercialization, requires a different mode of thinking—systems thinking—which looks at the interrelationships and dependencies among all the parts of the system. Combined with real options reasoning, which enables resilience in the system to mitigate uncertainty and improve decision-making, it may hold the key to better understanding the complexity of the university technology commercialization process and why it has not been as effective as it could be.
How do firms organize economic transactions? This question can be thought of as a question of firm boundaries or as a decision about a firm’s scope, encompassing the choice along a continuum of governance structures, including spot markets, short-term contracts, long-term contracts, franchising, licensing, joint ventures, and hierarchy (integration). Although there is no unified theory of vertical integration, transaction cost economics, agency theory, and more recently property rights theory have been influential not only in analyzing make-or-buy decisions but also in understanding “hybrid forms” or inter-firm alliances, such as technology licensing contracts, equity alliances, joint ventures, and the like.
Before Coase’s work became widely known, whatever theoretical underpinnings there were of vertical integration were provided by applications of neoclassical theory. Here, the firm was viewed as a production function that utilized the most technologically efficient way to convert input into output. In particular, neoclassical theory was concerned primarily with market power and the distortions that it created in markets for inputs or outputs as the main driver of vertical integration. Hence, the boundaries of the firm—that is, where to draw the line between transactions that occur within the firm and those outside the firm—were irrelevant within this framework. It was Coase’s question “Why is there any organization?” that first suggested that price mechanisms in the market and managerial coordination within firms were alternative governance mechanisms. That is, the choice between these alternative mechanisms was driven by a comparative analysis of the costs of implementing either mechanism.
Oliver Williamson built on Coase to provide the theoretical foundations for vertical integration by joining uncertainty and small numbers with opportunism in defining exchange hazards, and consequently established comparative analysis of alternative governance forms as the way to analyze vertical integration. More recently, property rights theory brought attention to ownership of key assets as a way to distinguish between the governance of internal organizations and those of market transactions, where ownership confers the authority to determine how these assets will be utilized. And lastly, agency theory also provides important building blocks for understanding contractual choice by placing the emphasis on the different incentives that vary with different contractual arrangements between a principal and its agent.
Transaction cost economics, property rights theory, and agency cost theory complement one another well in explaining vertical integration in terms of alternative governance forms in a world of asymmetric information, bounded rationality, and opportunism. These theories have also been utilized in analyzing “hybrid” organizational forms, in particular strategic alliances and joint ventures. Together, vertical integration and alliances account for a significant part of corporate strategy decisions, and more research on the theoretical foundations as well as novel ways to apply these theories in empirical analyses will be productive avenues for a better understanding of firm behavior.
Jihae You, Siri Terjesen, and Diana Bilimoria
In light of the growing number of women in the upper echelons, it is necessary to integrate and synthesize research on women at the top of corporations. The extant literature occurs in several disciplines—appearing in the fields of management, strategy, finance, economics, organizational behavior, ethics, sociology, and industrial relations—and is disparate and fragmented. A large and growing set of scholars provide various theoretical perspectives and empirical findings addressing organizational demographics, supply side factors, and outcomes. A number of theories are employed to understand the issue of women in the upper echelons, including resource dependence, tokenism and critical mass, glass cliff, social identity, human capital, social capital, and signaling theories. Most articles use U.S. data and tend to deal with the effect of female CEOs or that of female representation on corporate boards and top management teams (TMTs) on various firm-level outcomes. The majority of the studies investigate a potential relationship between gender diversity and financial performance. Research on this topic can guide policy and practice, improving the performance of organizations and the individuals who work within them.
Ellen Ernst Kossek and Kyung-Hee Lee
Work-family and work-life conflict are forms of inter-role conflict that occur when the energy, time, or behavioral demands of the work role conflicts with family or personal life roles. Work-family conflict is a specific form of work-life conflict. Work-family conflict is of growing importance in society as it has important consequences for work, non-work, and personal outcomes such as productivity, turnover, family well-being, health, and stress. Work-family conflict relates to critical employment, family, and personal life outcomes. These include work outcomes (e.g., job satisfaction, organizational commitment, and turnover), family outcomes (e.g., marital satisfaction and family satisfaction), and personal outcomes related to physical health (e.g., physical symptoms, eating and exercise behaviors), and psychological health (e.g., stress and depressive symptoms, life satisfaction). Many different theoretical perspectives are used to understand work-life conflict: starting with role theory, and more recently conservation of resources, job demands and resources, and life course theories. Many methodological challenges are holding back the advancement of work-family conflict research. These include (1) construct overlap between work-family conflict and work-life conflict, and work-life balance measures; (2) measurement issues related to directionality and operationalization; and (3) a lack of longitudinal and multilevel studies. Future research should include studies to (1) advance construct development on linkages between different forms of work-family and work-life conflict; (2) improve methodological modeling to better delineate work-family conflict mechanisms; (3) foster increased variation in samples; (4) develop resiliency interventions that fit specific occupational contextual demands; (5) increase integration and sophistication of theoretical approaches; and (6) update work-family studies to take into account the influence of the growing prevalence of technology that is transforming work-family relationships.
Rebecca J. Bennett, Shelly Marasi, and Lauren Locklear
The history of workplace deviance research has evolved from a focus on singular behaviors, such as theft or withdrawal in the 1970s and 1980s, to the broader focus on a range of behaviors in the 21st century. This more inclusive cluster of related “dark side” behaviors is made up of voluntary behaviors that violate significant organizational norms and in so doing threaten the well-being of an organization, its members, or both. Examples of behaviors that fall in this domain are employee theft and sabotage of organizational goods, services, data, customer lists, materials, working slow, calling in sick when you are not, bullying, harassment, discrimination, and gossip. Workplace deviance can be targeted at other individuals in the organization (coworkers, supervisors, subordinates) or at the organization itself, or both. Typically the actor’s perspective is considered, but other relevant views of the behavior include the supervisor/the organization, peers, customers, or other third parties. Many causes have been studied as sources of deviant workplace behaviors, for example personality characteristics such as neuroticism or low conscientiousness, modeling others’ behavior, experiences of injustice, uncertainty, lack of control or feelings of anger, frustration, and dissatisfaction. Nowadays, some researchers are returning to a focus on individual behaviors, or smaller clusters of behaviors such as sexual misconduct, gossip, and even constructive deviance, and the outcomes of workplace deviance on actors, targets, and observers are being investigated.
Keith Leavitt and David M. Sluss
Truthfulness and accuracy are critical for effective organizational functioning, but dishonesty (in the form of lying, misrepresentation, and fraud) continue to be pervasive in organizational life. Workplace dishonesty is an inherently unique behavior that should be distinguished from broader categories of unethical workplace behavior and organizational deviance, in that dishonesty is an overt social behavior—that is, requiring an audience to exist as a behavior. Compared to stealing or cheating, dishonest acts require knowing fabrication of false information, intended to deceive an anticipated audience. Thus, considering the overt social aspect of dishonesty (compared to the relatively clandestine behaviors of cheating and stealing) may add conceptual clarity to the construct of workplace dishonesty, which is surprisingly absent from extant literature. The potential audience for dishonest acts in the workplace is notably critical, in that dishonest organizational actors generally anticipate characteristics of the audience (in terms of relationship closeness, as well as expertise and motivation to evaluate the claim) and likely adapt and tailor their dishonesty accordingly. Historically two underlying paradigms have been used to study workplace dishonesty: the rational actor (economic) paradigm and the behavioral ethics (psychological) paradigm, but an emerging and nascent third paradigm (the social actor paradigm) may offer new opportunities for understanding antecedents of workplace dishonesty that do not occur exclusively for self-interested reasons. This novel paradigm suggests here important areas of inquiry related to the aftermath of workplace dishonesty: when will workplace dishonesty be detected in social interactions; what are the social and relational consequences of discovering dishonesty; how are dishonest actors likely to behave in the aftermath of their dishonest actions. Finally, two varying discrepancies relevant to workplace dishonesty should accordingly be considered when predicting subsequent behavior of the dishonest actor: the magnitude of the discrepancy between the truth and the fabrication, and the temporal discrepancy between the trigger event and dishonest act.
Lize A. E. Booysen
With the development of an integrated cross-disciplinary framework to study workplace identity construction, the current theoretical discussion on workplace identity construction is extended—first, by focusing on intersectionality as theoretical lens and methodology in our thinking about workplace identity, highlighting the significance of an individual’s intersections of social locations in the workplace embedded in socio-historical and political contexts, and second, by focusing on the influence of national culture and societal landscapes as important macro contextual factors, adding a super-group level and a cross-cultural perspective on how individuals navigate their identities at work.
Using an intersectional-identity-cultural conceptualization of workplace identity formation elucidates the personal, social identity, sub-group, group, and super group level of influences on identity formation. It focuses on the interplay between individual, relational, collective, and group identity, and emphasizes social identity as the bridge between personal identity and group identity. It highlights the multiplicity, simultaneity, cross cutting, intersecting, as well as differing prominence and power differences of social identities based on differing contexts. It illustrates the relatively stable yet fluid nature of individual (intra-personal and core) identity as it adapts to the environment, and the constant changing, co-constructed, negotiated, and re-negotiated nature of relational (inter-personal), collective identity (social identity) as it gets produced and re-produced, shaped and reshaped by both internal and external forces, embedded in socio-historical-political workplace contexts.
Understanding the interplay of the micro-level, individual (agency), relational, and collective identity levels (social construction), nested in the meso level structures of domination, and group dynamics in the workplace (control regulation/political) in its macro level societal landscape context (additional control regulation) will help us to understand the cognitive sense-making processes individuals engage in when constructing workplace identities. This understanding can help to create spaces where non-normative individuals can resist, disrupt, withdraw, or refuse to enact the limited accepted identities and can create alternative discourse or identity possibilities.