| The Co-Evolution of Resources and Scope |
| | Cuervo-Cazurra, Alvaro | Massachusetts Institute of Technology | alcuervo@mit.edu | (617)-253-0286 |
| | This paper analyzes how companies develop resources under conditions of dicontinuous institutional environment changes. It argues that companies develop their resources, among other strategies, through the expansion of scope, leading to the co-evolution of resources and scope. The expansion of scope permits firms to acquire and develop new resources and explore market opportunities. Thus, resources and scope co-evolve following an interactive process of exploration and exploitation. These ideas arise from the inductive comparative analysis of the transformation of three matched quartets of firms in the petroleum, paper and construction industries. |
| | Keywords: Resources;; Scope; Coevolution |
| Reorganizing Economic Activity in China: A Technological System Perspective |
| | White, Steven | Hong Kong U. of Science and Technology | mnsw@ust.hk | 852+2358-7732 |
| | This paper investigates the institutional and organizational sources of persistence and change in the technological systems that bring new products to market in China's transition economy. Even after two decades of economic reforms, the research institutes, manufacturers and wholesalers in state-dominated industries have not moved significantly beyond their functional boundaries established decades ago under the Soviet-style command economy. A case study of the pharmaceutical industry shows that while most state-dominated industries are still characterized by organizationally dis-integrated technological systems, the dynamics underlying this structure have changed dramatically with reforms. Further, organizations are beginning to pursue alternative strategies for securing complementary assets, leading to greater variation in technological system structure. |
| | Keywords: China; organizational strategy; complementary assets |
| Organizational Slack as a Source of Competitive Advantage: A Multimethod Test in an Emerging Economy |
| | Tan, Justin | California State U., San Marcos | jtan@mailhost1.csusm.edu | 852-2634-7627 |
| | In this paper, we study the role of organizational slack among Chinese enterprises, using a multimethod research design, i.e., case study, a survey, and quantitative analyses based on a longitudinal data from government archive. Results converge with each other and indicate that organizational slacks are positively associated with the firms' performance during the transition. More specifically, unabsorbed slack resources have greater buffering and smoothing effects, and give firm more strategic flexibility. We also found that the slack-performance relations to be curvilinear, which resemble inverse parabolas. Beyond the "optimal" point, slack's performance enhancing effects are overwhelmed by the costs of maintaining slack. Research and practical implications are discussed. |
| | Keywords: Slack; Strategy; Performance |
| Estimating the Performance Effects of Networks in Emerging Markets |
| | Khanna, Tarun | Harvard U. | tkhanna@hbs.com | (617)-4956038 |
| | Rivkin, Jan W. | Harvard U. | jrivkin@hbs.edu | (617) 495-6690 |
| | We find evidence that particular inter-firm networks--diversified "business groups"--materially affect the broad patterns of firm profitability in each of seven emerging markets: Argentina, Chile, India, Indonesia, the Philippines, South Korea, and Taiwan. Our analysis employs a unique data set compiled largely from local sources, and it uses econometric techniques developed in the strategy literature to isolate "firm effects," "corporate effects," and "industry effects." Our analysis shows that, in the median country, patterns of group affiliation account for 12% of the total variation in accounting profitability across firms. In all seven countries, the portion of variation explained by group membership is highly statistically significant. Group membership explains approximately as large a portion of variation in performance as does industry membership.
Moreover, membership in a group boosts the profitability of the average group member in four of the markets we examine. Contrary to U.S. findings widely cited in the strategy literature, then, our analysis suggests that strategies involving unrelated diversification may boost profitability in some emerging economies.
Cross-country comparisons are bedeviled by inconsistencies in group definition across countries, but exploratory cross-country analyses are consistent with two very different normative views of groups: groups both enhance efficiency in markets plagued by imperfections and exploit connections with corrupt authorities in order to extract private rents. |
| | Keywords: variance decomposition,; business groups,; diversification strategy |