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Flashcards in DO USE! Logelademaden Deck (72):
1

Strategy according to (Mintzberg 1987; S)

Plan:
1) Consciously intended course of action
2) “How to deal with a situation”
3) Made in advance
Example: (SWOT, Scenario planning, Regional strategies)
Slide definition: An intended course of actions which results in an explicit strategy. Formulation before implementation.

Ploy:
1) Maneuver that outwits opponent
2) all warfare is based on deception
3) Intended
Example: Threat of price war (game theory)

Pattern:
1) Stream of actions
2) Consistency
3) Focus on core competency (intention to consistency)
4) Uncovering the core
5) Emergent and realised
Example: Uppsala (empiric study pattern)
Slide: Actual actions of an organization and the consistency of these. Intended or not.

Position:
1) May overlap with preceding P’s
2) Compete in the niche that generates rent (niche=a place with economic profits according to Mintzberg)
3) Linking internal competencies with external environment (based on core competencies and environment, where do we want to play?)
4) Playing in a niche to avoid competition
5) Don’t get stuck in the middle
6) Outside-in view on strategy
7) Intended and Realised
Example: 5 forces and Generic strategies

Perspective:
1) Inside-out view on strategy: how and where do we fit in the environment
2) Individuals united to common thinking/behavior (ingrained way of viewing the world)
3) Collective and consistent behavior
Example: Sense-making for strategy

2

Strategy as configuration / learning (S)

o Organization is viewed as a configuration of its characteristics

o Company's strengths or weaknesses are determined in the context of a problem
• Thus, whether competencies are good/bad for a particular strategy is relative to the problem

o Strategy maintains stability and recognizes the need for change (major transformations)

o Close link between formulation and implementation
• Centralized power, flexible organization (start-ups as an example: founders create and implement strategy

o Framework for instance resource-based view
o Dynamic capabilities!!!!!!!!!!!

3

Multinational company (S)

o A firm that owns and controls operations in several countries and/or any public company that engages in international activities.

o Why care? – Global FDI increases exponentially

4

Drivers of company internationalization (Hitt et al. 2016; S).

Emil's Hitt et al. notes:
o Need of specialized assets (resources)
o Capability building (capability to build new capabilities to compete)
o Intense competition at home (retaliation?)
o Economic growth
o Globalisation (respond to competition)
o Diversification (reduce risk)
o Economies of scale/scope
o Location advantages
o Experimental learning
o Techonology (scalability – born global)
o Internationalisation experience
o Target country culture and institutions: Distance between home and target countries (culture and institution)

5

Drivers of globalization (S).

Emil's notes:
o Ease of communication
o Transportation time dramatically reduced
o Market liberalization (which goes in the other direction now)
o World Wide Web
o Convergence of tastes

Slides:
Technology - increased use and expansion

Liberalization - of trade and resource movements

Global products and customers (developing countries increasingly consume)

Global competition

Political changes
-In Eastern Europe, China etc.

6

Semi-globalization / regionalism (S)

o We’re not global, we are regional (emergence of regional blocs stalls globalization, cross-border economic integration is regional)
o Local adaptation – advantages of scale and scope without global exposure

7

Relationship between digitization and globalization* (Ghemawat 2017).

Digitalization can facilitate globalization in certain respects (e.g., by making it easier for small firms to export).
8 reasons for why digital technologies are insufficient in driving globalization forward. These include:

1. Language differences, and national borders (flow on social media heavier national)

2. E-commerce depends on physical barriers to trade

3. Governments can interfere with digital flows: Net Neutrality revoked in US

4. Positive correlation, environment is enabling and technology advancement. However, no need for China because of 3D printing. (Text: "Another common error is to conflate digitization with technology and to assert that all technological change is pushing in the direction of increased globalization. "

8

Difference between product and competitive strategies (S).

o Product strategy: Choices regarding company’s products in different geographical market
• Product mix and product adaptation in given markets
• Local responsiveness (customer tastes/needs differ)
• Global integration (Standardize, international strategy, cost-saving)

o Competitive strategy: Analysing source of competitive advantage, and locating parts of value chain in markets that can best enhance competitive position
• Sources of competitive advantage:
- Location advantage
- World-scale volume
- Global brand
- Access to supply and distribution channels

9

Product adaptation vs. product mix (S).

o Adaptation: Altering products to fit tastes (n.b. decoupling point)
o Mix: Offering different combination of products

10

When to pursue global integration and when local responsiveness (S)

o Global integration pursuit: 1) when cost pressure is high (we need benefits of EOScale), no to little variation in preferences (Commodities, transportation, Apple)

o Local responsiveness pursuit: when customer tastes and preferences differ or when it is too expensive to coordinate, OR legal requirements (due to shipping costs etc., McDonalds)

11

Multicountry vs. global competitive strategy (Whirlpool case; S):

• Global competitive strategy(=global integration, high cost pressure)
o Same competitors in many markets
o EOS
o Competitive strategy (value chain activity where is optimal)

• Multi domestic strategy (=local responsiveness)
o Autonomous subsidiaries (support activities in subsidiaries)
o Up-stream value chain mostly in home country, and down-stream is adapted



Whirlpool:
Different tastes in home market (US), EU and China (topload/frontload washing machines)
Government interference in China, saturated market in US, recession in EU
Cost pressure high, and local responsiveness pressure high  transnational strategy

12

Global competition vs. global business (Hamel & Prahalad 1985; S):

o Global competition:
- Battle global competitors
- companies cross-subsidise national marketshare in pursuit of global brand and distribution positions
• If you are not present on given market, global competitor cross-subsidises from that market

o Global business: Global investments are made to achieve scale &
cost efficiency not available in the home market
- Different roles of different markets: Source at low-cost; maintain minimum scale;
retaliate against a global competitor etc

13

3 global competitive strategies and rationales for each (Hamel & Prahalad 1985; S):

a) building global presence (Uber)
1) access volume, 2) cross-subsidise to win world, 3) redefine cost/volume relationships, 4) first-mover advantage, 5) low-cost sourcing from location advantages

b) defending domestic position (=by going global, so I can lower my price eventually),
1) Spread costs, 2) gain retaliatory capability  by gaining cross-subsidising capability from other market

c) overcoming national fragmentation (open R&D in Holland to catch clever students, even though we did not have operations in Holland before = global competitive strategy)
1) Reduce costs at national subsidiary, 2) rationalize manufacturing, 3) distribute decision-making across subsidiaries

14

Regional strategies:

a) home base:
o Up-stream activities and support activities are in home-base (centralized), but down-stream are also internationalized (sales divisions)
o Global integration, centralization, EOS, relatively (low level of diversication vs. risk of uncertainty) low risk and high shipping costs from home region.

b) portfolio:
o Up-stream activities and support activities are in home-base (centralized), but some up-stream activities, operations (including manufacturing), and sales (down-stream) are also internationalized. Still production at home.
o Fast-to-market growth in non-home market, high risk in FDI, matching currencies (economic exposures minimized)

c) hub:
o More home-regions, some as stand-alone divisions, (up-stream activities the same in different regions) and more foreign regions (only sales divisions)
o Purest form: multi-“regional” (multi-home-base)
o Challenge: achieving balance between customization and standardization.

d) platform
o Support activities in the value chain are shared and consolidated.
o Cost-efficiency  allowing customization atop common platforms (decoupling points)
o Ideally invisible to company’s customers (example: shared service center)

e) mandate
o Cousin of platform strategy (regions specialize as well as have scale)
o Centers of excellence that are responsible for making specific know-how and producing, which is available throughout the organization
• … and have decision-making power
• Need global network to succeed
o Pit-falls: 1) too much power  highjacking of overall strategy, 2) specialization to the extreme creates inflexibility (disruption of single location fucks entire network)

15

Stages of a company’s commitment to a country (Johanson & Vahlne 1977; S)

1) Sales via agents
2) Sales subsidiary
3) Production facilities

16

Psychic distance (Johanson & Vahlne 1977; S).

• Theme : entry into dissimilar countries
o Factors complicating the flow of information from and to the market
o Sum of differences in 1) language, 2) education, 3) business practices, 4) culture.

17

Institutional distance (S).

• Regulative
o Measured in: antitrust regulation, political transparency, intellectual property protection

• Normative
o Measured in: government transparency, corruption, political risk

• Cognitive-cultural
o Based on Hofstede’s dimensions

18

State and change aspects of the model (Johanson & Vahlne 2009; S).

Difference between new and old model: all about relationships, psycic distance is captured in “knowledge opportunities”
• State: The now
• Change: Outcome of current activities

State:
Knowledge opportunities (Market knowledge, relationships help identity opportunities)
Network positions (internationalise through network in order to improve network

Change:
Relationship commitment decisions (Increase/decrease commitment, augment or develop new relationship)
Learning, creating trust-building

19

Psychic distance paradox: definition, causes and solutions (O’Grady & Lane 1996; S).

• Definition: overestimation of psychical closeness
o Overlooking important differences (US Canada)

• Cause: Overestimated similarity

• Solution: 1) Foreign markets are foreign. 2) Interpret market data correctly (managers with experience). 3) Check assumption.

20

Born globals: definition and any 2 factors affecting early internationalization (Hitt et al. 2016 from class 1; S).

o Definition: Firms that become international (resources & sales) at or shortly after inception

o 2 factors affecting early internationalization:
1) Scalability (often software, low marginal cost)
2) Small (agile/flexible)
3) Ease of communication

21

4 subsidiary roles (Bartlett & Ghoshal 1986; S).

Matrix: Competence of the subsidiary vs. Importance of local market

Implementer: what there is most of
- Market potential is limited
- Subsidiary resources are limited
- Earn money in the market
=Efficiency is key

Contributor:
-Unimportant market
- Subsidiary with distinctive skills
- use the subsidiary's skills company-wide
=Often in R&D in clusters even though market is unimportant

"Black hole":
- Important market
- Small/undeveloped subsidiary; local rivals are better.
- "Spy" on competitors: develop a full-fledged business

Strategic leader:
- Important market
- Competent subsidiary
- Not only implement, but also develop corporate strategy

22

Value of competencies of upstream vs. downstream subsidiaries for the organization (S)

o Upstream: “
Universal” (transferable to other markets, can be centralised), value is higher => R&D and operations

o Downstream:
Competence is local-for-local, less valued (marketing & sales)

23

Hierarchy vs. heterarchy (Birkinshaw & Morrison 1995; S)

Relationship between HQ and subsidiary

- Hierarchy: “Do things right” – critical resources at the top. Centralised. Brings transaction costs down.

- Heterarchy: “Do the right thing” – Autonomy/decentralized – resources are dispersed throughout the organization

24

Subsidiary autonomy (S).

“(…) degree to which the foreign subsidiary of the MNC has strategic and operational decision-making authority”

25

Potential downsides of subsidiary autonomy (S).

Centers of excellence (mandate strategy) => pitfall: rigidity and hijacking of overall strategy

Agency theory: subsidiary acts in their own benefit (rather than HQ benefit)
May happen due to:
o Host country laws
o Customer requirements
o Specidic/unique resources/capabilities

26

Strategic vs. operational autonomy (Birkinshaw & Morrison 1995; S).

o Strategic: Make own decisions on how and what to “go-to-market”
o Operational: has to live up to strategy and requirements from strategy. Focus is on cost efficiency (decisions on how to produce)

o (Low strategic autonomy - hierarchy) Local implementer: limited geography (adapt global to local)
o (Medium strategic autonomy) Specialized contributor: Expertise, coordinates with other subsidiaries
o (High strategic autonomy - heterarchy) World mandate: worldwide responsibility for product line/business

27

Relationship between the company and its environment according to the a) “traditional” and b) network views of the MNC* (S).

Traditional view: Dyadic HQ – HQ and subsidiary:
o Clear separation between MNC and its environment (suppliers, regulators etc.)
o Environment is exogenous

Network view: enmeshed
o Management of network of subsidiaries and also external environment (defined by: diverse, multi-cultural and different goals)
o Competitive advantage gained by: managing network and benefitting from scope advantages (we depend on environment for its survival)
o configuration of resources is affected by the environment … dynamic capabilities … learning and configuration ..
o State and Change (NETWORK POSITION)

28

Resource dependency (Luo 2003; S).


o Dependency situation arises when MNE subsidiaries rely on irreplaceable resources controlled by local possessors. Dependency translates into power for local possessor, because parent’s resource commitment is too low.

If an MNE subsidiary can therefore reduce its dependence on local resources by utilizing more internal resources coming from its parent or subsidiaries, the economic risks or transactional costs associated with resource acquisition will be substantially decreased

29

Using local responsiveness and control flexibility to alleviate resource dependency (Luo 2003; S).

o Subsidiary relies on locally owned resources that cannot be sourced from elsewhere – Local responsiveness & control flexibility (output, budget or bureaucratic control) may alleviate some of that dependency
o “the reduction of external dependency requires improvements in parent-subsidiary relations on a number of fronts, notably resource support and intra-network information flow.”
o Note: resource commitment can be too high (too much foreign market exposure), so performance will fall if too much is invested. Exit cost and sunk cost

30

When environments modify the parent—subsidiary relationship* (Luo 2003; S)
CARL LÆSER

Many investors do not adjust parent-subsidiary links according to changes in environment.

Study found that: “(…)or over controlled daily activities (resulting in lack of flexibility in a changing environment”

Bounded rationality (information asymmetry) leads to parental strategies poorly aligned with local environment

“To our surprise, these subsidiaries were concerned not only about new challenges arising from China's industrial environment (e.g., more competition and fewer privileges) but also about the relationships with their headquarters. Many top managers we interviewed expressed the view that headquarters' managers knew little about the Chinese market, used improper strategies or control, or provided deficient support and ineffective communication systems”
o Subsidiary managers are crying when HQ do not know local market

So what to do?
o “The managerial implication is that firms can improve subsidiary performance in this situation by either committing more resources and responsiveness (the defensive way) or building a better relationship with the governmental authorities in charge (the offensive way”
o “Specifically, parent managers should realize that their operational strategies associated with various subsidiaries must configure properly with the characteristics of each host country environment and the requirements of strategic responsiveness. Without such configurations, local managers will perceive a high rate of failure of indigenous operations”
o Heterarchy
o Subsidiary autonomy
o … Learning and configuration strategy, dynamic capabilities

31

Just-in-time manufacturing* (Gunasekaran, Lai and Cheng 2008; S).

Definition: Receive supplies just-in-time to manufacture

JIT manufacturing: pull-system - production initiated by customer (agile: quickly adapt to demand)
o Demand driven

32

Risks and vulnerabilities of international supply chains and just-in-time* (S).

Pros:
Reduces holding costs and waste (mudas)
Quick detection of quality problems
Units produced as need (smooth flow)
Increases possibility for customization
Get forecast from customer to avoid bullwhip

Cons:
Difficult to manage fluctuations in demand (staff)
Coordinate long shipping routes (suppliers need to be close to production)
Inventory is at suppliers’ cost, and needs to be close to you
Need a just-in-case buffer system (JIT is not a perfect system)
Interruptions can disrupt entire systems
Bullwhip may be large early in supply chain

33

Factors influencing manufacturing location choice: country & product factors, government policies and organizational issues (S).

1. Country factors
Resource availability
Cost
Infrastructure
Institutional pillars?????

2. Product factors
Value-to-weight ratio
Production technology

3. Government policies
Political stability or corruption
Trade policies and barriers (tariffs)

4. Organisational issues
Business strategy (generic strategy in firm?)
Centralised or decentralized?

34

Five forces

1. Bargaining power of suppliers
a. Strength
b. Price sensitivity
c. Switching costs

2. Bargaining power of buyers
a. Strength
b. Price sensitivity
c. Switching costs

3. Threat of new entrants
a. Entry barriers

4. Threat of substitutes

5. Rivalry among industry competitors
a. Affected by the other forces and other causes.

35

Causes of rivalry

1) Equally strong players, 2) low-no growth, 3) high strategic stakes, 4) little opportunity to differentiate, 5) major barriers to exit

36

Multipoint competition (Chen 1996; S)

According to Chen: Porter is too vague - then came “strategic groups” which was better - then came Chen (looking at the firm, which is best)

- How to predict rivalry: action and re-action:
=Likelihood of attack and response
=Relationships with competitors
=Identify competitor likely to attack

- Multi-market competition is an economic situation where two or more firms are in competition against each other at the same time and in different markets (products or places).

Shared markets, market interdependence and multimarket contact on firm-level rather than Porter’s industry level. Product, country etc...

E.g. Amazon is the next big competitor to Maersk and Saxo.com

37

Competitive asymmetry (Chen 1996; S)

• “the notion that a given pair of firms may not pose an equal threat to each other.”
• A may see B as a competitor, but not the other way around. (Harboe vs. Coca Cola)
• Each competitive relationship, in terms of market commonality and resource similarity, is unique and directional

38

Market commonality (Chen 1996; S)

• “(…) defined as the degree of presence that a competitor manifests in the markets it overlaps with the focal firm.” (strategic importance of markets)
• Market: broadly defined here to include both product- and customer-based concepts such as geographical market, market segment, or brand.

39

Resource similarity (Chen 1996; S)

• “(…) the extent to which a given competitor possesses strategic endowments comparable, in terms of both type and amount, to those of the focal firm”
• See resource definition in next lecture.
• Restaurants in two different cities

40

Intensity of rivalry based on market commonality and resource similarity (Chen 1996; S)

Market commonality has a greater influence on intensity of competition than resource similarity

Intensity of rivalry:
o High market commonality: makes competitors aware and motivated to respond
§ Little likelihood of attack due to high stakes
o High resource similarity: makes them able to respond
§ Little likelihood of attack due to competitor having same resources as you (retaliation likelihood)
§ Response likelihood is still high when resource similarity is high
Draw 2 by 2 with market commonality and resource similarity on either axis.

1. Awareness: the extent to which competitors recognize interdependence (Harboe and Coke) 2. Motivation: An incentive to take action. Determined by perceived gains or losses. 3. Capability: The nature and flexibility of resources.

-Little likelihood of an attack, but if an attack is undertaken, a response will come.

-High market commonality: makes competitors aware and motivated to respond

-High resource similarity: makes them able (Cabability) to respond

-Strategic action: significant commitment

-Tactic action: fine-tun

41

Other factors affecting the likelihood of competitive attack: global MNC, managers’ international experience, wholly-owned subsidiaries, first and secondmover advantages* (Chen & Stucker 1997; S)

Global MNC: whole world is competitive arena

Managers’ international experience: Better knowledge of other markets (Capability)

Wholly-owned subsidiaries: Better coordination, incentives for subsidiary management (awareness and motivation increase)

FMA: Above-average return until response, customer loyalty, established market share

Second mover advantages: Learn from mistakes of competition

42

Factors influencing the speed of competitive response: geographic distance, subsidiary control (Yu & Cannella 2007; S

Response speed – time until counter attack – speed matters (or you lose market share)
Geographic distance: more difficult to recognize attack

-Home-Host: HQ transfers knowledge and resources

-Home-Initiating country: Low HQ awareness – importance?


Subsidiary control: easier to respond when control

-Host country: depends on strategic importance

-Host is initiating: importance increases

-… multi-market increases importance even further.

Host government: constraint

Home government: constraints

43

Slow vs. fast cycle markets (S)

Slow cycle market: Slow-to-market, FDA approvals, cash cow lasts longer (SCA), protected for a period

Fast cycle market: Fast-to-market, iPhone, counterattacks all year long

44

Definition of resources (Barney 1991; S).

All assets, capabilities, processes, attributes, information, knowledge that create value and enables strategy creation

45

Types of resources (hint, there are three)

Physical capital resources:
Plants, equipment, geographic location, access to raw materials etc.

Human capital resources:
Training, experience, judgment, intelligence, relationships etc. of individual managers and workers

Organizational capital resources:
Reporting structures, planning, controlling and coordinating systems
Informal relations among groups within a firm and between the firm and its environment

46

Competitive advantage vs. sustained competitive advantage (Barney 1991; S).

CA: strategy not employed by a competitor (currently)

SCA: Same as CA but which cannot be upended by competitors unless structural change -> VRIN attributes change

47

Link between VRIN resources and sustained competitive advantage (S).

VRIN - competitive consequences and Performance implications

Nothing - Competitive disadvantage and below avg. returns

V (N) - Competitive parity and avg. returns

VR (N) - Temporary competitive adv. and avg - above-avg. returns.

VRIN - Sustained com. adv and above avg. returns

48

Dynamic capabilities (Teece et al. 1997; S).

Capability to redeploy/reconfigure/integrate/adapt resources to changing conditions. Winners rapidly adapt to new conditions losers are rigid to change

49

Difficulties in being a “dynamic” firm (Teece et al. 1997; S).

Non-tradeable assets/capabilities -> values/culture.

Path dependency -> firms get stuck with what they have/don't have

50

Path dependency (Teece et al. 1997; slides for class 9).

Historical preferences, previous commitments and (sometimes) cost efficiency makes it easier to go along the same path

51

Replication vs. imitation* (Teece et al. 1997; S).

Replication: Redeploy resources from one economic setting to another. Difficult bc: tacit knowledge, location-bound resources, learning curve.

Imitation: replication by competitor. Difficult bc: same as replication and causal ambiguity, property rights and "appropriability"

52

Core competencies: definition (Prahalad & Hamel 1990; S).

Hard to imitate, deployable in several contexts (now and future), provide significant consumer benefit. These traits leads to durable sustained advantage.

53

Core competencies, core products and end products (Prahalad & Hamel 1990; S).

Core competency: Class of product functionality -> the company become the leader in this functionality.

Core Product: embodiment of core competencies -> maximize market share in the product group/functionality

End product: extension of core products -> build umbrella brands

54

Difference between a) VRIN resources, b) dynamic capabilities and c) core competencies (S).

VRIN: validation of value-creating resources with regards to competitive consequences
o Can be country specific  asset specificity SCA.
o SCA destroyed by Schumpetarian shocks

Dynamic capabilities: Dynamic redeployment of resources to adapt to ever-changing markets. Reconfiguration of competencies to fit to market. (speed & intensity)
o Cannot be destroyed (Schumpetarian schocks)
o Path dependency

Core competency: competency that is 1) hard to imitate, 2) can be deployed in several contexts (now and in the future), 3) provides consumer significant benefits (leads to sustainable competitive advantage)

55

Structural holes (Granovetter 1983; S)

When two homogenous clusters are not connected there is a structural hole. A third-party player with connections in both clusters may occupy the gap.

56

Strategic networks of firms (Jarillo 1988; S)

"If a firm is able to obtain an arrangement whereby it 'farms out' activities to the most efficient supplier, keeps for itself that activity which it has a comparative advantage, and lowers transactions costs, a superior 'mode of organization' emerges: the strategic network."

Distinct but related for-profit organizations.

Firms in the network gain or sustain a competitive advantage vis avis competitors are outside the network

57

Benefits of strategic networks for individual firms and for the entire network (Jarillo 1988; S)

Company keeps comparative advantage and "farms out" other activities to most efficient supplier when: external price + transaction cost < internal price.

Draw the matrix: x-axis, approach to relationship (zero-sum vs. Non-zero-sum). Y-axis, legal form (hierarchy vs. Market). Classic market, strategic network, bureaucracy, clan.

58

Embeddedness: definition and types (Beugelsdijk & Hospers 2005; S)

Things happen in a context that is:

Cognitive: rational economic action limited by uncertainty, complexity and information cost (bounded rationality)

Political context

Structural: social networks and relationships

Cultural context

59

Degree of embeddedness and firm’s economic success (Beugelsdijk & Hospers 2005; S

Inverse u-curve: no- or over-embeddedness -> no profit. Find the golden middle-way.

No embeddedness leads to isolation, no information exchange, amoral individualism.

Over embeddedness leads to lock-in, amoral familism, cognitive limitation.

60

Costs of production and coordination in markets (buying) vs. in hierarchies (making) (S).

Coasian framework: firms exist because of the cost of accessing the market.

Buy:
external arrangement, production cost decrease, coordination cost increases. (price/schedule determined by market forces)

Make:
Internal arrangement, cost of production increases, coordination cost decreases (price/schedule managerial decision)

61

Bounded rationality, asset specificity and opportunism (Rindfleisch & Heide 1997; S).

Bounded rationality:
Decision-makers cannot have complete information = transaction costs. Information asymmetry. Unknown-unknowns. Lemons.

Asset specificity:
factors/inputs that can't be readily adopted. Site specificity (immovable), physical asset specificity (designed for one purpose), human asset (special skills/knowledge), & time specificity (value depends on the time it reaches customer)

Opportunism:
Pursuit of self-interest at expense of other. Safeguarding through contracts.

62

Costs of production and coordination in markets (buying) vs. in hierarchies (making) (S).

Market:
Market forces determine price and schedule

Coordination cost, up. Production cost, down.



Hierarchies:
Price and schedule is a managerial decision

Coordination cost, down. Production cost, up.



Markets: market forces determine price and schedule

63

Impact of IT on transaction costs and implications for the choice between markets vs. hierarchies (S)

IT reduce time and cost of communicating information

Brings more alternatives, quality and decrease cost of search -> leads to choice paralysis.

As coordination costs decrease buying becomes more profitable than making.

64

Definition of institution

Structures and activities that provide stability and meaning to social behavior

“Rules of the game”

65

(S). Pillars of institutions (Trevino et al. 2008; S)

a) regulative (guilty or non-guilty)

Laws/rules/boundaries/regulations in a particular environment that promotes certain behaviours and restricts others

Enforcement mechanism required

b) normative (shame or pride)

Social norms, values, beliefs and assumptions (that are socially shared and carried out by individuals) o What is appropriate for members (both in institutions and in countries; moral support)

Janteloven,

c) cognitive-cultural (certainty or confusion)

Within social group actors’ shared perception of what is typical or taken for granted o Leads to isomorphism (:is a similarity of the processes or structure of one organization to those of another, be it the result of imitation or independent development under similar constraints)

Why 3 meals?

66

Difference between normative and cognitive-cultural pillars* (Busenitz, Gómez & Spencer 2000; S)

Specifically, example around entrepreneurship:

Cognitive-cultural: Knowledge and skills possessed to start and lead a business. (taken for granted, so what is a hierarchy, how expensive is it, how much time does it take? CVR number?)

Normative: Admiration of entrepreneurial activity and innovative thinking, you can fail, it is cool etc.

67

2 examples each of measures for institutional pillars* (Busenitz, Gómez & Spencer 2000; S).

Regulatory: 1) Assist individuals in starting their own business, 2) After failing, government assists entrepreneurs, 3) intellectual property protection

Normative: 1) admired career path, 2) Innovative thinking is admired, 3) Corruption

Cognitive-culturally: 1) Know how to manage risk, 2) know how a hierarchy should look, 3) Hofstede

68

Levels of institutions (Trevino et al. 2008; S)

World (regional) (Regulative: UN agreements, normative: #metoo)

Country (Regulative: laws, normative: traditions, cognitive-cultural: culture, language)

Industry (Contracts with suppliers, safety regulations, child labor, negotiation, cognitive-cultural: gender preferences)

Organisation (Structure, payment policies, culture, CSR)

Organisational department (Normative: hugs when you show up)

69

a) Coercive and b) normative and mimetic isomorphism and how each relates to pillars of institutions (S).

Becoming legitimate (surviving and thriving, conforming to rules and norms) to conduct business, gained through 3 isomorphisms:

a) Coercive isomorphism

Description: Coercive isomorphic change involves pressures from other organizations in which they are dependent upon and Isomorphic pressure on firm: regulations in given industry => you have to conform (compliance)

b) normative isomorphism

Description: within profession/professional values (banking, shipping, this is how you look)

Isomorphic pressure on firm: customer expectations and preferences => adapt

c) and mimetic isomorphism

Description: Lack of knowledge of what to do/uncertainty, imitate others because of a belief that they operate efficiently

Isomorphic pressure on firm: Uncertainty => mimic other firms (Follow the crowd, or, follow the most successful)

70

Differences between normative and mimetic isomorphism* (S)

Normative: change behavior because of norms (one may be told explicitly/implicitly what to do)

Mimetic: being uncertain causes one to observe and mimic. Motivation: increasing legitimacy. Moving production to China? Competitive responses to bold moves.

71

What is organizational legitimacy according to institutional theory* (S)

To survive and thrive, organisations need legitimacy

Gained through isomorphism

Legitimisation mechanism drives profits and grants accept from society => conformance/convergence

Consider pillars, isomorphism and view these on all institutional levels

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Imitation: late movers (risk and cost have been covered/absorbed by first-movers)

1) frequency-based vs.
Follow the crowd

2) trait-based (S).
Do what the successful does (prestigious)