By Hamed Armesh 1082200034

 Over the last decade, there has been steady progress in better

understanding the predictors of firm competitive behavior. This line of inquiry has focused on firm-related (e.g., Chen & MacMillan, 1992; Chen & Miller, 1994),network-related (Gnyawali & Madhavan, 2001), and industry-related (Young, Smith, & Grimm, 1996) drivers of firm competitive behavior. Firm-related factors commonly examined are age (Miller & Chen, 1996), size (Chen & Hambrick, 1995), prior performance (Miller & Chen, 1994), and market and resource commonality between a pair of competing firms (Chen, 1996). While other strategy research streams examine the importance of strategic human assets within the firm, such as the chief executive officer (Daily & Johnson, 1997), the top management team (Wiersema & Bantel, 1992), and board of directors (Westphal & Zajac, 1995), research on firm competitive behavior pays only limited attention to their influence. Given this theoretical gap and recent calls by scholars to better understand the role of strategic choice as a driver of firm competitive behavior (Smith, Ferrier, & Ndofor, 2001),

In building the strategic human resource (SHR) model. The strategic human assets that we examine are the CEO and the TMT.Gomez-Mejia & Balkin. . as well as. Based on prior literature. we make an effort to account for both human assets and human resource practices and their resulting influence on a firm’s competitive behavior. and magnitude of competitive moves. In addition. 1990. In terms of HR practice. we also call attention to the impact of the board of directors (BOD) as a driver of firm competitive behavior. 1992). which in line with previous research (Hambrick & Mason. substantive investments a firm can make (Gerhart & Milkovich. variety. we begin to build the model around executive compensation. one of the most controversial topics. 1984). we examine three of the most critical aspects of competitive behavior—the volume. we term the upper-echelon.

In particular. To construct the theoretical lattice around this SHR model of competitive behavior. we draw on th the intra-firm perspective of social capital. 1992) . Nahapiet & Ghoshal. 1999. we examine how executive compensation practices designed to influence. 1998). which suggests that relationships between people inside the firm leads to creation and use of knowledge and other valuable resources that facilitates collective action (Leana & Van Buren. we rely on three distinct research streams. e human capital perspective Finally.and motivate individual and group behavior (Gomez-Mejia & Balkin.

social capital exists in the embedded. complex.conceptual background  The central tenet of the SHR model is that firm competitive behavior is a function of the decisions and actions of its upper echelon and BOD. p. . our SHR model.1. and on-going relationships among the members of the upper echelon and the BOD. Porter (1991. which make it difficult for competitors to imitate or replicate—hallmarks of a firm resource this resource advantage results in a firm competitive advantage within the marketplace. 108).

how a firm’s internal human assets and human resource practices help drive the specific competitive activities that result in market advantage. more clearly.. we specify. firms with superior stores of human and social capital are in a better position to launch a high volume of complex and forceful competitive moves within the marketplace . In particular. ) According to the SHR model.

and capability (C) were first introduced in Chen’s (1996) AMC model of firm rivalry. These three characteristics of awareness (A). SHR model assume that firms must possess three defining characteristics to engage in a high volume of complex and forceful moves. motivation (M). .

particularly the human and social capital of its upper echelon and BOD along with the compensation systems of the senior executive team. improve awareness. which spur and allow the firm to undertake a high volume of complex and forceful competitive moves. . Accordingly. motivation and capability of the firm’s decision makers. we investigate how a firm’s own strategic human assets and human resource practices.

2. and abilities to deal with the larger organiza-tional environment. 1962. 1993. skills. 1964. General human capital refers to the knowledge. suppliers. customers. Human capital. social capital. . skills. and executive compensation :  Human capital refers to the full range of knowledge. Knowledge of one’s competitors. ). and abilities an individual can use to produce a given set of outcomes (Becker. and other significant external stakeholders as well as one’s abilities and skills in dealing with them represent important components of general human capital.

g. information. which is the nature of relationships that exist within the organization (Leana & Van Buren. and coordination).. In our view.. problem solving. Social capital refers to the linkages between social actors. Most of the strategy research examining social capital has focused on linkages between firms and the networks that develop from them. even if a firm’s strategic human assets possess a wealth of human and other productive forms of capital. 1998). 1999). and the processes social capital makes possible (e. the potential of resource flows through them (e.g. we focus on intra-firm social capital. and the resources that flow through them (Nahapiet & Ghoshal. . . While our conceptualization of social capital includes all of these characteristics. the strength of those relationships. advice. decision-making. the strength of those linkages. and trust). Our model builds on this notion of firm-specific social capital by focusing on the linkages between the members of the upper echelon and also the BOD. they need to have strong social capital involving deep trust and willingness to effectively work with each other in a manner that contributes to the collective goal of firm.

Variable pay is composed of bonus and longerterm incentives used by the organization to direct its executive agents to pursue specific outcomes or. 2003.  In our model. has commanded the attention of both professionals and academicians (GomezMejia & Balkin. Executive compensation. we distinguish between the effects of fixed and variable pay. 2002). engage in specific behaviors desired by the owners. sometimes. . Their attention is driven by the belief that various forms of compensation will drive the kinds of executive actions that will lead to competitive firm behavior (Craig. & Cohen. Kelly. 1992. variable pay is important to the CEO and TMT for its motivational properties. 1992).2.3. Executive compensation  The motivation of top executives to use their human and social capital comes from a variety of extrinsic and intrinsic sources. Gomez-Mejia & Balkin. Calian. Thus. Dugan. however.

Smith et al.most notably some scholars suggest that competitive behavior is strategy since a firms action are the building blocks of strategy (Mintzberg 1973). . Here we focus on three critical aspects of firm competitive behavior : competitive propensity . 2001). and closely related to the last point.. 1996. Firm competitive behavior  Better understanding firm competitive behavior is of critical importance to strategic management research for several reason . Next. is that it is difficult to understand firm competitive rivalry without first understanding the why and how of firm competitive behavior (Chen.complexity and magnitude.

competitive moves with great magnitude affect a larger number of firm operations . Nayyar & Bantel. 1994). Competitive magnitude  Competitive magnitude refers to how significant a competitive action or series of actions is (Hambrick et al.1.2. 1996). Competitive complexity  Competitive complexity refers to the range of different kinds of competitive actions taken by a firm (Ferrier et al.3. As such. .3. 3... 1994) 3. Competitive propensity  Competitive propensity is a firm’s tendency to engage in a number of competitive moves and indicates how status assertive and roils market environments to the confusion and disadvantage of competitors (D’Aveni. The magnitude or significance of a competitive move is tied to the amount of financial and other firm resources that are needed to undertake the action.1999.

we develop propositions related to the use of human and social capital of the upper echelon and BOD and the effects of executive compensation on those uses. and markets to be constant). boundary conditions. With these caveats in mind. we develop and specify a number of propositions connecting the independent and dependent constructs defined above and depicted in Fig. 1. physical resources. and conceptual scope be considered in all theory building (Pedhazur & Schmelkin. Model and related propositions In the sections below. an exhaustive development of a SHR ( model of competitive behavior in a single conceptual model is neither possible nor appropriate.) . 1991). Indeed. it is our hope that the SHR model will serve as a theoretical launching point and will attract a broader set of scholars to improve and build upon this model.( In so doing we assume factors such as firm’s size. In fact. 4. Thus. We do so in keeping with recommendations that issues of parsimony. age. our specification of the model and its propositions is intentionally limited.

Pelled. conducts the planning. execute. Therefore.. and makes the strategic decisions (Simons.  Proposition 1.1. the greater will be the competitive propensity of the firm. . processes the information. the higher the level of human capital within the upper echelon. 1997). the greater the likelihood that the upper echelon can initiate. & Smith. 1996). Throughout the process of planning and executing a competitive action. 4. Upper echelon human capital and firm competitive propensity A competitive action emerges as the upper echelon notices trends in the competitive environment and contemplates the competitive marketplace and its own firm’s abilities to initiate actions within it.  The upper echelon is also the command and control center for the execution of competitive moves (Hambrick et al. 1999) that result in the change and performance outcomes (Boeker. The higher the level of human capital within the upper echelon of a firm. and drive competitive moves into the market. the upper echelon sets the agendas.

The greater the levels of human capital . high human capital among the BOD also attract support from significant external stakeholders whose support is necessary . BOD human capital and competitive magnitude  In summery directors with high amounts of human capital bring unique external knowledge from varied and multiple industries. the greater will be the competitive magnitude of the firm. Furthermore. For these reasons.2. we propose that: within the BOD of a firm. access to financial and other critical resources.  Proposition 2.4. and provide the overall framework for the firm to undertake bold and forceful competitive moves.if not essential to lunch the more strategic and substantive competitive moves.

Upper echelon social capital and competitive complexity Our interest in social capital focuses on the strategic social networks within the upper echelon and the BOD.  Proposition 3. First.3. and. the greater will be the competitive complexity of firm. as a result. we explore and establish the general relationship between the upper echelon and the competitive complexity dimension of competitive behavior. The higher the levels of social capital within the upper echelon of a firm. . 4. increases the type or range of competitive actions undertaken by the firm.Concern centers on how social capital brings the human capital assets together and how it facilitates concerted efforts of the upper echelon and BOD.

4. BOD social capital and competitive complexity  The relationship. directors may be more willing to share key and critical information from the environment only with members of the upper echelon whom they trust. between directors and members of the upper-echelon can also impact the variety of moves a firm launches. As mentioned earlier.processing capability is diminished. 1988). particularly that with the CEO. By linking the firm to the environment. directors are hybrids in respect to their internal and external orientation to the firm. willingness to share is tightly related to the amount of social capital that exists between two parties (Kanter. 1989). the overall organizational information. or amount of social capital. In particular.4. the greater will be the competitive complexity of the firm. When the upper echelon cannot properly process information or scan the environment.  Proposition 4. . Predictably. most of a director’s time is spent outside the firm on which they sit. can improve the information-processing and environmental scanning capabilities of the upper echelon. The higher the level of social capital on the BOD of a firm. directors with strong and rich relationships to an organization’s upper echelon. While a BOD affects the internal functioning of the firm (Lorsch.

5. 5.As noted earlier. We now examine how these two aspects of executive compensation moderate the effects of human and social capital on firm competitive behavior. the stronger the effects of human capital on the firm’s competitive propensity 5. .2. The greater the pay dispersion within the upper echelon (excluding the CEO). we identify two important aspects of upper echelon compensation that impact firm competitive behavior: incentives that help motivate the upper echelon to engage in competitive actions and fixed pay that serves largely as a hygiene factor. Fixed pay effects  Proposition 6.1. the weaker the effects of upper echelon social capital on competitive complexity. Variable pay effects  Proposition 5. Moderating effects of executive compensation  . The greater the levels of variable pay offered to the upper echelon.

According to the SHR model then.g. Further. primarily at the upper echelon and BOD. the constructs put forth in the SHR model of competitive behavior can adapt and change more quickly to meet the demands of the competitive moment. firm size. For example. firm performance.. Conclusion We have argued that a firm’s human capital and social capital. organizational age or organizational size remain relatively constant or change at predictable rates. and specific HRM practices and systems—are likely to generate competitive consequences. we put forth that a firm’s executive compensation policies primarily motivate these human assets to engage in competitive actions. the relationships between those assets. Previous examination into the predictors of competitive behavior has examined firm characteristics that are quite static and stable. Such mechanisms as team training or the fostering of an organizational culture conducive for open dialogue may also influence social capital. motivation. In addition. For these reasons and unlike previously studied predictors of competitive behavior (e. firms can affect and improve upon their stores of both human and social capital. more rigorous selection or promotion criteria will ensure that those individuals with lower human capital are screened out at earlier stages. or market commonality). improve the firm’s awareness. differences in one or more of the following—strategic human assets. and capability to vigorously compete. For instance. these characteristics are less prone to manipulation and managerial influence. slack resources. . Human and social capital are less constrained in this regard. In fact.

. we only pursued the relationships between the human assets at the pinnacle of an organizationas the upper echelon perspective is firmly rooted in theoretical (e. 1984) and empirical strategy literatures (e.g. First. for parsimony. such as education and experience. Wiersema & Bantel.  the impact of human and social capital among the broader workforce and the role of other HR systems in influencing the kind and type of competitive moves a firm can undertake. it is quite likely that characteristics of the labor force impact the competitive posture and behavior of a firm. one could examine how a firm with low turnover and higher education levels of their employees competes compared to firms with lower marks in these areas . Hambrick & Mason. 1992)..g.Research Gap  Research on firm competitive behavior play only limited attention to their influence of human assets . Using typical variables and measures of human capital. However.

 Thank you .

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