Limits to globalization: organizational homogeneity and diversity in the semiconductor industry

This paper provides empirical evidence for the microeconomicexistence of distinctive national modes of organization fortechnology development. Evidence from the semiconductor industryshows that two forms of organization not only arose as the industryexpanded, but that the differences were maintained, or expanded,with neither side ‘converging’ on the other, evenas manufacturing-process development performance converged.Four propositions are tested statistically: (1) the organizationalstrategies employed by a sample of leading firms in the UnitedStates and Japan were significantly different, across a rangeof dimensions important to manufacturing process development;(2) these modes of organization did not converge during the1980s and 1990s, even as technology markets globalized, ratherthey grew increasingly different; (3) these modes of organizationcan meaningfully be described as nationally specific; (4) processdevelopment performance converged over time. The paper suggestsan explanation for the observed divergent organizational pathsby placing these strategies into institutional and culturalcontext.     

The Red Queen in organizational creation and development

We synthesize organization learning theory and organizationalecology to predict systematic patterns in the founding and growthof organizations over time. Our central argument is that competitiontriggers organizational learning, which in turn intensifiescompetition that again triggers an adaptive response. We modelthis self-exciting dynamic—sometimes referred to as the‘Red Queen’ in general evolutionary theory—toexplain organizational founding and growth rates among the thousandsof retail banks that have operated in Illinois at any time from1900–1993. We find strong evidence that Red Queen evolutionled some organizations to grow quickly and to place strong competitivepressure on rivals. Red Queen evolution also helped establishbarriers to entry. However, this same evolutionary process appearsto make organizations more susceptible to ‘competencytraps’, ultimately slowing their growth rates and invitingnew market entry. Organizations confronted by a widely varyingdistribution of competitors grow more slowly and are more likelyto face new entrants. Overall, the results suggest that processesof organizational creation and growth emerge from ecologiesof learning organizations. More generally, we discuss the useof ecological theory and models to study the empirical consequencesof organizational learning.     

Integration and Dynamic Capability: Evidence from Product Development in Automobiles and Mainframe Computers

We investigate the impact of two kinds of integration—internaland external—on dynamic capability. We use product developmentactivities as a lens with which to focus on the capability-buildingprocess in a firm. We first develop a conceptual model of thecapability-building process that relates specific problem-solvingactivities to the generation of organizational capabilities.We derive a measure, ‘ynamic performance’, thatestimates the level of dynamic capability in an organizationbased on the consistency of its performance. Furthermore, weuse the model to motivate a series of hypotheses which linkspecific processes to the achievement of high dynamic performance.We conjecture that the capacity to integrate diverse knowledgebases through problem solving is the basic foundation of knowledgebuilding in an organization, and is therefore a critical driverof dynamic performance. The hypotheses are tested by drawingon extensive cross-sectional empirical studies of product developmentin the automobile and mainframe computer industries. The workfollows by providing detailed longitudinal cases describingthe impact of integration on competence-building processes atNissan and NEC.     

Innovative Output,Productivity and Profitability. A Test Comparing USPTO and EPO Data

The aim of this paper is to test whether patent‐based indicators are still reliable measures of innovativeness in light of organizational changes in the field of Intellectual Property Rights (IPR) protection and the regulatory reforms already occurred and under way, respectively, at the US Patent and Trademark Office (USPTO) and the European Patent Office (EPO). For most high‐tech industries, patents represent an outcome of the production process and their number can be taken as a proxy for a firm's ability to improve its productivity growth and profitability. The case study reported here concerns the biotechnology industry in Italy, whose firms, by definition, have Intellectual Property (IP) activities in their portfolios. For this purpose, we use a unique dataset which collects balance sheet items and patent information from EPO and USPTO. After linking firms' financial and production data with the patent information, we estimate a modified knowledge production function in which the dependent variable is alternatively (labor) productivity growth and profitability. Although based on a quite small sample, our findings provide some indication of a statistically significant relationship between patents with the EPO and both productivity growth and, in particular, profitability. This suggests that firms might pursue different strategies when patenting with the USPTO and the EPO.     

Organizational environment and performance of research groups—A typological analysis

In this paper an attempt is made to construct a typology of research units according to a set of organizational features and relate the resulting classification to a set of performance measures. The organizational features include (i) resources and facilities for research; (ii) Communication and transfer of new ideas; (iii) Planning and organization of research; and (iv) Social psychological environment for research. The performance measure include (i) General R&D effectiveness, which essentially connotes the quality dimension of research performance; (ii) Recognition of the work of the research unit by the scientific community; (iii) User-oriented effectiveness; and (iv) Administrative effectiveness (budget and schedule compliance). This study is based on the subset of empirical data on 220 research units collected in India for the third round of the UNESCO International Comparative Study on the Organization and Performance of Research Units (ICSOPRU). Twenty three measures of organizational environment, operationalized by multiple indicators, were chosen as discriminant criteria for the construction of the typology, using a classification computer programme SYSTIT (Systeme' de Typologie Iterative). The relationship between typology groupings and performance measures was analyzed through multiple correspondence analysis. This study brings out that resources and facilities for research are a necessary but not a sufficient condition of performance. The sufficiency condition implies a positive work environment, effective communication within and outside the research group and a conceptually exciting research programme.     

Maintenance-based strategies for environmental risk minimization in the process industries

Industry, environmental agencies and the scientific community have all emphasized the need to include environmental impact considerations next to profitability objectives in the design phase of modern chemical processes, responding to the increasing social concern over environmental degradation in the past years. Most environmental impact assessment and minimization approaches, however, are rather qualitative, providing general guidelines. In this work, to overcome their limitations and rigorously represent the defining elements of environmental risk, i.e. the mechanism of occurrence of unexpected events usually related to equipment failure and the severity of their consequences, detailed process, reliability and maintenance characteristics are incorporated within a process optimization framework. The objective concerns the optimization of overall process performance defined as a system effectiveness vector characterized by both the environmental and the profitability functions of the system. Implementation of the framework on a process example identifies the optimal combination of process design and operation as well as preventive maintenance strategies that accomplish the conflicting environmental and profitability targets and quantifies the existing trade-offs between them.     

Routines and incentives: the role of communities in the firm

The purpose of this paper is to contribute to clarifying theconcept of routines, by focusing on a specific aspect of thisconcept: namely the question of localization of routines withinthe organization. We consider that one of the main weaknessesof the theory in the analytical treatment of routines comesfrom the fact that the local context does not really matter.Our position is that, on the contrary, the local context inwhich routines emerge and learning takes place does matter,and leads to routines that strongly differ in terms of powerof replication, of degree of inertia, of search potential. Webase our analysis of the localization of routines on the conceptof community. We consider that, as a result of the permanentinteraction between the individual and organizational levels,routines are shaped and determined at an intermediate level,the level of communities. Along these lines, we show that theanalysis of the localization of routines in the organizationhas important consequences for our understanding of the specificdimensions of routines (cognitive, co-ordination and motivational),in particular on the incentives and the structure of the firm.     

Economic Growth Revisited

In this essay it is suggested that the success of Japan andthe newly industrialized countries (NICs) is, in no small measure,due to their intuitive grasp of the relationships between technology,growth and economic policy as these countries constantly adjustedeconomic policy to reflect changed economic circumstances, withconcomitant changes in economic structure. The key element tothe explanation in this paper is ‘economic organization’.Economic organization refers to more than the simple dichotomybetween ‘centralization’ and ‘decentralization’of decision making at the highest level. As is now widely recognized,market economies consist of many firms; these firms, however,may be organized in different ways. At one extreme each maybe highly centrally controlled, in which case the economy canbe thought of as a polyarchy of hierarchies. There are two aspectsof economic organization of particular relevance: the abilityto monitor and to innovate. Changes in technology have profoundeffects on how well different organizational structures canperform these central functions and, on the other hand, an importantaspect of economic development is organizational innovationswhich affect the ability of the economic system to monitor andinnovate. Moreover, the performance of an economy depends notjust on the internal organization of its firms and the marketstructure; it depends on how well capital markets function.These too may be organized in markedly different ways. The paperis organized into six sections. The first describes the majorphenomena to be explained, the stylized facts with which anyexplanation of growth must come to terms. The second and thirddiscuss the two competing explanations—explanations whichemphasize returns to scale and factor accumulation—andargue that these explanations cannot account for * The authoris a member of the Council of Economic Advisors, on leave fromStanford University The views expressed are solely those ofthe author. This paper is based on research which was supportedin part by the National Science Foundation, the Sloan Foundation.the Hoover Institution and the World Bank My ideas on the growthprocess have been greatly influenced by an extended study ofthe East Asia miracle, sponsored by the World Bank. For fullerdiscussions of the East Asia miracle, see World Bank (1993).Stiglitz (1994a) and Stiglitz and Uy (1994). This paper incorporatesand excends ideas developed there as well as those presentedin several earlier papers, in particular Stiglitz (1992a). Theinfluence of my co-authors Bruce Greenwald. Andrew Weiss, ThomasHellmann, Andres Rodriguez, Kevin Murdock and Marilou Uy shouldbe evident.     

Cooperation in aircraft design

We describe how aircraft are designed in a large organization. We discuss the different phases of design and interaction with the customer. We then describe the models used by each specialist department and the interactions among departments during the design process. We observe that the main design choices are refinement operations on the design. We then briefly describe how the negotiation process is controlled by an organizationally agreed sequence of commitment steps. We then describe negotiation at higher levels in the organization. What decisions are made, the compromises worked out, and the effect of these higher-level commitments on the design process.We conclude that: (1) aircraft design proceeds by thecooperation ofspecialists (specialist teams or departments); (2) each specialist has its ownmodel of the design, and may use several different models or partial models for different purposes; (3) specialists have limited ability to understand each other's models. They communicate using ashared vocabulary, but not necessarily shared technical knowledge; (4) design proceeds by successiverefinement of the models, which are coordinated and updated together; (5) the design decisions, which are acts of commitment and model refinement, arenegotiated by the specialists among themselves; (6) one way this negotiation process is organized and controlled is by the use ofcommitment steps; (7) negotiations occur at higher levels in the organization, resulting in commitments which greatly influence and constrain the design process and its organization, and which have the greatest effect on the cost of the product.     

Where do small worlds come from?

Interfirm networks often take on characteristics consistentwith the notion of a small world—they are locally clusteredinto dense sub-networks or cliques that are sparsely connectedby a small number of ties that cut across the cliques, linkingnetwork members through a relatively small number of intermediaries.Are these characteristics an emergent property of interfirmnetworks that result from chance connections among firms, ormore strategic partnering by firms to improve or protect theirnetwork positions? After outlining a behavioral account forthis frequently observed network topology, we show that theevolving investment bank syndicate network in Canada exhibitedsmall world properties from 1952 to 1990. We then identify theinvestment bank cliques comprising the network and the ‘spanning’ties that cut across them, and test three distinct scenariosthat may explain the formation of these ties, which are responsiblefor the small worldliness of the network: (i) chance partneringof firms in different cliques; (ii) insurgent partnering byperipheral firms to destabilize the network and improve theirnetwork positions; and (iii) control partnering by core firmsto maintain the network status quo and their positions withinit. All three scenarios played a role in explaining the formationof clique-spanning ties; however, chance and insurgent partneringplayed a greater role in our empirical setting. Our analysisof how small world structures emerge and evolve over time offersnew insight into the origins of a prevalent interfirm networktopology, and a baseline for constructing future models of interfirmnetwork evolution and dynamics.     

Non-continuous growth of firms: some empirical evidence from Italian manufacturing industry

Firms change their size through a row of discrete leaps. A basic model allowing for discontinuous growth can be based on several assumptions that entail testable consequences: profitability is not a continuous function of the firms’ size, but exhibits peaks, each corresponding to a locally optimal size. The model has been tested by using a panel of Italian manufacturing firms. Both the non-parametric analysis and a panel estimation confirm the presence of ‘peaks’ in the distribution of profitability by size.     

Statistical Contamination and the Selection of Management

Emphasizing the probabilistic aspects of decision making makes it clear that even if the criterion for promotion within an organization is success in all past decisions, the laws of probability assure all managers except those who unfailingly err the possibility of promotion. This introduces statistical contamination into the organizational hierarchy. This paper considers the effects of the probabilistic nature of decision making upon the quality of management in an organization using past performance records as the sole promotion criterion. In addition, we consider the consequences of lowering promotion standards, and investigate the possibility of determining optimal promotion criteria.     

Dynamic Capabilities and Manufacturing Automation: Organizational Learning in the Italian Automobile Industry

The search for competitiveness in automobile assembly is tendingtowards more cautious and selected investment in flexible automationtechnology. During the 1980s a number of car makers were luredby the myth of computer-integrated manufacturing, but recentsurveys show that approaches to automation (especially in finalassembly) have changed. This longitudinal study illustrates,on the basis of a plant survey, the automation strategy of FiatAuto, one of the world’s largest auto producers, tracingits evolution from the experiments of the 19 70s driven by industrialrelations pressures, to the ‘pan-technologist’ philosophyunderlying the ‘highly automated factory’ of the1980s, to the more realistic concepts inspiring the ‘FabbricaIntegrata’ organizational model of the 1990s. The papershows that the implementation of automation techniques and thedevelopment of related know-how have a cumulative and path-dependentnature. Furthermore, it is argued that the technologies usedin a firm's plants result from a non-linear learning process,based on the internal development, external acquisition, imitation,analogical replication, combination and selection of capabilities.The knowledge incorporated into technologies becomes an integralpart of a firm's repertoire of capabilities. Parts of this knowledgecan be retrieved over time, to become modules of original technologicalsolutions. Similarly, the necessity to imitate competitors whohave successfully implemented organizational paradigms basedon lean manufacturing in order to respond to the ‘regimeof variety’ can cause a mismatch between the existingand the desired technological trajectory of a firm.     

An exploration of the relationship between country of origin (COE) and the internationalization-performance paradigm

Abstract and Key Results

Corporate strategy and the management of innovation and technology

This paper explores the evolution of corporate organizationwith special attention to the organization of R&D. Morespecifically, the paper addresses the comparative long-termorganizational dynamics of management of innovation and technologyin two different types of technology-based industrial companies:the ‘related diversifier’ pursuing ‘synergisticeconomies’ and the ‘vertical integrator’ pursuing‘vertical economies’. These types of companies areillustrated by case studies of two large Danish manufacturingcompanies. The analysis aligns the strategic management literatureon strategy and structure in large companies with the literatureon management of innovation and technology. It is argued thatthe organizational design for managing innovation and technologyis contingent on both the overall strategy–structure profileand dynamics of the companies, and on key characteristics oftheir particular innovation and technology strategies.     

Bringing individuals back in: the effects of career experience on new firm founding

Because of methodological and theoretical obstacles, researchon organizational foundings has largely focused on societaland population-level explanations. This paper takes the viewthat understanding firm foundings also requires linking to individual-levelprocesses. We suggest that careers are an important mechanismlinking individual-level processes to firm foundings. The firm-foundingexperience of potential founders impacts organizational foundingsby influencing expectations of the liability of newness. Wetest our explanation on the set of inventions patented by theMassachusetts Institute of Technology over the period 1980–1996by examining the effect of inventors' career experiences onthe likelihood that an invention will be commercialized throughthe founding of a new organization.     

Patent evolution in relation to public/private R&D investment and corporate profitability: Evidence from the United States

Summary In this paper we analyze the (historical) co-evolution of technological development and economic progress (by relating public and private R&D investment, patenting, and corporate profitability). We relate to the work ofSchmookler(1966),Griliches(1990),Pakes&Griliches(1980) andPakes(1986) who all have studied the techno-economic interplay by considering patents as in indicator of technological performance. We use United States industry and government data over the period 1953-1998 (45 years). Co-evolution analysis over this period reveals a strong interdependency among the variables. Patent evolution is strongly related to the development of private R&D and corporate profitability; the levels of public and private R&D expenditure in combination with the level of technological output (i.e. patents) have a strong predictive and explanatory power towards corporate profitability (R² value of 94.9%). Causality tests reveal a joint determination between R&D investment and corporate profitability (L=2; p<0.01).     

Concordance and complementarity in IP instruments

ABSTRACT

This work investigates the relationship between proxies of innovation activities, such as patents and trademarks, and firm performance in terms of revenues, growth, and profitability. By resorting to the virtual universe of Italian manufacturing and service firms, this work provides a rather complete picture of the Intellectual Property (IP) strategies pursued by Italian firms, in terms of patents and trademarks, and studies whether the two instruments for protecting IP exhibit complementarity or substitutability. In addition, and to our knowledge novel, we propose a measure of concordance (or proximity) between the patents and trademarks owned by the same firm and we then investigate whether such concordance exerts any effect on performance. The results suggest that while patents and trademarks independently exert a relevant impact on firm performance, there is no convincing evidence in favour of a complementary role of IP.     

A unified theory of market partitioning: an integration of resource-partitioning and sunk cost theories

Our objective was to integrate a sociological and an economictheory of market partitioning into a unifying framework: GlennCarroll’s resource-partitioning and John Sutton’ssunk cost theories, respectively. In so doing, two importanttheory fragments from organizational ecology and industrialorganization are integrated in an attempt to understand theantecedents and consequences of so-called dual market structures.A dual market structure features high concentration and highdensity, two market structure conditions that in most extanttheory are thought to be unrelated. We argue that both theoryfragments are highly complementary, offering different storiesabout the evolution of competition that produce similar marketstructure outcomes. In terms of the competitive strategies andorganizational forms involved, however, the accounts of dualmarket structure evolution in the resource-partitioning andsunk cost theories are very different. This is instrumentalin developing a dynamic theory of Porterian strategic management.We use these insights to reinterpret existing evidence, discussinga series of well-known industry studies.     

How supply quality management improves an organization's quality performance: a study of Chinese manufacturing firms

Because of unfavourable economic conditions, organizations worldwide have to constantly reconstruct their business strategies in order to survive. Recent studies have stressed the importance of supply quality management (SQM) for the general competitiveness of manufacturers. However, very little empirical research has been carried out that specifically examines how SQM practices lead to improvements in quality across an organization. To scrutinise the impact of SQM practices, a survey was conducted of 138 leading manufacturing companies in the Pearl River Delta (PRD), a manufacturing hub in southern China dubbed ‘the factory floor of the world’. By using path analytic techniques, a model was constructed to portray the relationships among SQM practices and organizational quality performance. This model could act as a tool of reference for companies seeking to improve their SQM systems, and help them in their efforts to raise quality across the company. This paper demonstrates that quality-conscious management practices speed up the implementation of SQM practices. This paper finally reveals the influential effect of SQM practices on both supply quality and organizational quality performance.