Abstract:
Government industrial policies are a controversial topic among economists, with their economic adherents as well as their skeptics. (Krugman 1986) Industrial policies, focused on specific industries, are not new, with Airbus, formed in the mid-seventies as a joint effort between the Governments of France, Germany, the UK and Spain, being one prominent example. Fifty years later, Airbus has become an equal member of a duopoly in the commercial jet aircraft industry, (though it is an open question whether Airbus has achieved economic returns on shareholder equity). (Esty and Kane 2004) Another example is Taiwan’s fostering of its semiconductor industry (Shih and Wang 2009). Taiwan has similarly benefited from its Government policies, to develop a globally dominant semiconductor industry. As Pierce et. al. (2009: 532) suggest, because strategy theory has developed in environments with more liberal markets and capable governments, “corporate strategy theorizing has placed less emphasis on the importance of governments”.

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Jugaad has been looked upon as a uniquely Indian management practice that is translated as ‘fast and frugal innovation’, or ‘creative problem solving’. Will this be India’s contribution to new management ideas, akin to the Japanese practices of kaizen or Kanban? In India, Jugaad can have a negative connotation. There is a call for India to move away from jugaad towards systemic innovation, to be able to realize it’s true potential. There are no empirical studies of jugaad, and the fieldwork is addressing this research challenge.

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Transaction cost theory (TCE) scholars argue that MNEs exist due to failure of markets, a main stimulus of which is opportunism. On the contrary, proponents of the knowledge based view (KBV) claim that the opportunism assumption is redundant; the existence of the MNE can be explained without recourse to opportunism. This debate still persists (e.g., Fransson, Hakanson, &Liesch, 2011), but a key feature is that despite competing causal mechanisms, predictions of TCE and KBV are identical. We see this lack of predictive uniqueness as the prime bottleneck in resolving the question of whether opportunism matters, and contribute to the debate in two ways:(1) conceptually, we exploit the contingency logics inherent in KBV and TCE to build distinctive predictions from both theories and (2) empirically, we test the competing logics of both theories, bringing empirical evidence to the debate which has this far been largely on conceptual turf alone.Our results suggest that, subject to certain caveats, opportunism matters

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Legitimacy Beyond Borders: Indian Software Services Firms in The United States 1984-2004 The organizational legitimacy of the multinational corporation (MNC) in host country institutional environments has been an ongoing concern for scholars in international management research. Notwithstanding a substantial literature on legitimacy as an outcome, our knowledge of legitimacy as a process, or legitimation, in the MNC context remains sketchy. We argue that the contemporary emergence of developing country MNCs (DMNCs) provides researchers a valuable opportunity to acquire a deeper understanding of the dynamics and mechanisms of the legitimation of MNCs. By means of a qualitative inquiry into the cultural-cognitive legitimation of Indian software services firms in the United States over the course of two decades from 1984 to 2004, we identify five core legitimation dynamics that explain how DMNCs acquire legitimacy in developed country markets. We also propose institutional bricolage as an alternative legitimating mechanism

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This paper examines the performance impact of supervisor changes for workers within firms, and considers whether the magnitude of this effect depends upon a manager’s level within an organizational hierarchy. At lower levels in a hierarchy, codified rules dictating worker activities are typically implemented to a greater extent relative to higher levels, while managers at higher levels are given greater discretion to execute their role. As a consequence, the cumulative experience of managers and their subordinates working together may be more important in determining performance at higher levels. Using a proprietary dataset from a quick-service restaurant firm, I test for differences in the importance of this experience by estimating the short-term performance cost of supervisor changes at both upper and lower levels in the hierarchy. I find that supervisor changes at upper levels results in greater performance losses relative to lower levels, even after accounting for differences in assigned responsibility

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We study the impact of Corporate Social Responsibility (CSR) on bank loans. Findings suggest CSR has a negative impact on loan spread.In addition, CSR negatively moderates the effect of loan characteristics such as maturity, and firm characteristics such as leverage.We also findCSR positively moderates the effect of a firm’s growth opportunities on spread. Our study implies CSR acts as a form of collateral which the firm‘puts on the line’ when transacting with stakeholders including banks.But CSR also consumes scarce managerial resources which may temper its beneficial effects by leading to tradeoffs with economic opportunities.

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This study proposes that the institutional environmentimpacts the level of female representation within a firm’s board of directors. Based on proxy data for the top 150 Fortune 500 companies of 2006, hypotheses concerning the three forms of isomorphism through which the institutional environment may impact a company’s board gender diversity are put forward and tested.Our results show support for the impact of two hypothesized forms of coercive isomorphism and for normative isomorphism on female board representation. Our findings contribute to furthering research onboard composition and institutional theory by helping to explain the integral role that institutional mechanisms play in shaping board composition and by identifying possible antecedents of female board representation that have previously been absent from the governance literature.

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Entrepreneurship research is dominated by two theories of opportunity formation: discovery and creation. The specific entrepreneurial actions leading to identification and exploitation of each likely differ. We explore entrepreneurs’ alignment of human resources, and specifically advice networks. Extant research favors diversity within advice networks as a source of idea generation and pursuit. However, we argue that diversity may not always be advantageous. Drawing from literature on entrepreneurial opportunities, social network theory, and cognitive psychology, we suggest that diversity within advice networks may benefit entrepreneurs pursuing discovery opportunities but similarity within advice networks may benefit entrepreneurs pursuing creation opportunities. Further, we argue that proper alignment between opportunity type and advice network results in superior performance. We test these assertions using publically available survey data to classify entrepreneurial opportunities and advice networks.

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In this paper we attempt to understand how capabilities may be developed so as to provide a sustainable basis for competitive advantage in the context of the global IT services industry. Using detailed project-level data from a large Indian IT services multinational we find that speed of project execution follows a quadratic relation with project margin and a linear relationship (negative) with project revenue productivity. Increasing offshore work increases project margin without impacting revenue productivity. Change of scope in the middle of project significantly increases revenue productivity, but does not impact project margin. The results indicate how service delivery capabilities can be used successfully by execution focused service providers to increase margin without increasing cost to customer even in the face of changing requirements.

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A potential strength and weakness of the MNE is that it is characterized by a heterogeneous workforce that is geographically dispersed, and embodied by location-specific human capital. This paper develops a framework of the processes by which firms engage in knowledge retention, exchange and combination in order to create a firm-specific and globally relevant body of knowledge. We explore HR practices that may facilitate both new value creation and capture for subsidiaries and the MNE.

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Prof. Sharique Hasan, Assistant Professor - Stanford University will present a talk on 12th Sep, 2011 Abstract: In this article, we study the career effects of getting diverse versus specialized experience. Existing research on social categorization in labor markets has found that specialized experience is privileged in external labor markets. That research has suggested that in internal labor markets characterized by managerial rotation, generalists should not be penalized. We examine the relationship between specialized experience and career outcomes using rich longitudinal data on the careers of Indian Administrative Service Officers, members of the Republic of India’s elite bureaucratic organization. Contrary to prior theory, our results show that diversified experience is penalized at both early and late career stages. We theorize that the differentiation of jobs is sufficient to introduce bias in favor of specialists even in the presence of full information and collective norms that favor generalists

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This paper investigates the common but unproven claim that firm performance suffers because managers are myopic about long-term investments. We use accounting data on the expected life of equipment purchases to measure temporal orientation for over 1000 publicly-traded US manufacturing firms, and find a positive relation between temporal orientation and financial returns. As predicted, however, we also find diminishing marginal returns for temporal orientation. In addition, we show that firms in relatively short horizon industries fall farther short of optimal levels of temporal orientation than firms in long horizon industries. These results confirm the intuition that myopia hurts performance, but also identify important limits on the value of lengthening a firm's temporal orientation.

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How firms draw boundaries is a topic of significant interest to management scholars. A firm’s boundary represents a simple demarcation between the organization and its environment (Santos & Eisenhardt, 2005). This study examines the co-evolution of a firm’s capabilities and boundaries in the context of a radical product introduction. It highlights specific antecedents that drive the particular choice of boundaries a firm adopts. Specifically, drawing on multiple theoretical conceptions of boundary choice, it examines Boeing's introduction of the 787-Dreamliner airplane and the impact of this product introduction on boundary choice and capability development. The study’s important contribution is to highlight how firm capabilities and boundaries co-evolve at the product level (often through trial and experimentation). It highlights “patch-work” mechanisms that Boeing has introduced in order to coalesce into a coherent configuration.

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Is the relationship between corporate governance mechanisms and corporate social responsibility (CSR) contingent on satisfaction with firm performance? Research Findings/Insights: Our results suggest that while effective corporate governance discourages both positive (proactive stakeholder relationship management) and negative (violation of regulations and standards) CSR, higher slack and positive attainment discrepancy lead to higher positive and lower negative CSR, respectively. More significantly, we find that the association between effective corporate governance and both positive and negative CSR depends on satisfaction with firm performance as indicated by the levels of slack and attainment discrepancy. Put simply, the impact of corporate governance on positive CSR is more pronounced under low slack/negative attainment discrepancy conditions, and that on negative CSR is more pronounced under high slack/positive attainment discrepancy conditions. Theoretical/Academic Implications: Our study provides robust support for the behavioral theory of the firm. Previous research has not adequately considered the role of satisfaction with firm performance in studying the impact of corporate governance on managerial decision-making. We show that the association between corporate governance and CSR dimensions depends on differences in decision-making latitude originating from relative firm performance compared to those of peer firms. Practitioner/Policy Implications: First, to understand how effective corporate governance can constrain positive CSR and more importantly reduce negative CSR. Second, to appreciate that the effectiveness of an organization’s governance mechanisms is contingent on slack and performance and the marginal returns from improving governance mechanisms when things are going well may be low.

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We reassess the theoretical underpinnings and associated empirical findings of the three-staged sigmoid-curve relationship between degree of internationalization (DOI) and performance. Our empirical results, based on 5542 observations of 551 US firms over the period 1979-1996, and a re-examination of the findings reported in one of the prominent studies in the literature, show that while the relationship between DOI and performance conforms to a monotonically-negative sigmoid curve, it does not support the three-stage theorization. Further examination reveals that even after incorporating enhanced scale of operation as a mediating mechanism (through which internationalization contributes to performance) and controlling for liability of newness to international business as a confounding variable, at no degree of internationalization does an internationalized firm outperform the domestic counterpart. We debate the conceptualization of enhanced profitability as the primary motivation underlying firm international diversification

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This paper introduces a novel method for examining the effects of vertical integration. The basic idea is to estimate the parameters of a vertical entry game. The econometric model is used to measure vertical rival effects and to make inferences about the effect of vertical integration on market outcomes and market structure formation. Application of the model to the US generic pharmaceutical industry, which consists of vertical oligopolistic markets that open up sequentially, yields the following result: vertical integration has significant efficiency effects that spill over to unintegrated downstream firms. This implies that vertical integration is procompetitive from a static point of view. The parameter estimates are used to simulate the impact of a hypothetical policy that bans vertically integrated entry. The simulation result indicates that such a ban reduces the equilibrium number of downstream entrants. In other words, allowing vertically integrated entry results in a greater number of downstream entrants. Combined with the finding that vertical integration has strong efficiency effects, this suggests that the dynamic effects of vertical integration are also likely to be procompetitive for the generic drug industry.

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While home and host country institutions and policies protecting property rights have long been shown to influence strategic choices of MNEs, the literature has largely ignored the proliferation of international institutions – the macro rules or principles negotiated among countries either bilaterally or multilaterally. We examine the effectiveness of agreements governing foreign investment (International Investment Agreements or IIAs), focusing on investor willingness to pay for foreign assets. This should be higher for IIA-protected investments if investors perceive IIAs as effective in providing property-rights protection. Using detailed transaction level data for sale of petroleum reserves in 52 countries, we find that investors pay significantly higher amounts for assets protected by IIAs – but only in countries with relatively low political risk. Our results contrast with those of previous researchers, who related IIAs to FDI flows, with inconclusive results.

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In this essay, we outline the provocative argument that in the realm of human affairs there exists an “entrepreneurial method” analogous to the scientific method spelled out by Francis Bacon and others with regard to the natural realm. We then suggest a series of open questions that we believe will help future scholars spell out the contents of such a method and ways in which it can be put to work in the design and achievement of socio-economic ends. At least one normative implication of accepting the argument would be to teach entrepreneurship not only to entrepreneurs but to everyone, as a necessary and useful skill and an important way of reasoning about the world.

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Search is fundamental for understanding human decision-making. Recent theoretical and empirical contributions in management have drawn on the NK model of rugged performance landscapes to examine search in complex settings. This paper reports findings from an experiment on search behavior on rugged performance landscapes. The results from our experiment confirm basic predictions of the NK model about the search performance in complex task environments. However, our results point to a different set of behavioral rules governing search behavior. Human subjects adapt their search behavior to problem complexity. Our results suggest that the statistical properties of performance landscapes systematically influence feedback conditions and thereby actual search behavior. What is more, the cost of exploring new alternatives systematically leads to the stopping of search before reaching a local peak. In sum, while we find broad support for the predictions of the model, our findings also point to an alternative causal mechanism to connect the properties of complex problems to search behavior and performance.

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We empirically examine how new biotechnology firms (NBFs) select pharmaceutical firms as R&D allies as a function of partner attractiveness and appropriation risks. We find that NBFs are more likely to ally with pharmaceutical firms that have greater levels of the following two attributes: (1)technological relatedness and(2)development experience. However, we also find that the positive effects of technological relatedness and development experience on the likelihood of establishing an R&D alliance are negatively moderated by the pharmaceutical firm’s therapeutic area diversity and the NBF’s knowledge breadth. These findings suggest that, under certain conditions, NBFs view pharmaceutical firms’ development experience and technological relatedness as increasing appropriation risks (rather than partner attractiveness).

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To launch their new ventures successfully, entrepreneurs have to assemble resources necessary to exploit opportunities. While literature highlights the importance of resources for venture success, there is little work that explores the process by which entrepreneurs accumulate resources. In this paper, we develop theory and hypotheses to focus attention on the efficient order of resource accumulation. Using a cohort of entrepreneurial ventures devoid of prior constraints, we show that getting access to equity resources before human capital resources not only helps new ventures realise higher revenues but also lowers mortality. We suggest that early in the process of resource acquisition, human capital resources constrain the entrepreneur‘s likelihood of attracting equity resources and lead to lower performance and higher mortality. We also find that the downside of acquiring human capital resources is higher when these resources are tacit, lead to greater routinisation, and based on relational considerations.

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This paper examines the relationship between corporate governance characteristics such as ownership identity (a feature of ownership structure) and board structure and the firm’s degree of internationalization (DOI), in a longitudinal sample of Indian firms. We analyze this relationship using two different modes of internationalization, namely, exports and foreign direct investment (FDI) and contribute to both the governance and international business literature streams in the following manner. Firstly, drawing from agency theory and the resource based view of the firm; we argue that foreign corporate and foreign institutional shareholding is positively related to internationalization whereas domestic corporate shareholding is negatively related to DOI. These apply for both exports and FDI. On the other hand, family ownership is argued to have an interesting dichotomy, in that, it is positively related to the firm’s degree of exports intensity but negatively related to the firm’s degree of FDI. The empirical results indicate support for our conjectures. Secondly, in addition to ownership identities, we explore the influence of board structure on internationalization. In particular, outside directors are found to positively influence internationalization efforts when coupled with the presence of foreign institutional shareholding, indicating a positive reinforcing effect as far as the monitoring efforts from an agency perspective are concerned. Finally, the use of multiple theoretical lenses stemming from the agency, resource based view and resource dependence streams enables us to provide a more composite understanding of the underlying nature of the relationship between corporate governance and internationalization and discern their mutually reinforcing or mitigating effects.

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Classical theorists described actors’ structural embeddedness within the overall network of ties. However, current interpretations of structural embeddedness focus on the actor, and the actors’ immediate network of contacts. This paper aims to broaden the scope of structural embeddedness, and go back to the original conception of actors’ embeddedness within the overall network of ties. Such a conceptualization of structural embeddedness takes into account not just the structure of actors’ immediate network of contacts, but also second-level contacts, third-level contacts (and so on). The advantage of this broader conceptualization of structural embeddedness is that it takes into account the complexity of networks. In the organizational context, research into business groups suggests a network composed of dense clusters of firms. In addition, business group research describes hierarchical differences between groups of firms, and within groups of firms. The concept of nestedness is an indicator of structural embeddedness within the overall network, and takes into account firms’ position within the group, and also group’s position in relation to the rest of the network. I rely on theories of centrality, closed groups, and conflict between groups, to predict that nestedness has a positive effect on firm performance (ROA and Tobin’s q). This relationship is tested and finds support in the Indian interorganizational network of publicly traded firms. This research supports the fundamental claim in Economic Sociology and Organizational Theory about the social and structural basis of economic activity. In addition, my research broadens the scope of this claim by focusing on structural embeddedness within the overall network.

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Inderpreet Thukral, Vice President, Strategy and New Business Development, IBM Growth Markets, will be talking on the topic, " Building an Asset Based Services Business - Some Considerations."