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.     

Regulatory Pricing Rules to Neutralize Network Dominance

This paper evaluates the effectiveness of several pricing rulesintended to promote entry into a network industry dominatedby an incumbent carrier. Drawing on the work of Cournot andHotelling, we develop a model of competition between two interconnectednetworks. In a symmetric equilibrium, the price of cross-networkcalls exceeds the price of internal calls. This ‘callingcircle discount’ tends to ‘tip’ the industryto a monopoly equilibrium as would a network externality. Byequalizing charges for terminating calls, reciprocity eliminatesdifferences between internal and cross-network prices and makesmonopoly less likely. Imputation counteracts an incentive bythe dominant network to ‘price squeeze’ a rivalby eliminating differences in the wholesale price of terminationand the implicit price for internal use. By increasing profitsof rival networks and increasing their subscribers‘ surplus,imputation supports additional entry. Finally, an unbundlingrule reduces termination fees charged by a dominant networkthat was engaging in pure bundling. Again, entry will be facilitatedas rival networks offer potential subscribers a more attractiverate schedule.     

Experience of emerging market firms: The role of cognitive bias in developed market entry and survival

Abstract and Key Results

Turbulence, discovery and foreign market entry: A longitudinal study of an entry into the Russian market

Abstract

How much distance do we need? Revisiting the “National cultural distance paradox”

Abstract and Key Results

Structural reforms, technological gaps and economic development: a Latin American perspective

This paper explores the impact that recent structural reformshave had upon macro-to-micro linkages, as well as upon the patternof production specialization, the entry and exit of firms duringthe adjustment process, and the ‘sources’ of technicalchange in the present more open and deregulated Latin Americanmacroeconomic scenarios. From this exploration a major questionemerges: is the new ‘market-oriented’ developmentparadigm sustainable in the long run? The interpretation presentedin this paper suggests that the present pattern of productionspecialization—strongly biased in favour of industriesfeaturing low domestic knowledge generation and value-addedcontent—and the inhibition of local R&D and engineeringactivities resulting from the rapid expansion of internationallyintegrated production systems are pushing Latin American economiesinto a ‘low development trap’ from which it mightprove extremely difficult to escape on the basis exclusivelyof free market principles.     

On the association between a random parameter and an observable

The association between an observable and a random parameter characterizes their joint distribution given the marginal distributions. It has been shown to be incorporated in the (log-)odds ratio function. The association is inherent in each of the conditional distributions and hence determines the learning process formalized in Bayes' theorem. The paper focuses on two applications. Commonly used measures of dependence, especially Kullback-Leibler distances between densities of interest are identified and interpreted as expected valuves of the log-odds ratio function. Frequently Bayesian inference is based on the maximization of an expected utility. If the utility of a probability density is defined by the logarithmic score function, the expected utility can often be decomposed approximately into a term of “fit” and a term of “model complexity”. The log-odds ratio parameterization of probability densities reveals that “model complexity” again can be defined as an expected value of the log-odds ratio function, i.e., as a measure of dependence between the observable and the random parameter. The ideas are illustrated throught with examples from the class of conjugate exponential families.     

Competitive dynamics and economic learning: an extended resource-based view

In this paper a conceptual framework for the analysis of economiclearning is developed. Economic learning, by analogy with organizationallearning, results in the development of economic competences,or capabilities, shared between firms, which rest on a foundationof economic resources, from which value is generated, and economicroutines, through which resources are utilized. It is the mobilityof resources, and their exchange and production dynamics, alongevolutionary pathways, which underpins the plausibility of anotion of economic learning. The paper elaborates this frameworkas a ‘resource-based view’ (RBV) of the economyas a whole, as an extension of the RBV of the firm. Such a frameworkcaptures the dynamics of exchange and circulation of technologies,know-how and intangible assets, as well as of tangible assetsand capital goods; it is concerned with investment behaviorby entrepreneurs rather than with the behavior of producersand consumers in goods and services markets. Within this resourceeconomy framework, it is possible to generate an account ofthe resource dynamics that underpin production of goods andservices—including resource propagation, diffusion, imitation,replication and recombination. These processes encompass evolutionarypressures, experienced through resource variation, selectionand retention. Entrepreneurial initiatives take the form ofresource recombinations, while resource innovation capturesthe creation of new economic resources, such as technologicalstandards. Such a perspective brings into focus the resourcespecialization and configurations that drive real economies,within firms and between firms, that translates into enhancedor diminished performance of the economy as a whole.     

Are More Good Things Better, or Will Technical and Market Capabilities Conflict When a Firm Expands?

This paper examines the effects on performance of possessingmarket and technicallyrelated capabilities before entry intoa new technical subfield of the imaging industry between 1954and 1988. The study addresses cases in which technical changedoes not destroy the value of market-related assets of incumbentfirms. I examine the survival, short term market share, andlonger term market share, attained by industry incumbents andentrants diversifying from other industries. I find that differentresources contribute to different types of performance, andthat the intuitively likely result— that possessing moretechnical and market-related resources leads to better performance—sometimesdoes not occur.     

The influence of industrial policy and national systems of innovation on emerging economy suppliers’ learning capability

This paper links the industrial policy and national systems of innovation literature to the investigation of learning capabilities of suppliers in the context of the automotive parts industry of Pakistan. Drawing data from 50 Pakistani autoparts suppliers, the findings suggest that industrial policy has been helpful in creating a local parts supply base and facilitating the entry of Japanese assemblers in the market. However, the implementation of the policy has been weak, and it is an arduous journey for the local suppliers to develop ambidextrous (exploratory and exploitative) learning capabilities. The findings also indicate that where local training and support from R&D institutions are weak, networking alone with foreign multinationals is not sufficient on its own to develop exploratory learning capabilities of local suppliers. This paper shows the importance of creating national–provincial institutions offering learning and skills development aimed towards innovation.     

The influence of inlet velocity profile on three-dimensional three-generation bifurcating flows

 The influence of inlet velocity profile on the three-dimensional three-generation bifurcating flow has been numerically studied using a CFD code based on finite volume method. The bifurcating airways simulated the branches of human lung. The axial length and cross-sectional diameter of the three-generation airway are taken from the anatomic data of the 5th–7th generation airway of an averaged height man. The curvature and bifurcating angle of each junction are taken as 2.265 diameter of the next generation and 70^∘, respectively, from physiological consideration. Computations are carried out for eight Reynolds numbers ranging from 200 to 1600, each under uniform and parabolic inlet velocity profiles, to consider the relations between the entry flow patterns and the overall flow characteristics including mainstream flow pattern, secondary flow vortices, asymmetrical flow partition and pressure drop. The mass flow ratio between the medial and lateral branch, and the total pressure drop are closely related to the entry flow patterns for larger Reynolds numbers. Received: 1 October 2001 / Accepted: 12 July 2002 Support given by the Research Grants Council of the Government of the HKSAR under Grant No. PolyU 5166/01E and by the Hong Kong Polytechnic University under Central Research Grant No. A-PD75 is gratefully acknowledged.     

Technological Knowledge Intensity and Entry Mode Diversity

• This paper expands the entry mode literature by referring to multiple modes exerted simultaneously in different value chain activities within and across host markets, rather than to a single entry mode at the host market level. We apply competing theoretical perspectives—internalization theory and knowledge transfer efficiency considerations on the one hand, and organizational learning theory on the other—to argue that firms’ technological knowledge intensity affect their entry mode diversity across value chain activities, across host markets, and at the overall corporate level.
• Analyzing a unique dataset we show that high technological knowledge intensity is strongly associated with high entry mode diversity across value chain activities and at the corporate level, but only weakly associated with greater entry mode diversity across geographic host markets.

     

Types of Rules, Interpretation and Colletive Dynamics: Reflections on the Introduction of a Salary Rule in a Maintenance Workshop

This article presents a ‘conventionalist’ approachto rule-directed behavior, emphasizing the interpertive dimesion.The first part presnents a general definition of a rule andtypology of rules in order to analyze its consequences for interpretivebehavior. The secone part studies the modes of interpretationsof rules in relation to collective dynamics and gives emphasisto be tole playee by underdeter minastin. The interpertive framworkis applied to a French maintenance workshop in which a teambonus was introduced in 1991. The paper concludes that (i) allcontracts and bence the interpretation requirements are essentiallyincompletel; (ii) as a consequence thetre is an inevitably imperfectincentive alignment; (iii) the dynamics of interpretation alsobring about imperfectly reciprocal behavior and a ‘logic’of collective action; (iv) interpretation is intertwined withthe distribution of team knowledge; and (v) there are two typesof links between rules and routines. To interpret a rule isto initiate a learning process and to construct collective knowledge.     

If Nelson and Winter are only half right about tacit knowledge, which half? A Searlean critique of 'codification'

The paper explores the inherent tensions in the relationshipsbetween different theories of knowledge. The paper shows howPolanyi's rather nebulous concept of tacit knowledge can begiven a rigorous foundation in recent biological treatmentsthat link neurological causal processes, subjective mental statesand speech acts. Drawing on the work of John Searle, the papershows how information-processing approaches relate to these‘cause and effect’ relationships in order to critiquethe binary distinction between tacit and codified knowledge.The utility of the framework and the problems with this binarydistinction are illustrated by showing the confusions behindrecent theories that propose that information technologies allowthe codification of tacit knowledge. Errors inherent in theidea of codification are traced back to Newell and Simon's abstract‘programme level’ of explanation. Implications forscience policy, technical learning, management and innovationare discussed.     

Mode of international entry: The advantages of multilevel methods

Abstract and Key Results

Innovation and Entry in the US Disposable Diaper Industry

Economic analysis concerning new product innovation is dividedbetween the perspective (associated with Bain) that new productdesigns are based on product differentiation which erects barriersto new competition insulating incumbent firms, and the perspective(associated with Schumpeter) that innovation erodes the positionof incumbent firms. This paper offers an analysis of the USdisposable diaper industry which emphasizes the long-run effectsof technological competition and entry on market performanceover the short-run effects of incumbency advantages. As thedisposable diaper industry evolved, neither product differentiation,supported by large advertising expenditures, nor technologicalleadership in new product development insulated the major companyProcter & Gamble from the ‘gales of creatives destruction’.Spillovers created by the market leaders became the means ofsuccessful entry and the channels of technology diffusion thatsustained entrants in the technology race and enlarged consumerbenefits.     

Extremality in the selection and optimization of measurement devices

The only two possible directions for extremal selection of tabular data, including those used in measurement technology, are considered: selection of the closest lower and closest greater datum (table entry) relative to a computed value, with the table itself considered an elementary Dedekind structure. The results of the selection are interpreted as a “floor” and a “ceiling,” respectively, two concepts well known in discrete mathematics that even have their own computer symbols. A solution of the problem of integral optimization of the precision of a measurement device consisting of a sensor and normalizing amplifier is presented as an example.