| The Impact of Product and International Diversification Strategy on the Corporate Performance: Spanish Case |
| | Ramírez-Alesón, María Luisa | U. of Zaragoza/Temple University | mramirez@surfer.sbm.temple.edu | 215-204-2663 |
| | Espitia-Escuer, Manuel Antonio | U. de Zaragoza | espitia@posta.unizar.es | 34-976-761833 |
| | The relationship between product diversification strategy or international diversification strategy and performance has generated numerous research studies. Nevertheless, only few of them have analyzed jointly both types of diversification. Therefore, in this paper we try to study the joint effect of these two diversification types in a sample of 103 firms quoted in the Spanish Stock Market in the years 1991-1995. In particular, we try to determine the existence or absence of interaction between product diversification and international diversification or if it is better to choose only one of them. We also examine if there is a strategy that lets the firm to gain a higher market value (Tobin’s q). The results indicate that international diversification enhances the value of the firm value more than product diversification, and also those firms with less degree of product diversification improve their performance when they increase their internationalization. |
| | Keywords: Diversification Strategy; Performance; Spanish firms |
| Option Potential and the Innovator's Dilemma: Resource Commitment to Uncertain New Projects |
| | McGrath, Rita Gunther | Columbia U. | rgmcgrath@aol.com | (609) 275-6048 |
| | Dubini, Paola | Bocconi U., Milan | Paola.Dubini@sda.uni-bocconi.it | 39-2-5836-6309 |
| | Our purpose is to empirically examine the hypothesis that option value plays an important role in securing resource commitment for uncertain projects, and that this value is distinct from the potential of a project to generate near-term rents. To our knowledge, this is one of the first studies to operationalize the option potential construct and link it empirically to corporate commitment to uncertain new projects. We examine patterns of resource allocation in a sample of 322 such projects.
The results of a structural analysis suggest that both option potential and rent potential have a positive effect on the level of managerial interest in and enthusiasm for a project, a construct we call the salience of the project. Our results suggest that salience is a powerful driver of resource commitment. We also find, consistent with the extant literature on resource allocation, that rent potential and option potential exert an independent relationship on resource commitment. This occurs, we suggest, through the allocation of discretionary corporate resources under the control of middle managers. This explains, for instance, why such managers might perpetuate "skunkworks"- innovation projects carried out without the explicit strategic mandate of senior level staff.
The study contributes to the further development and empirical study of real options reasoning as a promising conceptual approach to strategic management under conditions of uncertainty. |
| | Keywords: real options; resource allocation; innovation |
| Organizational Time Horizons, Resource Availability and New Product Introduction |
| | Walker, Gordon | Southern Methodist U. | gwalker@mail.cox.smu.edu | (214)-768-2191 |
| | Makadok, Richard | Emory U. | Rich_Makadok@emory.bus.edu | (404)-727-8639 |
| | Abstract
The effect of an organization's time horizon on investment
decisions has long been a subject of discussion and debate, especially
in the comparison of national tendencies, particularly the U.S. and
Japan. In this paper we measure differences in time horizon within a
single industry and show how it influences growth through new product
introduction. New products represent a clear form of investment that
could be affected by the willingness of a firm to tradeoff short term
for longer term financial returns. We control for a range of important
predictors of new product introduction, both within the organization,
which pertain primarily to the availability of resources, and in the
market, which have to do with the availability of opportunity. The
industry we study is the money market mutual fund industry over its
history from 1975 to 1994. Using a measure of time horizon based on
an organization's tendency to subsidize its prices to attract future
shareholders, we find that it predicts new product introduction
significantly, in conjunction with a range of other factors.
The implications for future research are discussed.
|
| | Keywords: Time Horizons; Economies of Scale; New Product Introduction |
| Entry Timing and Option Value |
| | Miller, Kent D. | New York U. | kmiller@stern.nyu.edu | (212) 998-0261 |
| | Folta, Timothy B. | Purdue U., West Lafayette | foltat@mgmt.purdue.edu | (765) 494-9252 |
| | Emphasis on first-mover advantages has led strategic management researchers to advocate speed as a key to competitiveness. By contrast, real option theory emphasizes the value of waiting when considering sunk investments under uncertainty. We revisit the strategy question of market entry timing in light of theoretical advances in real option theory. Unlike financial option pricing theory, we allow for time-varying option valuation parameters. These time-varying parameters have implications for initial option purchase decisions as well as subsequent exercise timing. Recognizing the option value associated with maintaining strategic flexibility sets a higher threshold for exercising options than conventional analyses of investment timing might suggest. Optimal timing for exercising real options depends on current dividends, the possiblity of preemption, and whether the option is proprietary or shared, simple or compound. A final section elaborates the implications of real option theory for strategy practice and research. |
| | Keywords: real options; first-mover advantages; market entry |
| Facing the Uncertain Evnironment from Technological Discontinuities: Hedging as a Technology Choice Strategy |
| | Hatfield, Donald E. | Virginia Polytechnic Institute and State U. | hatfield@vt.edu | (540) 231-4687 |
| | Tegarden, Linda F. | Virginia Polytechnic Institute and State U. | tegarden@vt.edu | (540) 231-5065 |
| | Echols, Ann E. | Virginia Polytechnic Institute and State U. | aeechols@vt.edu | (540) 231-4075 |
| | Emerging markets are prone to technological uncertainty. Several approaches have been proposed as possible strategies for
dealing with these uncertainties. The implications of adopting a hedging strategy are investigated in an industry where a
dominant design has yet to emerge.Using the personal computer industry as a case study, this research shows that
1) firms are most likely to hedge prior to the emergence of a dominant design, 2) entry timing does not have a direct impact
upon the likelihood of hedging once controls are considered, and 3) hedging is related to both increased survival rates and
higher market share.
|
| | Keywords: Technology Strategy; Options; Dominant Design |