No full-text available
To read the full-text of this research,
you can request a copy directly from the authors.
The MNC as a Knowledge Structure: The Roles of Knowledge Sources and Organizational Instruments in MNC Knowledge Management
Abstract
Recent research on the differentiated MNC has concerned knowledge flows between MNC units. While linking up with this literature, we extend in two directions. First, we argue that conceptualizing the MNC as a knowledge structure furthers the understanding of intra-MNC knowledge flows. Thus, we see MNC knowledge elements as being structured along such dimensions as their type and degree of complementarity to other knowledge elements, and their sources, for example, whether they are mainly developed from external or internal knowledge sources. These dimensions matter in terms of knowledge flows, because they influence the costs and benefits of knowledge transfer and, hence, the actual level of knowledge transferred. Second, based on this conceptualization, we argue that MNC management can influence the development, characteristics and transfer of knowledge through choices regarding organizational instruments (control, motivation and context). We test six hypotheses derived from these arguments against a unique dataset on subsidiary knowledge development. The dataset includes information on organizational instruments, sources of subsidiary knowledge, and the extent of knowledge transfer to other MNC units. It covers more than 2,000 subsidiaries located in seven different European countries.
... It largely suggests that the solution to the challenge of loose coupling lies in improving communication by, for instance, creating interfaces for interaction and fostering a continuous dialogue between individual actors and collegial groups (Eppler, 2006;Paquette, 2006). As noticed by Foss and Pedersen (2003), the governance of intraorganisational heterogeneity -choices regarding the level of interdependence between the units, their autonomy in decision-making, and the intensity of communication -has a bearing not only on the flow of knowledge, but also on its characteristics, such as the share of tacit vs. explicit elements. Other studies recommend high-commitment human resource management (Chiang, Han, & Chuang, 2011) and managerial interventions based on relational models (Boer, Berends, & van Baalen, 2011) to enhance knowledge sharing. ...
A well-functioning regional innovation system involves a lot of communication and interaction among the actors. However, sometimes the communication and interaction create tensions impeding regional development. In order to explore the reasons behind this, this study looks at the relationships between key stakeholders in the Twente Region in the Netherlands. The region has an established reputation for innovation and entrepreneurship, a high inter-connectedness between the actors, and a strong knowledge infrastructure. The research focuses on the University of Twente as a key actor contributing to regional growth in close cooperation with various stakeholders. This is an introductory interview-based case study that identifies four areas of tension between the university and its regional stakeholders. Our inquiry sheds light on the misalignment of stakeholders’ interests and expectations that lessens the actors’ capacity for policy formulation and strategic agenda setting, as well as hinders its successful translation into action. Then, the absence of clear intermediaries significantly increases the perceived distance between the University of Twente and the Twente region and impedes the university’s collaboration with companies outside the science and business park. Next, the tension of discontinuity highlights the complexities of human resources and personalised networks – their diversity, multidimensionality, and overlaps make it harder to synchronise action and enhance reciprocal benefits. The knowledge asymmetry between the parties further complicates their communication and weakens commitment. In the end, the paper offers a few ideas for action for academic leaders and regional policymakers.
... First, some knowledge-augmenting subsidiaries are weakly embedded locally, but are strongly embedded within the MNC, leading to 'parent company outposts'. Second, some knowledge-augmenting subsidiaries may be relatively weakly embedded internally and externally (Foss & Pedersen, 2001); these 'free spirits' are largely self-sufficient and require little input from other actors to enhance their capabilities. ...
Multinational corporations (MNCs) increasingly seek to gain access to, and exploit, locationally specific sources of advanced knowledge and technological capabilities, creating a need to explain (1) the diversity among these facilities and (2) how institutions influence MNCs’ abilities to invest in different subsidiary types. Extending debates on firms’ knowledge-augmenting activities, the authors integrate institutions into their analytical framework to a greater extent than previous work has done. Moreover, existing contributions provide typologies of R&D subsidiaries. In contrast, the authors focus on a particular subset of subsidiaries, knowledge-augmenting ones, and put forward a theory to explain their variety and their prevalence, enabling them to identify previously neglected subsidiary types that have important managerial and policy implications. By downplaying the diversity of these subsidiaries, existing work has not been able to capture the full range of managerial challenges as well as the costs and benefits of different subsidiary types to host countries. The authors, therefore, problematize firms’ abilities to gain access to foreign knowledge-generating assets, highlight the importance of institutional environments, provide policy recommendations and identify areas for future research.
... Thus, its transfer within a firm will be conditioned by the origin of that knowledge. Consequently, the firm will try to structure the knowledge through organizational mechanisms in such a way that the transfer cost will be minimized (Foss, 2003). ...
Intangible assets and research and development (R&D) expenditure are essential instruments in a firm's competitive productivity and profitability strategy. The relationship between productivity, tangible and intangible investments, and R&D expenditure has given rise to much analysis concerning the importance of the role played by intangible investment in the achievement of higher competitiveness. Using the Spanish database of the Fundación Empresa Pública-Ministerio Industria (FUNEP) for the period 1991–2001, with an average of 1,800 firms per year taken from 20 industries and classified in six sectoral groups, we compare the possible relationship of the former variables with firms' profitability and productivity. The empirical results obtained show the importance of tangible investments and unit labor costs for achieving high productivity levels. R&D expenditure and intangible capital are shown to be complementary variables of the aforementioned aspects that have a delayed effect on the productivity and profitability of Spanish industries. The relevance of the prior variables differs according to whether we are referring to industrial sectors characterized by important economies of scale, intensive in capital or labor. © 2006 Wiley Periodicals, Inc.
... It is learned by direct interaction and transmitted through shared experience and the development of common understanding in particular contexts. The experiential nature of tacit knowledge may create significant barriers to organisational learning and knowledge creation within the MNC because of the difficulty in engendering interactive learning and maintaining mutual knowledge (Cramton 2001;Sole and Edmonson 2002) within its geographically dispersed and socially diverse knowledge structures (Foss and Pedersen 2003;Becker 2001). MNCs face a distributed organisational learning problem in general but the problem becomes especially complex when the creation and transfer of new (tacit) knowledge is at stake, as in the case of global dispersion of R&D and innovation activities. ...
This paper argues that MNCs seeking to use overseas R&D for knowledge creation have to deal with two aspects of the tacit knowledge problem: the 'cognitive' and 'societal', conceptualised as the 'two-Polanyi' problem. Based on a comparative analysis of the 'knowledge incubators' of US and Japanese MNCs in the UK, the study explores how MNCs characterised by contrasting home-based models of learning and innovation adopt different strategies for dealing with the problem. The analysis shows that the US MNCs tend to adopt the 'learning region' strategy, using the local regional context as the main social space in which extensive network ties are constructed with local scientists to facilitate inter-organisational flows of tacit knowledge. In contrast, the Japanese MNCs adopt the 'communities of practice' strategy, focusing on the creation of tight organisational spaces across geographical boundaries to support site-specific learning and intra-organisational tacit knowledge transfer. The study illustrates how these two different strategies unfold in practice and the ways in which home-based models of learning interact with the local context to shape MNCs' abilities to harness local tacit knowledge.
The paper revisits the socioeconomic theory of the Austrian School economist Ludwig M. Lachmann. By showing that the common claim that Lachmann’s idiosyncratic (read: eclectic and multidisciplinary) approach to economics entails nihilism is unfounded, it reaches the following conclusions. (1) Lachmann held a sophisticated institutional position to economics that anticipated developments in contemporary new institutional economics. (2) Lachmann’s sociological and economic reading of institutions offers insights for the problem of coordination. (3) Lachmann extends contemporary new institutional theory without simultaneously denying the policy approach of comparative institutional analysis.
Knowledge governance is characterised as a distinctive research subject, the understanding of which cuts across diverse fields in management. In particular, it represents an intersection of knowledge management, strategic management, and theories of the firm. Knowledge governance considers how deployment of governance mechanisms influences knowledge processes: sharing, retaining and creating knowledge. We survey the papers in this volume of the special issue, and discuss the remaining research challenges.
This article maintains that the consistent application of subjectivism helps reconcile contemporary entrepreneurship theory with the strategic management literature, particularly the resource-based view of the fi rm. The article synthesizes theoretical insights from Austrian economics, Penrose's (1959) resources approach, and modern resource-based theory, focus-ing on the essential subjectivity of the entrepreneurial process. This new synthesis describes entrepreneurship as a creative team act in which heterogeneous managerial mental models interact to create and arrange resources to produce a collective output that is creatively superior to individual output.
A considerable amount of research has emphasized the mutual cohesion between organizational culture and business performance. Pursuant to the said, for forestry sector in transition economies organizational or corporate culture can be a key link in restructuring processes and business improvement of forest companies. Therefore, this research examines: a) forestry employees' attitudes on indicators of organizational culture, and b) a links between organizational culture, management style, decisionmaking, employee satisfaction and efficiency of forest company organizational units (Croatian Forest Ltd.). Measuring instrument for analyzing company culture is made based on the competing values framework and associated models used (the X-Y theory and ERI approach). Credibility of the measuring instrument was tested and confirmed by metric characteristics of the questionnaire key components (validity and reliability). Data collection was made by two parallel samples (1 - a representative sample at the enterprise level, 2 - target sample at three forest administrations and associated 31 forest offices). The research finding presents general results of representative sample where the hierarchical type of culture proved to be the dominant business culture of the forest company. The dominant type of organizational culture is accompanied with expressed autocratic management style that is positively correlated with an indicator of mental workload and occupational exposure to stress (ERI indicator). The findings by the target
Nell’ambito dei processi di innovazione sviluppati in contesti globali si sono determinati cambiamenti inattesi nelle dinamiche tra headquarter e subsidiary che hanno contribuito a generare un nuovo flusso nel processo di innovazione, denominato reverse innovation. Questo articolo si prefigge di indagare l’impatto della reverse innovation nel settore automobilistico, attraverso l’osservazione delle esperienze di tre aziende europee le cui principali subsidiary sono localizzate in Brasile.
Emerge molto chiaramente che, sfruttando la collaborazione con partner e fornitori di tecnologia localizzati sia sul mercato locale sia nel contesto internazionale, le subsidiary dimostrano che la capogruppo e la sua Ricerca Centrale non sempre costituiscono il nodo principale nel flusso di conoscenza del processo di innovazione di una multinazionale. L’osservazione condotta evidenzia inoltre che le filiali possono influenzare in modo proattivo il processo di innovazione della casa madre e che la capacità di incidere sulle decisioni di strategia tecnologica cresce quanto più a monte la subsidiary viene coinvolta nei processi decisionali dell’headquarter.
Detecting intellectual structure of a knowledge domain is valuable to track the dynamics of scientific research. Formal concept analysis (FCA) provides a new perspective for knowledge discovery and data mining. In this paper we introduce a FCA-based approach to detect intellectual structure of library and information science (LIS). Our approach relies on the mathematical theory which formulates the understanding of “concept” as a unit of extension (scholars) and intension (keywords) as a way of modelling the intellectual structure of a domain. By analyzing the papers published in sixteen prominent journals of LIS domain from 2001 to 2013, the intellectual structure of LIS in the new century has been identified and visualized. Nine major research themes of LIS were detected together with the core keywords and authors to describe each theme. The significant advantage of our approach is that the mathematical formulae produce a conceptual structure which automatically provides generalization and specialization relationships among the concepts. This provides additional information not available from other methods, especially when shared interests of authors from different granularities are also visualized in concept lattice.
Resumo
The role of the subsidiaries, in the decision making process of international technology alliance operation and its execution, has increasingly become a critical factor for the success of the operation itself. The objective of this paper is to explore the factors that can influence the role of the subsidiary on the effectiveness of international technology cooperation. The work focused on three different international technology alliances in the Fiat Group Automobiles, representing different directions in the process and information flows within the parent-subsidiary relationship. The case study method was applied to investigate these three selected alliances. Interviews were conducted with top management of FIAT in Brazil and in Italy. The findings have been summarized into four main “lessons” and they are discussed vis-à-vis the extant literature. From the theoretical viewpoint, these factors highlight further potential contributions to the current streams of research on MNCs and their process of technological innovation.
Question/Issue: Institutional and transaction costs theories highlight the idea that group affiliated firms outperform unaffiliated firms in emerging economies. The persistence of superior performance for group affiliated firms is, however, questioned by the fast and recent development of markets and institutions in these countries. In this article, we explore this link between firm performance and the evolution of institutional environment. Research Findings/Insights: The setting of the empirical investigation is India in the post-reform era (post 1990). We test for effects of business group affiliation on firm performance over a 17 year time period from 1990 to 2006. Our findings show that (i) the performance benefits of group affiliation erode with the evolution of the institutional environment; (ii) older affiliated firms are better able to cope with institutional transition than younger affiliated firms; (iii) service-sector affiliated firms are better able to cope with institutional transition than manufacturing-sector affiliated firms. Theoretical/Academic Implications: Our findings both support the institution - and transaction costs-based theory of business groups, and extends it by incorporating a dynamic and longitudinal component. They also demonstrate - in line with recent works - that the benefits of group membership differ for different types of member firms. Practitioner/Policy Implications: The article has implications for both managers and policy makers. Managers of business groups should timely adapt their strategy to the evolution of the institutional environment. Policy makers should, instead, devote attention to the consequences of their policies because they may undermine the efficiency of large national companies.
An enduring characteristic of extant literature on foreign operation modes is its discrete choice approach, where companies are assumed to choose one among a small number of distinctive alternatives.
In this paper, detailed information about the operations of six Norwegian companies in three key markets (China, UK and USA) is used as the basis for an exploration of the extent to which, and how and why, companies combine clearly different foreign operation modes. We examine their use of foreign operation mode combinations within given value activities as well as within given countries.
The study reveals that companies tend to combine modes of operation; thereby producing unique foreign operation mode “packages” for given activities and/or countries, and that the packages are liable to be modified over time—providing a potentially important optional path for international expansion.
The data show considerable variation across cases; ranging from extensive use of mode combinations to a singular focus on a specific mode of operation. The study contributes to a refinement of our understanding of the path of internationalisation, and throws up a number of awkward theoretical questions about the process.
Agency theory studies the problems and solutions linked to delegation of tasks from principals to agents in the context of conflicting interests between the parties. Beginning from clear assumptions about rationality, contracting and informational conditions, the theory addresses problems of ex ante (“hidden characteristics”) as well as ex post information asymmetry (“hidden action”), and examines conditions under which various kinds of incentive instruments and monitoring arrangements can be deployed to minimize the welfare loss. Its clear predictions and broad applicability have allowed agency theory to enjoy considerable scientific impact on social science; however, it has also attracted considerable criticism.
I present an analysis of a survey in which the effect of entrepreneurship education and project-based education on students at lower secondary level is investigated. The results are based on a random sample of 2000 Danish students. The analysis indicates that entrepreneurship education has a positive effect on students’ personal development, and that its effect on entrepreneurial intentions is fully mediated by its effect on students’ self-conception. A finding with important policy implications is that there is a negative interaction effect between entrepreneurship education and project-based education regarding impact on students’ self-conception. The implication of the results is that we should replace project-based education with entrepreneurship education rather than having them run in parallel.
of the workshop for their insightful comments. I also wish to thank Prof. Sanjaya Lall and Mr Manuel Albaladejo for their invaluable cooperation during the first part of this research, carried out at St. Antony’s College, University of Oxford. This paper is part of a broader research project “Automotive value chains in developing countries”, financed by the Fondazione Einaudi, Torino. This paper, drawing inspiration from the work of J. Humphrey, questions the impact of trade regimes on automotive value chains. It discusses the effect of global and regional trade integration for the re-structuring of Brazilian and Argentinean automotive value chains. During the 1990s, as a result of trade liberalization and the Mercosur trade agreements, automotive assemblers integrated production at both regional and global levels, with geographic configurations varying according to assemblers ’ product strategies. The paper applies value chain analysis to assess the impact of such trade-determined strategies on the organization of automotive production. In order to simplify the analysis of global and regional value chain integration, the paper focuses on the in-house value chain of one product, Fiat’s P178, manufactured in a regional value chain, and also inserted in a global network. The paper analyses the various phases of the launching
An attempt is made to characterize a "knowledge governance approach" as a distinctive, emerging field that cuts across the fields of knowledge management, organisation studies, strategy and human resource management. Knowledge governance is taken up with how the deployment of administrative apparatus influences knowledge processes, such as sharing, retaining and creating knowledge. It insists on clear behavioural foundations, adopts an economizing perspective and examines efficient alignment between knowledge transactions with diverse characteristics and governance structures and mechanisms with diverse capabilities of handling these transactions. Various open research issues that a knowledge governance approach may illuminate are sketched. Although knowledge governance draws clear inspiration from organizational economics and "rational" organization theory, it recognizes that knowledge represents various challenges to more "closed" social science disciplines, notably economics.
Three varieties of institutionalism currently dominate international business studies: new institutional economics, new organizational institutionalism, and comparative historical institutionalism. Yet corresponding measures of institutional country distance are only available for the first two strands of institutionalism. This paper addresses the under-representation of comparative historical institutional thought in currently available measures of institutional distance. Building on Whitley's business systems framework, a measure of institutional distance is developed and validated which captures intrinsic, substantive institutional differences in economic organization, rather than differences in institutional effectiveness. The results of the two-stage cluster analysis used to validate the selected indicators closely approximate the business systems typology, which is both indicative of the validity of this measure and of the distinctiveness of the business system types that make up the business system framework.
The emerging knowledge governance approach asserts the need to build micro-foundations grounded in individual action. Towards this goal, using the theory of planned behaviour, we aim to explain individual knowledge-sharing behaviour as being determined by the intention to share knowledge and its antecedents: attitude towards knowledge sharing, subjective norms and perceived behavioural control. In addition, we consider managerial interventions (governance mechanisms) that managers can employ to influence the identified antecedents and thereby govern individual knowledge-sharing behaviour. We test the model arrived at on a dataset collected among individuals engaged in knowledge sharing in two competing firms. Results of the LISREL analysis show that the use of rewards affects attitudes towards knowledge sharing negatively, while the use of reciprocal schemes and communication mechanisms have a positive effect on subjective norms and perceived behavioural control, respectively.
Two of Herbert Simon's best-known papers are 'The Architecture of Complexity' and 'The Structure of Ill-Structured Problems.' We discuss the neglected links between these two papers, highlighting the role of decomposition in the context of problems on which constraints have been imposed as a general approach to problem solving. We apply these Simonian ideas to organisational issues, specifically new organisational forms. Specifically, Simonian ideas allow us to develop a morphology of new organisational forms and to point to some design problems that characterise these forms.
This paper proposes a multidimensional index of regional and global orientation that can be used in confirmatory studies with econometric methodologies. Unlike extant measures, the index is objectively scaled, and controls for home country orientation and market size differences. The index is shown to be consistent with models of internationalization that incorporate different assumptions about investment choice and global competition. Preliminary results show that large multinationals follow home region oriented internationalization paths, although much of the regional effect reported by previous studies in fact reflects strong home country biases.
The role of knowledge, organizational learning and innovation as levers of competitive advantage is now a commonly acknowledged insight in research in international management, specifically in the emerging ‘knowledge-based view’. However, this view has not yet developed into a unifying framework and there are significant holes in the understanding of how knowledge may be turned into a source of competitive advantage for MNCs. In order to advance the knowledge-based view of the MNC – and particularly of the metanational company – we develop the notion of the MNC as a global knowledge system that links local knowledge structures and combines local knowledge elements that are complementary in order to achieve strategic advantage. These ideas are used to frame the changing environments, strategic intents and learning stances that characterize MNCs, and to derive a set of research challenges for MNC research.
This empirical paper explores knowledge outflow from MNC subsidiaries and its impact on the MNC performance. We develop and test hypotheses derived from literature on MNC knowledge flows integrated with the perspective of knowledge-creating, self-interested MNC subsidiaries. The hypotheses are developed using a simultaneous equation model applied to a unique dataset encompassing a German MNC, HeidelbergCement. Enablers and impediments of knowledge outflows are assessed in order to explain why subsidiaries share their knowledge with other MNC units. Implications are examined by studying the link between knowledge outflows and subsidiary performance. Our findings suggest that knowledge outflows increase a subsidiary's performance only up to a certain point and that too much knowledge sharing may be detrimental to the contributing subsidiary's performance.
In this study, we examine the influence of control mechanisms and internal and external knowledge on multinational company (MNC) subsidiary knowledge development. Previous research stresses the importance of these factors for subsidiary behavior, but nonetheless they remain underexplored in the context of subsidiary knowledge development. The study is based on questionnaire data from 161 MNC subsidiaries in China and Finland. The results indicate that MNC internal and external knowledge, as well as decision-making autonomy of MNC subsidiaries, positively influence knowledge development in MNC subsidiaries. Conversely, the importance of knowledge development as a performance evaluation criterion did not show any influence on MNC subsidiary knowledge development. © 2008 Wiley Periodicals, Inc.
Absorptive capacity is frequently highlighted as a key determinant of knowledge transfer within multinational enterprises. But how individual behaviour translates into absorptive capacity at the subsidiary level, and how this is contingent on subsidiaries' social context, remains under‐addressed. This not only limits our understanding of the relationship between individual‐ and organizational‐level absorptive capacity, but also hampers further research on potentially relevant managerial and organizational antecedents, and limits the implications we can draw for practitioners who seek to increase their organization's capacity to put new knowledge to use. To address this shortcoming we conduct an in‐depth comparative case study of a headquarters‐initiated knowledge transfer at two subsidiaries of the same multinational enterprise. The findings demonstrate that social interaction is a prerequisite for subsidiary absorptive capacity as it enables employees to participate in the transformation of new knowledge to the local context and the development of local applications. The findings also illustrate how organizational conditions at the subsidiary level can impact subsidiary absorptive capacity by enabling or constraining local interaction patterns. These insights contribute to the absorptive capacity literature by demonstrating the scale and scope of social interaction as a key link between individual‐ and organizational‐level absorptive capacity.
The purpose of this exploratory study is, first, to identify the underlying dimensional nature of the range of decision variables that MNEs generally associate with making RHQ location choices and, second, to examine the extent to which MNEs, when grouped according to contextual characteristics, use discernibly different decision criteria when making RHQ location selection decisions. Based on a sample of respondents from 57 RHQs in Europe and the Asia-Pacific (specifically Australia), principal components analysis yielded 9 interpretable factor dimensions, underlying 39 location decision variables, which were then used to compare decision schemas groups. Three contextual classifications, 'strategic purpose of RHQ establishment', 'nationality of company origin', and 'industry sector', were hypothesized and used to categorize the sample. The analysis indicated that while subgroups within these grouping categories were associated with distinctive location selection priorities, those RHQs established in order to be responsive to regional markets appeared to use significantly different selection criteria compared to those RHQs established to facilitate global coordination. Similarly, the selection criteria US-based MNEs used to make RHQ location decisions, were found to be significantly different to the selection criteria Asian-based MNEs used when making their RHQ location decisions. Finally, location decision priorities were also found to vary across industry sector.
We discuss the behaviorist and empiricist foundations of the organizational routines and capabilities literature, specifically the extant emphasis placed on experience, repetition and observation as the key inputs and mechanisms of behavior, learning and change in organizations. Based on this discussion we highlight several concerns associated with specifying experience and repetition as antecedents of routines and capabilities, namely, (1) the problem of origins and causation, (2) the problem of extremes, (3) the problem of intentionality, (4) the problem of new knowledge, and (5) the problem of the environment. We highlight the “poverty of stimulus” argument and more generally discuss how internalist or rationalist, choice-based approach might provide a more fruitful (though preliminary) foundation for extant research on organizational routines and capabilities.
The knowledge-based view has recently been criticized for overlooking individual-level action and interaction in favor of an over-emphasis on the firm-level capabilities. This paper seeks to respond to that criticism by providing some individual-level explanations for a collective-level phenomenon – intraorganizational knowledge transfer. We suggest that variations in individual ability, motivation and the use of interaction opportunities provided by the organization explain part of the variation found in individuallevel knowledge acquisition and use, and that this has an influence on organizational level knowledge transfer within a firm. More specifically, we find that ability and intrinsic motivation are important drivers of individual level knowledge acquisition and use, while extrinsic motivation has no impact. Furthermore, the extent to which an individual uses interaction opportunities provided by the organization influences knowledge transfer both directly and through a moderator effect with ability and person-to-person interaction.
This paper assesses the differential performance effects of learning mechanisms on the development of alliance capabilities. Prior research has suggested that different capability levels could be identified in which specific intra-firm learning mechanisms are used to enhance a firm's alliance capability. However, empirical testing in this field is scarce and little is known as to what extent different learning mechanisms are indeed useful in advancing a firm's alliance capability. This paper analyzes to what extent intra-firm learning mechanisms help firms develop their alliance capability. Differential learning may explain in what way firms yield superior returns from their alliances in comparison to competitors. The empirical results show that different learning mechanisms have different performance effects at different stages of the alliance capability development process. The main lesson from this paper is that firms can steer the creation and speed of their alliance capability development as different learning mechanisms have differential performance effects and are more appropriate at different levels of alliance capability.
We discuss the emergence of the theory of the firm (in the Coasian sense); survey and discuss the main currents of the theory of the firm, and discuss what has determined the emergence of the theory of the firm. We argue that advances in the theory of the firm have been strongly influenced by conceptual innovations in (mainstream) economics in general and by the ongoing division of labour in economics in tandem with a recognition of the importance of a number of empirical anomalies. The substantive borrowing from neighbouring disciplines, such as business history, law, psychology, organizational sociology and business administration has been relatively limited and ad hoc (although some scholars, notably Williamson, have made more substantive use of these disciplines than others). The fact that the theory of the firm has stayed relatively close in to the (changing) economic mainstream and that its substantive borrowing from neighbouring disciplines has been relatively limited underlie and explain much of the "external" critique of the theory (i.e., the critiques of sociologists, heterodox economists and management scholars).
Entrepreneurs in a competitive economy face three fundamental problems. They need to search for and discover a business opportunity (Kirzner, 1973), evaluate it (Knight, 1921), and then seize the opportunity to reap entrepreneurial profits (Schumpeter, 1911) (Langlois, 2007). The problem that we address is how the ability to exploit business opportunities is influenced by entrepreneurial search and the economic organization of entrepreneurship (Arrow, 1962; Lippman & Rumelt, 2003; Aghion et al., 2005; Foss et al., 2007). In many cases, the discovery for a new business opportunity needs to be motivated by expected gains, since the search and evaluation of business opportunities is a costly, resource-consuming process (Denrell, Fang & Winter, 2003; Nickerson & Zenger, 2004; Foss & Klein, 2005; Teece, 2007; Foss & Foss, 2008). We show the critical role of expectations for understanding of the economic organization of entrepreneurship, and argue that transaction cost economics, with its insistence on bounded rationality, but far-sighted contracting offers useful insights and presents rich opportunities for further theoretical and empirical research (cf. also Furubotn, 2002).
Entrepreneurship has become a fast-growing subfield in management research, and is increasingly appearing in economics, finance, and even law. We survey a number of approaches to entrepreneurship in the economics and management literatures, and argue that modern research in this area need to be focused around ideas from Austrian economics and Frank Knight on entrepreneurial judgment. We critically discuss the recent opportunity discovery literature in management, and argue that it has partially misunderstood the Austrian origins of the theory, and fails to adequately distinguish between opportunity identification and opportunity exploitation.
Interest in entrepreneurship education is growing over the world, especially in innovation based economies, such as Denmark (GEM, 2010). However, we know rather little about the outcomes of entrepreneurship education, in particular with respect to which type of course content produces the best results (i.e. most high performing entrepreneurs) and how this affects different types of students. There is a great variety of different views in the field of research concerning the content and structure of entrepreneurship courses, but no comprehensive study has yet been done in which these competing views are clearly articulated as rivals and tested against each other. There is also a lack of programme evaluations that use control groups and have a longitudinal design (Gorman, Hanlon & King, 1997; Karlsson & Moberg, 2011; Matlay, 2008). Those that have this setup often experience methodological problems due to their conceptual framework (Krueger, 2009), or they have a view of entrepreneurship that does not take into account the advancements within research that have been made during the last decade (Sarasvathy, 2008). Thus, we clearly need to dig deeper into this field in order to create methods and models that allow us to evaluate the outcomes of different types of entrepreneurship courses.In the beginning of 2011, the Danish Foundation for Entrepreneurship – Young Enterprise initiated a research project with the aim to further our understanding of the type of impact entrepreneurship education and different educational designs have on different types of students. Two longitudinal surveys, one with a focus on elementary- and secondary-level education and one with focus on tertiary-level education, will be performed and databases with students from all levels of the Danish educational system will be created. The surveys will use entrepreneurial self-efficacy (Mauer, Neergaard & Kirketerp, 2009) as a performance indicator, but in order to generate robust results the development of new measurement tools is needed. In this paper the initial phases of this project and the research design of these two surveys will be presented. The development of a new ESE scale and the results from the pilot surveys will also be presented.
Israel Kirzner's concept of entrepreneurship as alertness to profit opportunities is one of the most influential modern interpretations of the entrepreneurial function. Shane and Venkataraman's (2000: 218) influential assessment defines entrepreneurship research as "the scholarly examination of how, by whom, and with what effects opportunities to create future goods and services are discovered, evaluated, and exploited." As such, "the field involves the study of sources of opportunities; the processes of discovery, evaluation, and exploitation of opportunities; and the set of individuals who discover, evaluate, and exploit them." Shane's General Theory of Entrepreneurship (2003) cites Kirzner and "Kirznerian opportunities" more than any writer other than Joseph Schumpeter. More generally, the entrepreneurial opportunity, rather than the individual entrepreneur, the startup company, or the new product, has become the centerpiece of the academic study of entrepreneurship. In Kirzner's framework, profit opportunities result from prices, quantities, and qualities that diverge from their equilibrium values. Some individuals tend to notice, or be alert to, these opportunities, and their actions bring about changes in prices, quantities, and qualities. The simplest case of alertness is that of the arbitrageur, who discovers a discrepancy in present prices that can be exploited for financial gain. In a more typical case, the entrepreneur is alert to a new product or a superior production process and steps in to fill this market gap before others. Success, in this view, comes not from following a well-specified maximization problem, such as a search algorithm (High, 1980), but from having some insight that no one else has, a process that cannot be modeled as an optimization problem. Entrepreneurship, in other words, is the act of grasping and responding to profit opportunities that exist in an imperfect world. Unlike other approaches in modern economics, the imperfections in question are not seen as temporary "frictions" resulting from ill-defined property rights, transaction costs, or asymmetric information. While those imperfections can be cast in an equilibrium mold - as in the modern economics of information-Kirzner has in mind a market in permanent and ineradicable disequilibrium. Kirzner's approach, like that of Knight, Schumpeter, and other key contributors to the economic theory of entrepreneurship, sees entrepreneurship as an economic function, not an employment category (i.e., self-employment) or type of firm (i.e., a startup company). The main effect of the entrepreneurial function is market equilibration: by closing pockets of ignorance in the market, entrepreneurship always stimulates a tendency towards equilibrium (Selgin, 1987). While Kirzner's "pure entrepreneur," an ideal type, performs only this function, and does not supply labor or own capital, real-world business people may be partly entrepreneurs in this sense, partly laborers, partly capitalists, and so on. The relationship between entrepreneurial discovery and capital investment distinguishes Kirzner's approach sharply from Knight's (and, arguably, from Kirzner's mentor Ludwig von Mises's). Because Kirzner's (pure) entrepreneurs perform only a discovery function, rather than an investment function, they do not own capital; they need only be alert to profit opportunities. Kirznerian entrepreneurs need not be charismatic leaders, do not innovate, and are not necessarily creative or in possession of sound business judgment. They do not necessarily start firms, raise capital, or manage an enterprise. They perform the discovery function, and nothing else. Kirzner's work is routinely invoked in references to the classics of the economics of entrepreneurship, alongside Knight's (1921) and Schumpeter's (1911) contributions. Kirzner's framework builds on the market-process approach associated with the Austrian school of economics and can trace its roots further back to Richard Cantillon, J. B. Clark, Frank A. Fetter, and other writers. Kirzner himself sees his contribution as primarily an extension of the work of Mises and F. A. Hayek, in effect bridging Mises's (1949) emphasis on the entrepreneur with Hayek's (1946, 1968) conceptualization of market competition as an unfolding process of discovery and learning. Among mainstream economists, Kirzner has been cited in the literature on occupational choice, and there have been a few attempts to formalize his model of the market process (Littlechild, 1979; Yates, 2000) and a few experimental investigations (Demmert and Klein, 2003; Kitzmann and Schiereck, 2005). Kirzner has explained the Austrian model of the entrepreneurial market process to readers of the prestigious Journal of Economic Literature (Kirzner, 1997). Still, his work has been more influential among management scholars than among economists. Thus, his approach underlies much of the opportunity-discovery or opportunity-recognition branch of the modern entrepreneurship literature (Shane and Venkataraman, 2000; Gaglio and Katz, 2001; Shane, 2003) which makes opportunities, and their discovery and (potential) exploitation, the unit of analysis for entrepreneurship research. This has given rise to a large theoretical, empirical, and experimental literature looking into the various antecedents of such opportunity discovery. As we shall argue, this literature goes much beyond Kirzner's work, making opportunity discovery and its determinants the key feature of the theory, whereas Kirzner's real interest lies in explaining market equilibration, a higher-level phenomenon. This chapter traces the origin and development of the concept of entrepreneurial alertness. In particular, we place Kirzner's contribution within the broader context of the Austrian school of economics, comparing and contrasting it with other Austrian conceptions of entrepreneurship. We argue that while Kirzner's contribution is often thought of as the Austrian conception of the entrepreneur, there is in fact an alternative Austrian tradition that emphasizes the entrepreneur as an uncertainty-bearing, asset-owning individual and that this tradition offers some advantages over the discovery approach (whether in the Kirznerian or modern-management incarnations). We also critically discuss the way Kirzner's work has been interpreted and used in the opportunity discovery approach in recent management research on entrepreneurship.
The purpose of this paper is to identify the source of competitive advantage in the resource based view of strategic management literature. In particular, it is argued that the source of competitive advantage is rooted in entrepreneur judgment. In this argument, this paper consists largely of three parts: firstly, a brief survey of the theoretical framework of the RBV of strategic management, particularly to identify critically the resource conception in the sense of what RBV scholars understand; secondly, to argue the significance of exploiting the Austrian perspective, especially focusing on Lachmann (1947,1956), Mises (1946) and Knight (1921) to improve the RBV framework; thirdly, to apply the Austrian perspective to the RBV and demonstrate that the source of competitive advantage is derived from entrepreneurial judgment per se, not the resource per se, and to discuss some possible future research avenues for further development. It becomes clear through this paper that a strategy is mainly seen as the quest for the entrepreneurial judgmental rent. The major insight of this paper is that taking the entrepreneur insight from the Austrian school of thought is the fruitful way to understand the source of competitive advantage.
This paper offers a critical perspective on Israel Kirzner’s basic analytical framework. Specifically, we characterize Kirzner’s emphasis on processes of equilibration as a departure from the causal-realist price theory developed by Menger and his nineteenth- and twentieth-century followers. In this context, we contrast Kirzner’s interpretation of entrepreneurship as discovery with a more realistic, and operationally meaningful, idea of entrepreneurship as action. Finally, we discuss an inconsistency in Kirzner’s treatment of the antecedents of entrepreneurial behavior.
Research on companies' internationalization has mainly focused on firm-level and country-level factors in order to explain firms' cross-border activities. With the exception of a limited number of studies emphasizing rivalistic behavior in oligopolistic industries, industry factors have been neglected as potential determinants of companies' internationalization. We argue that differences across industries with regard to competition level, research intensity, tangibility of the products, and the existence of clusters should influence the impetus and opportunities to internationalize. This study examines the role of such factors using data covering the internationalization patterns of the 100 largest non-financial Norwegian companies over the period 1990 to 2000. We find that industry factors contribute significantly to explaining the internationalization of these companies, and that the effects of industry factors remain strong when firm-level characteristics are taken into account.
This chapter discusses entrepreneurship in the context of the RBV. What does the RBV have to say that the study of entrepreneurship may usefully draw on? And, conversely, how can entrepreneurship research further the RBV? I begin by sketching the RBV. I then discuss the relation between the RBV and entrepreneurship research, before I characterize a new research stream that has emerged over the last decade or so in the intersection of the RBV and entrepreneurship research, namely “strategic entrepreneurship.”
The field of strategic entrepreneurship is a fairly recent one. Its central idea is that opportunity-seeking and advantage-seeking — the former the central subject of the entrepreneurship field, the latter the central subject of the strategic management field — are processes that need to be considered jointly. The purpose of this brief chapter is to explain the emergence of SE theory field in terms of a response to research gaps in the neighboring fields of entrepreneurship and strategic management; describe the main tenets of SE theory; discuss its relations to neighboring fields; and finally describe some research gaps in extant theory, mainly focusing on the need to provide clear microfoundations for SE theory and link it to organizational design theory.
Recent work links entrepreneurship to the economic theory of firm using the Knightian concept of entrepreneurship as judgment. When judgment is complementary to other assets, and these assets or their services are traded in well-functioning markets, it makes sense for entrepreneurs to hire labor and own assets. The entrepreneur's role, then, is to arrange or organize the human and capital assets under his control. We extend this Knightian concept of the firm by developing a theory of delegation under Knightian uncertainty. What we call original judgment belongs exclusively to owners, but owners may delegate a wide range of decision rights to subordinates, who exercise derived judgment. We call these employees "proxy-entrepreneurs," and ask how the firm's organizational structure - its formal and informal systems of rewards and punishments, rules for settling disputes and renegotiating agreements, means of evaluating performance, and so on - can be designed to encourage forms of proxy-entrepreneurship that increase firm value while discouraging actions that destroy value. Building on key ideas from the entrepreneurship literature, Austrian economics, and the economic theory of the firm we develop a framework for analyzing the tradeoff between productive and destructive proxy-entrepreneurship. We link this analysis to the employment relation and ownership structure, providing new insights into these and related issues in the economic theory of the firm.
ResearchGate has not been able to resolve any references for this publication.