Gsoc Artikelen Samenvatting

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GSOC papers - Summaries GSOC
Growth Strategies and Organizational Challenges (Vrije Universiteit Amsterdam)
Studeersnel wordt niet gesponsord of ondersteund door een hogeschool of universiteit

Gedownload door Leidy Atmidjojo (gabygirl16@live.com)
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GSCO-summary of papers
Required readings related to content of lecture 1: Business planning versus

effectuation
Brinckmann, J., Grichnik, D., & Kapsa, D. (2010). Should entrepreneurs plan or
just storm the castle? A meta-analysis on contextual factors impacting the
business planning–performance relationship in small firms. Journal of Business
Venturing, 25(1), 24-40.
 Abstract: This study contributes insights to the business planning discussion

by following an evidence-based research approach. We conduct a meta-
analysis on the business planning performance relationship and specifically
focus on contextual factors moderating the relationship. Results indicate that
planning is beneficial, yet contextual factors such as newness of the firms and
the cultural environment of firms significantly impact the relationship. Based
on this evidence, we propose a concomitant and dynamic approach that
combines planning and learning.
 Executive summary: The planning school argues that a systematic, prediction-
oriented, and formal approach leads to superior venture performance. An
opposing group of researchers challenges the value of prediction-oriented
strategic approaches for an organization's performance. These researchers
propose instead to focus on learning, strategic flexibility, and controlling
resources, especially when facing high degrees of uncertainty.
With this study, we address this controversy by synthesizing prior
empirical findings. Especially we aim to explain divergent findings by
introducing context variables that moderate the planning–performance
relationship such as the newness of the sampled firms, the nature of business
planning, and cultural variables. In so doing, we intend to foster a contextual
and dynamic understanding of the business planning–performance
relationship. In other words, beyond the question whether a general planning-
based approach is beneficial for small firms, we aim to uncover empirical
evidence relating to contexts when business planning shows increased
effectiveness.
Our findings confirm that business planning increases the performance of
both new and established small firms, yet different factors moderate the
strength of the relationship. In samples with more established small firms,
business planning has a stronger positive effect on performance than it does
in samples consisting only of new firms. Thus, we find indications that
contingencies such as uncertainty, limited prior information, and an absence
of business planning structures and procedures can limit the return on
business planning. Based on these findings we suggest a concomitant and
dynamic approach of planning, learning, and doing. Initially, basic business
planning activities can be undertaken providing the foundation for sense-
making and learning while other value creating activities are carried out at the
same time. As plans are carried out, real-world experiences are made, and
learning takes place, the business planning effort can be increased. This
approach combines both planning school and learning school based
approaches. Rather than understanding entrepreneurship as a sequential
process ofplanning followed by execution, this approach stresses parallel
activities of planning and doing with an increasing allocation of resources to
the planning domain.
Moreover, our results also show that studies analyzing the performance
effect of business planning outcome (written business plans) determine similar

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positive performance effects as studies focusing on the business planning

process (sophistication of business planning activities). Both outcome and
process of business planning augment firm performance with comparable
strength. Since business planning in new and established small firms is
oftentimes informal, iterative, incremental, unstructured, and irregular leading
to no written outcome, the development of these firms might suffer. Our
findings caution practitioners to avoid these frequent shortcomings of
business planning and apply both formal and more sophisticated planning
approaches.
Furthermore, our findings show with respect to different cultural settings
that business planning is less beneficial for the performance in cultures
characterized by higher uncertainty avoidance than firms in cultures with
lower uncertainty avoidance. An interpretation of this finding is that founders
or small business leaders might stick more closely to their predetermined
plans in countries where uncertainty avoidance is high. This post-planning
behavior could limit their strategic flexibility and openness to necessary
changes to their business plans which in consequence limits performance. This
interpretation of our study findings introduces post-planning behavior as a
new dimension to the discussion of the business planning–performance
relationship
 Introduction:
 Hypotheses:
- Hypothesis 1. Business planning in small firms increases performance.
(significant)
- Hypothesis 2. Business planning increases performance more in established
small firms than it does in new small firms. (significant)
- Hypothesis 3. The outcome of business planning has a greater effect on firm
performance than the business planning process. (not significant)
- Hypothesis 4. Business planning has a greater effect on firm performance in
cultures with low uncertainty avoidance than it does in cultures with high
uncertainty avoidance. (significant)
 Methods: meta-analysis, 46 studies, 11,046 organizations, moderating effect
of contextual factors tested through bivariate analyses and meta-regressions.
Measures: Performance, Business planning, newness, cultural uncertainty
avoidance, control variables,
 Results:
 Discussion and conclusion: Returning to our entrepreneur who is considering
whether to plan or just to storm the castle, our study suggests to assess the
circumstances of the endeavor, and to develop a dynamic understanding of
planning that integrates learning and attack, and preparedness for post-
planning adjustments. In the early days ofa venture characterized by
environments ofhigh uncertainty, one may need a degree of foolishness to
rush into a new market with limited predictability of future happenings. With
luck, this approach may lead to success, yet can imply substantial costs. In

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environments characterized by limited uncertainty (e.g. certain established

markets) the planning approach may lead to an improved preparedness, less
costs ofnewness, and greater likelihood of success when coupled smartly with
a focus on contingencies, market-feedback, continuous improvement and
learning.
Sarasvathy, S.D. (2001). Causation and effectuation: Toward a theoretical shift
from economic inevitability to entrepreneurial contingency. Academy of
Management Review, 26(2), 243-263.
 Abstract: Causation rests on a logic of prediction, effectuation on the logic of

control. This paper illustrates effectuation through business examples and
realistic thought experiments, examine its connections with existing theories
and empirical evidence, and offer a list of testable propositions for future
empirical work.
 Introduction: How do we make the pricing decision when the firm does not yet
exist? How do we hire someone for an organization that not yet exist? How do
we value firms in an industry that did not exist? At the macro level, how do we
create a capitalist economy from a formerly communist one? Each of these
questions involves the problem of choosing particular effects that may or may
not implement intentional goals. For example, if we knew precisely what type
of firm we wished to create, we could use existing theories and principles to
cate the firm. But usually all the entrepreneur knows when he or she starts out
is something very general, such as the desire to make lots of money or to
create a valuable legacy like a lasting institution, or, more common, to simply
pursue an interesting idea that seems worth pursuing.
Definition: Causation = processes take a particular effect as given and focus on
selecting between means to create that effect. Effectuation processes take a set
of means as given and focus on selecting between possible effects that can be
created with that of means. (chef example. Recipe or cooking from the pantry).
In a nutshell, in using effectuation processes to build a firm, the entrepreneur can
build several different types of firms in completely disparate industries. This
means that the original idea (or set of causes) does not imply any one single
strategic universe for the firm. Instead the process of effectuation allows the
entrepreneur to create one or more several possible effects irrespective of the
generalized end goal with which she started. The process not only enables the
realization of several possible effects (although generally one or only a few are
actually realized in the implementation) but it also allows a decision maker to
change his or her goals and even o shape and construct them over time, making
use of contingencies as they arise.

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1. Affordable loss rather than expected returns

2. Strategic alliances rather than competitive analyses
3. Exploitation of contingencies rather than exploitation of preexisting knowledge
4. Controlling an unpredictable future rather than predicting an uncertain one

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Propositions at the level of the economy:

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 Proposition 1: Prefirms or very early- stage firms created through processes of

effectuation, if they fail, will fail early and/or at lower levels of investment than
those created through processes of causation. Ergo, effectuation processes
allow the economy to experiment with more numbers of new ideas at lower
costs.
Proposition at the level of the market:
Proposition 2: Successful early entrants in a new industry are more likely to
have used effectuation processes than causation processes. With later entrants,
the trend could be re- versed.
Proposition at the level of the firm:
Proposition 3: Successful firms, in their early stages, are more likely to have
focused on forming alliances and partnerships than on other types of competitive
strategies, such as sophisticated market research and competitive analyses,
long-term planning and forecasting, and formal management practices in
recruitment and training of employees.
Proposition within the firm/ founders:
Conjecture 1: In marketing decisions, in contrast to traditional decision makers,

effectuators are less likely to use traditional types of market research, such as
carefully designed surveys and test marketing; instead, they are likely to dive
straight into seat-of-the-pants marketinglselling activities and alliances.
Conjecture 2: In financial decisions, in contrast to traditional decision makers,

effectuators are less likely to use long-term planning or net present value (NPV)
analyses; instead, they are likely to be focused on the short term and, at most, to
use informal versions of real options.
Conjecture 3: In organizational decisions, in contrast to traditional decision

makers, effectuators are more likely to build strong participatory cultures, rather
than hierarchical, procedures-based ones. In fact, in contrast to traditional
decision makers, effectuators are likely to be less effective in running large
organizations with well-oiled procedures.
Conjecture 4: Effectuators are more likely to fail more often but are also more
likely to manage the failures more effectively and to create larger, more
successful firms in the long run (although they may need to hire pro- fessional
chief operating officers to actually run them!).
Required readings for lecture 2: Growth versus. survival in international

markets
● Lu, J.W., & Beamish, P.W. (2004). International diversification and firm
performance: The S-curve hypothesis. Academy of Management Journal,
47(4), 598-609.
 Abstract: A proposed theoretical framework for the study of multinationality

and performance includes both benefits and costs of geographic expansion
over different phases of internationalization. The study shows a a consistent
horizontal relationship between multinationality and performance. Further,
firms investing more heavily in intangible assets, such as technology and
advertising, achieved greater profitability gains from growth in foreign direct
investment. The framework in this study highlights complexity and temporal
dynamics.

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 Introduction: What is the relationship between multinationality and firm

performance? Further, this study began to explore how the motives for a firm’s
international expansion influenced the performance consequences of a
geographic diversification strategy. We found that the returns from a geo
graphic diversification strategy were related to costs and benefits that varied
depending on the extent of a firm's internationalization. This association was
manifest in a horizontal S-curve, which at first showed a performance decline
with increasing internationalization, followed by a positive relationship
between increasing geographic diversification and firm performance, which
then declined at very high levels of multinationality. This relationship in turn
was moderated by intangible asset advantages that accrued with expansion of
the geo graphic scope of a firm. Firms with strong technology or advertising
asset advantages achieved higher returns to geographic expansion.
 Hypotheses:
 Hypothesis 1. The relationship between geo graphic diversification and firm
performance is nonlinear, with the slope negative at low levels of geographic
diversification, positive at medium levels of geographic diversification, and
negative at high levels of geographic diversification. (strongly supported)
Hypothesis 2. A firm's intangible assets mod erate the relationship between
geographic di versification and firm performance in such a way that high
levels of intangible assets increase the performance gains attributable to
geographic diversification. (partially supported)
 Methods: Longitudinal datashet on 1,489 Japanese firs over 12 years
 Results:
 Discussion and conclusion We examined the nature of the relationship be
tween geographic diversification and firm performance at different phases of
internationalization, across firms with different assets. As depicted in Figures 2
and 3, we found that geographic diversification had a nonlinear relationship
with performance. At high and low levels of internationalization, the extent of
geographic diversification was negatively associated with firm performance,
while at moderate levels of internationalization, greater geographic diversity
was accompanied by higher performance. Practical implications for managers:
- Long term view internationalization, there might not be immediate positive
returns from foreign expansion, and a firm can even suffer a decline in profits in
its initial forays. During this stage, declining profits need not halt
internationalization efforts, provided management devotes attention to
ameliorating the initial disadvantages of being new and foreign to permit the
intrinsic benefits of internationalization to arise and improve firm performance.
Alternatively, management can extend the peak of performance encountered in
phase 2 of the internationalization and performance relationship and move the
threshold of internationalization to a higher level.
Even hen a firm is in phase 3 of the intern. And perform. Relationship
managers can learn to adjust organizational structures and systems to handle

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the coordination problems we identified. When this happens a firm can enter a
new phase with positive returns from international expansion.
Finally, the importance of intangible assets to internationalization should not
be underestimated.
 One of the interesting realities of internationalization in recent years is how
frequently a firm's reputation can precede its entry into a foreign market. Just
as many exporting firms started exporting as a result of a welcome but
unsolicited export order, managers in some firms that invest internationally
have been pleasantly surprised to learn that their reputation for possessing
strong intangible assets (patents, brands, and the like) has preceded them.
Customers, suppliers, the business press, and potential partners have often
already determined which foreign firm is a leader, whether an investment has
occurred or not. Thus, the untapped benefits of intangible assets are
eventually captured with actual firms foreign direct investment.
● Sapienza, H.J., Autio, E., George, G., & Zahra, S.A. (2006). A capabilities
perspective on the effects of early internationalization on firm survival and
growth. Academy of Management Review, 31(4), 914-933.
 Abstract: Recent critiques of internationalization process models question the

wisdom of de laying internationalization. Internationalizing late allows firms to
assemble resources and gain experience but also allows inertia to develop. We
resolve this tension by positing that internationalization has differing effects
on firm survival and growth. These effects are moderated by organizational
age, managerial experience, and resource fungibility. Our framework provides
insights into the evolution of capabilities across borders and may be tested
and built on by organization researchers.
 Introduction: Consequently, we seek to show that examining the effects of
early internationalization on both outcomes can help resolve some of the
apparent theoretical and empirical contradictions of the recent past. We build
on the idea of organizational imprinting, the process by which events
occurring at key developmental stages have persistent and possibly lifelong
consequences. We argue that earlier a firm internationalizes, the more deeply
imprinted its dynamic capability for exploiting opportunities in foreign markets
will be.
We advance two primary arguments in this article. We extend the perspective
developed by Autio et al. (2000), who posit that early internationalizers are more
likely to grow rapidly than older entrants because of "learning advantages of
newness." These authors conclude that, despite significant liabilities of newness,
younger firms also enjoy some learning advantages in new environments that
can spur growth. However, Autio et al. do not assess the potential threats to
survival induced by early internationalization. Therefore, we extend their analy
sis by suggesting that early internationalization may decrease the probability of
survival but simultaneously increase prospects for growth.
 Hypotheses: First, we hypothesize that the younger the firm at

internationalization, the stronger the imprinting effect will be, because
internationalizing early develops specialized capabilities for rapid adaptation
to the external environment.
Second, we posit that managers previous international experience influences
the outcomes of internationalization because it partially substitutes for the
lack of organizational experience with internationalization.
Finally, whereas a large resource endowment is an advantage, we propose
that the fungibility of a firm’s resources plays a critical role in determining the

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costs of capability development and deployment. We propose that because

fungibility reduces the costs of sunk investments internationalization, young
firms with fungible resources have enhanced prospects for survival and
growth.
 Methods:
 Results:
 Conclusion: Recent research has documented the rapid internationalization of
new firms in the pursuit of survival and growth. This article improves our
understanding of this phenomenon, contributing to the entrepreneurship,
internationalization, and capability development literature. The paper forwards
a model of the direct effects of internationalization on new ventures' survival
and growth prospects, as well as the moderating effects of age, managerial
experience, and re source fungibility. Substantial promise exists for research at
the nexus of entrepreneurship, internationalization, and capability
development. This article provides a starting point for such theoretical
refinement and advancement.
Required readings for lecture 3: Organic versus. non-organic growth

● Klier, H., Schwens, C., Zapkau, F.B., & Dikova, D. (2017). Which Resources
Matter How and Where? A Meta‐Analysis on Firms’ Foreign Establishment
Mode Choice. Journal of Management Studies, 54(3), 304–339.
Theoretical framework based on Resource-based view (RBV) that a) differentiates

between heterogeneous types of resources, b) provides a rationale that
consistently explains how firms adapt their establishment mode choice to their
resource base, and c) reflects on contextual factors that intervene in the
consistency of the direct relationships is largely missing.
According to the resource-based view, firms have to manage their valuable rare,
non-imitable, and non-substitutable resources to achieve sustainable competitive
advantages. Drawing on the RBV view this paper examines the impact of
knowledge based (i.e. technological resources, marketing) and experience-based
(i.e. general international experience, host county experience) resources on a
firm’s establishment mode choice. Further, the study studies the relationships
between different types of resources and a firm’s establishment mode choice
vary with cultural distance.
Methods: meta-analysis, 31 studies, 13.559 establishment mode choices

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* Hypotheses: Hypothesis 1: Parent firms, which possess more knowledge-based

resources, are more likely to establish a foreign subsidiary via greenfield
investment (as opposed to an acquisition).
* Hypothesis 2: Parent firms, which possess more experience-based resources,
are more likely to establish a foreign subsidiary via acquisition (as opposed to a
greenfield investment).
* Hypothesis 3a: The propensity of parent firms with abundant knowledge-based
resources to opt for a greenfield investment increases with higher cultural
distance.
* Hypothesis 3b: The propensity of parent firms with abundant experience-based
resources to opt for an acquisition increases with higher cultural distance.
Findings: Knowledge based-resources enhance a firm’s propensity for greenfield

investments, while experience-based resources more likely lead to acquisitions.
Further, Cultural distance increases knowledge-intensive firms’ preference for
greenfield investments
● Puranam, P., Singh, H., & Chaudhuri, S. (2009). Integrating acquired

capabilities: When structural integration is (un) necessary. Organization
Science, 20(2), 313-328.
Acquirers who buy small technology-based firms for their technological

capabilities often discover that post-merger integration can destroy the very
innovative capabilities that made the acquired organization attractive in the first
place. Viewing structural integration as a mechanism to achieve
coordination between acquirer and target organizations helps explain
why structural integration may be necessary in technology acquisitions despite
the costs of disruption this imposes, as well as the conditions under which it
becomes less (or un-) necessary. We show that interdependence motivates
structural integration but that pre-existing common ground offers acquirers an
alternate path to achieving coordination, which may be less disruptive than
structural integration.
This study provides evidence of the positive relationship between

interdependence and the likelihood of structural integration, as well as the
negative likelihood of structural integration, as well as the negative moderating
role of common ground in this relationship.
Capability renewal strategies through external development call for more than
the recognition of valuable new external capabilities that complement internal
ones; they require the ability to effectively use them in conjunction. This study
suggests that the manner in which internal and external capabilities are
organizationally linked depends on the nature of interdependence between them,
which is likely to have consequences for the extent of disruption that occurs on
linkage. Thus the attractiveness of external capabilities depends not only on their
value combination with internal capabilities, but also on interdependence.
Interdependence = the concept in theory of organization design and refers to the

property that says that the value of performing on activity depends on how
another activity is performed.
* A decision maker who takes into account both the benefits and costs of
structural integration is less likely to choose structural integration in this case. 
H1. Structural integration is more likely in technology acquisitions, when the

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acquisition is motivated by obtaining a component technology (rather than a

standalone product).
*A decision maker who matches a structural integration decision to the requisite
levels of coordination made necessary by interdependence is less likely to
structurally integrate component technology acquisitions when common ground
is available as an alternative means of achieving coordination  H2. The
existence of high levels of common ground between individuals from acquiring
and acquired organizations lowers the likelihood that component technology
acquisitions will be structurally integrated.
Methods: Firms <500 employees, M&A database, 207 acquisitions by 49

acquirers
Results: H1 and H2 are supported
Discussion: The results support their arguments that despite the known adverse
consequences of structural integration in technology acquisitions,
interdependence motivates structural integration, but common ground can
substitute for structural integration as an alternate means.
Conclusion: A coordination perspective helps explain why structural integration

may be necessary I technology acquisitions despite the disruption costs this
imposes, as well as the conditions under which it becomes less (or un-)
necessary. The study shows that interdependence motivates structural
integration, but pre-existing common ground offers acquirers an alternate path
to achieving coordination that may be less disruptive than structural integration.
The key implications for capability renewal through external sources are the
importance of interdepended as a criterion to assess the attractiveness of
external capabilities and the value of creating an harnessing common ground
between source and recipient organizations.
Required readings for lecture 4: Innovation vs imitation
● Pisano, G., & Teece, D. (2007). How to capture value from innovation: Shaping
intellectual property and industry architecture. California Management
Review, 50(1), 278-296.
Figuring out how to capture value from innovation at the enterprise level is not a
new problem.
In making strategic decisions about how to capture value from innovation,
managers often look at two critical domains—the intellectual property
environment and the architecture of the industryas beyond their control. By
understanding these forces, managers will be in a better position to utilize the

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full toolkit of available mechanisms (and strategies) to capture value from

innovation.
PFI – Profiting from innovation framework - PFI addressed a puzzle that had not
been well explained in the previous literature: namely, why is it that pioneers
often fail to capture the economic returns from innovation?
Two environmental factors that shape the distribution of returns from innovation,
and that strategy innovators should follow to enhance returns, are the
appropriability regime and industry architecture.
The appropriability regime refers to the protection afford to innovators through

both legal mechanisms (e.g., patents, trade secrecy, copyrights, and non-
disclosure agreements) and “natural” barriers to imitation (e.g., degree of
difficulty in reverse engineering, and tacitness of relevant technology). From
strong to weak. Managers can re-engineer the appropriability regime in their
favour, to some degree.
Upstream.. downstream?!
In short, innovators can sometimes help shape the investment decisions of

others (such as complementors). Having a high share and financial resources to
invest in venture capital and/or alliance relationships helps. This is particu-larly
true when markets have two or more “sides,” as is frequently the case with
hardware and software markets, and with payment schemes (e.g., credit cards).
An emerging literature on platforms illuminates these dynamics.
The frame-work developed may allow both scholars and managers to think about
tech-nology strategy more expansively. In particular, it is sometimes beneficial
for innovators to push technology into the public domain rather than keeping it
proprietary. Also, it is sometimes beneficial to promote modularity, particularly if
one retains competence (and control) over the systems integration function.
Promoting modularity can be both beneficial and hazardous.
● James, S. D., Leiblein, M. J., & Lu, S. (2013). How firms capture value from
their innovations. Journal of management, 39(5), 1123-1155.
Abstract:
Over the past 25 years, the technology strategy literature has examined how
four primary
mechanisms—patents, secrecy, lead time, and complementary assets—influence
whether and to
what extent firms capture value generated by their innovations. Although this
literature has had
a profound impact on our understanding of how firms capture value from
innovation, we have
yet to develop a robust theory that allows us to unbundle the characteristics of
institutions,
industries, firms, and individual technologies that affect the selection of
particular value cap-ture mechanisms. The purpose of this article is to provide a
foundation for addressing these gaps
in the literature. We identify and assess relevant scholarly work regarding value
capture

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mechanisms published in top-tier peer-reviewed management journals between

1980 and 2011.
We then review the assumptions, insights, and causal mechanisms for the
antecedents and con-sequences of the value capture mechanisms highlighted in
these articles. The ultimate objective
is to identify research opportunities that help to better understand the conditions
under which
specific bundles of value capture mechanisms are most likely to help innovating
firms achieve
persistent superior performance.
Introduction: The field of strategic management is fundamentally interested in

describing why firms
differ in their investment choices and subsequent performance
Although previous work has had a profound impact on technology strategy

research,
at least three limitations remain. One, the majority of work in this area
emphasizes the use
and relative effectiveness of patents (versus secrecy) as a mechanism for
capturing value
from innovation. Two, the field has yet to unbundle the characteristics of
institutions, industries,
firms, and individual technologies that affect the selection of particular value
capture mech-anisms. Three, we have yet to develop a robust theory that allows
us to comparatively assess whether and when each of these mechanisms is likely
to be most effective in capturing value generated by a given innovation.
The objectives of this article are to review the literature on value capture
mechanisms, to document what is known about the conditions under which
specific mechanisms are selected, and to spur future work that examines the
conditions under which these mecha-nisms are more or less effective. In
particular, we examine what is known and identify future research opportunities
regarding the following two questions: One, when should firms choose to invest
in the use of a specific value capture mechanism or bundle of mechanisms? Two,
what are the relative effects of these value capture mechanisms on profits from
innova-tion?
The ultimate objective of this article is to identify research opportunities that

help scholars to better understand the conditions under which specific bundles of
value capture mechanisms are most likely to allow innovating firms to achieve
persistent superior performance.

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In sum, our review of the literature on how firms capture value from their
innovations suggests that firms create barriers to imitation and protect their

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competitive advantages by selecting from the entire set of isolating mechanisms

available to them. We highlight impor-tant institutional, industry, firm, and
technological characteristics that influence a firm’s selection of six value capture
strategies emphasized in our sample of articles. Table 1 sum-marizes these key
factors that drive firms’ selection decisions.

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Methods: 100 key articles, summary of the literature from .. until ..
Conclusion: General insight:

1. One, although the literature highlights the use of four primary isolating
mechanisms—patents, secrecy, lead time, and complementary assets or their
combinations—as value capture strategies, we are unaware of any work that has
explicitly acknowledged all of the 16 possible generic strategies highlighted in
this review.
2. Two, the evidence demonstrates that the propensity of firms to use these
mechanisms varies with the institutional appropriability regime, industry, firm,
and technological characteristics.
3. Three, the evidence shows significant differences in the effectiveness of each
mechanism across industries (e.g., food vs. the pharmaceutical industry) and
types of innovation (e.g., discrete vs. complex, product vs. process).
4. Four, value capture strategies that draw on sources of firm-specific
appropriability may be more effective than patents alone.

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5. Five, firm-specific innovation capabilities may enable firms to capture value

from their innovations, and this potential effect is independent of other
contextual factors.
● Zobel, A., Lokshin, B., & Hagedoorn, J. (2017). Formal and informal
appropriation mechanisms: The role of openness and innovativeness.
Technovation, 59(1), 44-54.
Introduction: This study examines how firms’ degree of openness and innova-
tiveness is individually and jointly associated with their use of formal and
informal appropriation mechanisms innovation activities are associated with the
implementation of formal as well as informal appropriation mechanisms. A recent
study by Neuhaeusler (2012) investigates to what extent firm characteristics,
such as size and industry affiliation influence the preference for formal and
informal appropriation me-chanisms. Despite this evidence, less is known about
how firms’. This is surprising, since appropriation mechanisms are relevant tools

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for translating innovation activities into sources of competitive advantage (Milesi

et al., 2013) and are, therefore, likely to be influenced by characteristics of the
innova-tion process. This paper addresses this gap by investigating how the
degrees of openness and newness of firms’ innovation activities influence firms’
use of both formal and informal appropriation mechanisms.
This study adds to this prior work by investigating how two specific
characteristics of the innovation
process –the degree to which it is open and the degree to which it is radical
versus incremental – influence the implementation of both formal and informal
appropriation mechanisms. As such this study follows prior research in
suggesting that characteristics of the innova-tion process impact firms’ use of
appropriation mechanisms
Hence, the first research question refers to the influence of openness in

innovation – in terms of external search breadth and depth the use of both formal
and informal appropriation mechanisms.
Hence, the second research question is: to what extent does the degree of
innovativeness of firms influence their use of formal as well as informal
appropriation mechanisms?
Accordingly, a third research question deals with the joint impact of the two
aspects of firms’ overall innovation strategies, i.e., their openness and innova-
tiveness, on appropriation mechanisms.
H1. Firms’ external search breadth has a positive association with their
H2. Firms’ external search depth has a positive association with their use of (a)
formal appropriation mechanisms and (b) informal appropriation mechanisms.
H3. Firms’ radical innovation orientation has (a) a negative association with their
use of formal appropriation mechanisms and (b) a positive association with their
use of informal appropriation mechanisms.
H4. Firms’ incremental innovation orientation has (a) a positive association with their use of formal
appropriation mechanisms and (b) a negative association with their use of informal appropriation
Mechanisms
H5. Increasing external search breadth of incremental innovators is positively associated with their
use of formal appropriation mechanisms.
H6a. Increasing external search depth of radical innovators is positively associated with their use of
formal appropriation mechanisms.

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H6b. Increasing external search breadth of radical innovators is positively associated with their use of
informal appropriation mechanisms.
Methods: Dutch Community Innovation Survey, DV formal appropriation mechanisms, DV informal

appropriation mechanisms, IV external search breadth, external search depth
First, the results displayed in Table 5 can serve as a helpful template for managers deciding on the
firms’ use of formal and informal appropriation strategies. The table shows how the openness in
innovation and the overall innovativeness of firms constitute important factors in the
implementation of formal and informal appropriation mechanisms.
Second, the results are informative for understanding appropriation strategies of competitors and
potential partners.
In sum, this study suggests that the role of search breadth and depth differs between radical and
incremental innovators. This differ-entiation of firms in terms of both the breadth and depth of their
search openness as well as their role as incremental or radical innovators, enables a new and more
fine-grained analysis of the degree to which firms use formal and informal appropriation
mechanisms. Interestingly the strategic innovative choices – in terms of external search openness
and degree of innovativeness – are more relevant for determining firms’ use of formal and informal
appropriation than external factors such as industry affiliation – or more general firm characteristics,
such as size, level of R&D engagement, and group affiliation.
Limitations and conclusion:

To conclude, the analysis presented in this paper generates a number of interesting new insights. It
demonstrates how two specific facets of the overall innovation activities of firms (i.e. openness and

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degree of innovativeness) influence firms’ implementation of formal and informal appropriation

mechanisms. These findings suggest a more detailed insight regarding appropriation strategies and
manage-ment of appropriation mechanisms by firms and how these are influenced by firms’ strategic
behaviours. In addition, this study contributes to the open innovation literature by developing a
more differentiated picture of how firms manage appropriation mechanisms when engaging in open
innovation activities. In particular, it suggests that the different types of search openness (i.e.
breadth and depth) and different levels of innovativeness (i.e. incremental versus radical) intertwine
in shaping a firm's implementation of formal and informal
appropriation mechanisms.
Required readings for lecture 5: Stakeholder- vs. shareholder-oriented growth

● Margolis, J.D., & Walsh, J.P. (2003). Misery loves companies: Rethinking social initiatives by
business. Administrative Science Quarterly, 48(2), 268-305.
Abstract: We propose an alternative approach, embracing the tension between economic and
broader social objectives as a starting point for systematic organizational inquiry. Adopting pragmatic
stance, we introduce a series of research questions whose answers will reveal the descriptive and
normative dimensions of organizational responses to misery.
Middle: The challenge facing those who advocate corporate social initiatives then is to find a way to
promote what they see as social justice in a world in which this shareholder wealth maximization
paradigm reigns. The aim has largely been to demonstrate that corporate attention to human misery
is perfectly consistent with maximizing wealth.
Aware of human suffering and alert to the challenge from economic contractarianism, organization
theorists and empirical researchers have sought to identify a role for the firm both attends to
shareholders' interest in wealth creation and looks beyond it. In this light, empirical research has
largely focused on establishing a positive connection between corporate social performance (CSP)
and corporate financial performance (CF).
TOWARD A NORMATIVE THEORY OF THE FIRM - The antinomy poses a fundamental question for
organizanization theorists and managers: How can business organizations respond to human misery
while also sustaining their legit cy, securing vital resources, and enhancing financial performance?
Conclusion: The many organizational scholars who have investigated the relationship between social
and financial performance have been eager to develop empirically informed theory that stimulates, if
not guides, practice. Paradoxically, by acknowledging the fundamental tension that exists between
the roles corporations are asked to play, organizational scholars have the opportunity to inform
practice-and thereby help society-where past efforts to remove the tension have fallen short. Before
rushing off to find the missing link between a firm's social and financial performance, all in hopes of
advancing the cause of social performance, we need to understand the conditions under which a
corporation's efforts benefit society. This asks us to question corporate social performance and
competing conceptions of the firm down to their very roots. Personal values and commitments will
no doubt orient the theories we prefer and the research questions we ask. To honor those values and
commitments, however, we must acknowledge and question them. Such appraisals ensure the
quality of our research and the integrity of our commitments.

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● Bosse, D. A., Phillips, R. A., & Harrison, J. S. (2009). Stakeholders, reciprocity, and firm
performance. Strategic Management Journal, 30(4), 447-456.
Rather than being purely self-interested, people behave reciprocally by rewarding others whose
actions they deem fair and willingly incurring costs to punish those they deem unfair. Economists
show that employers who are perceived as distributionally fair by their employees generate
comparatively more value due to the positively reciprocal behavior of those employees. The
organizational justice literature distinguishes two additional types of fairness assessed by employees.
Drawing from both these bodies of work, we employ stakeholder theory to propose how perceptions
of fairness result in reciprocity (1) extending to all stakeholders of the firm and (2) affecting firm
performance.
Specifically, we have discussed how stakeholders’ perceptions of a firm’s distributional, procedural,

and interactional justice can influence their behavior toward the firm. We have also discussed why
and how more rent can be created in firms that are considered fair. In other words, a firm can create
value by sharing it with stakeholders.
In this approach, the firm attempts to distribute some surplus value in the form of material
resources, procedural fairness, and/or interactional fairness to a broad group of stakeholders. By
distributing this value, the firm creates a pattern of positive reciprocity among its stakeholders that
supports the creation of additional rent.
Our central argument is that the primary pay-off to the firm for incurring these costs associ-ated with
the three dimensions of justice is that it enjoys relationships with stakeholders who pos-itively
reciprocate—and that the cooperation of such stakeholders in aggregate creates rent.
● Jones, T. M., Harrison, J. S., & Felps, W. (2018). How applying instrumental stakeholder
theory can provide sustainable competitive advantage. Academy of Management Review,
43(3), 371-391.
Abstract: If instrumental stakeholder theory–based stakeholder treatment is so valuable, why isn’t it

the dominant mode of relating to stakeholders? We argue that the existing instrumental stakeholder
theory literature has three shortcomings that limit its ability to explain variance in performance. (1)
Little theory exists around how instrumental stakeholder theory–based stakeholder management
could provide sustainable competitive advantage. (2) The literature has largely neglected the
potential downsides (i.e., costs) associated with pursuing these sorts of stakeholder relationships. (3)
There is a paucity of theory on the contexts in which the incremental benefits of instrumental
stakeholder theory–based stakeholder relationships are most likely to exceed the costs. As our
primary contribution, we develop a theoretical path from a communal sharing relational ethics
strategy—characterized by an intention to rely on relational contracts, joint wealth creation, high
levels of mutual trust and cooperation, and communal sharing of property—to a close relationship
capability, which we argue is valuable, rare, and difficult to imitate and, thus, a potential source of
sustainable competitive advantage. We also consider the potential costs of achieving this capability
and identify contexts in which the resulting relationships are likely to have the greatest net value.

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Any other scholarship that provides a detailed

examination of why the capability to create a close
relationship with a stakeholder could represent a source
of sustainable competitive advantage. We have provided
a model that illustrates that, given particular contextual
and firm- specific conditions, the incremental benefits of
a close relationship capability can exceed the costs of a
strategy used to develop and maintain it. Furthermore, firms that are successful in developing a
close relationship capability may enjoy a sustainable competitive advantage because such
capabilities are likely to be rare and are very difficult to imitate, even in contexts in which they are
the most advantageous.
Required readings for lecture 6: the pyramid principle & product, service or
platform?
• Minto, B. (1998). Think your way to clear writing. Consulting to Management, 10 (1),
33.
Conclusion: Use headings
• Cusumano, M. A., & Gawer, A. (2002). The elements of platform leadership. MIT Sloan
management review, 43(3), 51.
Platform leaders = companies that drive

industrywide innovation for an evolving system
of separately developed pieces of technology
Three problems for platform leaders: 1. How to

maintain the integrity of the platform (the
compatibility with complementary products) in
the face of future technological innovation and
the independent product strategies of other
companies. 2. A related problem is how to let
platforms evolve technologically (as they must
or become obsolete) whule maintaining
compatibility with past complements. 3. A third
problem is how to maintain platform leadership.
Wannabes = companies that want to be

platform leaders and challenge them
Complementors = companies that make

ancillary products that expand the platform’s
market

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Example, Intel
makes computer chips that are a component in a broader
platform and has no value without other companies
‘’rabit’’ strategy – targeting a promising complementor and assisting in such a visible
way that other companies follow. (What is the intel of BBLeap?). The approach draws the
attention of investors and complementors to a potentially lucrative new market and
signals that the platform leaders aim to stay out of the complementary market.
Conclusion: Platform leaders need to have a vision that extends beyond their current
business operations and the technical specifications of one products or one component.
The ecosystem can be greater than the sum of its parts if companies follow a leader and
create new futures together. Complementors need to understand the vision of the
platform leader in their industry and make some bets on that vision means for their own
future. But it is the platform leaders over the degree and kind of innovations that
complementary producers create. Platform leadership and complementary innovation by
outside companies are not things that happen spontaneously in an industry. Managers
with vision make them happen. (What BBLeap’s platform leaders, what is the vision of
the platform leader?, Does BBleap/ platform leaders have management with vision?)
• Gawer, A., & Cusumano, M. A. (2015). Platform leaders. MIT Sloan management
review, 68-75.
This article focuses on the special problems of companies that want to become platform
leaders – ‘’platform leader wannabes’’. Many companies fail to tackle adequately the
technology and business aspects of platform leadership.
The technological challenges involve designing the right architecture, designing the right
interfaces/connectors and disclosing intellectual property selectively, in order to facilitate
third-parties’ provision of complements. The business challenges include either making
key complements or introducing incentives for third-party companies to create the
complementary innovations necessary to build market momentum and defeat competing
platforms.

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One strategy, “coring,” addresses the challenges of creating a new platform where one
has not existed before. The second strategy, “tipping,” tackles the problem of how to
win platform wars by building market momentum
Put simply, a product is largely proprietary and under one company’s control, whereas an
industry platform is a foundation technology or service that is essential for a broader,
interdependent ecosystem of businesses. The platform requires complementary
innovations to be useful, and vice versa. An industry platform, therefore, is no longer
under the full control of the originator, even though it may contain certain proprietary
elements.
Nor can every product become a platform. To have platform potential, however, research
suggests that a product (or a technology or service) must satisfy two prerequisite
conditions: (1) It should perform at least one essential function within what can be
described as a “system of use” or solve an essential technological problem within an
industry, and (2) it should be easy to connect to or to build upon to expand the system of
use as well as to allow new and even unintended end-uses.
(BBLeap must focuss on one product and let external companies develop complementary
and interoreable products)
How can platform-leader wannabes successfully encourage other companies to join
their ecosystems and develop essential complementary applications? Answering that
question is one of the two essential business aspects of coring. The platform leader must
create economic incentives for ecosystem members to invest in creating
complementary innovations and to keep doing so over time. In addition, platform-leader
wannabes need to protect their ability to profit financially from their innovations, just as
any innovator company should. The balancing act — protecting one’s sources of profit
while enabling complementors to make an adequate profit and protect their own
proprietary knowledge — is perhaps the greatest challenge to platform leadership.
“Tip- ping” is the set of activities or strategic moves that companies can use to shape
market dynamics and win a platform war when at least two platform candidates
compete. These moves cover sales, marketing, product development and coalition

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building. As with coring, successful tipping requires actions taken from both the
technology and the business sides of the platform.
Companies that tip across markets by bundling new features can leverage existing
market power, technology or reputation to help them move into adjacent markets.
Linux good example for BBleap? Still, we believe that Linux would not have become
widely ac- cepted as an enterprise software platform without the decision of numerous
powerful companies, led by IBM and Hewlett-Packard Co., to provide support services for
it and bundle it with their hardware servers and other software products. Linux is a case
study that illustrates the ability to accomplish tipping through the power of a large, and
still growing, coalition of service provider companies as well as users.
At the same time, though, smaller companies are likely to have a harder time negotiating
with large enterprise
customers. They may also find it difficult to tip markets on their own and generally will
need to establish ecosystem part-nerships or coalitions of providers and users — as JVC,
Microsoft, Intel and Linux have done.
It can sometimes times be hard to convince others to follow a particular direction, for
example, when an industry is undergoing transition and its contours are ill-defined, or
when technology is evolving too rapidly. But these are the very conditions when
companies that want to become platform leaders can stand out — precisely because they
are so badly needed.
Eisenmann, T. R., Parker, G., & Van Alstyne, M. (2009). Opening platforms: how,
when and why?. Platforms, markets and innovation, 6, 131-162.
Selecting optimal levels of openness is crucial for firms that create and maintain
platforms. Opening a platform can spur adoption but also increase competition. In this
chapter, we review research on factors that motivate managers to open or close mature
platforms.
Platform openness occurs at multiple levels depending on whether partici- pation is
unrestricted at the (1) demand-side user (end user), (2) supply- side user (application
developer), (3) platform provider, or (4) platform sponsor levels. These distinctions in
turn give rise to multiple strategies for managing openness.

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Horizintal strategy = target a firm’s existing and prospective rivals, as with horizontal
mergers that consolidate a monopoly. In this context opening a firm’s platform means:
(1) allowing a rival platform’s users to interact with the focal platform’s users;
(2) allowing additional parties to participate directly in the focal platform’s
commercialization;
(3) allowing additional parties to participate directly in the focal platform’s technical
development.
Conditions under which these three strategies for opening mature platforms will be
attractive for sponsors:
 Interoperability with established rivals = platform A can interact with platform B
users (Ex. Mobile providers)
 Properties of converters = Adapters/ gateways (Ex. Apple store and Real’s
Harmony music app)
 Entry deterrence = platfrom creator uses linceses so that it makes some profit
from other companies on the platform.
 Licensing New Providers = License to additional platform providers
 Broadening sponsorship = Platform uses core technology as given and others can
only use this technology.
Vertical strategy = Firms that sponsor platforms face familiar decisions about vertical
strategy. For example, they must decide when to rely on third-party suppliers versus in-
house units for platform components.
The conditions under which platform sponsors are likely to pursue these vertical
strategies:
 Backward compatibility = when launching next-generation platform products and
services, platform sponsors must decide whether to engineer them to be
backward compatible with complements developed for previous platform
generations.
 Platform and Category Exclusivity = Agreements between sponsors and third-
party complementors that restrict complementors’ platform access have two
dimensions – platform exclusivity and category exclusivity
 Platform exclusivity = When competing against rival platforms, securing the
exclusive affiliation of complementors can accelerate a platform’s growth. In order
to secure exclusive rights when a platform is young and there is uncertainty about
its prospects, sponsors typically must offer economic concessions to third- party
complementors.
 Category exclusivity = Complementors may be reluctant to make platform-
specific investments if they will face a serious problem with ‘business stealing’ by
their close rivals. One way for platform sponsors to profit from this situation is to
deliberately exclude all but a few supply-side users, then charge that sole user
high fees for the privilege of trading with the platform’s demand- side users.
 Absorbing Complements = As platforms mature, proprietary providers may absorb
complements previously supplied by third parties.
 Efficiency gains = When a complement is consumed by a large fraction of a
platform’s users, bundling its functionality with the platform provider’s core
offering may be more
convenient for users, who can
avoid shopping among alterna-
tives, spend less time
configuring the complement,
and value a single point of
contact for customer service.

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Strategic advantages Beyond the efficiency gains described above, absorbing a

complement can also yield strategic advantages:
- Bundling components can importove customer rentention rates
- Allow a monopolist to profitably extend its market
 New market viability = Sometimes a platform sponsor must serve as a supplier in

a new applications layer to help build users’ confidence that a market will
emerge. To resolve ‘chicken-and-egg’ dilemmas, platform sponsors sometimes
step into the user role on one side of their network, producing complements
valued by users on the other side. Chicken-and-egg.
 Cross-layer envelopment = Moves like Microsoft’s to absorb essential
complements play an important role in the evolution of industries that are
organized into hierarchical layers. As platforms mature, their providers sometimes
embrace modular technologies and cede responsibility for supplying certain
complements to partners.
MANAGING MATURE PLATFORMS: Whether a platform becomes more open or closed as it

matures depends on whether it was originally structured as a proprietary or a shared
platform. By its nature, a proprietary platform can only become more open. In contrast,
a shared platform is already open; the available options are mostly more closed. These
dynamics suggest that as proprietary and shared platforms mature, their sponsors and
providers will face very different management challenges. Below, we discuss some of
these challenges.
 Proprietary Platform Priorities: Dealing with Dominance = By definition, a

proprietary platform provider is the central participant in its ecosystem. This can
be a position of considerable power, especially when the platform is a monopolist
in its market. Managers
 Shared Platform Priorities: Dealing with Stalemates = Competition between
sponsors to build their own technologies into next-generation products can lead to
the dissolution of a shared platform in two ways. The platform can splinter into
incompatible versions. Alternatively, paralysis over the platform’s design may
retard innovation and expose it to rival (stalemates0
 Accommodating new platform providers = The management skills needed as a
shared platform matures overlap with those required during the platform’s early
phases. Executives and entrepreneurs must time their proposals carefully,
manage intellectual property strategically, practice peer-to-peer diplomacy, and,
when necessary, reen- gineer platform governance arrangements. Diplomacy is
complected since start-ups and established firms are totally different
environments  Start-ups versus incumbents
 Centralizing governance
o Vertical governance As described above, a mature platform’s sponsor may
choose to absorb complements previously supplied by third parties,
especially when the complements are consumed by a large fraction of the
platform’s end users.
o Horizontal governance Reengineering horizontal governance arrange-
ments may also be a priority as a shared platform matures. To prevent
splintering and stalemates, platform partners may recognize a need to
create or strengthen a central authority that can dictate priorities.
Required readings for lecture 7: Related vs. unrelated diversification

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Chatterjee, S., & Wernerfelt, B. (1991). The link between resources and type of
diversification: Theory and evidence. Strategic management journal, 12(1), 33-
48.
This paper theoretically and empirically investigates the idea that firms diversify in part
to utilize productive resources which are surplus to current operations. Knowledge of
these resources allows us to make predictions about the direction of a firm’s expansion.
In particular this paper suggest that excess physical resources, most
knowledge-based resources, and external financial resources are associated
with more related diversification, while internal financial resources are
associated with more unrelated diversification.
There is some lack of consistent support in the literature about the finding that related
diversified firms perform better than those that are unrelated. Is unrelated diversification
the better choice in specific instances, even though on average it seems to be inferior to
related diversification?
This paper is not about why a firm diversifies, but rather the type of market that a firm
chooses to enter. Resources are key in explaining diversification. A resources based
approach allows us to adopt the perspective of the diversifying firm’s managers. If the
basic assumption is valid, then we would expect managers to deploy firm resources to
markets they believe would lead to the most profits.
Three classes of resources:

(a) Physical resources (Ex. Plant and equipment)
(b) Intangible assets (Ex. Brand names and innovative capability)
(c) Financial resources (Most flexible, liquidity, funds, external funds)
H1 Excess physical capacity will lead to related diversification

H2 Presence of intangible assets will lead to related diversification
H3A: Availability of internal funds or unused debt capacity will favor more unrelated
diversification
H3B: Availability of equity capital will favor more related diversification
H4: Firms which have higher performance ex-post, will conform better to our model
Controls: risk, size, capital intensity, initials level of diversification
Discussion and implications:

 Intangible resources: intangible and financial resources are the dominant factors
in explaining the type of diversification a firm chooses.
 One of the more interesting findings of the study is the association between long-
term liquidity and more unrelated diversification. This finding lends empirical
support for the new generation of finance theories that claim that the method of
financing does matter when the capital market has different expectations than the
managers of the firm. This finding confirms the results of the studies in strategic
management that suggest that unrelated diversification is considered to be more
risky by the capital market (see also the discussion on risk in the stratified
sample, later).
 Performance: Perhaps the most important finding of this study comes from the
stratified samples of high- and low-performing firms. The lack of significance for
the overall regression for the low-performance sample supports our expectation
that the high- performance firms are the ones who are likely to use resources
according to the theory developed in the paper.
o High research intensity was associated with more unrelated diversification
(highly significant)
o Free cash flow can lead to more unrelated diversification.

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o Overall the performance subsamples suggest that performance is not a

function of diversification strategy but the appropriateness of the
diversification strategy given the resource profile of the firm.
o In contrast to the high-performing firms, the low-performing firms use
short-term liquidity (CR) in long-term diversification moves. Since short-
term funds should, in general, not be used for long-term moves this may
have contributed to their inferior performances.
Palich, L. E., Cardinal, L. B., & Miller, C. C. (2000). Curvilinearity in the

diversification–performance linkage: an examination of over three decades of
research. Strategic management journal, 21(2), 155-174.
While an extensive literature examines the diversification-performance relationship, little

agreement exists concerning the nature of this relationship. Both theoretical and
empirical disagreements abound. This study synthesizes findings from three decades of
research to address major theoretical issues that remain open to debate. We derive three
competing models from the literature and empirically assess these using meta-analytic
data drawn from 55 previously published studies. The results of our tests indicate
that moderate levels of diversification yield higher levels of performance than
either limited or extensive diversification. Thus, we provide support for the
curvilinear model; that is, performance increases as firms shift from single-
business strategies to related diversification, but performance decreases as
firms change from related diversification to unrelated diversification. The
results also indicate major effects from variation in diversification and
performance operationalizations.
There is no consensus within the literature about diversification and performance. In our
review, critique, and synthesis of theoretical perspectives, we derive our own view of the
diversification-performance linkage, and we then test
this view empirically.
 The linear model:

o Market power
o Internal market efficiencies
o Other advantages (firm specific assets)
 Curvilinear models: this theory recognizes that
increasing diversification may not be
associated with simultaneous increases in
performance. Two models:
o The inverted U-model: The notion that
related diversification is superior to that
which is unrelated or conglomerate in
nature. Combining these arguments
with those supporting related
diversification.
o The intermediate model: In general, the
Intermediate Model can be tied to the
notion that diversification yields positive
but diminishing returns beyond some point of optimization
Hypothesis: Diversification exhibits an inverted-U relationship with firm performance:
diversification is positively related to performance across the low to moderate range of
diversification and is negatively related to performance across the moderate to high
range of diversification.
Past a certain level, however, diversification seems to cause performance problems. In

our work, this pattern emerges as a positive diversification-performance relationship in
samples that do not include firms with high levels of diversification, and as a negative
relationship in samples that do not include firms with low levels of diversification. With

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most of our results supporting the inverted-U pattern, and the overall analysis averaging
across operationalizations of diversification clearly exhibiting the inverted-U pattern, it is
evident that strategic management researchers arguing against high levels of
diversification have been on sound theoretical ground.
Thus, our findings provide support for the Inverted-U Model. These findings are parallel to
increasing anecdotal evidence in the business press that firms diversifying outside of
their core businesses or competencies inherit increased costs that interfere with
performance.
Andreou, P. C., Louca, C., & Petrou, A. P. (2016). Organizational learning and
corporate diversification performance. Journal of Business Research, 69(9),
3270-3284.
This study investigates the role of organizational learning on the valuation effects of
corporate diversification. The empirical findings suggest that corporate diversification
reduces shareholders' wealth. However, consistent with the absorptive capacity
viewpoint of organizational learning, diversification performance depends on
repetitive and accumulative experiences that relate to a firm's prior
diversification activity and/or a firm's experience in operating in multiple-
business segments. Specifically, single-business firms that diversify once
demonstrate significant value reduction. In contrast, multi-business firms that
diversify once do not demonstrate value reduction, while single/multi-business
firms that diversify multiple times demonstrate value creation. Findings also
reveal that performance is conditional on the mode of diversification since internal
growth diversification shows higher valuation effects than diversifications through
acquisitions. These findings contribute to the literature by affirming the importance of
organizational learning, a cognitive and behavioural perspective, in explaining the
valuation effect of corporate diversification.
This study tests a theoretical model that draws on the absorptive capacity viewpoint to
relate organizational learning to the valuation effects of corporate diversification.
The experience from individual diversifications including failed ones, create valuable
learning for firms which can enhance the overall performance of a diversification
program. To address this issue, this study uses business segment-level data, to develop
corporate diversification profiles that capture different capacities of repetitive and
accumulative organizational experiences as an indication of absorptive capacity.
The study defines diversification profiles by classifying diversified firms into three
categories depending on both a firm's prior diversification activity and the firm's
experience in operating in a multiple-business structure:
(i) single-business firms that diversify once (Single-Busi- ness-Once);
(ii) multi-business firms that diversify once (Multi-Busi- ness-Once), and;
(iii) (iii) single/multi-business firms that diversify multiple times (Single/Multi-
Business-Many). Single-Business-Once;
Diversifications should demonstrate higher performance when firms diversify through

internal growth than acquisitions.
Some scholars argue that diversification destroys shareholders value others rationalizes
the fact that many firms remain diversified or even decide to diversify further.
H1a. Single-Business-Once firms demonstrate the lowest corporate diversification

performance in comparison to firms belonging to the other two diversification profiles.
H1b. Single/Multi-Business-Many firms demonstrate the highest corporate diversification
performance in comparison to firms belonging to the other two diversification profiles.

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H1c. Multi-Business-Once firms demonstrate higher corporate diversification performance

in comparison to Single-Business-Once firms and lower corporate diversification
performance in comparison to Single/Multi-Business-Many
The results show a value discount only in single-business firms that diversify once. In
contrast, firms with two or more diversifications achieve value premiums instead. These
firms develop competence in the process of carrying out such corporate actions.
Naturally, the repetitive pursuit of diversifying decisions refines these competences to
further enhance economies of scope, which translates into greater firm value. In that
respect, firms that engage in multiple diversification actions should possess greater
experience at integrating the different resources, such as manufacturing,
transportation, distribution, and, capabilities in communication, coordination and cost
management of their different business units.
In addition, these firms operate in multiple-business segment structures, and as such,

they develop specialist skills to exploit commonalities among businesses which they may
successfully apply to new diversifications (Hayward,
Finally, multi-business firms that diversify once do not experience any adverse value
effects indicating that they perform better than single-business firms that diversify once.
 in line with practitioner’s view
Findings show that firms using internal growth to

diversify demonstrate higher valuations rather firms that pursue (resource extending)
acquisitions, which supports the perspective that the relatedness of a new business
facilitates the application of learning to reduce costs and raise innovation.
Therefore, creating systems that actively identify, transfer, store and use new knowledge
to improve practices and take better decisions may increase the benefits from
experience accumulation. In addition, this study confirms the findings of previous studies
that internal growth diversifications result in better performance than acquisitions, and
re-iterates that new diversification experience is more productive when it relates to the
firm's knowledge stock.
Required readings for lecture 8: Growing with products vs. services
Sawhney & Balasubramanian & Vish (2004). Creating growth with services. MIT
Sloan Management Review, 45(2), 34.
In a world of commoditized products companies are turning to service offerings for

growth. The key to success involves redefining markets in terms of customer activities
and outcomes, not products and services.
By mapping the customer-activity chain and relating the map to a service-opportunity

matrix, managers can systematically explore opportunities for new services in four
directions. It has the following characteristics:
 It must be defined at the segment level, not at the aggregate market level. For
instance, it makes no sense to talk about the customer-activity chain for
information workers when analyzing productivity. Activities should be mapped
according to segments — lawyers, sales executives, health care practitioners and
so on.
 It will often cross industry and product-market boundaries. For example, in the
home ownership customer-activity cycle, customers might engage with
contractors, insurance companies, realtors, banks, telecom companies and many
other service providers. In fact, services are often the glue that holds the activity
sequence together.

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Companies traditionally think about markets in terms of the offerings they sell. But as
Peter Drucker has pointed out, “What the customer buys and considers value is never a
product. It is always utility — that is, what a product does for him.”
Once companies are thinking in terms of the customer-activity chain, they can classify
new services along two dimensions: the focus of growth (where does growth occur?) and
the type of growth (how does growth occur?). The “where” question can be answered by
thinking about primary and complementary, or
adjacent, activity chains. For example, visiting a
dealership is a primary activity on the auto ownership
chain, whereas seeking insurance quotes is a
complementary activity that falls on an adjacent chain.
Service growth opportunities can be found on both
chains and in two ways (the “how” question): first by
adding new activities and second by reconfiguring
existing activities.
Merging the focus of growth with the type of growth

results in the two-by-two service-opportunity matrix. The
four elements of the framework include:
 Temporal expansion: growth from services that
add new activities to a primary activity chain;
managers should make a blueprint
o Can Services Be Added That Precede the
Sale of the Core Product?
o Can Services Be Added That Follow the Sale of the Core Product?
o Can Services Be Added To Accompany the Product?
o Can the Product Be Augmented With Network-Based Services?
o Can the Product Be Updated With Services?
 Spatial expansion: growth from services that add new activities to an adjacent
chain (Kodak example)
o Are there activities that are not typically part of the primary chain but are
closely associated with it?
o Can existing products or service platforms anchor the introduction of
services in another context?
o Can the company’s reputation related to the primary activity chain be
extended to other contexts?
o
o
o
o
o
o
o
o
o
o
o
o
o
Can Products Become
o
Platforms for Embedded Services?
o Can the Existing Customer Base Be “Rented”?
o Can the Existing Customer Interface Be Leveraged?
 Temporal reconfiguration: growth from services that change the structure and
control of activities within a primary chain

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o Can Process Expertise Be Leveraged?

o Can Customers’ Inventory-Control and Stocking Processes Be Replaced?
o Can Processes Unrelated to Customers’ Core Competencies or Strategic
Objectives Be Taken Over?
 Spatial reconfiguration: growth from services that change the structure and
control of activities within an adjacent chain
o Can Services Be Added To Integrate Complementary Customer Activities?
o Can Services Be Added To Leverage the Brand?
o Can Services Be Shifted From Grounded to Mobile Assets?
o Can Services Change the Way Customers Acquire Products?
Conclusion: There are no mature markets; there are only mature marketers.” In difficult
economic times, companies often find themselves stumped as they look for growth in
their core businesses. And they are intimidated by the high rate of failure of services-led
growth initiatives. But those that systematically employ the frameworks for exploring
opportunities and managing risks in services-led growth should find that success is less
elusive.
Brax, S. A., & Visintin, F. (2017). Meta-model of servitization: The integrative

profiling approach. Industrial Marketing Management, 60, 17-32.
This study develops a profiling framework that allows systematic comparison of different
value constellations of industrial, service-based business models. Following the
systematic review method, 154 research articles on servitization are analyzed using this
profiling approach, producing an integrative meta-model of servitization. Three different
approaches to represent servitization in studies are identified: 1) end-state models; 2)
gradual transition models, and 3) stepwise progression models. These are systematically
compared and eight conceptu- ally different, generic value constellations ranging from
low to high levels of servitization are identified: products with limited support; installed
and supported products; complementary services; product-oriented solutions; systems
leasing; operating services; managed service solutions; and total solutions. These form a
pattern of servitization showing increases in complexity of the offering and value for the

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customer as well as changes in operational responsibilities in the value constellations.

This approach resolves the gap of conceptual incommensurability’ in the literature by
providing a reference against which the different value constellations of servitization can
be compared. The meta-model connects the various perspectives, models and
terminology into a base line theory of servitization as a process, and enables a
systematic comparison of the different empirical studies.
Servitization = matching products to services  ‘servitization of manufacturing is

conceptualized as a change process whereby a manufacturing company deliberately or in
an emergent fashion introduces service elements in its business model.’
Methods: systematic review
C = customer, S = supplier, T = third party

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Conclusion: Thus, eight generic value constellations of servitization were identified and
this conceptual system was fully saturated in the analysis. Each constellation
accommodates several different constellations
with different names that are similar regarding their essential elements. The generic
types were distinguished based on a change in one of the following dimensions which we
analyzed: 1) structural coverage of the product-service system life cycle (whether an
offering element is provided or not), 2) who is the party responsible for the stage
(customer, provider, or third party), 3) ownership (same as for responsibility), and 4) the
payment model (input/output/outcome based). Thus, the dimension of structural
coverage corresponds with complexity (increases to provider, decreases to customer).
Based upon the findings, this study argues that the developed profiling framework is a
valid metamodel for servitization – a model ofmodels – since it successfully mapped and
accommodated all 94 models found in the literature. In other words, instead of producing
‘yet another model’,the developed framework accommodates the pre-existing models
within one and arranges them from less to more servitized or service-dominant.
Huikkola, T., & Kohtamäki, M. (2017). Solution providers’ strategic capabilities.

Journal of Business & Industrial Marketing, 32(5).
Product manufacturers are transforming themselves into solution providers to attain a sustainable
competitive advantage.
Purpose – Drawing on the resource-based view of the firm, this study aims to analyze solution
providers’ strategic capabilities that facilitate above-average returns.
Design/methodology/approach – The study applies a qualitative comparative case method. In

addition to an extensive set of secondary data, the results are based on interviews with 35 executives
from nine leading industrial solution providers, their strategic customers and suppliers. The analyzed
solution providers were identified based on quantitative survey data.
Findings – By observing six distinctive resources and three strategic business processes, the present
study identifies seven strategic capabilities that occur in different phases of solution development
and deployment: fleet management capability, technology-development capability, mergers and
acquisitions capability, value quantifying capability, project management capability, supplier network
management capability and value co-creation capability.
Research limitations/implications – The study develops a generic model for the strategic capabilities
of servitization. Application of the developed model to different contexts would further validate and
enhance it.
Practical implications – Managers can use the developed model to benchmark, identify, build and
manage solution providers’ strategic capabilities and associated practices.
Originality/value – The study develops a valuable conceptual model based on the comparative case
data. Case firms were selected for the study based on a representative quantitative data set. The
results were verified and triangulated with external data.
Product manufacturers are transforming themselves into solution providers to attain a sustainable
competitive advantage. Only 20 per cent of manufacturers succeed in implementing their strategies
to develop, sell and deliver solutions.
The present study intends to fill this gap by building on the grounds of the resource-based view (RBV)
and solution business literature. The purpose of the paper is to identify those strategic capabilities

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that enable solution providers to outperform their rivals in the industrial markets. The paper answers
the research question: RQ1. What determines the solution provider’s strategic capabilities?
Methods: The present study utilized representative quantitative data (in the economy of Finland) to
select nine extreme manufacturing cases, where 35 interviews with senior managers were conducted
to complement an analysis of extensive secondary data.
The Resources Based view suggests that a firm’s sustainable competitive advantage is based on its
valuable, scarce and inimitable set of resources and capabilities.
The study intends to study the solution provider’s capabilities, suggesting that the advantage is
embedded in its ability to integrate the benefits of these logics by balancing and stretching
development of products, software and services into solutions.
The study’s theoretical contribution is three-fold. First, it identifies the manufacturers’ distinctive
resources that support the formulation of strategic capabilities. Second, the study sheds light on the
strategic business processes that convert resources into capabilities. Finally, this study advances the
literature on solution provider’s capabilities by identifying seven strategic capabilities that support a
solution provider’s ability to generate above-average
profits.
Regarding the first contribution, the present study

identifies six distinctive resources for the solution
providers:
1. the installed base of products and service
contracts (e.g. global installed based and
quality data ofthe installed base and
servicing);
2. physical and technological assets (e.g. product
knowledge and remote diagnostics);
3. intellectual capital (e.g. patents, brand and
references);
4. human assets (e.g. top and middle
management and solution personnel);
5. financial assets (e.g. cash flow and loans); and
6. external assets (e.g. supplier network,
intermediaries and customer base).
These pure resources that do not create competitive advantage per se correspond the concepts of
threshold capabilities, our study suggests that manufacturers should consider their suppliers and
customers’ capabilities as their key resources.
Paradoxically, the ability to exploit the supplier network was a bottleneck for many manufacturers. As
the manufacturer has to rely on other firms, it loses a degree of control. However, the best solution
providers studied were able to utilize their supplier network to reduce their production and
transaction costs and increase the number of innovations and value to the end-users.

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As the second contribution, we distinguish three strategic business processes that steer a firm’s
activities toward its strategic objectives, namely: 1 productivity-increasing business processes; 2
customer-value enhancing business processes; and 3 innovation-enabling business processes.
The findings of this study indicate that building an innovative and cost-efficient supplier network can
be a key source of a competitive advantage for the solution provider. Finally, value co-creation
capability refers to a solution provider’s downstream control, that is, the capability to build long-
lasting and profitable customer relationships that generate life-cycle benefits for both of the parties.

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GSOC papers - Summaries GSOC

Growth Strategies and Organizational Challenges (Vrije Universiteit Amsterdam)

Studeersnel wordt niet gesponsord of ondersteund door een hogeschool of universiteit

Required readings related to content of lecture 1: Business planning versus

 Abstract: This study contributes insights to the business planning discussion

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positive performance effects as studies focusing on the business planning

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environments characterized by limited uncertainty (e.g. certain established

 Abstract: Causation rests on a logic of prediction, effectuation on the logic of

Gedownload door Leidy Atmidjojo (gabygirl16@live.com)

1. Affordable loss rather than expected returns

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Propositions at the level of the economy:

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 Proposition 1: Prefirms or very early- stage firms created through processes of

Conjecture 1: In marketing decisions, in contrast to traditional decision makers,

Conjecture 2: In financial decisions, in contrast to traditional decision mak- ers,

Conjecture 3: In organizational deci- sions, in contrast to traditional deci- sion

Required readings for lecture 2: Growth versus. survival in international

 Abstract: A proposed theoretical framework for the study of multinationality

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 Introduction: What is the relationship between multinationality and firm

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 Abstract: Recent critiques of internationalization process models question the

 Hypotheses: First, we hypothesize that the younger the firm at

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costs of capability development and deployment. We propose that because

Required readings for lecture 3: Organic versus. non-organic growth

Theoretical framework based on Resource-based view (RBV) that a) differentiates

Methods: meta-analysis, 31 studies, 13.559 establishment mode choices

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* Hypotheses: Hypothesis 1: Parent firms, which possess more knowledge-based

Findings: Knowledge based-resources enhance a firm’s propensity for greenfield

● Puranam, P., Singh, H., & Chaudhuri, S. (2009). Integrating acquired

Acquirers who buy small technology-based firms for their technological

This study provides evidence of the positive relationship between

Interdependence = the concept in theory of organization design and refers to the

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acquisition is motivated by obtaining a component technology (rather than a

Methods: Firms <500 employees, M&A database, 207 acquisitions by 49

Results: H1 and H2 are supported

Conclusion: A coordination perspective helps explain why structural integration

Required readings for lecture 4: Innovation vs imitation

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full toolkit of available mechanisms (and strategies) to capture value from

The appropriability regime refers to the protection afford to innovators through

In short, innovators can sometimes help shape the investment decisions of

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mechanisms published in top-tier peer-reviewed management journals between

Introduction: The field of strategic management is fundamentally interested in

Although previous work has had a profound impact on technology strategy

The ultimate objective of this article is to identify research opportunities that

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Gedownload door Leidy Atmidjojo (gabygirl16@live.com)

competitive advantages by selecting from the entire set of isolating mechanisms

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Gedownload door Leidy Atmidjojo (gabygirl16@live.com)

Methods: 100 key articles, summary of the literature from .. until ..

Conclusion: General insight:

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5. Five, firm-specific innovation capabilities may enable firms to capture value