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Data obtain from the National Basketball Association showed that shared experience, the mechanism by which a stock of tacit knowledge is accumulated over time, leads to competitive advantage. But this advantage cannot be sustained indefinitely because of the paradox that rigidity or myopia in organizational behavior also develops in time.

Patterns of horizontal alliances are examined within a single industry. A horizontal alliance refers to a long-term contract with a competitor to exchange or combine resources. The theoretical background for such arrangements often draw from transaction cost economics and classic industrial organization perspectives, which imply strategic expansion and competition reduction, respectively, as motives for horizontal alliances. This study is based on the view that such alliances are undertaken in order to reduce both demand and competitive uncertainties. The results lend support to this hypothesis, and indicate further that propensities to negotiate alliances and to seek a greater number of partners depend upon a firm's performance. The dynamics of subnetworking are also revealed against the backdrop of the uncertainty-reduction versus strategic flexibility cost trade-off.

In this study, we investigate a central tenet of the resource-based view of the firm—that tacit knowledge often lies at the core of sustainable competitive advantage—and attempt to articulate it with greater theoretical precision than has been done previously. Using data from the National Basketball Association, we find support for a predicted positive relationship between shared team experience and team performance that declines as shared experience grows, eventually becoming negative. The implications of this study for non-sports-related firms are discussed along with suggestions for future research. [ABSTRACT FROM AUTHOR]

Contingent work is an increasingly integral part of the world of work, affecting firms' abilities to accumulate knowledge, create value, and establish competitive advantage. Although its growing use reflects a belief that firms can reduce cost structures and increase strategic flexibility, we suggest that in certain contexts, such as dynamic environments, contingent work can be a means of accumulating and creating valuable knowledge. We also discuss implications for other forms of permeable organizational boundaries. [ABSTRACT FROM AUTHOR]

Transaction cost theorists have generally neglected to consider the implications that the invisible hand of the market mechanism can have for the risk of opportunism. In the long run, the invisible hand deletes actors whose behaviors are habitually opportunistic. Consequently, as markets move toward the state of competitive equilibrium, the risk of opportunism will be low, even for transactions supported by specific asset investments. Therefore, in many contexts the transaction cost rationale for internalization has been overstated. [ABSTRACT FROM AUTHOR]

In the policy literature there is an assumption that the generic business-level strategies of differentiation and overall cost leadership are generally inconsistent. Contrary to this view, this article presents a contingency framework in which differentiation can be a means for firms to establish an overall low-cost position and discusses that a combination of differentiation and low cost may be necessary for firms to establish a sustainable competitive advantage. [ABSTRACT FROM AUTHOR]

In this paper we argue that unobservable constructs lie at the core of a number of influential theories used in the strategic management literature--including agency theory, transaction cost theory, and the resource-based view of the firm. The debate over how best to deal with the problem of unobservables has raged in the philosophy of science literature for the best part of the current century. On the one hand, there are the positivists, who believe that theories containing unobservable constructs are only useful as tools for making predictions. According to positivists, such theories do not inform us about the deep structure of reality. On the other hand, there are the realists, who believe that our theories can give us knowledge about unobservables. Herein we review this debate, we argue for adopting a realist position, and we draw out the implications for strategic management research. [ABSTRACT FROM AUTHOR]

The theory articulated in this paper suggests that the desire to reduce demand and competitive uncertainty are two separate, important motives for alliance formation. Taking this as a starting point, we predict the configuration of horizontal alliances that we might expect to observe within an industry when firms experience these uncertainties to different degrees. An empirical test of this theory using data from the global auto industry yields results consistent with the view (1) that alliances are a device for reducing both the uncertainties that arise from unpredictable demand conditions and those that arise from competitive interdependence, and (2) that variation of demand uncertainty and competitive uncertainty across firms explains differentials in both the intensity and structure of their horizontal alliance activity. [ABSTRACT FROM AUTHOR]

The paper hypothesizes that diversification by firms based in the pharmaceutical industry during the 1977-86 time period was primarily undertaken to reduce the risks associated with being dependent upon a technologically dynamic environment. Consistent with this non-efficiency motive for diversification, declining economic performance is predicted. A longitudinal empirical analysis provides support for these propositions. [ABSTRACT FROM AUTHOR]

This paper examines the popular myth that managers in high-technology industries are altering their critical R&D investments in response to the short-term profit pressures of large institutional stockholders. The study entails an empirical examination of the relationship between R&D spending and institutional ownership over a 10-year period for 129 firms based in four research-intensive industries. Contrary to the view that institutional investors are having a damaging affect on R&D spending, after controlling for intervening effects the results suggest that higher levels of institutional ownership may be associated with greater R&D expenditures. A number of possible explanations for this finding are developed. [ABSTRACT FROM AUTHOR]

The choice of entry mode into a foreign market has a major impact on the success of a firm's international operations. However, the existing literature on the entry mode decision has either presented a list of considerations without identifying underlying constructs, or treated each entry decision in isolation. Here, a unifying framework is developed. This framework identifies three underlying constructs that influence the entry mode decision. These constructs are linked to considerations that have been previously discussed in the literature. It is argued that a firm's choice of entry mode depends on the strategic relationship the firm envisages between operations in different countries. A particular entry decision cannot be viewed in isolation. It must be considered in relation to the overall strategic posture of the firm. Further, the paper argues that different variables often suggest different entry modes, and that resolving these differences involves accepting trade-offs. [ABSTRACT FROM AUTHOR]

This paper explores the proposition that the divergence of interest between managers and stockholders has implications for corporate strategy and firm profitability. Stockholders prefer strategies which maximize their wealth. Managers prefer strategies which maximize their utility, it is theorized that in research-intensive industries, when stockholders dominate, innovation strategies are favored. When managers dominate, diversification strategies are favored. In addition, innovation is argued to be associated with greater firm profitability than diversification. This theory is tested on 94 Fortune 500 firms drawn from research-intensive industries. The results largely confirm theoretical expectations. [ABSTRACT FROM AUTHOR]

This paper constructs a transaction cost model that provides an explanation for the transition between two distinct governance modes for serving a foreign market; a wholly owned subsidiary and licensing. The paper initially outlines a single-period model of the factors that influence a firm's choice of governance mode. The model is then extended, first to incorporate a temporal perspective and then a dynamic perspective. The completed model identifies organizational and environmental contingencies that shape dynamic multi-period decision-making for the choice of governance mode. [ABSTRACT FROM AUTHOR]

Using a transaction cost approach this paper analyzes the relationship between strategy, structure and organizational performance. It addresses three related questions. First, what determines the limit to growth through internalization for a firm pursing a particular strategy? Second, why does a firm pursue different strategies for achieving growth? Third, what determines changes in the strategy and structure used by the firm over time? This analysis serves to integrate work in strategic management and provides a framework for analyzing corporate strategy choice. [ABSTRACT FROM AUTHOR]

This article reports the results of an ex post study of the effects of leveraged buyouts (LBOs) upon the goals, strategy, structure, and performance of firms. Our study was designed to test arguments that can be logically derived from agency theory. We used a survey to collect data on pre- and post-LBO goals, strategy, structure, and productivity for a sample of 214 firms that underwent buyouts between 1986 and 1989. Our results do not enable us to reject hypotheses based upon agency theory. [ABSTRACT FROM AUTHOR]

Our hypotheses were that the influence of chief executive officers (CEOs) over boards of directors and the likelihood that the CEOs' compensation packages will reflect their preferences increase with CEO company tenure. Results of empirical tests were consistent with this argument, suggesting that the relationship between CEO pay and stock returns weakens with tenure. [ABSTRACT FROM AUTHOR]

Incentives for division managers in large firms affect their risk orientation and thus their decisions to invest in R&D. This paper reviews theory and hypothesizes that division managers' incentive compensation that is based on financial performance is negatively related to risk taking as measured by R&D intensity. Results of a study of 184 major U.S. firms suggest that incentives based on short-term (annual) division financial performance are negatively related to total firm R&D intensity after controlling for industry R&D intensity, firm diversification, size and group structure. Furthermore, the results suggest that an emphasis on long-term financial incentives may mitigate the negative relationship between these incentives and R&D intensity, but does not promote risk taking. The results suggest the importance of emphasizing strategic controls [evaluating division managers based on operational understanding of strategies proposed (strategic criteria)] as opposed to the use of financial controls [evaluating division managers based on financial performance (often annual RODE However, the use of financial controls becomes more common as firms diversify. Diversification increases the span of control of corporate executives and the diversity among divisions. In highly diversified firms, corporate executives are no longer able to fully understand the operations of the multiple and diverse divisions. Thus, they must not only decentralize operating authority to divisions, but they also cannot use strategic criteria to evaluate division managers. As a result, they begin to emphasize financial controls. The shift toward risk aversion caused by the use of incentives based on short-term financial outcomes can have important implications for long-term firm performance. The results of this study have implications for long-term competitiveness, especially for firms in R&D intensive industries where R&D expenditures may affect a firm's competitive position. [ABSTRACT FROM AUTHOR]

A cluster analysis of questionnaire data is used to classify a sample of 156 large United Kingdom firms according to their internal control type. Interactions between the control types identified, strategy and size, are hypothesized to have an impact upon financial performance. Testing these hypotheses raises a number of issues concerning the appropriateness of recommended strategy-structure fits. [ABSTRACT FROM AUTHOR]

This paper identifies important research issues at the international, corporate, and business levels of strategy research. In addition, research questions that require integration across multiple levels of strategy as well as the incorporation of both the content and process dimensions of strategy are addressed. [ABSTRACT FROM AUTHOR]

The multidivisional (M-form) structure has been variously characterized as the most significant organizational innovation in the twentieth century (Williamson, 1985) and as an organizational fossil that is increasingly irrelevant in the modern world (Bettis, 1991). Against this background, the purpose of this paper is threefold. First, to critically evaluate three perspecitvies, including transaction cost, strategic management and sociological, relating to the M-form firm. Second, to examine what the empirical evidence finds about relationships proposed by these perspecitves. Finally, to develop a model that summarizes the relationships proposed among tyhese perspectives and make suggesting about future theory building and areas where further empirical work is needed. [ABSTRACT FROM AUTHOR]

Executive Overview For many industries, new product development is now the single most important factor driving firm success or failure. The emphasis on new products has spurred researchers from strategic management, engineering, marketing, and other disciplines to study the new product development process. Most conclude that in order to be successful at new product development, a firm must simultaneously meet two critical objectives: maximizing the fit with customer needs, and minimizing time to market. While these objectives often pose conflicting demands on the firm, there is a growing body of evidence that the firm may employ strategies to successfully meet these objectives. Successful firms are those that articulate their strategic intent and map their R&D portfolio to find a fit between their new product development goals and their current resources and competencies. Their success also rests on how well the technology areas they enter contribute to the long term direction of the firm by helping them build new core capabilities critical to the firm's long term goals. Strategic alliances to obtain enabling technologies may shorten the development process, but partners must be chosen and monitored carefully. When firms are choosing technologies to acquire externally, they must assess the importance of the learning that would be accrued through internal development of the project, and its impact on the firm's future success. Other imperatives include using a parallel (rather than sequential) development process to both reduce cycle time and to better incorporate customer and supplier requirements in the product and process design, and using executive champions to ensure that projects gain the resources and organizational commitment necessary to their completion. Development teams should include people from a diverse range of functions and should include suppliers and customers to improve the project's chances of maximizing the fit with customer requirements while reducing cycle time and potentially reducing costs. Tools such as Stage-Gate processes. Quality Function Deployment, Design for Manufacturing, and Computer Aided Design/Computer Aided Manufacturing may be useful on different projects. [ABSTRACT FROM AUTHOR]

The ability of a firm to establish its technology as an industry standard is a critical determinant of its long-term competitive position and success. Witness, for example, the successes of Microsoft and Intel, whose technologies define standards in today's personal computer industry. The strategic options that a firm might adopt in order to establish its technology as a standard include licensing, entering into strategic alliances, adopting an appropriate positioning strategy, and diversifying into the production of complementary products. There are benefits, costs, and risks associated with each of these options. The key factors that have an impact on the scale of these outcomes include the height of barriers to imitation, the capabilities of the firm's competitors, the firm's own resources and skills, and the availability of complementary products. These factors influence the particular competitive strategy that a firm adopts. [ABSTRACT FROM AUTHOR]