A structural approach to handling endogeneity in strategic management: the case of RBV


European Management Review

avril 2014, vol. 11, n°1, pp.47-62

Départements : Stratégie et Politique d’Entreprise, GREGHEC (CNRS)

Mots clés : Resource based view, Bayesian modeling, Endogeneity, Structural modeling, Competitive strategy

In this paper we posit that the lack of consensus about empirical tests of resource based view (RBV) could be the result of endogenous resource picking on the part of firms. If resources are endogenously selected, regression based methods that examine their connection to firm performance will be mis-estimated. We show that traditional remedies for endogeneity do not resolve this problem when returns to resources are heterogeneous (as theorized under RBV) and when managers act with at least partial knowledge of the expected, idiosyncratic return (as theorized under the strategic factor market hypotheses). As such, we develop a Bayesian approach that solves this endogeneity problem by directly incorporating resource picking into the modeling framework. We illustrate the validity of our approach through the use of a comprehensive simulation study and show that our proposed approach outperforms traditional linear models (including traditional cures of endogeneity and unobserved heterogeneity) under a variety of conditions. Our findings suggest that: (1) research in strategy requires a more careful and deeper understanding of potential sources of endogeneity and (2) the use of Bayesian methods in management can help develop more theoretically motivated empirical approaches to hypothesis testing

Behavioral patterns in born-again global firms


Multinational Business Review

2014, vol. 22, n°4, pp.418-441

Départements : Stratégie et Politique d’Entreprise

Mots clés : Born-again global firms, International entrepreneurship, Internationalization behavior, Internationalization theories

Purpose – The purpose of this paper is to identify factors that influence so-called born-again global firms’ internationalization behavior. Specifically, this article explores the following questions: why do mature, domestically focused firms suddenly turn into born-again global firms, how do they do so and what elements are needed for born-again global firms to be sustainable. Design/methodology/approach – Using an established international entrepreneurship model as a starting point, we extract relevant factors for a conceptual framework on born-again global firms’ internationalization activities. Case study research among a cross-sectional sample of born-again global firms is being applied for that purpose. Findings – Driven by the insufficient size of their domestic market, born-again global firms typically embark on internationalization after a generational change at the chief executive officer level. Throughout their internationalization journey, they flexibly adapt toward new needs of their foreign environments. Due to their idiosyncratic characteristics, born-again global firms deserve consideration as a separate group of research objects in the field of international entrepreneurship. Research limitations/implications – The investigated sample of case study firms was drawn across a variety of industries. As such, industry-specific conditions could not be observed and the findings from case study research run the risks of being generalized too broadly. In addition, the accuracy of the case study results may suffer from a certain degree of hindsight bias as the internationalization event took place in the past. Practical implications – Openness to learning from other markets and the flexibility to modify products according to client needs strengthen born-again global firms’ competitiveness. To endure, born-again global firms have to be innovative in adapting to changes, which makes it easier for them to launch their products in new markets. Originality/value – To date, international entrepreneurship has focused on the activities of small and newly established firms, largely neglecting the behavior of somewhat larger and established firms in traditional sectors. This study shows that established companies can exhibit the same innovative, proactive and risk-seeking behavior across borders as new ventures do. Despite their strongly rooted structures, strategies and cultures, born-again globals can flexibly adapt to new environments

Business sustainability: It is about time


Strategic Organization

février 2014, vol. 12, n°1, pp.70-78

Départements : Stratégie et Politique d’Entreprise, GREGHEC (CNRS)

Mots clés : Business sustainability, short-termism, corporate social responsibility, systems thinking

Sustainability is fast becoming fashionable in strategic management, and yet its meaning is often elusive. Some people restrict sustainability to environmental issues, and others use it synonymously with corporate social responsibility. In this essay, we return to the roots of its original meaning and argue that sustainability requires the consideration of time. Sustainability obliges firms to make intertemporal trade-offs to safeguard intergenerational equity. In this essay, we clarify the meaning of sustainability by showing that the notion of ‘time’ discriminates sustainability from responsibility and other similar concepts. We then argue that the omission of time from most strategic management has contributed to short-termism, which is the bane sustainability. We conclude with directions for future research that will integrate sustainability into strategy and contribute to a world in which both business and society can thrive for generations to come

Capturing Value From Innovations: The Importance of Rent Configurations


Management Decision

mars 2014, vol. 52, n°1, pp.122-143

Départements : Stratégie et Politique d’Entreprise

Mots clés : Innovation, Business strategy

Purpose – The purpose of this paper is to devise recommendations for firms to formulate modes of value capture for their product innovations, ex ante. More specifically, the research question is: how can innovators try to maximize, ex ante, the appropriation of the rent they can derive from their innovating projects? Design/methodology/approach – A theoretical framework is developed and proposed to assess modes of value capture of product innovations and two illustrations are provided to show how the framework can work in practice for innovation projects. Findings – This paper presents a practitioner's view based on the development of an original concept of rent configuration and appropriable rent. Research limitations/implications – In terms of research limitations, the possible endogeneity of intellectual property protection and the timing of were not considered. Practical implications – The framework allows a set of predictions regarding modes of value capture for product innovators. Originality/value – The paper's contribution lies in the proposal of an integrative framework based on the concept of rent configuration, separating analytically three dimensions of innovation value, namely volume, profit and duration. This concept allows the authors to present a richer set of recommendations in comparison to previous frameworks, in order to avoid adopting the form of a yes/no decision tree that tends to over simplify the issues at stake. The authors also contemplate not only erosion effects, but also amplification effects on the rent, which constitutes another contribution of this paper.

Divisive Faultlines and the Unplanned Dissolutions of Multi-partner Alliances


Organization Science

septembre-octobre 2014, vol. 25, n°5, pp.1351-1371

Départements : Stratégie et Politique d’Entreprise

Mots clés : Interorganizational relations, Multipartner alliance, Embeddedness, Faultlines

Received wisdom suggests that multi-partner alliances are relatively unstable because of their complexity and the increased potential for free-riding. Nonetheless, multi-partner alliances do benefit from built-in stabilizing third party ties that mitigate opportunism and conflict between partner pairs. Previous empirical research on multi-partner alliance stability has been inconclusive. We shed some light on these inconsistencies by recognizing that within multi-partner alliances, schisms can occur not only between a pair of partners, but also between subgroups of partners that are divided by faultlines. We suggest that divisive faultlines can form between subgroups of partners within a multi-partner alliance as a function of their prior experience with one another. When a subgroup of alliance partners have relatively strong ties to each other and weak ties to other partners, destabilizing factions can develop that hamper reciprocity among the partners. Using a longitudinal analysis of 59 multi-partner alliances, we found that in general faultlines (as modeled by the dispersion of tie strength within multi-partner alliances) increase the hazard of unplanned dissolutions. We also found that multi-partner alliances comprising a mix of centrally and peripherally positioned partners within the industry network were less apt to suffer the effects of divisive faultlines. We suggest that this is due to the greater opportunity costs of dissolution and the presence of relatively high status partners who can act as peacekeepers and coordinators of their lower status partners.

Firm-Specific Human Capital, Adverse Learning, and Agency Costs: Evidence from Retail Banking


Strategic Management Journal

septembre 2014, vol. 35, n°9, pp.1279-1301

Départements : Stratégie et Politique d’Entreprise, GREGHEC (CNRS)

Mots clés : Agency costs, Organizational incentives, Performance pay, Adverse learning, Firm-specific human capital

This paper explores conflicting implications of firm-specific human capital ( FSHC) for firm performance. Existing theory predicts a productivity effect that can be enhanced with strong incentives. We propose an offsetting agency effect: FSHC may facilitate more-sophisticated 'gaming' of incentives, to the detriment of firm performance. Using a unique dataset from a multiunit retail bank, we document both effects and estimate their net impact. Managers with superior FSHC are more productive in selling loans but are also more likely to manipulate loan terms to increase incentive payouts. We find that resulting profits are two percentage points lower for high- FSHC managers. Finally, profit losses increase more rapidly for high- FSHC managers, indicating adverse learning. Our results suggest that FSHC can create agency costs that outweigh its productive benefits

Fishing for excuses and performance evaluation


Review of Accounting Studies

juin 2014, vol. 19, n°2, pp.988-1008

Départements : Stratégie et Politique d’Entreprise, GREGHEC (CNRS)

Mots clés : Performance measurement, Manipulation, Controllability principle, Excuse culture, Influence activity

We study a principal–agent model in which the agent can provide ex post additional relevant information regarding his performance. In particular, he can provide a legitimate excuse, that is, evidence that a poor result is only due to factors outside his control. However, building a convincing case requires time, time that is not spent on exerting productive effort and thus generating information represents an opportunity cost. We obtain necessary and sufficient conditions for the principal to prefer a policy of adjusting ex post the performance measure for the information provided by the agent to a policy of conforming to a result-based system with no adjustments. The risk aversion and a possible limited liability of the agent play an important role in the analysis. This paper clarifies the issues associated with the so-called “excuse culture” prevailing in some organizations

Governance mode vs. governance fit? Performance implications of Make-Or-Ally choices for product innovation in the worldwde aircraft industry, 1942-2000


Strategic Management Journal

septembre 2014, vol. 35, n°9, pp.1386-1397

Départements : Stratégie et Politique d’Entreprise, GREGHEC (CNRS)

Mots clés : Product innovation, Horizontal collaboration, Autonomous governance, Discriminating alignment, Endogeneity, Aircraft industry

We examine the impact of governance mode and governance fit on performance in make-or-ally decisions. We argue that while horizontal collaboration and autonomous governance have direct and countervailing performance implications, the alignment of make-or-ally choices with the focal firm's resource endowment and the activity's resource requirements leads to better performance. Data on the aircraft industry show that relative to aircraft developed autonomously, collaborative aircraft exhibit greater sales but require longer time-to-market. However, governance fit increases unit sales and reduces time-to-market. We contribute to the alliance and economic organization literatures

How Do Strategic Factor Markets Respond to Rivalry in the Product Market?


Strategic Management Journal

décembre 2014, vol. 35, n°13, pp.1952-1971

Départements : Stratégie et Politique d’Entreprise, GREGHEC (CNRS)

Mots clés : Strategic factor markets, Resource development, Rivalry, Product market competition, Formal foundations of strategy

This paper explores the interplay between product market, strategic factor market, and resource development. More competition in the product market makes resource buyers bid higher for resources, as the value of trying to preempt the resources is higher. Holding other initial conditions constant, resources are developed more in industries with factor markets than in industries without. When buyers of resources cannot integrate more than one resource, developers choose to develop either at a low or high level, generating a type of heterogeneity that would not arise otherwise. Changes in the intensity of competition in the product market can have the opposite effect on resource development efforts depending on the presence or absence of factor markets

Kitchen Confidential? Norms for the Use of Transferred Knowledge in Gourmet Cuisine


Strategic Management Journal

novembre 2014, vol. 35, n°11, pp.1645-1670

Départements : Stratégie et Politique d’Entreprise, GREGHEC (CNRS)

Mots clés : Social norms, Knowledge transfer, Institutional theory, Thick rationality, Intellectual property

When will knowledge holders share their knowledge with peers? Several studies suggest that norms of knowledge disclosure encourage knowledge transfer. More recently, scholars have hypothesized that norms of knowledge use may indirectly promote it. In this article, we synthesize a theoretical framework of the effect of norms of knowledge use and test its predictions by means of a field experiment involving more than 500 Italian chefs. For the literature on knowledge transfer, we confirm the importance of norms, but we also show that they are not complete substitutes for other means of protecting private knowledge. For the literature on social norms, we provide evidence of how actors assess others’ propensity to conform and how this influences the intention to participate in the norm-regulated exchange