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Volume 26, No. 6, 2005
Edited by • Édité par
Dr. Johann Vallerand
Université de Moncton, New Brunswick
Strategy
Stratégie
Actes de Congres annuel de la
section Stratégie de l’association
des sciences administrative du
Canada
Proceedings of the Annual
Conference
of the Administrative Sciences
Association of Canada, Strategy
Division
Toronto (Ontario)
28-31 mai, 2005
Toronto (Ontario)
May 28-31, 2005
Des exemplaires de ces Actes
peuvent être obtenus auprès de:
Copies of these Proceedings may
be ordered from:
Dr. Nina Cole
Faculty of Business
Ryerson University
350 Victoria Street
Toronto, Ontario M5B 2K3
Tel: 416-979-5000 x7558
Fax: 416-979-5266
Email: [email protected]
ACKNOWLEDGEMENTS
REMERCIEMENTS
The proceedings and program of the Strategy Les actes de la division Stratégie de ASAC
Division, ASAC 2005, are the result of many 2005 sont le résultat des efforts de plusieurs
personnes.
people’s efforts.
Sincere thanks to the authors for the quality of
their submissions and to the referees for their
well-considered comments. Thank you also to
those who agreed to serve as chairs and
discussants at the conference.
Je remercie les auteurs pour la qualité de leurs
soumissions, et les évaluateurs pour leurs
commentaires bien pensées. Merci aussi à
ceux qui ont d’agir à titre de commentateur ou
de président de session au congrès.
I am grateful to the current (and several former)
Strategy division officers for their guidance and
encouragement, particularly Elizabeth Croft
and Parshotam Dass.
Aux officiers de la division présente et passée,
tout particulièrement Elizabeth Croft et
Parshotam
Dass
vos
conseils
et
encouragement ont été d’une très grande
valeur.
I wish to acknowledge the support of the
Business faculty, Université de Moncton, and Je tiens à remercier la Faculté d’administration
the hard work and patience of my student de l’Université de Moncton pour leur soutien,
et mon assistant étudiant Denis Ouellette pour
assistant, Denis Ouellette.
sa patience et son bon travail.
Johann Vallerand
Johann Vallerand
Academic Reviewer
Responsable de l’évaluation
Faculté d’administration
Faculté d’administration
Université de Moncton
New Brunswick
Nouveau Brunswick
ii
REVIEWERS-ÉVALUATEURS
Samia Belaounia
Sylvie Berthelot
Frances Bowen
Michele Bowring
Shamsud Chowdhury
Jacqueline Dahan
Parshotam Dass
Robert H. Desmanteau
Carole Donada
Karen Ekstein
Salma Fardie Ellovze
Denise Graham
Irene Henriques
Jack Ito
Joyce Jin
Mouloud Khelif
Preeti Krishnan
Juliano Lissoni
Reg Litz
Ebrahimi Mahrau
Martin Martens
Micheal Mayo
Jane McKay-Nesbitt
Agnes Meinhard
Na Ni
Marielle Payaud
John Phillips
Patrizia Porrin
Laurent Renard
Suhaib Riaz
Glen Rowe
Richard Sopranot
Eric Stevens
Carol Ann Tetrault Sirsly
Norlaine Thomas
Jacques Vallerand
Johann Vallerand
Huanglin Wang
Taiyuan Wang
Jaana Woiceshyn
David di Zhang
Zhou Zhang
Rouen Graduate Business School
University of Calgary
University of Manitoba
Dalhousie University
HEC Montreal
Université du Québec Montreal
ESSEC, France
York University
Université El Manar, Tunisie
Bristol Business School, UK/Uni. of Windsor
York University
University of Regina
Queen’s University
HEC Montreal
Universidade Federal de Santa Catarina
EURISTIK (IAE-Université de Lyon)
Concordia University
Athabasca University
Ryerson University
EURISTIK (IAE-Université de Lyon)
University of Western Ontario
Long Island University
Université du Québec Montreal
Groupe ESCEM Tours-Poitiers, France
Groupe ESCEM Tours-Poitiers, France
Université Laval
iii
TABLE OF CONTENTS / TABLE DES MATIÈRES
The Behavioral Theory of Strategic Decision Making: Building on Greve’s empirical
studies................................................................................................................................. 1
Frances E. Bowen (University of Calgary)
Mahdi Rostami (University of Calgary)
Upward Ratcheting Of Ceo Compensation In Large Canadian Corporations:
Alternative Explanations................................................................................................ 10
Shamsud D. Chowdhury (Dalhousie University)
Mohammed F. Safa (Dalhousie University)
Individual Success And The Strategy Process: An Exploratory Study ..................... 19
Jacqueline Dahan (HEC Montreal)
STRATEGY DIVISION BEST ENGLISH PAPER (Meilleur papier anglais)
Got rhythm? Testing a model of the rhythm of change in product diversity ........... 30
Parshotam Dass (University of Manitoba)
Na Ni (University of Manitoba)
DIVISION STRATEGIE MEILLEUR PAPIER FRANCAIS (Best French Paper)
Les PME Biotechnologiques Sont-Elles Contre-Nature?............................................ 45
Carole Donada (ESSEC, France)
Isabelle Dostaler (Concordia University)
La Resistance D’un Fournisseur Aux Exigences De Flexibilite : L’impact Sur Son
Slack Organisationnel..................................................................................................... 55
Carole Donada
Isabelle Dostaler
STRATEGY DIVISION BEST STUDENT PAPER ((Meilleur papier d’étudiant)
Why do firms build network partnerships in hypercompetitive environments? An
explanation from the resource-based view ................................................................... 65
Dev K. Dutta (University of Western Ontario)
Organizational Responsiveness: A Conceptual Foundation And Research Agenda 75
Karen Ekstein (York University)
Inside The Black Box: Understanding Dynamic Relations......................................... 86
Tamiko Hynes (York University)
Approches De La Gouvernance Et Performance : Le Cas Des Organisations Du
Secteur Public.................................................................................................................. 95
Mouloud Khelif (HEC Montreal)
iv
Entreprise Durable Et Responsable : Modélisation De La Stratégie Et Principes De
Gouvernance.................................................................................................................. 107
AC Martinet (Euristik, IAE Université Lyon 3, France)
Marielle A Payaud (Euristik, IAE Université Lyon 3, France)
Are Alliances A Risky Proposition? Taking A Closer Look At Alliances From A
Systematic-Risk Perspective ........................................................................................ 117
Patrizia Porrini (Long Island University)
Are Investment Bankers To Blame For Acquisition Premiums? If Acquiring Proceed
With Caution!................................................................................................................ 132
Patrizia. Porrini (Long Island University)
Capacité Organisationnelle Internet Et Capacités Dynamiques : Le Cas D’une
Organisation De L’industrie Du Tourisme Au Canada ............................................ 145
Laurent Renard (UQAM)
Gilles St-Amant (UQAM)
Can elephants dance? A look at the ‘mahouts’ for some answers............................ 161
Suhaib Riaz (University of Western Ontario)
Sources Of Competitive Advantage And Above Normal Performance: An Empirical
Test ................................................................................................................................. 172
W. Glenn Rowe (University of Western Ontario)
Michael J. Rouse (University of Western Ontario)
Suhaib Riaz (University of Western Ontario)
Peut-on Opérationnaliser L’apprentissage Organisationnel ? Une Analyse Du
Processus D’innovation De Services............................................................................ 190
Richard. Soparnot (Groupe ESCEM, France)
Eric Stevens (Groupe ESCEM, France)
Further On The Theory Of Stakeholder Salience: Defining Why And When Does
The Who Really Counts................................................................................................ 209
Sujit Sur (Concordia University)
Governance Beyond Agency Theory: The Tale Of Dual Class Firms ..................... 226
Sujit Sur (student) (Concordia University)
Corporate Social Responsibility Initiatives: A First-Mover Theory........................ 243
Carol-Ann Tetrault Sirsly (Concordia University)
Examining Pre-IPO Activity: Firm Growth By Acquisition .................................... 253
Melissa Toffanin (student)
Martin L. Martens (Concordia University)
Generic Strategy And Capital Structure: The Impacts Of Product Differentiation On
Financial Leverage........................................................................................................ 268
Taiyuan Wang (student) (The University of Western Ontario)
v
How ‘Good Minds’ Think: A Study Of CEO Decision Making ............................... 277
Jaana Woiceshyn (University of Calgary)
SUMMARIES / SOMMAIRES
D’une Approche Deterministe A Une Approche Contingente Du Lien
« Diversification –Performance » : Quel Impact Sur La Validite De Contenu Des
Indicateurs « Classiques » De La Diversification ?.................................................... 286
Samia Belaounia (Rouen Graduate Business School, France)
Dynamic Capabilities: The Strategy-Hrm Interest ................................................... 287
Denise Ghanam (Bristol Business School, UK/University of Windsor)
The Dynamics Of Residual Revalorization: A Case Study In The Canadian
Enterprises..................................................................................................................... 288
Jean D. Kabongo (Virginia State University)
CEO Moral Capital And Strategic Leadership In Turbulent Times....................... 289
John R. Phillips (University of Western Ontario)
An Analysis Of The Relationship Between Alliance Networks And Firm Performance
......................................................................................................................................... 290
Huanglin Wang (University of Western Ontario)
vi
ASAC 2005
Toronto, Ontario
Frances E. Bowen
Mahdi Rostami (student)
Haskayne School of Business
THE BEHAVIORAL THEORY OF STRATEGIC DECISION MAKING:
BUILDING ON GREVE’S EMPIRICAL STUDIES
In this paper we review Henrich Greve’s recent set of empirical tests of the
behavioural theory of strategic decision making. We contextualise his work within
broader behavioural theory and strategic management, and identify several
theoretical and empirical critiques. Our paper builds an expanded behavioural
model which addresses some of these critiques, and suggests future research
directions.
There has been a reinvigorated interest in the behavioural theory of the firm within strategic
management, with several influential books and articles being published in the last few years (e.g.
Augier & March, 2002; Bromiley, 2005). Prominent within this line of research have been a series
of studies by Henrich Greve on strategic decision making in the radio station and shipbuilding
industries (Greve, 1998, 2002, 2003a, b, c). Greve has made significant contributions to the
behavioural theory of the firm by injecting risk and strategic decision making into the sometimes
passive behavioural view, and by applying empirical techniques to a variety of strategic decisions
such as asset expansion, product changes and innovation.
While Greve’s models take us closer to an understanding of strategic decision making from a
behavioural perspective, there remain several theoretical and empirical enhancements that need to
be made to this line of research. While the behavioural approach can provide foundations for
understanding strategic decisions because of its realistic assumptions (Bromiley, 2005; Bromiley
& Papenhausen, 2003), it is not widely used within the field of strategic management. This is
unfortunate, given behavioural theory’s ability to shed light on important issues such as the drivers
of strategic change, the influence of managerial risk perceptions on strategic decision making,
organizational learning from performance feedback and firm performance. We suggest that this
relative lack of interest among strategy scholars is due to an over-reliance of previous behavioural
theory on simulations rather than empirical tests based on “real world” strategic data (e.g. Cyert &
March, 1963; Levinthal & March, 1981), and an overly passive view of decision makers. Greve’s
work has begun to overcome these obstacles. The aim of our paper is to review Greve’s work and
suggest future enhancements in this line of enquiry so that the behavioural view can take a more
prominent place within strategic management.
Our paper begins with a contextual overview of the origins of the behavioural theory of strategic
decision making and recent developments in strategic management. We then go on to provide a
summary and critique of Greve’s studies, and to suggest some modifications to his decision
making model. We conclude by outlining some future challenges for a behavioural approach to
strategic decision making research.
The Behavioral Theory of Strategic Decision Making
The behavioural theory of the firm is usually traced back to Cyert and March’s highly influential
book A Behavioural Theory of the Firm. Its earlier intellectual origins can be seen in the work of
1
other members of the Carnegie School of Industrial Administration, particularly that of Herb
Simon (March & Simon, 1958; Simon, 1955, 1957). Behavioural theory was born out of a
frustration with the inability of economic theories of the firm to explain actual decision making
behaviour within organizations. Proponents of this view aimed to inject behavioural realism into
the stylised analytics of economic theories of the firm which were based on rational economic
actors. The focus was to provide a more empirically grounded theory of organizational goals,
expectations and choice. In moving away from assumptions of rationality and equilibrium,
behavioural theory provides a more realistic foundation for strategic management research than
conventional microeconomics (Bromiley, 2005).
Core features of Cyert and March’s (1963) behavioural view were bounded rationality, imperfect
environment matching and unresolved conflict (Cyert & March, 1992). Each of these tenets
represented a serious challenge to previous economic theories of the firm, but has since to greater
or lesser extent become widely accepted assumptions in strategic management. Cyert and March
(1963) saw firms as an information-processing and decision-rendering system, and derived a
coherent theoretical framework based on the new assumptions. Firms were conceived as “a
coalition of individuals, some of them organised into sub-coalitions”, and “a complex system in
which different decisions are made at different places in the organization” (Cyert & March, 1963:
31). Organizations are therefore characterised by the quasi resolution of conflict, uncertainty
avoidance, problemistic search and organizational learning.
Cyert and March’s (1963) theory was designed to explain core economic decisions such as output
price and quantity, but over the years elements of behavioural theory have been used to analyse
many other phenomena such as the evolution of organizational routines (Nelson & Winter, 1982),
organizational learning (Greve, 2003c; Levinthal et al., 1981) and political behaviour (Bourgeois
& Singh, 1983). Recently, the behavioural framework has been used to understand a range of
strategic issues such as investment (Chen, 2003; Greve, 2003b), innovation (Geiger & Cashen,
2002; Greve, 2003a; Nohria & Gulati, 1996), corporate environmental management (Bowen &
Sharma, 2005; Bowen, 2002) and managerial risk preferences (Miller & Chen, 2004). There is also
an emerging line of enquiry within strategic management which attempts to integrate behavioral
theory with the dominant resource-based view. Examples include bringing bounded rationality
(Amit & Schoemaker, 1993; Bromiley et al., 2003; Kemmerer, Kellermanns, & Narayanan, 2004),
bargaining and coalitions (Blyler & Coff, 2003), organizational slack (Bowen et al., 2005; Mishina,
Pollock, & Porac, 2004) or the behavioral antecedents of investment decisions (Alessandri &
Maritan, 2004; Moliterno & Wiersema, 2004) into the resource-based view.
The most cited features of Cyert and March’s (1963) book are search, coalition and slack (Engwall
& Danell, 2002). Among strategy researchers, however, the most useful concepts from within
behavioural theory are bounded rationality, aspirations and search, routines and slack (Bromiley,
2005). Bounded rationality is an accepted assumption within several theories of the firm including
transaction cost economics (Williamson, 1963), and the resource-based view (Barney, 2001).
Routines have formed the basis of a whole school of strategic thought based on evolutionary views
of the firm (Nelson et al., 1982), and are core to our understanding of dynamic capabilities
(Eisenhardt & Martin, 2000; Teece, Pisano, & Shuen, 1997).
Greve’s recent empirical studies have focused on the other two areas relevant for strategic
management: aspirations and search, and slack, particularly as they relate to managerial risk taking.
In the next section we review the recent set of empirical studies conducted by Henrich Greve,
focusing on areas for future development. We use these critiques to suggest some adaptations to
Greve’s decision making model.
2
Henrich Greve’s Empirical Tests of Behavioral Theory
Henrich Greve employed the behavioural theory of the firm in empirical studies of US radio
stations and Japanese shipbuilding. In a related series of studies (Greve, 1998, 2002, 2003a, b, c),
he used an adapted behavioural model to explain strategic changes within firms such as product
format change, R & D, innovation, and facility investment. He reoriented Cyert and March’s (1963)
organizational approach more towards strategic management by highlighting the roles of managers
in corporate strategy, and by emphasizing on “how managers set goals, evaluate performance, and
determine strategic changes” (Greve, 2003c: III).
A brief summary of Greve’s studies illustrates his diverse range of findings. Greve (1998) applies
the behavioural theory of the firm to 160 US radio markets from 1984 to 1992. The dependent
variable is format change, which is a significant strategic change for radio stations. The results
showed that different format changes are organizations’ reactions to performance-aspiration in
different ways. For instance, the innovative format mainly responds to the organizational historical
aspiration, and does not react the social aspiration level. Greve (2003b) applies his behavioral
model to the Japanese shipbuilding industry from 1971 to 1996. The results show that high
performance decreases R&D expenditure, while higher absorbed slack increases it. Greve (2003a)
also applied the model to production innovation among Japanese shipbuilding companies. He
found that performance above the aspiration level reduces innovation launches in Japanese
shipbuilding, and showed a decreasing probability of change trend (with a decreasing rate above
the aspiration level) in response to higher performance. Application of the model to Japanese
shipbuilding firms also revealed that they invest in their assets only in response to performance
feedback and not to their slack resources. In addition, Greve (2003b) found that different
measurements of investment in assets change the results. For example, production asset growth
has a negative relationship with performance only above the historical aspiration level, while
machinery growth has a positive relationship with performance below the historical aspiration
level, and a negative relationship above it.
Greve has made significant contributions to our understanding of strategic decision making by
developing and refining Cyert and March’s (1963) original model. Firstly, unlike Cyert and
March’s (1963) approach to the organizational aspiration level, in which they treat historical and
social aspirations together as one single entity, Greve unpacked the concept of aspiration level. He
developed empirical measures which allowed him to separate historical from social aspirations,
and to observe the relative organizational reactions (manifested in organizational strategic change)
to them (Greve 1998, 2003b). For instance, Greve (1998) shows that while some strategic changes
(format changes) in radio stations are driven by both historical and social aspiration levels (e.g.
new format and enter satellite), other strategies such as innovative format are initiated only by the
historical aspiration level. Greve also raised the question of how managers decide on target
aspiration when performance is between historical and social aspiration levels. He partially
addressed this issue by proposing, “an organization near to mean performance of its competitors
might pay attention to the social aspiration level, while an organization close to failure would pay
attention to the survival point” (Greve, 2003c: 50). Greve also developed a model to explain the
speed of updating the historical aspiration level by firms and its possible consequences for firm
performance (Greve, 2002). He showed that in an uncertain environment, the slow updating of the
historical aspiration improves firm performance.
Secondly, Greve introduced a kinked curve which illustrated that the relationship between firm
performance and the probability of strategic change has a tipping point at the aspiration level
(Greve, 2003b: 1058; and 2003c: 63). The curve is downward sloping, showing an increasing
3
likelihood of change as performance decreases, and organizational inertia reduces the propensity
to change below the aspiration level and leads to the kink in the curve. This kinked curve is a
powerful graphical device in understanding the likelihood of strategic change. Although Greve
(2003c) adapted the kinked curve into a more continuous inverse curvilinear probability function,
there remain further modifications that might be made using this graphical approach to the theory.
Thirdly, Greve incorporated theory on risk taking into his behavioral model. He employed
managerial risk taking and prospect theory (Bromiley, 1991; Sitkin & Pablo, 1992; Tversky &
Kahneman, 1981) to argue that managers take more risk when they fail to fulfil organizational
goals. Finally, Greve also contributed to behavioural theory in terms of research design and
analytical techniques. He designed his research mainly to use archival data, which is attractive to
strategic management researchers as it leads to easier application by managers and replication by
researchers. Greve also used a combination of time series and cross-section data which helps to
show the causality between variables (Greve, 2003c). While Greve is clearly familiar with the
simulation tradition of behavioural research (e.g. Greve, 2002), he brought behavioural theory
closer to the mainstream of strategic management by conducting well designed empirical studies
on publicly available data.
Critiques and Extensions of Greve’s Empirical Studies
While Greve contributed a series of well designed and executed tests of behavioural theory, there
remain critiques and opportunities for the extension of his work. In this section, we outline three
areas which could be enhanced within this theory, as a prelude to developing the model in the next
section. Areas of Greve’s work which might be developed include the importance of managerial
perceptions, the survival level as an additional reference point and interactions between slack and
the performance-aspirations level.
Cyert and March (1963) were aware of the importance of considering perceived firm performance
as well as the firm’s actual performance. However, it seems that the “perceived approach” is
missing from Greve’s empirical studies. Obviously under ceteris paribus perceived performance is
equal to historical performance. But since managers are assumed to be boundedly rational within
behavioural theory, they can only estimate perceived variables as environmental conditions,
organizational capabilities, or managerial cognitive capacities change. Entering perceived
performance can explain the paradoxical behavior of successful firms (with performance above
their aspiration level) who undertake more change than would be expected according to
behavioural theory. Some firms may more accurately perceive their performance and aspiration
levels than others. Indeed, there may be companies with higher cognitive capacity that can predict
future performance and prevent the decline of firm performance through the implementation of
proactive strategic change. For example, Greve (2003c) reported that the pharmaceutical firm Eli
Lilly’s increase in its R&D expenditure prior to a predicted decline in revenue does not conform to
his performance feedback framework. As the behavioural theory of the firm only considers past
performance, and reactive strategic change to it, adding perceived performance could capture the
proactive firm’s behavior. The same reasoning holds for the slack and aspiration levels. Current
performance, past performance, and change in environmental conditions, will shape managers’
perspectives about the future, enabling them to respond to perceived performance, slack, and
aspiration like they respond to historical variables. Thus, risk taking behavior and consequently
strategic choice are jointly determined by historical and perceived organizational performance,
slack, survival, and aspiration levels.
Greve’s Kinked-curve model is unable to explain the firm’s behavior especially below the
aspiration level (1998, 2003a, and 2003b). For instance, Greve (2003c, p. 86) reported that firms
with “several years of declining sales appeared to take greater risks when their performance
4
increased, contrary to the prediction.” Therefore it seems that when a firm approaches the survival
point through declining performance, “assets are more important than performance.” This
evidence supports March and Shapira (1992) who suggested that a firm responds to the survival
level as well as the aspiration level. While Greve did mention the survival level in his book, this
modification is not well developed in the book. Future research in this stream should incorporate
recent tests of the firm’s survival level as an important reference point (e.g. Chen, 2003).
Replacing the probability of performance which Greve used in his kinked curve, with the
probability of strategic change (Greve, 2003c: 162) may provide a better explanation for firm
behavior in response to its performance feedback. A continuous probability function could better
take performance around the survival level into account. The slope of the curve would be
influenced by different behaviors around and between the aspiration and survival reference points.
Greve focused his work around the performance-aspiration level, hypothesising (but not finding
conclusive evidence) that higher risk tolerance leads to more risk taking and a higher likelihood of
strategic change as performance falls below the aspiration level. We suggest, however, that
decision makers will only increase their risk tolerance to a certain extent. As the firm’s
performance falls to near the survival level, decision makers become more sensitive to risk. The
threat-rigidity perspective indicates that organizations make less strategic changes when their
survival is threatened due to organizational inertia (Staw et al., 1981). This flip-side of prospect
theory (Tversky et al., 1981) has been recognised within theory on managerial risk taking (Sitkin
et al., 1992), but was not fully addressed by Greve. We would therefore expect an inverse
curvilinear probability function for strategic change. Consistent with Greve (2003c) (but
inconsistent with his kinked curve), managers will behave in line with the behavioral theory of the
firm between the aspiration level and the maximum risk taking point, while they behave according
to the threat-rigidity perspective between the survival and maximum risk taking point. Moreover,
unlike Greve, and according to Rajagopalan and Spreitzer (1997), the maximum point on this
curve, which is the firm’s maximum likelihood of choosing to enact a strategic change, is
determined not only by organizational capabilities but also by the environmental conditions,
organizational cognitions, and managerial cognitions as well as managerial actions.
In Greve’s static model, slack and problemistic search are distinct, but complementary drivers of
strategic change. We agree with Greve that achieving performance below the aspiration level
triggers problemistic search. However, we also expect that it will affect the perceived level of
organizational slack over time. Achieving performance below the aspiration level might lead to a
perception of less slack being available, and to increased organizational inertia, and consequently
might reduce the sensitivity (rate) of strategic change. We therefore suggest an interaction between
a firm’s performance above or below the aspiration level and the intensity of slack search.
Expanding Greve’s Behavioral Model of Strategic Decision making
Figure 1 presents an expanded behavioural model of strategic decision making which takes
several of the critiques of Greve’s work into account as well as Greve’s basic behavioural model.
Highlighted boxes and dashed arrows in Figure 1 indicate refinements to Greve’s basic model.
Expansions to the model are in three areas. Firstly, at the top of Figure 1, we recognise that Greve’s
“observe performance feedback” is not as straightforward as it might appear. We suggest instead
that decision makers “perceive performance feedback” based on the firm’s actual performance, the
aspiration level and the decision maker’s interpretations of threats and opportunities, and cognitive
capacity (as a moderator). Secondly, in the right hand side of the figure, we add the survival level
as a significant reference point. As firms approach the survival level, they are expected to decrease
their risk tolerance based on threat-rigidity theory. Including the two reference points – the
5
survival and aspiration levels – generates different expectations of risk tolerance in different
regions of the strategic change curve, resulting in the expected inverse curvilinear relationship
between performance and strategic change. Finally, near the centre of Figure 1, we recognise that
there is an interaction between performance-aspirations and organizational slack. We also suggest
the importance of perceived, as well as actual, slack in strategic decision making.
Figure 1: An expanded behavioural model of strategic decision making
Firm’s
performance
Perceived firm’s
performance
Managerial interpretations
and cognitive capacity
Perceived performance
feedback
Evaluation
yes
Is performance above
the aspiration level?
no
Is performance close to
the survival level?
no
yes
no
Increase
problemistic
search
Search
Deliver solutions to
decision making
Lower perceived
slack
Higher perceived
slack
no
yes
Slack
search
Increase risk
tolerance
Decision
Decrease risk
tolerance
Decide based on risk tolerance,
solutions, and problems
Decrease risk
tolerance
Remaining Challenges within the Behavioural Approach to Strategic Decision making
Our expanded behavioural model of strategic decision making addresses several of the critiques of
Greve’s recent empirical work. However, several theoretical and empirical challenges remain for
behavioural theory to become more attractive to strategic management researchers. Firstly, it could
be argued that the even the expanded behavioural model of strategic decision making we have
proposed suffers from myopia. The criticism presented by Levinthal and March (1993) of the
organizational learning perspective is also valid for Greve’s work. The model suffers from
“temporal myopia” which refers to the priority of the short run to the long run, as well as spatial
myopia (locality of search in Greve’s case). The natural consequence of such myopia is the
competence trap (Levitt & March, 1988), or the paradox of success (Audia, Locke, & Smith, 2000).
Both terms refer to the “failure of successful organizations to search ways to improve” (Greve,
2003a: 3). Although Greve (2003: 157) argued that “while the myopia of problemistic search [as a
core element of Greve’s model] seems to be inevitable, and perhaps also efficient result of
bounded rationality, other aspects of search process can be modified to increase their
effectiveness.” At the macro level and public policy perspective this myopia probably is not a
problem since in the long-run, the competitive market will penalize organizations that chose
incorrect strategies or that fall into the competence trap in response to performance feedback, and
keep the efficient organizations. However, from a strategic management perspective, behavioural
theory suffers as a managerial framework because myopia is capable of leading to the competence
trap.
Secondly, the challenge remains to test elements of the expanded model. The behavioral theory of
the firm began with qualitative research (Cyert et al., 1963; Greve, 2004). It seems that more
6
qualitative studies are needed in order to build a better understanding of the effects of critical
points (aspiration, survival, and maximum strategic change) on risk taking behavior and
consequently on strategic decision making. As Greve (2002, p. 13) suggested, “a very useful
triangulation of methods is afforded by the opportunity to test these propositions both by direct
measure of aspiration levels (in either experiment or surveys) and by estimation from behavioral
data.” Having more case studies and different tools to choose from to measure performance, slack,
and risk taking constructs will improve our understanding of firm behavior.
We would also encourage further quantitative tests of the theory examining various strategic
decisions and empirical contexts. A wide range of strategic decisions could be investigated using
this behavioural framework including divestments, mergers and acquisitions, foreign entry modes,
product launches, etc. At first glance it may appear inconsistent to use optimization statistical
techniques within the behavioral framework because the emergence of behavioural theory was
itself a reaction to traditional optimisation economic theories. However, the decisions of
boundedly rational actors can be understood using optimizing statistical techniques without
inferring optimisation on the decision makers, and is a well accepted technique among behavioural
scholars (Greve, 2003c; Miller et al., 2004; Nohria et al., 1996). While Greve made a valuable
contribution by developing specific measurements of the social and historical aspiration level,
several measurement challenges remain. There is a long standing debate on the measurement of
organizational slack (see for example Bourgeois, 1981; Marino & Lange, 1983) which has still not
been entirely resolved. While some valuable attempts have been made recently to directly measure
managerial risk preferences (Miller et al., 2004), managerial interpretations of risks and
opportunities (Chattopadhyay, Glick, & Huber, 2001) and the firm survival level (Chen, 2003;
Miller et al., 2004), these could be developed further.
The behavioural theory of strategic decision making has much to offer strategic
management scholars: it makes realistic behavioural assumptions; it can be applied to a wide range
of strategic situations; and it incorporates the pivotal strategic variables of firm performance and
strategic change. Greve has enhanced behavioural theory’s attractiveness to strategic management
scholars by incorporating managerial risk taking, developing empirical tests using secondary data
and expanding the scope of strategic decisions to which behavioural theory can be applied. We
have identified several further extensions to Greve’s work and provided an expanded behavioural
model of strategic decision making. Our new model can better account for the behaviour of
proactive firms, and may account for some of the Greve’s inconsistent empirical findings. Our hope
is that others will join us in the challenge of developing behavioural theory, and in applying it to an
increasing range of strategic problems.
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9
ASAC 2005
Toronto, Ontario
Shamsud D. Chowdhury
Mohammad F. Safa (Student)
School of Business
Dalhousie University
UPWARD RATCHETING OF CEO COMPENSATION IN LARGE CANADIAN
CORPORATIONS: ALTERNATIVE EXPLANATIONS
Anecdotes, business press, and some empirical studies suggest that the 1993 OSC
requirement for executive salary disclosure, coupled with traditional market
forces, has led to information efficiency of executive labor market, resulting in an
upward ratcheting of CEO compensation in large Canadian public corporations.
Based on the tenets of managerial power, social comparison, and hidden action,
we maintain that the information efficiency-based argument is partial, and that
psychological, organizational, and social forces are even more powerful
influencers of upward ratcheting. We present the case of a board’s compensation
committee as an ideal context for supporting our argument.
Over the last couple of decades, the relationship between CEO compensation and firm
performance has generated a great deal of controversy. Besides becoming a topic of both interest
and scrutiny in the business press, this relationship has also inspired a rich stream of debate among
academic researchers in finance, organization theory, and strategy. A consistently high rate of
growth in the average earnings of CEOs in Canada and the US over the recent past has stirred this
controversy. Although the notion that rewards given to the heads of our public corporations should
be linked to the earnings of the companies is consistent with theory, for the most part, academic
researchers have been “stymied” in their search for a meaningful association between CEO pay and
firm performance (Jensen & Murphy, 1990).
Despite an ongoing debate surrounding the controversy, the effect of one critical influence
on the process of setting CEO compensation—bidding-up—remains unexplored. Bidding-up
refers to an upward “ratcheting” or shoot up of the executive pay over time due to the possibility of
a comparison of compensation in the external executive labor market (Ezzamel & Watson, 1998;
Finkelstein & Hambrick, 1988; Van Clieaf, 2004). According to anecdotes (e.g., McFarland, 2002,
2004; Van Clieaf, 2004) and some empirical research with indirect bearing on ratcheting (e.g.,
Chowdhury & Wang, 2004; Magnan, St-Onge, & Thorne, 1995; Park, Nelson, & Huson, 2001;
Zhou, 2000), bidding-up has shot up the level of CEO compensation in large publicly held
Canadian corporations. The 1993 Ontario Securities Commission (OSC) requirement that all
publicly traded firms listed with the Toronto Stock Exchange (TSC) disclose the amount and
composition of individual compensation of the five highest paid executives has contributed to an
upward ratcheting of CEO pay. As public disclosure of executive compensation adds to
information efficiency of the executive labour market (Fama, 1980), bidding-up appears to be an
attendant corollary of such regulation. The US experience of upward ratcheting, which stems from
a very strict disclosure regulation of the Securities Exchange Commission (SEC), is consistent
with Fama’s explanation.
We maintain that Fama’s (1980) is a partial explanation, and that there are other equally, or
even more powerful social, psychological, and organizational forces that also influence the upward
ratcheting of CEO pay both directly and indirectly. An exploration of the nature and interaction of
these forces is important for both theoretical and practical reasons. Accordingly, this paper
addresses itself to the exploration of these forces and to the way they interact and contribute to
10
upward ratcheting. In this bid, we draw on three theories—managerial power (Bebchuk, Fried, &
Walker, 2002), social comparison (O’Reilly, Crystal, & Main, 1988), and hidden action
(Holmstrom, 1979)—which seem equipped to encapsulate the intricate and interactive nature of
the forces underlying upward ratcheting.
Background and Rationale
Effective October 1993, the OSC made it a requirement that firms traded on the TSE
disclose the amount and composition of individual compensation of the five highest paid
executives. Until October 1993, The OSC traditionally required only group disclosure of
compensation data for individuals who are defined as executives. In the US, however, such
disclosure became mandatory a year earlier. The SEC initiated changes in the Securities Exchange
Act of 1934 and effective October 15, 1992 instructed the corporations to provide shareholders
with easy, more understandable reports on executive compensation. Accordingly, corporations are
required to disclose all compensation awarded to a CEO and four most highly compensated
executive officers.
This regulation came in response to demands from various stakeholders, especially
stockholders and institutional activists, that executive pay packages be made a function of a
corporation’s performance. Non-profit-organizations and social activists pressed for such a
regulation as well. As the total CEO compensation is usually large, some find the amount to be
“offensive” from a point of view of fairness and social justice Following the introduction of the
disclosure requirement, directors have come under intense public pressure to make CEO
compensation contingent upon firm performance (McFarland, 2002; Park et al., 2001). In reality,
however, the opposite appears to be true, which could be attributed to two sets of reasons. The first
set relates to a CEO’s obvious self-interests guided by risk aversion. Performance-based pay is
riskier, more uncertain (Gray & Cannella, 1997; Hill & Phan, 1991), and generally unwelcome by
risk-averse managers who have a significant part of their human capital tied to the company’s
future (Muelbroek, 2001). Stockholders, on the other hand, have an obvious interest in opposing
pay packages that are independent of performance, in that exorbitant CEO pay affects the ultimate
profitability of a corporation. Therefore, to balance these opposing preferences, corporations
generally divide total CEO compensation into two components—contingent and noncontingent.
Both of these two forms of pay expose CEOs to different levels of risk (Daily, Johnson, Ellstrand,
& Dalton, 1998). Contingent compensation induces real uncertainty in CEOs’ pay (Gray &
Cannella, 1997), whereas noncontingent compensation provides them with a stable stream of
income (Tosi & Gomez-Mejia, 1994). Stockholders prefer the former and CEOs prefer the latter;
thus, some trade-off between the degree of risk sharing between the stockholders and the CEOs is
likely to determine the proportion of contingent and noncontingent pay. The second set stems from
imperfections in the design and execution of corporate governance and incentive mechanisms and
their interactions with the market forces.
Like any other remuneration, the classic justification for high CEO compensation is that it
is driven by the market forces. With respect to market forces, Finkelstein and Hambrick wrote,
“There are two perspectives from which this calibration can be considered. First,
[CEO] pay may be viewed as a function of supply and demand. Second, it can be
viewed as a function of how much the executive is expected to contribute to the
performance of the firm. These are not mutually exclusive views, although they
may require somewhat different assumptions” (1988: 546).
Both perspectives are rooted in economics. If demand for CEOs outstrips their
11
corresponding supply, then, regardless of the performance of the firm, boards may be forced to pay
their CEOs a compensation that may not be necessarily related to a firm’s performance. The
second perspective is related to the concept of marginal productivity of labor, which simply states
that a worker is paid his or her value to the firm. Because these two theoretical perspectives
explain how CEO pay is determined in the market, according to the opponents of
pay-for-performance, there should not be any controversy over a CEO’s pay. Therefore, argue
these proponents, a firm’s board has to ensure that its CEO is paid at least the going rate, or a
compensation level typically paid by similar firms to comparable individuals occupying similar
posts. Going rate is the minimum level of compensation required to recruit and/or retain effective
individuals (Ezzamel & Watson, 1998) to run the corporation. This phenomenon can be
represented in a simple graph, which appears below.
CEO Performance
C2
Total Pay or
Going Rate
Contingent Pay
C1
Non-contingent
Pay
Firm Performance
In the graph, C1 represents noncontingent pay, which a CEO prefers, as it ensures him or her a
stable stream of income independent of company performance. C2 represents total pay or going
rate, which has to be awarded in order to retain the CEO. Any point along the contingent pay line
represents a CEO’s pay-for-performance compensation, depending on the nature of compensation
contract he or she has with the board. The corresponding space (against any point on the
contingent pay line) between C2 and contingent pay line represents a CEO’s total pay, which is
much inflated due to upward ratcheting.
However, both perspectives are problematic, in that they add to the inefficiency of the
executive labor markets. Imperfections in both demand and supply of available CEOs in the
market make appropriate CEO pay questionable. A major inefficiency results from the ambiguities
of CEO talent pool (Finkelstein & Hambrick, 1988). According to critics, on a more fundamental
level, arguments for both shortage of supply and excessive demand for CEOs are not tenable.
Based on discussion with experts in CEO compensation, McFarland (2004) noted that Canada has
enough brilliant corporate leaders who are as good as the ones on corporate payrolls with very high
amounts of salary. Similarly, on the demand side, according to McFarland, in some industries in
Canada, banking being one, there are not many competitors to whom a CEO could turn for
alternative employment. Similarly, the justification for CEO pay based on the concept of marginal
productivity is questionable. A host of ambiguous factors, which are mostly perceptual in nature,
make marginal productivity-based compensation complicated and arbitrary. Most important, how
is the marginal productivity of a CEO measured? Besides hundreds and thousands of employees, a
12
CEO is aided by a top management team (TMT). How can, then, a CEO’s marginal productivity be
delineated? Because a CEO is the individual responsible for the overall performance of the
organization, there is good reason to suspect that a fair chunk of marginal productivity of other
members of the TMT is lumped under that of the CEO. Therefore, a marginal productivity based
explanation is far too simplistic and inaccurate to describe CEO compensation in the executive
labor market (Iacobucci, 1996). In order to save on transaction costs stemming from sources, such
as motivation, recruitment, and retention, added Iacobucci, boards pay CEOs a higher
compensation, thus breaking the expectation consistent with the notion of marginal productivity of
CEOs. Despite such inefficiencies, economic theories have been used in the study of executive
compensation in such a way as if no inefficiency ever existed. Consistent with Finkelstein and
Hambrick (1988) and O’Reilly et al. (1988), we maintain that theories from organizations,
psychology, and sociology may help us present a more complete explanation of upward ratcheting.
In this bid, we start with a special context—a board’s compensation committee—which we
consider ideal for supporting our argument.
Board of Directors
The assessment of the performance of CEOs and the determination of their appropriate
compensation packages is one of the central monitoring functions of a board of directors (Lorsch,
1989; Walsh & Seaward, 1990). Therefore, a careful utilization of the CEO compensation process
should serve to align his or her interests to those of the stockholders of a firm (Jensen & Meckling,
1976; Tosi & Gomej-Mejia, 1994). As agency theory implies, a CEO’s compensation, at the least,
must be consistent with the performance of the very corporation he or she serves. A failure on the
board’s part to constrain excessive CEO compensation hurts corporate profitability, and thus,
erodes stockholder wealth.
The imperfections associated with the two market-driven forces, as outlined earlier,
underscore the role of a board’s compensation committee in the determination of CEO pay.
Consistent with agency theory, a widely held perception in many quarters and the business press is
that independent compensation committees help to protect shareholder interests. However, the
failure of the OSC’s mandatory disclosure requirement and the sales elasticity of CEO
compensation, as outlined in the following paragraphs, indirectly justify why compensation
committees, even with a large proportion of outside members, award their CEOs generous pay
raises unrelated to firm performance.
The purpose of the OSC’s legislated, mandatory disclosure of executive compensation to
link pay to performance appears to have been defeated. With a sample of 80 firms, Park et al.
(2001) found an increase in total executive pay in real terms following open disclosure. Because of
mandatory executive salary disclosure, CEOs can easily determine their position among peers in
Canada and can benchmark themselves rather easily, and may move to alternative corporations
accordingly (Gelinas, Magnan, & St-Onge, 2004; Park et al., 2001; McFarland, 2004). As a result,
this disclosure might have created ripple effects, initiating a tradition for other companies to match
the CEO pay of a rival company. Besides finding out their pay position among peers in Canada,
more importantly, CEOs have access to an even much larger and more attractive US executive
labor market, which provides them with an opportunity to assess their options in terms of career
moves. Certain provisions of the North American Free Trade Agreement (NAFTA) might have
made such moves easier. Given these options, CEOs of large Canadian corporations now have
effective bargaining chips to negotiate their employment contracts upward. Air Canada pilots
illustrate this point. During their strikes on at least a couple of recent occasions, they have
benchmarked their pay with their peers in the US, and have pressed for higher compensation.
13
Sales elasticity of executive compensation in Canadian firms tacitly supports why a
bidding-up effect might be present in the Canadian executive labor market. Chowdhury & Wang
(2004) found a clear association between the proportion of outside directors on a compensation
committee and the level of CEO compensation. Similarly, Conyon and Peck (1998) found that the
fraction of outside directors in a compensation committee is positively related to top management
pay. Such findings suggest that independent compensation committee members are not there to set
a CEO’s compensation level appropriately. The disclosure requirement, coupled with the sales
elasticity argument, supports the presence of a upward ratcheting effect for CEO compensation in
Canadian corporations. This situation might also explain why large pay raises to CEOs are
unrelated to company performance.
If compensation committees acted in the best interests of the stockholders, agency theory
would suggest, CEO pay increases could not be so unrelated to firm performance. The above
discussion suggests that there might be other explanations for an absence of the relationship
between pay and performance. In other words, the elements of managerial power (Bebchuk, 2002),
social comparison (O’Reilly et al., 1988), and hidden action (Holmstrom, 1979) work in a way
that ultimately adds to the efficacy of market-driven forces in augmenting upward ratcheting of
CEO pay.
Managerial power. In large public corporations, the board of directors is in charge of
compensating the CEO. A board is usually made up of both inside and outside members. For
effectiveness in the trusteeship role of a board, according to agency theory, it should have a large
proportion of independent outside directors on it. However, both anecdotes and survey evidence
suggest that CEOs can handpick new board members from outside (Bebchuk et al., 2002.). This
ability of a CEO formally ties managerial power to CEO compensation. Empirical evidence on
suboptimal CEO compensation contracts also endorses managerial power. For example,
Shivdasani and Yermack found that CEOs exert influence in the selection of new directors and that
when CEOs are involved in the process, “directors predisposed to monitor the CEO are less likely
to be appointed” (1999: 1830). Because of their long tenure or because of having a contract on the
degree of influence in the selection of new directors (Bebchuk et al., 2002), boards appoint fewer
independent outside directors and more gray outsiders (Shivdasani and Yermack, 1999). In such a
situation, a board’s monitoring of the CEO deteriorates. Therefore, a compensation committee
made up from such a board is more likely to protect the interests of a CEO, recommending an
inflated pay package that other considerations would not normally justify. In formal terms,
Proposition 1: All else being equal, when a CEO has discretion in the selection of new
outside directors, a compensation committee made up of such outside directors is more
likely to contribute to upward ratcheting of CEO compensation.
Social comparison. The compensation committee of a board typically consists of a small
number—three to five—of board members, all of whom are, by convention, not members of
management (O’Reilly et al., 1988). In other words, the compensation committee typically
consists of outside directors on the board. These individuals are CEOs of other firms (Kesner,
1988; O’Reilly et al., 1988), who are generally influential and well-compensated. O’Reilly et al.
(1988) found that compensation committee members set CEO pay in relation to their own salaries.
Outside directors, who also sit on the compensation committees of other companies, award CEOs
as much compensation as they deem appropriate (Ezzamel & Watson, 1998; Kesner, 1988).
Independent of other critical considerations, their basis of recommendation for CEO compensation
is purely social comparison. These individuals anchor their judgments about appropriate CEO
remuneration by comparing the CEO’s salary to their own (O’Reilly et al., 1988). In formal terms,
14
Proposition 2. All else being equal, in boards where a compensation committee is made up
largely of independent outside directors, such a compensation committee is more likely to
contribute to an upward ratcheting of CEO compensation.
Hidden action. Several researchers highlight the importance of information regarding
comparison levels of pay in setting the CEO compensation process, such as wage surveys and
mandatory salary disclosure (Finkelstein & Hambrick, 1988; Ezzamel & Watson, 1998; Magnan et
al., 1995; Park et al., 2001). It may be argued that this reliance on external information is an
offshoot of what Holmstrom (1979) referred to as a “hidden action” model of CEO tasks.
According to this model, the CEO is required to perform a series of activities to maximize the
utility of the shareholders. However, the tasks of the CEO may not be observable to the investors.
Similarly, the board may be unable to completely observe or understand the tasks a CEO performs.
Although the CEO should receive higher compensation if the tasks are complicated and require
greater skill or hard work, the opposite might be true as well. As this apparently hidden, unclear
job role of a CEO can be likened to a black box, the contents of which are not really known, a
compensation committee prefers to play safe. It aligns managerial incentives by tying CEO
compensation to clear observable corporate characteristics, such as company size, performance,
role titles, reporting lines, and capital structure (Holmstrom, 1977; O’Reilly et al., 1988; Van Clief,
2004), which might throw off the balance between pay and performance.
There is another reason why compensation committees rely heavily on salary surveys and
external compensation consultant reports. An overly inflated compensation package may create an
“outrage” to the external constituencies of a firm, especially its stockholders and institutional
activists. Outrage can be costly to the directors in terms of their reputation. Therefore, they need
what Bebchuk et al. (2002) called “camouflage.” The recruitment of pay consultants and the use of
their reports, coupled with other comparable statistics, legitimize exorbitant pay under managerial
power approach. So, the interaction of hidden actions and managerial power through camouflage
appears to be an important contributor to the inflation of a CEO’s compensation package. In formal
terms,
Proposition 3: All else being equal, when a compensation committee relies extensively on
outside information, such as mandatory executive salary disclosure, independent
consultant reports, and salary surveys, such a compensation committee is more likely to
contribute to an upward ratcheting of CEO compensation.
Conclusion and Implications
Many investors consider CEO compensation as a proxy for board effectiveness. A lack of
connection between CEO pay and firm performance signals a governance problem within the
enterprise which, in turn, negatively affects the ability of a corporation to attract capital both at
home and abroad. Excessive compensation packages for CEOs, mainly attributable to bidding-up,
can “erode the respect of investors and employees, and even start to undermine faith in the whole
free-market system” (McFarland, 2004: B7). Therefore, a complete understanding of the process
of upward ratcheting of CEO pay is necessary.
In this paper, we argued that executive labor market is not perfect, and that traditional
economic theory inadequately explains the full scope of upward ratcheting. Rooted mainly in
sociology, psychology, and organization, other equally, or even more powerful, forces explain why
upward ratcheting of CEO pay occurs. As we have demonstrated in the context of a board’s
compensation committee, which recommends a CEO’s pay package, managerial power, social
comparison, and hidden actions also encourage, either singly or in combination, upward ratcheting.
15
More interestingly, these non-economic forces are found to foster upward ratcheting in
combination with traditional market-driven forces.
In Canada, the 1993 mandatory disclosure of executive pay is often blamed for this
unintended consequence of upward shooting of CEO compensation. However, as we argued, the
1993 disclosure regulation should not be entirely blamed for this phenomenon. As a matter of fact,
such a disclosure of executive pay provides a safeguard against looting by management in
collusion with captive boards of directors (Jensen & Murphy, 1990). Ratcheting is largely an
outcome of an imperfectly designed and poorly monitored CEO compensation package by a
corporation’s board. As we demonstrated, there are other equally or more effective contributors
to upward ratcheting to which attention needs to be paid.
Due to an interaction of an array of both market and non-market forces, it may not be
possible to establish an exact pay-for-performance package for CEOs, but the effects of upward
ratcheting can be neutralized greatly. Therefore, determining the extent of ratcheting in the overall
package of a CEO’s compensation appears to be the first crucial step. However, a precondition for
this step is to understand the process of how a CEO’s compensation is determined. For example, of
the corporate characteristics that form the basis of outside consultants’ recommendations for CEO
pay, characteristics such as role titles, reporting lines, and a CEO’s locus in the overall structure are
difficult to observe, and hence, an in-depth, first hand understanding of these characteristics is
necessary. The second step involves a determination on the part of a board to undertake added
responsibility for curbing excess. Added responsibility includes, but is not limited to, measures
such as more truly independent, but professionally dedicated, outside members on the
compensation committee (Vafeas, 2003); a detailed explanation in the proxy statement as to how
compensation is awarded to a CEO and how it matches corporate performance (McFarland, 2004;
Vafeas, 2003); restricting absolute reliance on compensation consultants (McFarland, 2004);
measuring performance over a multiple year time period (Gray & Cannella, 1997; Van Clieaf,
2004); structure of compensation contracts (Perry & Zenner, 2001); and a separation of the total
CEO compensation into contingent and non-contingent components (Daily, Johnson, Ellstrand, &
Dalton, 1998; Tosi & Gomez-Mejia, 1994); and a restriction on the participation of a CEO in the
board’s nomination committee. Once a complete understanding of how CEO pay is awarded is
established, it will then be possible to model the effect of ratcheting on a CEO’s pay.
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18
Jacqueline Dahan (student)1
HEC Montréal
ASAC 2005
Toronto, Ontario
INDIVIDUAL SUCCESS AND THE STRATEGY PROCESS:
AN EXPLORATORY STUDY2
Today’s business press questions the link—by no means
automatic—between individual and organizational success. Top performers
or mavericks (“straight shooters”) display idiosyncratic behaviour that, while
it brings innovation, puts organizational success at risk. The study reveals
that individual success is a social construct that is part of the process of
strategy formation and stems from a corporatist attitude to official strategy.
The business press regularly reports that individual professional success (the success of the
manager or professional) is not an automatic component of organizational success (Bunker, 2002;
Cliffe, 2001; Groysberg et al., 2004; Ludeman and Erlandson, 2004). In these articles aimed at
practitioners, successful individuals (“star performers”), mavericks (McMahan, 1993) and “alpha
males” (Ludeman and Erlandson, 2004) consistently display idiosyncratic behaviour that yields
much innovation. However, such deviance from the norm, while bolstering the organization’s
competitive edge on the one hand, may paradoxically prove harmful to organizational success on
the other. A number of authors in the business press have raised the problem of the “abrasive
personality” that star performers, so vital to organizational success, can nonetheless pose for the
organizations that employ them (Alder et al. 1997; Bunker et al. 2002; Cliffe, 2001). Ludeman
and Erlandson (2004) summarize the issue in their article “Coaching the Alpha Male”: “Bold,
self-confident, and demanding, alpha males get things done. But the traits that make them so
productive can also drive their co-workers crazy.” Similarly, Cliffe, in her article “What a
Star—What a Jerk,” asks: “Sometimes an employee can be nasty, bullying, or simply hard-hearted.
What should you do, though, when that person also happens to be a top performer?” Bunker et al.
(2002) also refer to this dilemma: “[H]e’s a rising star. He’s also arrogant and unseasoned. Denying
him that promotion might be the best thing you could do for his career—and your company (...)
Unfortunately, most managers seek out smart aggressive people, playing more attention to their
accomplishments than to their emotional maturity.” Faced with this quandary—that of the
organization at the mercy of its maverick performers—Ludeman and Erlandson demonstrate that,
for the good of the organization, it becomes imperative to “tame the Beast” and focus instead on
group cohesion.
1
The author, Jacqueline Dahan, is currently working toward her Ph.D. in Management at HEC Montréal.
Her thesis, which focuses on the meaning “professional success” holds for managers and professionals, sets
out to examine managers’ interpretations of how such success is constructed, as well as any links they
perceive between individual and organizational success. Ms.. Dahan is currently exploring how the process
by which individual success is constructed relates to the strategy process. The data she has collected to date
is from private sector Quebec manufacturers in the high-tech industry.
2
The author would like to thank Christiane Demers, Ph.D. and Full Professor at HEC Montréal, for her
informed and insightful comments on the first draft of this article.
19
In the spirit of these articles and supporting the existence of such a quandary, the study conducted
by Groysberg et al. (2004) on 1,000 senior and high-performance financial analysts in the finance
industry unearthed some surprising findings. The authors drew the following conclusion:
Top performers quickly fade out after leaving one company for another. The results were
striking. After a star moves, not only does her performance plunge, but so does the
effectiveness of the group she joins—and the market value of her new company. Moreover,
transplanted stars don't stay with their new organizations for long, despite the astronomical
salaries firms pay to lure them from rivals. Companies cannot gain a competitive advantage
or successfully grow by hiring stars from outside. Firms shouldn't fight the star wars, because
winning could be the worst thing that happens to them.
Our reading of the business press led us to perceive this dilemma primarily as a strategy issue, one
that appeared to emanate from the tension between, on the one hand, top performers who marked
themselves out from the group (and the ensuing recognition of their success by their superiors), and
on the other hand, organizational success which, by definition, implies group cohesion. We noted,
too, that this issue faced by practitioners—the individual/group polarity and the tension it
engendered—was a virtually non-existent topic in university research.
Taking our lead from these findings, we set out to understand how the individual success of the
manager or manager was constructed. In the summer of 2003, we conducted an exploratory study
within a large Quebec parapublic organization. The choice of the parapublic domain was
deliberate, and was based on the following premise: if individual success could be said to arise
from the tension between deviant individualism and group cohesion, then any such divergence
from the group ought to be that much more visible in the highly institutionalized character of the
parapublic organization. Such a context would therefore provide us with an extreme case that
would allow us to approach our research topic from an interesting perspective.
The study was executed based on the idea that strategy, the core element of organizational success,
also played a key role in the construction of individual success. Our starting point was thus the
notion that a manager’s contribution to company strategy could have a significant positive effect on
his or her individual success. More specifically, we wished to respond to the question, How does
“success” come about for the manager, and how does this correspond to the strategy process?
Research question
This case study thus aims to uncover the link between professional success and company strategy.
The question, while focused on individual success, is more particularly concerned with the process
by which such “success” is constructed—a central tenet of our stance. To all intents and purposes,
our starting point was the hypothesis that individual professional success is a process of social
construction that transpires through the interactions between manager and peer or co-worker.
Our question necessarily brings us to the field of strategy. There are two main reasons why we
chose to conduct our research from this perspective. First, to return to the idea that the strategy
process may serve an important function in the construction of individual success, we believe that
managers distinguish themselves from their peers to the extent that they contribute differently or
significantly to the strategy process. Underpinning this is our own belief in the local actor’s
value-added contribution to strategy formation through micro actions, along with our subscription
to the beliefs held by certain authors who study emergent strategy and strategy-in-action
(strategizing) (Rouleau, 2002; Salvato, 2003; Jarzabkowski, 2003). These authors take their lead
20
from Bower and his classic work, Managing the Resource Allocation Process (1970), one of the
first to cast light on the substantial contribution of the local actor to strategy and organizational
success.
The second reason for focusing on the field of strategy stems from the depiction of organizational
success in both the business press and academic research. An apparent consensus exists among
certain authors of university studies in strategy as to the near-tautological link between official
corporate strategy (deliberate strategy), organizational success, and an organization’s enduring
competitiveness (Barnett and Burgelman, 1996; Burgelman, 2002; Eisenhardt and Brown, 1998;
Eisenhardt and Sull, 2001; Hamel and Prahalad, 1995; Kanter, 2002; Klein, 2002). As Klein
(2002:318) writes, “[M]any authors (...) define competitive strategy as ‘the basis on which a SBU
(strategic business unit) might achieve competitive advantage in its market,’ and in most of the
definitions given to strategy, competitive advantage means nothing more than success.”
Our research question thus entailed a two-pronged review of the literature: the first focusing on
individual success; the second, on strategy and the local actor’s contribution to the strategizing
process.
A review of the literature
Current literature on professional success is almost exclusively focused on the career; its authors
implicitly endorse the simple idea that professional success is consistent with a successful career
(Falcoz, 2001; Lee, 2003). In substance, career-centred literature falls into one of two camps.
The first, academic and often prescriptive, takes an objectivist approach and mainly concerns
career or performance management. This approach clearly has value for the practice insofar as it
provides company directors and/or human resource management experts with a reference tool
(Watson and Hassett, 2004). The second, equally prescriptive, comes from the business press.
This type of literature addresses managers directly, much like a coach; urging readers to take their
careers in hand and build sound individual career strategies, it essentially lays out the
stepping-stones to professional success (Ibarra, 2004; Michaud, 2003). As we see it, both types of
literature are informed by two dominant ideas: first, that professional success hinges on the degree
to which a manager’s profile (education, experience, values, etc.) “fits” a given organizational
culture (Anderson, 1997; Falcoz, 2001; Hall, 2004); and second, that success per se is the
by-product of individual will. In this sense, the individual is an active and determining force in the
construction of his or her own professional success and in achieving a good “fit” (Falcoz, 2001;
Hall, 2004).
Academic research on professional success is rooted in a positivist paradigm with an objectivist
ontological foundation—which is to say, premised in an objective, not subjective, definition of
success. Studies of this kind generally fall into the field of Organizational Behaviour (OB), and
examine the correlation between variables. Objective success is sometimes the independent
variable: the study by Weil and Kimball (1996) demonstrates the causal relationship between
success and salary. Other positivist studies present success as a dependent variable; here,
individual factors generally serve as the independent variables. For instance, the study by Zorn
and Violanti (1996) deepens the causal relationship between an individual’s interpersonal skills
and his or her professional success.
However, less common positions in current academic research point to the importance of
differentiating between “objective” and “subjective” success. While the first instance may be
quantified through its factual indicators (promotions, salary scale, etc.), the second appears subject
21
to the interpretation given to it by the individual in question—the manager vis-à-vis his or her own
career path. Subjective success (Lee et al., 2003), also known as “psychological success” (Hall,
2004; Lee et al., 2003), means that managers may still see themselves as a success even if they
choose to eschew such traditional outward indicators as pay rises and promotions. Researchers’
interest in psychological success, apparently fleeting, becomes clear in a context where the
proverbial “job for life” is increasingly rare, where organizations can no longer promise their
managers endless promotions or guarantee employment until retirement. Construction of this kind
of success, rather than being dependant on outward indicators, is fed by different experiences with
different employers. This is precisely what certain authors are referring to when speaking of the
“boundaryless career” (Ackah and Heaton, 2004; Hall, 2004; Lee et al., 2003), or of the
multidirectional career path (Baruch, 2004; Hamori, 2003). The career characterized by frequent
changes of employer invokes the “protean worker” (Hall, 2004; Reitman and Schneer, 2003). The
analogy to the Greek god Proteus and his ability to take on any form points up the identity building
process intrinsic to the career.
In summary, we note that the bulk of these studies are positivist; the rare studies that take an
interpretive approach centre their research objectives on the career, and frequently situate their
arguments within the academic discourse around the “work/family balance.” As our methodology
will make clear, our research delves instead into managers’ sense-making regarding professional
success. To date, and to the best of our knowledge, no study has closely examined the ways in
which managers perceive the process by which professional success is constructed; nor does any
study closely examine the relationship between individual and organizational success.
Because it is interpretive, and because it explores success from a strategy perspective, our study
stands to reveal new insights into the subject. However, while individual success has never been a
research topic per se in the field of strategy, the work of certain authors—in particular, Burgelman
(2002), Kanter (1983) and Avenier (1997)—has nonetheless shed considerable light onto the
subject, and should be mentioned.
Burgelman argues that strategy formation is a collective process. In his work Strategy is Destiny
(2002), Burgelman shows how the local actor can contribute to strategy in two different ways that
are not mutually exclusive: by complying with the official strategy, and by diverging from it.
Burgelman’s findings support the idea that individual success may be constructed around
conforming to and/or deviating from the organizational context and the official (deliberate)
strategy. In his famous study on Intel,1 Burgelman proposed a model of strategy that consists of the
four processes inherent to strategy formation. These are variation, selection, retention and
competition.
Variation refers to the multiple ways in which actors or groups of actors experiment and the varied
initiatives that allow them to reach personal fulfilment. Selection is a structured process
consisting of a number of mechanisms (cultural, political, etc.) that act as regulators in sorting
initiatives and in making resource allocation decisions. Retention refers to the fact that certain
initiatives survive the jungle of local initiatives to be retained (by upper management). Lastly,
competition is both internal and external by nature: internal insofar as internal projects must share
the limited resources available; external in the extent to which organizational success turns on
strategies that are formed with a view to prevailing over other organizations who display similar
potential. It is worth noting that, with regard to these processes, Burgelman was strongly inspired
by the evolutionary perspective—highly macro in nature—and brought it to an intra-organizational
1
Intel is an American corporation which started out in the semi-conductor industry and changed its
positioning to the microprocessor industry.
22
level by applying the Darwinian model to the organizational system to explain the refinement of
local initiatives (Burgelman, 1996).
For Burgelman, these four processes fall within two generic types of strategic action: the Induced
Strategy Process and the Autonomous Strategy Process. The first refers to the top-down process by
which a strategy officially approved by upper management is implemented through subaltern
levels. “Induced strategy” underpins the implementation of an official strategy, which evokes the
organization’s past successes along with the successes to come. In this sense, induced refers to the
idea that any such official strategy constitutes a strong frame of reference: the actors who
implement the strategy not only share this frame of reference, but also fundamentally subscribe to
the historic “essence” carried by the official strategy throughout the hierarchy; in this sense,
“induction” is a kind of indoctrination.
The second great strategic process, which Burgelman calls Autonomous Strategy, corresponds to
“intrapreneurship.” Autonomous strategic action relates to the moment of emergence of local
initiatives that leave the field of the official strategy. These initiatives may be described as
forward-looking for the organization and/or its positioning within the industry. Autonomous
strategic action never overlaps with induced strategic action in the target markets and/or use of
technology (“strategic dissonance”). For Burgelman, the genotype or genetic code is an
appropriate metaphor for induced strategy, while the metaphor of mutation most aptly describes
autonomous strategy.
Though far from being an interpretive approach, Burgelman’s model is an inspiring one for two
main reasons. The first relates to our argument that strategy is a propitious place—a crucible—for
the construction of individual success. Burgelman posits strategy as a social construct, a concept
that parallels our ontological stance. The second reason is specific to the induced and autonomous
processes that acknowledge the local actor’s contribution and enable individual success to be
viewed from two perspectives: conformity on the one hand, and deviance from official strategy on
the other.
Avenier (1997), in turn, presents strategy from an even more micro perspective than Burgelman.
Here, the literature treats strategy-in-action (strategizing), which Avenier (1997) calls “tentative”
or “trial and error” strategy. The process referred to is iterative, complex and fluid; in it, the
emerging and the deliberate, much like vision and action, come together and inform each other in a
symbiotic exchange from which strategy materializes. Within the determining and limiting
complexity of industry, the organizational actors (aiming, of course, for organizational
performance) have to feel their way forward—a notion that perfectly illustrates the ebb and flow
between emergent (induced, unexpected, involuntary) and deliberate (rational, deductive,
voluntary) strategies. For our purposes, this “tentative” strategy or strategizing corresponds to
strategic processes achieved on a micro level through daily emergent interactions that inevitably
occur within the standardized context of organizational routine. These local emergent actions are
only qualified as strategic in hindsight, i.e. when the members of upper management render an a
posteriori judgment on their compliance with the overall vision (Mintzberg and Waters, 1985).
What remains is that these ideas or projects for change which appear as emerging strategies for
upper management are, in all likelihood, first considered at length by the local actor. The process
by which success is constructed appears to be enmeshed with strategizing and emerging strategies.
Another author whose research, along with that of Burgelman and Avenier, shed insight on our
study is Kanter. In her work The Change Masters (1983), which examines the private American
company, Kanter is credited with highlighting the local actor’s role in both the process of strategy
formation and the organization’s capacity for change. For Kanter, all local actors are potential
23
agents of positive change regarding the organization’s competitiveness. Strongly loyal to the
company, these actors are innovative subordinate managers whose role consists of anticipating the
need for change and of steering this change. These are the “intrapreneurs” who allow the
organization to reinvent itself. The organizations discussed by Kanter are from the private sector
and see local initiatives as vital to their success. These initiatives are encouraged by upper
management: “[I]nnovating companies provide the freedom to act, which arouses the desire to act”
(Kanter 1983:142). An organization’s innovative capacity rests on its participative culture
(culture of pride, culture of success) and its structural flexibility. However, while Kanter
recognizes local actors’ contributions, she does not examine the visibility that the local actor might
gain through his or her contribution to strategy and organizational success. In fact, for Kanter, the
local actor does not stand out from the group, his or her initiatives notwithstanding: “[I]ndividuals
disappear into collectives” (Kanter, 1983:284). When all is said and done, organizational success
supplants individual success, even if the initiatives submitted by the local actor should contribute to
major change.
In short, the authors of works on strategy who influenced us did so because they acknowledged the
local actor’s contribution to strategy. However, none of the authors delve into the formation of
individual success from a micro enough perspective or an interpretive enough manner to broaden
our understanding of how certain managers “break free from the herd” in the way that this is
understood by organizational actors.
Methodology
Our exploratory study was carried out in the summer of 2003 in a large, parapublic quebec
organization with over 1,000 unionized employees, of whom just over thirty could be called
managers We gathered our data through nine semi-directed, semi-structured interviews, six of
which were with directors who reported directly to the president, and three with department heads
who reported to the directors. Each individual interview was recorded and transcribed solely by
us.
The deliberate choice of a parapublic organization may be explained by our initial surmise: a
manager would stand out from his/her peers to the extent in which he or she contributed in an
atypical manner to the organization’s strategy. It was our belief that, in such a heavily
institutionalized context, any aberrance would be that much more apparent.
In other respects, while our interests centred on the process by which success was constructed,
there was no need for a longitudinal study because the process by which meaning is created is in
itself retrospective1.
Since our objective was to come to grips with a subject that was as yet undeveloped from an
interpretive angle, this accounts for our use of the qualitiative methodology known as Grounded
Theory. We did not wish to inventory the objective variables that confirm objective success. On
the contrary, we wanted to understand the meaning the respondents gave to individual success and
its construction within the process of strategy formation. Furthermore, the number of interviews
was calculated in order to reach saturation. As Strauss and Corbin (1998:136) explain: “A
category is considered saturated when no new information seems to emerge during coding, that is,
1
“The idea of retrospective sensemaking derives from Schutz's (1967) analysis of ‘meaningful lived
experience.’ The key word in that phrase, lived, is stated in the past tense to capture the reality that people can
know what they are doing only after they have done it..” (Weick, 1995:24)
24
when no new properties, dimensions, conditions, actions/interactions, or consequences are seen in
the data.” Our results led us to believe that we had reached this level.
Lastly, influenced by Glaser and Strauss (1967) and their work, The Discovery of Grounded
Theory, our data analysis process was inductive and subject to a systematic comparison of the
meaning our respondents gave to professional success and its construction.
The results
To begin with, the responses obtained showed a clear consensus regarding professional success and
its construction. In essence, all the respondents agreed that professional success is a collective
process that not only takes time, but depends narrowly on the manager’s interactions with his or her
co-workers. Indeed, it is precisely through multiple local interactions that the manager is
perceived as standing out from the group and his or her reputation established. More specifically,
the meaning that respondents gave to success indicates that the process by which success is
constructed feeds into the process by which others (peers, immediate superiors, upper
management) establish recognition or the professional reputation. In short, success will not
happen without collective approval, a recurring notion in our interviews:
“Individual success depends on group success.”
“Professional success is the reputation you earn from the people you work with (...) All of
these people have to agree in saying, ‘That guy—he really scores in his field!’ It’s a little like
a professional hockey player. His peers recognize his talent, his trainer recognizes his
talent, the owner of the team will pay for his talent, the fans will see him as a good player... “
“An individual builds his credibility within the organization only through projects carried out
with others—and the others are the ones who judge his potential or how successful he is
when they see the results. Success emerges through team projects.”
Secondly, this consensus deserves to be given nuance. Slightly less than half of the respondents
spontaneously defined success in a way that matched the interpretation of the success-construction
process as collective. However, others, while supporting the notion that success is constructed
collectively, stated that a manager’s success occurred primarily through the fulfilment of personal
ambition, whether purely professional in nature or of the “work/family balance” kind. In sum, for
the second group of respondents, even though success also corresponded to a social construct, it
could not be called true success if the individual who was experiencing it didn’t recognize his or her
own active role in the process, particularly that of personal concerns and, above all, ambition.
Moreover, the respondents who insisted that success is largely subordinate to personal satisfaction
were naturally more inclined to couch their judgment in individual parameters (e.g. political skill,
the ability to assemble peers around a common project, skill in presenting files, etc..), whereas the
others framed their viewpoints by citing the role of conformity in the context of organizational
strategy.
Third, the responses supported the idea that success also rested on the manager’s propensity to take
the helm and become deliberately involved in interactions through which his or her potential might
be recognized. Such recognition was gained through a series of micro achievements that
surpassed the actual requirements of the position: managers voluntarily marked themselves out
from their peers through little ‘extras’ that fell outside normal responsibility. However, these
micro achievements mainly serve to illustrate compliance with the established institutional
25
framework. More specifically, such extras bear similarities to the ideas for change that inform the
strategy process:
“For a manager to be successful, he or she has to be an agent of change. A manager who is
happy to keep the status quo shouldn’t be a manager… However, it’s true that the public
organization has its own set of values and ways of doing things (…) And, unfortunately for
the middle manager, the public organization isn’t going to be the one to change or model
itself according to what a middle manager thinks it ought to be (…) Public organizational
structure and culture stifles its managers (…) It’s the manager who has to fit in, saturate
himself (…)”
Fourth, success translated into a value-added contribution to organizational strategy. Individual
success that did not ultimately inform organizational success could not last. If it didn’t serve to
sustain organizational success, individual success translated into an individualistic and/or careerist
attitude that was diametrically opposed to recognition within the organization (“Success doesn’t
just come about through major coups”; “It’s important not to cut corners if you want to establish
credibility in the eyes of others”).
Fifth, the results demonstrated that success is constructed from the bottom up; it begins with
horizontal recognition of peers (those within range of interaction), followed by vertical recognition
from upper management.
Sixth, the results support the idea that success contains an element of ‘luck,’ which refers to timing
and contextual contingencies (e.g. financial, human and/or material resources).
Lastly, the results clearly indicate the existence of an element of taboo that is tied in with individual
success. Talk of success did not happen without talk of those who had achieved it. To publicly
name top performers was seen as problematic: it runs counter to team spirit.
Discussion
We wish to highlight three pivotal elements in our results. First, based on the meanings extracted
from our data, individual success is essentially a process of social construction achieved through a
series of daily actions. In this sense, our data concur with the strategy process described by
Avenier and his concept of strategy-in-action or strategizing.
Second, recognition, credibility or reputation was established through micro achievements that
surpassed the stated requirements of a given occupation. In addition, these micro achievements
corresponded to the micro ideas of change at the heart of strategy formation. However, these
initiatives fed into the official strategy only in a marginal sense. This indicated that individual
success was primarily constructed along the lines of the induced strategy process described in
Burgelman’s model. Put in other terms, success emerged through compliance with the official
strategy. Furthermore, this corporatist attitude to success is akin to the manager’s strong company
loyalty discussed by Kanter. Whether initiatives represent marginal or radical change, Kanter’s
thesis appears validated through our study’s findings that group success invariably supplants
individual success.
The ascent of group success to the detriment of visibility for the local actor/agent of change brings
us back to the taboo surrounding individual success that was described by our respondents. The
interdict emerging from our analysis gave us to understand that deviance or non-conformity is quite
26
simply off limits. This in turn allows us to imagine that the process by which success is
constructed is first and foremost a reproduction of the organization’s identity, a process that
supplants the individual and banishes the marginality of his or her ideas for change. In sum, the
organization is essentially a greenhouse within which managers subscribe to the conformist attitude
that, generated by the upper echelons, permeates the organizational context and culture. The
creativity, projects for change and local initiatives that were most publicly supported by managers
appeared to have been powerfully inspired by great strategic decisions which took place on a
top-down level. Before they even had a chance to emerge, micro achievements were conditioned
by the word from the top.
As we noted, a manager’s success must first pass through a consensus on his or her worthiness to be
recognized, credibility and reputation. Most importantly, this recognition, credibility and
reputation that depends so narrowly on group approval is fundamentally or invariably enmeshed
with a comparative process through which managers’ reputations are held up and measured against
each other’s. The comparative process, based on the idiosyncratic recognition, credibility and
reputation attributed to each manager, is ultimately where managers may distinguish themselves
from their peers.
Finally, our study confirms that success is not only a social construct, it is also the result of
voluntary actions on the part of successful managers who know how to sell their ideas, or convince
others of the good of their initiatives or projects. As such, success is also the result of political
savvy. Put in other terms, our study does not contradict current wisdom in the field of
Organizational Behaviour.
Conclusion
While not especially contradicting OB studies, our results uphold the concept of individual success
as a social construct. Above all, our findings indicate that individual success is largely constructed
through a manager’s conformist contributions to the strategy process. A manager thus stood out
from his or her peers primarily through the inductive strategy process described in Burgelman’s
model. While such visibility appears to transgress the boundaries of certain “taboos,” it doesn’t
detract from the fact that individual success remains a well-established phenomenon within the
organization. It emerges, reproduces, is shaped and modified in the shadows yet somehow in
tandem with the strategy-in-action or strategizing that likewise enables official strategies to emerge
and be implemented, shaped, and refined. The manager effectively stands out from his or her
peers through multiple local initiatives.
Our case study has encouraged us to further investigate the idea that a “favourable place” for the
construction of professional success does indeed exist, and that this place might well be the process
of strategy formation. As a final word, while the scope of the present study (which only concerned
a single organization) is necessarily limited, we believe that future research—particularly research
aiming to support the argument that individual success is a social construct—would do well to draw
up a strategy that entailed a comparison of different organizational contexts.
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29
ASAC 2005
Toronto, Ontario
Parshotam Dass
I. H. Asper School of Business
Na Ni (student)
I. H. Asper School of Business
GOT RHYTHM? TESTING A MODEL OF THE
RHYTHM OF CHANGE IN PRODUCT DIVERSITY
In this paper, we test a model of the rhythm of change in product diversity, using
pooled data from a random sample of 100 manufacturing firms over 1990-2001.
The results support the relationships of the confluence of antecedents, the rhythm
of change in product diversity, and subsequent adjusted return on assets.
INTRODUCTION
Most research on strategic management in general, and product diversification in particular,
has focused on the magnitude of change and its consequences (Ramanujam & Venkataraman,
1989). It has largely ignored other dimensions of change such as rhythm, as well as antecedents of
change. However, a few researchers have taken the lead and have shown that organizations may
follow a gradual, incremental, and evolutionary or an irregular, quantum, and revolutionary model
(Miller & Friesen, 1984). Organizations that change in a continuous, gradual fashion follow a
more regular rhythm of change as compared to others that change in fits-and-starts. The rhythm a
firm follows has consequences for its performance. Whereas some studies have shown the
superiority of quantum change (e.g., Hoskisson & Galbraith, 1985; Miller & Friesen, 1984), others
tend to portray the pre-eminence of continuous change in organizations (e.g., Brown & Eisenhardt,
1997; Vermeulen & Barkema, 2002). Nevertheless, most theory and research may indicate that the
effectiveness of the rhythm of change may depend on its internal and external context, thereby
leading to a contextual approach (e.g., Lamont, Williams, & Hoffman, 1994; Pettigrew, 1985;
Pettigrew, Woodman, & Cameron, 2001). Moreover, if the rhythm that organizations follow is
important for their success and survival, it is theoretically interesting and practically useful to
documents its antecedents.
The purpose of this paper is to empirically test a model of the rhythm of change in product
diversity, including its antecedents and consequences. We take a contextual approach, and argue
that the relationship of the rhythm of change with its antecedents as well as consequences may
depend on their confluence or joint effects rather than independent effects. This approach is
consistent with the classical schools of strategic management, e.g., design, planning and
positioning, as well as the modern concepts of resources and competencies and incremental
learning (e.g., Barney, 1991; Mintzberg, Ahlstrand, & Lampel, 1998). We draw from industrial
organization (I/O) economics, transaction cost approach, and behavioral theory of the firm,
among others, to build on the insights generated by previous research on strategic change (e.g.,
Aldrich, 1999; Brown & Eisenhardt, 1997; Ginsberg, 1988; Huff, Huff, & Thomas, 1992; Miller &
Friesen, 1984; Rumelt, 1995; Sastry, 1997; Staw, Sandelands, & Dutton, 1981).
In the following sections, first, we briefly present our model and hypotheses regarding
the relationships involved. Next, we describe our research methods, followed by analysis and
results. Finally, we present our discussion and conclude the paper, giving its limitations as well as
30
contributions. Given limitations of space, our focus in this paper is on empirical testing of the
relationships. The theoretical background and development of the model as well as details of the
hypotheses have been presented elsewhere in a conceptual paper.
RHYTHM OF CHANGE IN PRODUCT DIVERSITY: MODEL AND HYPOTHESES
Consistent with most schools of strategic management and integrating insights from I/O
economics, transaction cost analysis, and behavioral theory of the firm, among other theoretical
perspectives, we follow a contextual approach and conceptualize strategic change as the result of
confluence of antecedents, including the internal context, external context and prior performance
(Andrew, 1971; Ginsberg, 1988; Huff et al., 1992; Mintzberg et al., 1998; Pettigrew, 1985;
Pettigrew et al., 2001; Porter, 1991; Sastry, 1997). Also, we propose that the strategic change
within its context may lead to varying levels of subsequent organizational performance. To test our
model, we choose three variables, one each from the internal, external and prior performance
arenas, and examine their joint effects on the rhythm of change in product diversity. We also
examine the combined influence of the rhythm of change and its contextual variables on
subsequent organizational performance.
Industrial organization economics began with its Bain-Mason paradigm of market
structure-conduct-performance (Rumelt, 1974; Porter, 1991) with its emphasis on external
pressures for and resistance to change. These external factors, such as technology, regulations,
institutional rules, as well as industrial attributes may influence the market demand in terms of the
well-known construct of industry munificence/scarcity (Dess & Beard, 1984; Keats & Hitt, 1988;
Wiersema & Bantel, 1993). In this paper we selected industry scarcity/munificence as the external
factor because: a) it has been shown to influence strategic change in product diversity (Wiersema
& Bantel, 1993) as well as its subsequent performance (Palich, Cardinal, & Miller, 2000; Wan &
Hoskisson, 2003); b) it presents a potential opportunity/threat to the vital interests of the firm
(Staw et. al., 1981); and c) it could be reliably measured with well-developed measures in the
literature using multiwave data available to us (Dess & Beard, 1984; Rogosa, Brandt, &
Zimowski, 1982).
Similar to the external pressures, internal pressure for or resistance to change may influence
the organization’s willingness as well as capability to change. According to transaction cost
theory—a theory that has guided considerable research on diversification and change—the nature
of the assets in terms of their specificity increases the costs of unrelated change (Williamson,
1975, 1985). Related product diversification may not induce huge sunk cost, but it is not true for
unrelated diversity. Additionally, existing explicit and implicit knowledge in the organization may
prevent the organization from diversifying into some new unrelated industries. According to
Williamson (1985), asset specificity is the most important construct in transaction cost theory. We
chose asset specificity/flexibility as an indicator of organization’s internal context, because: a) it is
expected to influence strategic change (Fombrun & Ginsberg, 1990), particularly product
diversification (Chatterjee & Wernerfelt, 1991; Hoskisson & Hitt, 1990; Porter, 1991; Wan &
Hoskisson, 2003); b) it is conceptually more distant from firm performance than is firm size, slack
and risk and is therefore less likely to be correlated with firm performance; and c) it could be
reliably measured using multiwave data available to us (Rogosa et al., 1982).
Likewise, behavioral theory of the firm has highlighted the role of firm financial performance
in strategic management, resulting rigidities and fluidities, problemistic search and learning (e.g.,
Cyert & March, 1963; Greve, 1998; Haveman, 1993; March & Sutton, 1997; Staw et al., 1981).
Success can induce inertia in the organization (Boeker & Goodstein, 1991; Hannan & Freeman,
1984; Huff et al, 1992; Nelson & Winter, 1982; Oster, 1982; Romanelli & Tushman, 1994), while
failure creates pressure for organizations to change (Duhaime & Grant, 1984; Kahneman &
31
Tversky, 1979). Ignoring the role of firm performance misses the role of feedback of internal and
external stakeholders through learning, risk-taking, slack, and aspirations, thereby ultimately
resulting in researchers’ use of “simple models of complex worlds” (March & Simon, 1997: 700).
Hence, we consider firm’s financial performance as an antecedent as well as an outcome.
In this paper, we integrate contributions from process as well as variance theories, thereby
employing “variance type predictions” (Mohr, 1982: 69) to test a model of the rhythm of product
diversity. We propose that industry scarcity, asset specificity, and prior firm performance set in
motion a virtuous or vicious cycle, resulting into a regular or irregular rhythm of change,
respectively. Therefore, each of the conditions is deemed necessary but not sufficient for strategic
change. In other words, interactive effects of the constructs involved provide much stronger and
compelling rationales for the likelihood of the rhythm of change. Hence, we eschew the
independent effects as well as their two-way interactions in favor of a three-way interaction of the
variables considered in the study. None of the conditions by themselves are likely to have a
significant influence on the possibility of strategic change. However, they reinforce one another
through positive feedback loops resulting into a significant effect over time. We improve upon
previous attempts by testing the complex (three-way) interactions among the antecedents of the
rhythm of change, going beyond the main effects of internal, external, and performance variables
(Fombrun & Ginsberg, 1990) and their simple (two-way) interactions. We also examine the
consequences of the rhythm of change by using complex interactions, going beyond simplistic
models of continuous versus quantum change (Park, 2003; Vermeulen & Barkema, 2002).
In the paragraphs below, we present two hypotheses of the relationships of the rhythm of
change, its consequences as well as antecedents.
Rhythm of Change and Subsequent Financial Performance
A contextual approach implies that there is no one best strategy for change in all
organizations; rather, the best strategy of change for an organization may depend on its internal
and external context. For their continuous success or survival, organizations try to balance
between two types of matches: a) the fit of the organization with its environments; and b) the fit of
the internal organizational environment (e.g., Miller & Friesen, 1984). Any organization that
focuses on either one of these two fits and ignores the other may do so only at its own peril.
Accordingly, rather than raising the question, which rhythm, regular or irregular is best for the
organizations, we ask: Under what conditions, is a regular (or irregular) rhythm good for
organizations, in terms of their financial performance? For example, when industry scarcity is
high, there may be fewer opportunities within the industry, and more firms may be desperate to
escape their own industry to diversify into ‘greener pastures’ (Rumelt, 1974; Stimpert & Duhaime,
1997; Wan & Hoskisson, 2003). Therefore, they may be frantically searching for opportunities to
do so. Flexible assets may enable them in this search process as well as lower their transaction
costs to capitalize on windows of opportunity and increase fluctuations of changes. Such reactive
moves may turn out to be more haphazard, accidental, episodic and opportunistic rather than
deliberate, purposeful, systemic and strategic, thereby resulting in lower returns (Vermeulen &
Barkema, 2002).
In contrast, an organization that avoids the temptation to rush out with the herd—a reactive
behavior—may be able to scrutinize its opportunities more fully on its own time and terms.
Consistent with the design school approach (Andrew, 1971), this approach may enable it to match
external opportunities with its own resources and competencies (Barney, 1991; Porter, 1991) to
stick to its knitting (Peters & Waterman, 1982)—in terms of content (e.g., positioning school)
and/or process (Mintzberg et al., 1998) because of underlying economies, culture, risks and
competencies. Moreover, such circumstances may allow the firm to manage and digest the
diversification in a timely manner without creating disruptions and diseconomies, given
32
constraints of internal procedures, management talent, cognitive limits of managers, absorptive
capacity and learning, thereby resulting into higher returns (Cohen & Levinthal, 1990; Vermeulen
& Barkema, 2002; Wan & Hoskisson, 2003). Therefore,
Hypothesis 1. A regular rhythm of change in product diversity will lead to higher levels of
subsequent return on assets than an irregular rhythm when industry scarcity and asset
flexibility are high.
Rhythm of Change and its Antecedents
Consistent with our model, any organization that focuses its vision, strategy or change
either on internal or external conditions rather than balancing them, including its performance
feedback, may do so at its own risk. In other words, each of the selected three variables, industry
scarcity, asset flexibility and prior financial performance are likely to influence the rhythm of
change. However, none of them are expected to be significant enough to cause change by
themselves, as revealed in several empirical studies (Birnbaum, 1984; Graham & Richards, 1979;
Harrigan, 1981; Jauch, Osborne, & Glueck, 1980; Oster, 1982). Therefore, the effect of any one
variable is expected to depend on the level of the other two variables. For example, Boeker and
Goodstein (1991: 822) note that, "environment changes influence organizations only to the extent
managers can act on them" through processes of problem recognition, signaling, analysis of
deviations, and corrective action (Kiesler & Sproull, 1982).
According to the I/O economics theory, industry scarcity may signal declining support for
firm’s products and services as new entrants and increasing supply decrease their ability to
appropriate rents (Porter, 1991). This may provide incentive for the firm to initiate
experimentation for activities that precede change (Dutton & Freedman, 1985; Lawrence & Dyer,
1983) and increase the likelihood and/or urgency to escape its adverse industry environment into
more attractive—related or unrelated—industries (Christensen & Montogomery, 1981; Rumelt,
1974; Stimpert & Duhaime, 1997; Wiersema & Bantel, 1993). However, it may be difficult to do
so unless there are other internal pressures to lower inertia resulting from specific assets and from
good firm financial performance.
For instance, borrowing from the transaction cost theory, we argue that managers may have
already invested into specialized assets due to a specific strategy to avoid opportunism by their
partners (Williamson, 1975). They may escalate their commitment further (Staw & Ross, 1987),
which is likely to constrain their choices and increase the transaction costs (Chatterjee &
Wernerfelt, 1991; Montgomery & Wernerfelt, 1988; Porter, 1991; Williamson, 1975) to lower
their discretion to change quickly in response to the rare windows of opportunity available in
scarce markets. On the other hand, flexible assets may signal a prior general strategy, which may
be considered more akin to organizational capital or core skills that is likely to facilitate
diversification (Hoskisson & Hitt, 1990).
In spite of facing adverse industry environment, managers may not have the incentives or
legitimacy to use their flexible assets as long as the organization is functioning smoothly and
performing well. According to behavioral theory of the firm, good performance may reinforce
existing strategic processes and change may not be noticed enough to be part of the organizational
discourse (Boeker & Goodstein, 1991; Hannan & Freeman, 1977; Huff et al., 1992; Johnson,
1988; Kiesler & Sproul, 1982; Nelson & Winter, 1982; Oster, 1981; Romanelli & Tushman,
1994). In contrast, failure may undermine confidence in current commitments, stimulate
stakeholders to action, encourage managers to search for solutions, take risks or lose their
positions, and provide impetus for quick, even unplanned change (Boeker & Goodstein, 1991;
Kahneman & Tversky, 1979; March & Sutton, 1997; Sastry, 1997; Staw et al., 1981; Wiersema &
Bantel, 1993).
33
In short, industry scarcity may exert external pressure to react and diversify irregularly,
however, organizations with high financial performance would not have such momentum.
Similarly, firms where asset flexibility is low would be constrained to capitalize on windows of
opportunity for irregular diversification. On the other hand, firms facing scarce industries, low
financial performance and high asset flexibility have greater pressure and much higher latitudes
for irregular changes in product diversity. Hence, we propose a joint effect expressed in terms of a
three-way interaction among these variables.
Hypothesis 2. High industry scarcity, low financial performance and high asset flexibility
will amplify the effect of one another to lead to a more irregular rhythm of changes in
product diversity.
METHOD
Sample
Data used to assess the hypotheses were obtained from the COMPUSTAT II database.
We selected a random sample of 100 companies registered on U.S. stock exchanges in SIC codes
20-39 (manufacturing) that reported complete data on the variables of interest over the time period
of the study from 1990 to 2001. The sample includes a wide range of small, medium and large
organizations. For example, for the year 2001, the number of employees varied from 6 to 168,000,
with an average of 14,499. Similarly, average assets of the firms in the sample for the year 2001
were $ 3.938 billion, ranging from $ .793 million to $78.863 billion. Likewise, net sales for the
year 2001 ranged from $ .918 million to $ 93.744 billion, with an average of $ 3.832 billion.
All variables are computed over three year period (Bergh & Fairbank, 2002; Dess &
Beard, 1984; Rogosa et al., 1982). For example, subsequent performance for the year 2001 is
computed using data from 1999 to 2001. Likewise, firm performance for the year 1992 is
computed from data for years from 1990 to 1992. We computed data for each year and then pooled
them. To test our two hypotheses, we used two regression equations. The first regression equation
included rhythm of change as the dependent variable (1993 to 2001) and antecedents of
rhythm—industry scarcity, financial performance, and asset flexibility—and control variables as
exogenous variables (1992-2000). Data for this regression equation were pooled over nine years,
giving a sample size of 900. The second regression equation used subsequent performance as the
dependent variable (1994 to 2001), rhythm of change, industry scarcity and asset flexibility as the
exogenous variables, including the controls such as prior performance (1993-2000). Data for the
second regression equation were pooled over eight years, giving a sample size of 800. These time
periods reflect realistic strategic planning horizons and have been used by other researchers (e.g.,
Boeker & Goodstein, 1991; Chang & Thomas, 1989; Finkelstein & Hambrick, 1990; Keats & Hitt,
1988; Miller & Friesen, 1984). In addition, we improve upon other studies (e.g., Grant et al., 1988)
by ensuring that our findings are not favorably influenced by temporal overlap between the
independent variables and the dependent variable.
Measures
Subsequent Firm Performance. Subsequent firm performance is measured by
assessing adjusted return on assets (Bettis & Mahajan, 1985; Stimpert & Duhaime, 1997). Return
is calculated as after tax profits plus interest received divided by total assets. The adjustment
makes a firm's return on assets relative to the average returns for a firm with an identical
diversification profile.
Rhythm of change. Rhythm of change in related and unrelated product diversities are
measured using entropy indexes (Palepu, 1985). The construct validity of these measures has been
established by studies in the diversification area (e.g., Hoskisson, Hitt, Johnson, & Moesel, 1993).
34
Instead of using the difference score measure, we used the least squares measure (Bergh &
Fairbank, 2002; Dess & Beard, 1984; Keats & Hitt, 1988; Rogosa et al., 1982; Wiersema and
Bantel, 1993). The exact measure is the standard error of the regression coefficient, using sales as
the dependent variable and time as the independent variable.
Industry Scarcity. Industry scarcity (opposite of industry munificence) is measured
following Dess and Beard (1984), Keats and Hitt (1988) and Wiersema and Bantel (1993). The
munificence measure essentially assesses the growth of sales of an industry over time. The exact
measure is the regression coefficient obtained for the firm's four-digit SIC code industry from
aggregate sales divided by mean sales (to adjust for absolute industry size) of the industry. The
coefficient is weighted for each firm on the basis of the percent of the firm’s sales accounted for by
each four-digit industry in which the firm operates. It then is multiplied by –1 to assess industry
scarcity (versus munificence).
Prior Firm Performance. Prior firm performance is measured the same way as the
subsequent firm performance, mentioned above.
Asset Flexibility. Asset flexibility is measured as the ratio of financial assets to tangible
(physical) assets. Financial assets are relatively flexible, whereas tangible assets are comparatively
inflexible. The latter represent particular resource commitments to specific products or services
(Chatterjee & Wernerfelt, 1991).
Controls. Based on theory and prior research, we used a number of controls to avoid
confounding the results. These included GDP, firm size, organizational slack, initial level of
product and international diversities, and magnitude of change in international diversity (e.g.,
Ginsberg & Buchholtz, 1990; Lamont et al., 1994; Zajac & Kraatz, 1993). We used measures for
these variables employed in previous research (Bettis & Mahajan, 1985; Bourgeois, 1981;
Fiegenbaum & Thomas, 1988; Finkelstein & Hambrick, 1990; Hambrick & D'Aveni, 1988; Hill &
Hansen, 1991; Hitt, Hoskisson, & Kim, 1997; Lubatkin & Chatterjee, 1994). All independent and
control variables associated with related diversification are standardized with respect to firm's
dominant 4-digit SIC codes, whereas those associated with unrelated diversification are
standardized with respect to firm’s 2-digit SIC codes to render them comparable across industries
within the set describing general manufacturing (SIC 2000-3999).
ANALYSIS AND RESULTS
Rhythm of Change and Subsequent Performance
We examined the correlations (not shown) among the control variables, the rhythm of change
in related and unrelated product diversity, and the subsequent performance. The highest correlation
(r = .75; p < .001) is between prior firm performance and subsequent performance, as expected
(Park, 2003). The second largest correlation coefficient is between firm size and initial
international diversity. All other relevant correlation coefficients among the exogenous variables
are less than .36. An inspection of the collinearity diagnostics revealed no multicollinearity
problem.
Using pooled data for regression analyses has its own strengths and challenges. We tested for
the presence of heteroscedasticity and autocorrelation in the data and found evidence for the
presence of both. Therefore, generalized least squares (GLS) instead of ordinary least squares
(OLS) are considered appropriate for data analysis (e.g., Hill & Hansen, 1991). GLS involves
correction for heteroscedasticity and autoregression before application of the OLS. We use PROC
AUTOREG with the Yule-Walker method in SAS for correcting autocorrelation. The Yule-Walker
method is similar to a sophisticated Cochrane-Orcutt method except that it retains the first
observation. Judge and colleagues (1985) term this method as Estimated Generalized Least
Squares (EGLS). Due to the transformations involved, statistics such as F and R square are not
35
considered reliable (Greene, 2000; Judge et al., 1985). The results of these analyses for the
rhythms of change in related and unrelated diversities are presented in Table 1. Note that lower and
higher levels of the rhythm of change in all regression analyses in this paper represent regular and
irregular rhythms of change, respectively.
----------Insert Table 1 about here---------Hypothesis 1 proposed that a regular rhythm of change in product diversity will lead to higher
subsequent adjusted return on assets than an irregular rhythm when industry scarcity and asset
flexibility are high. To avoid confounding of these two three-way interactions, we entered the
controls in Model 1, main effects of antecedents in Model 2, and two-way interactions in Model 3,
followed by the three-way interactions in Model 4 (Table 1). All models were significant overall (p
< .001). The three-way interactions were found to be statistically significant, thereby supporting
Hypothesis 1 both in case of the rhythm of change in related and unrelated product diversities. We
discuss the results of the controls before proceeding to the discussion of the hypothesized
relationship of the rhythm of change and subsequent performance.
Controls. We used a number of controls to avoid confounding the results of the relationships
of principal interest in the study. The controls presented in Model 1 (Table 1) reveal some
interesting relationships. First, there was no significant relationship between subsequent
performance and magnitude of change in unrelated product diversity, which is not surprising.
However, the effects of the magnitude of change in related product and international diversities, as
well as firm risk were negative. Moreover, the relationship of firm size, slack, and GDP were not
statistically significant.
Main Effects. To further avoid confounding of results for Hypothesis 1, we entered industry
scarcity, prior firm performance, and asset flexibility in Model 2. The positive relationship of prior
performance with subsequent performance is obvious. We also entered rhythm of change in related
and unrelated product diversities in this model as well. The results reveal that a regular rhythm of
change in unrelated product diversity improves subsequent adjusted return on assets. The rhythm
of change in related product diversity did not significantly influence subsequent firm performance.
Two-way Interaction Effects. We entered the two-way interactions of rhythm of related and
unrelated change with industry scarcity and asset flexibility, in addition to the industry scarcity x
asset flexibility in Model 3 (Table 1) to partial out the influence, if any, of these interactions before
entering the three-way interaction, which is of major interest in the study. The results show that a
regular rhythm of change in related product diversity leads to a higher level of subsequent adjusted
return on assets when industry scarcity is high. Similarly, a regular rhythm of change in unrelated
product diversity improves subsequent adjusted return on assets when asset flexibility is high.
Three-way Interaction Effect. As mentioned above, when two multiplicative terms
reflecting the effect of rhythm of change in related and unrelated product diversities with industry
scarcity and asset flexibility are added in Model 4 (Table 1), they make a statistically significant
contribution to the subsequent adjusted return on assets. The regression coefficients of the
three-way interactions for related and unrelated rhythms are -.07 (p < .05) and -.06 (p < .05),
respectively. As predicted in Hypothesis 1, the influence of the rhythm of change in related and
unrelated product diversities appears to be contingent on both industry scarcity and asset flexibility.
Consistent with expectations, a regular rhythm of change in related and unrelated product
diversities facilitates subsequent adjusted return on assets when both industry scarcity and asset
flexibility are high. Therefore, these results strongly support Hypothesis 1.
Rhythm of Change in Related and Unrelated Product Diversities
A look at the correlations (not shown) reveals that the rhythms of change in related and
unrelated product diversities are positively associated with initial levels of related and unrelated
36
product diversities, respectively. The highest correlation among the exogenous variables is the
positive association between firm size and initial international diversity (r = .49, p < .001)
followed by the positive association of rhythm of change in related product diversity and initial
related product diversity (r = .35, p < .001). All other correlations among the exogenous variables
were less than .27. An inspection of the collinearity diagnostics revealed no multicollinearity
problem.
Hypothesis 2 predicted a three-way interaction of industry scarcity, prior firm performance
and asset flexibility on the rhythm of change in related as well as unrelated product diversities. As
depicted in Table 2, to avoid confounding of our hypothesized results, we entered the controls in
Model 1, main effects of antecedents in Model 2, two-way interactions in Model 3, and the
three-way interaction in Model 4 (Table 2). All models were significant overall (p < .001). To test
Hypothesis 2, three-way interaction was found to be statistically significant, thereby supporting it
both in case of the rhythm of change in related and unrelated product diversities. We discuss the
results of the controls before further discussion of the hypothesized results.
----------Insert Table 2 about here---------Controls. We used a number of controls to delineate the results of the relationships of prime
interest in the study. The controls presented in Model 1 (Table 2) reveal two relationships that are
similar across the rhythms of change in related and unrelated product diversities. First, firms with
high initial product diversities make more irregular changes. Second, the effect of the magnitude
of change in international diversity on the rhythm of change in both related and unrelated
diversities seems to be statistically insignificant.
All other relationships appear to vary across the rhythms of change in related versus unrelated
product diversities. For example, the relationship of the magnitude and rhythm of change in
product diversities varies with respect to related versus unrelated product diversity. Firms that
make more change in the magnitude of related product diversity follow a more regular rhythm,
whereas those that make more change in the magnitude of unrelated product diversity are likely to
follow a more irregular rhythm. Similarly, higher firm slack and GDP lead organizations to change
their related product diversity in a regular fashion. In contrast, these relationships are not
significant with respect to unrelated product diversification. Likewise, firm size, risk, and initial
level of international diversity are associated with the rhythm of change in unrelated product
diversity but not in the case of related diversification. Firms that had higher variability of returns
and initial international diversity seem to prefer a more irregular mode of change in unrelated
product diversity. In contrast, firms with higher number of employees appear to follow a more
regular rhythm of change in unrelated product diversity.
Main Effects. To avoid confounding of results for Hypothesis 2, industry scarcity, firm
performance, and asset flexibility are entered in Model 2. Though we expected that each will
incline firms to change their rhythm in a regular or irregular fashion, we did not expect them to
make significant influences by themselves, therefore, we did not hypothesize their main effects.
Two of the variables—industry scarcity and prior firm performance—meet our expectation in
related as well as unrelated product diversity. However, we find that asset flexibility has a main
effect. Interestingly, the effect of flexibility is positive with respect to the rhythm of change in
related product diversity (β = .08; p < .01), whereas it is negative with regard to the rhythm of
change in unrelated product diversity (β = -.07; p < .01). In other words, whereas asset specificity
(the opposite of flexibility) leads firms to change their related product diversity in a more regular
pattern, asset flexibility facilitates firms to change their unrelated product diversity in a more
regular fashion.
Two-way Interaction Effects. We entered the two-way interactions of industry scarcity x
firm performance, industry scarcity x asset flexibility, and firm performance x asset flexibility in
37
Model 3 (Table 2) to partial out the influence, if any, of these interactions before entering the
three-way interaction, which is of primary interest in the study. Similar to the main effects, we did
not expect two-way interactions to play a statistically significant role in the rhythm of change in
related and unrelated product diversities. Four of the six two-way interactions met that
expectation. However, we found that two interactions were statistically significant. These were
industry scarcity x asset flexibility and industry scarcity x firm performance with respect to related
and unrelated product diversification, respectively. Higher levels of industry scarcity and asset
flexibility reinforced each other to lead to more irregular rhythm of change in related product
diversity. Likewise, higher levels of industry scarcity and lower performance reinforced each other
to stimulate a more irregular rhythm of change in unrelated product diversity. These interactions,
though not hypothesized, act in the expected directions.
Three-way Interaction Effect. As mentioned above, when a multiplicative term reflecting
the effect of industry scarcity x financial performance x asset flexibility is added in Model 4 (Table
2), it makes a statistically significant contribution to the rhythm of change in related and unrelated
product diversities. The regression coefficients for changes in related and unrelated diversities are
-.08 (p < .01) and -.03 (p < .05), respectively. Consistent with Hypothesis 2, the effect of industry
scarcity appears to be contingent on both financial performance and asset flexibility. As predicted,
a higher level of industry scarcity leads to a more irregular rhythm of change when performance is
low and flexibility is high. The nature is of this relationship is similar in the case of the rhythm of
change in related and unrelated product diversities, though the relationships are more pronounced
in the case of related diversification. Therefore, these results provide strong support for Hypothesis
2 (The plots of the interactions have been omitted due to limitations of space but will be available
from the authors).
DISCUSSION AND CONCLUSION
The objective of this study was to examine the antecedents and consequences of the rhythm of
change in product diversity. Using rationale from several theoretical approaches, particularly, I/O
economics, transaction cost theory, and behavioral theory of the firm, and support of the extant
empirical findings, we proposed a testable model of the rhythm of change. Using data from a
random sample of 100 companies pooled from 1990 to 2001, we found strong support for our two
hypotheses. The first hypothesis predicted that a regular rhythm of change in related and unrelated
product diversities will lead to a higher subsequent adjusted return on assets when industry
scarcity and asset flexibility were high. The second hypothesis proposed that a confluence of three
antecedents of high industry scarcity, high asset flexibility and poor prior firm
performance—expressed in terms of a three-way interaction—will lead to an irregular rhythm of
change in related and unrelated product diversities. Data analyses using GLS that involved
correction for heteroscedasticity and autocorrelation provided strong support for the hypothesized
effects.
This study supports developing organization and management theory and research on
strategic change in several ways. First, it corroborates a contextual approach to strategic change
(e.g., Pettigrew, 1985; Pettigrew et al., 2001) where change ought to be seen as a confluence of
various external and internal factors as well as prior performance (Ginsberg, 1988; Greve, 1998;
Huff et al., 1992; Kraatz & Zajac, 2001; Sastry, 1997). This necessitates avoiding an “either or”
mentality and synthesizing a number of varied theoretical approaches that help understand a
phenomenon, its antecedents and consequences for academic as well as practical insights (e.g.,
Aldrich, 1999). It reinforces a view of organizations as adaptive, co-evolving, learning systems
and incorporating complex interactions (Brown & Eisenhardt, 1997; Lewin et al., 1999), which is
consistent with a new philosophy of management developing in the 21st century.
38
More specifically, this study advances research on strategic change by extending it from the
magnitude of related and unrelated product diversities (Chatterjee & Wernerfelt, 1991; Hoskisson
& Hitt, 1990) to a relatively neglected dimension of change—the rhythm of change. Not only do
we examine the consequences of the rhythm of change in related and unrelated product diversities,
but we also analyze complex interactions of antecedents, controlling for a host of external as well
as internal factors—from GDP to the magnitude of related/unrelated product and international
diversity (Park, 2003). These findings generally support earlier research on the role of context and
confluence (Greve, 1998; Huff et al., 1992; Kraatz & Zajac, 2001; Pettigrew et al., 2001; Sastry,
1997; Wan & Hoskisson, 2003). Specifically, our study confirms results from Vermeulen and
Barkema (2002) about the efficacy of regular rhythm and continuous change in organizations
(Brown & Eisenhardt, 1997), albeit with the caveat that the relationship may be contingent upon
external and internal conditions such as industry scarcity and asset flexibility. These results can
help make sense of the apparently contradictory prescriptions and findings on change research
(e.g., Lamont et al., 1994; Miller & Friesen, 1984). In other words, the moral of the tale of the hare
and the tortoise is relevant within its framework. Given proper context, being steady does win the
race. However, it leaves plenty of space for other contexts and other successful modes and rhythms
of change.
Each research has strengths as well as limitations, which may point to avenues for further
research. We examined a random sample of 100 diverse manufacturing firms from SIC codes
20-39 in the U.S. so the results may be internally valid and externally generalized to other
manufacturing firms in the U.S. Further research and comparison with manufacturing firms in
other countries, service firms and other business and non-business organizations in the U.S. and
abroad may extend its findings. It may also be useful to study specific industries and sectors and
compare them to test and strengthen its findings. We have utilized pooled data from 1990-2001
and have examined lagged models. Future researchers may extend the time period and use
time-series analysis. Moreover, there is dearth of research on lags and this area may offer
opportunities to examine different lags and how they may influence the relationships with
antecedents and consequences of change. In addition, it may be theoretically challenging as well
practically useful to explore relationships and interactions among various dimensions of change.
Most of the earlier research on change has focused on the magnitude of change. For example,
exploring how antecedents of change interact to influence magnitude, rhythm, and direction of
change may help understand the multidimensionality of change. We hope, the results of this
research will encourage others to advance these findings further to develop more contextual and
rigorous theories and deeper understanding of strategic changes in organizations.
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TABLE 1
Results of Generalized Least Squares (GLS) Regression of the
Subsequent Adjusted Return on Assets a, b
Exogenous variables
Control Variables
Model 1
- .06
- .18***
.10**
- .09***
.04
- .22***
.02
- .01
- .06***
.00
Initial related product diversity
Initial unrelated product diversity
Initial international diversity
Magnitude of change in international diversity
GDP
Firm risk
Firm size
Firm slack
Magnitude of change in related product diversity
Magnitude of change in unrelated product diversity
Model 2
Model 3
- .02
.03
.03
- .04*
.01
- .02
- .02
- .04
- .01
.10***
- .02
.02
.02
- .05
.00
.00
- .02
- .04
.00
.09***
.75***
- .02
- .01
.02
- .07**
.77***
.04
.004
.002
.11**
.05***
.04
.03
.12***
.04
Model 4
- .06
.02
.01
- .06**
.02
.00
- .02
- .06*
.01
.11***
Study Variables
Prior firm performance
Industry scarcity
Asset flexibility
Rhythm of change in related product diversity
Rhythm of change in unrelated product diversity
Rhythm of change in related product diversity × Industry scarcity
Rhythm of change in related product diversity × Asset flexibility
Rhythm of change in unrelated product diversity × Industry scarcity
Rhythm of change in unrelated product diversity × Asset flexibility
Industry scarcity × Asset flexibility
-
Rhythm of change in related product diversity × Industry scarcity × Asset flexibility
Rhythm of change in unrelated product diversity × Industry scarcity × Asset flexibility
- .04
- .02
5.17***
69.96***
10, 789
15, 784
Intercept
F value (OLS)
Degrees of freedom (OLS)
a
b
- .02
54.81***
20, 779
N = 800. Standardized regression coefficients are reported and p values are for two-tail tests.
† p < .10; * p < .05; ** p < .01; *** p < .001 (two-tailed).
43
-
.78***
.09**
.01
.02
.09**
.12***
.01
.06*
.05
.09**
.07*
.06*
.04
47.65***
23, 776
TABLE 2
Results of Generalized Least Squares (GLS) Regression of the Rhythm of Change
in Related and Unrelated Product Diversity a, b
Related product diversity
Exogenous variables
Unrelated product diversity
Model 1
Model 2
Model 3
Model 4
Model 1
Model 2
Model 3
Model 4
.50***
.48***
.51***
.51***
.58***
.47***
.48***
.43***
.09**
.05
.06*
.27***
.30***
.24***
.04
.04*
.06**
.02
.01
Control Variables
Initial related/unrelated
product diversity
Magnitude of change in
related/unrelated product diversity
- .20***
Initial international diversity
- .05
- .04
- .04
- .03
Magnitude of change in
- .01
- .01
.01
.01
.00
- .01
- .02
- .02
- .07***
- .04*
- .02
- .02
- .03
- .02
- .01
.01
- .01
- .02
.02
- .01
- .07
- .04
international diversity
GDP
Firm risk
.01
.01
Firm size
.01
.13*
Firm slack
- .02*
.04**
.05**
.19**
.14**
- .08*
- .10*
- .03*
- .04***
- .04***
.02
.01
.00
- .004
- .03
.07**
.03
- .01
.03
- .03
.02
Study Variables
Industry scarcity
Firm performance
.02
.01
.01
Asset flexibility
.08**
.12***
.10***
Industry scarcity × Firm performance
- .004
Industry scarcity × Asset flexibility
- .03
.20***
Firm performance × Asset flexibility
- .01
- .14*
F value (OLS)
37.04***
Degrees of freedom (OLS)
8, 891
b
- .02
.03
- .02
.004
- .04*
.01
.03
- .02
- .08**
×Asset flexibility
a
.15***
- .01
Industry scarcity × Firm performance
Intercept
- .07**
.004
.10***
- .03*
- .03*
.05
.02
.05
- .05
29.55***
23.80***
22.20***
1.83***
8.17***
6.64***
6.74***
11, 888
14, 885
15, 884
8, 891
11, 888
14, 885
15, 884
N = 900. Standardized regression coefficients are reported and p values are for two-tail tests.
† p < .10; * p < .05; ** p < .01; *** p < .001 (two-tailed).
44
.00
- .11*
ASAC 2005
Toronto, Ontario
Robert H. Desmarteau
Département de Stratégie des Affaires
Anne-Laure Saives
Département de Management et Technologie
École des sciences de la gestion - UQAM, Canada
LES PME BIOTECHNOLOGIQUES SONT-ELLES CONTRE-NATURE1 ?
Le cas des entreprises des bio-industries au Québec (Canada)
Moult PME néo-technologiques résultent d’un processus complexe
d’industrialisation des innovations fondées sur les sciences du vivant. Or,
comment caractériser la spécificité de l’objet-PME néo-managériale ?
Pour réponse, cet article propose une instrumentation du concept de
modèle d’affaires pour scruter la diversité des PME, dans le cas des firmes
technologiques des bio-industries au Québec (Canada).
Introduction
Dans le prolongement d’une réflexion sur les très petites entreprises (TPE) (Desmarteau et
Saives, 2005), cet article ajoute aux interrogations de Torres (1997) sur la pertinence d’une
réflexion renouvelée sur la définition et la spécificité contingente de la PME comme objet
d’analyse, une réflexion sur l’instrumentation de cette définition au plan stratégique à l’aide du
concept de modèle d’affaires. Partant d’un constat empirique éloquent sur le terrain des firmes
valorisant les biotechnologies modernes au Québec (Canada) – la plupart des firmes y ont
moins de 10 ans d’existence, 43% de ces firmes sont des TPE (moins de 10 salariés), 52% sont
des PME de 10 à 250 employés; et plus de 36% de l’ensemble de ces firmes ne génèrent pas
encore de chiffre d’affaires – cet article tente de répondre à la question de recherche suivante :
comment caractériser la spécificité des PME biotechnologiques s’il en est une ?
Notre réflexion s’articule en trois temps. D’abord, un cadre théorique est proposé pour
caractériser les PME à partir d’une revue de littérature sur les critères de définition des PME et
sur le concept de modèle d’affaires. Ensuite, nous faisons état de la méthodologie d’analyse
statistique multi-factorielle classificatoire adoptée pour distinguer de façon constructiviste les
différents comportements de PME technologiques sur le terrain choisi, la grappe
bio-industrielle du Québec, avant, enfin, d’exposer quelques observations conclusives.
1. Cadre théorique
Notre questionnement renvoie largement à deux questions récemment posées par Torres (1997)
et Marchesnay (2003), respectivement : 1) « dans quelle mesure la conception traditionnelle de
la PME élaborée à la fin des années 70 est-elle apte à intégrer certains phénomènes nouveaux »
comme celui de l’émergence de petites et moyennes entreprises néo-managériales dans les
secteurs modernes de haute-technologie ? et 2) comment qualifier la spécificité de la PME en
scrutant sa diversité ?
1.1. De la PME traditionnelle à la PME « organisée »
Plusieurs travaux récents (Torrès, 1997)1 s’accordent pour reconnaître la nécessité de repenser
les critères de définition de la nature propre de la PME depuis les années 80. Julien et
Marchesnay proposaient en 1987 une série de 6 critères (petite taille, centralisation de la
gestion, spécialisation faible, système d’information informels et simples, stratégie intuitive et
1
Cf. aussi la recommandation de la Commission Européenne concernant la définition des PME (OJ, L 124/36, 20.5.2003)
45
peu formalisée, marché local) pour définir la PME. Plus récemment, pour mieux rendre compte
de la diversité des PME – objet de recherche spécifique, Julien (1994) proposait une typologie
sur continuum modulant ces critères1. En 2002, dans le cas des PME à forte croissance au
Québec, P-A Julien observait également la pertinence d’intégrer à ces caractéristiques : le type
de leadership (orientation dynamique donnée par la direction), le type de relation avec la
clientèle (marquée par la proximité et l’échange de savoirs), le mode d’organisation de
l’innovation et de l’apprentissage (organisation complexe, décentralisée et participative,
décisions consensuelles, décisions stratégiques partagées, planification stratégique flexible), et
enfin le recours à des réseaux de signaux forts et faibles (complémentarité de ressources), au
sein du milieu local, ce que d’autres travaux sur le territoire (Saives, 2002) et les modes
d’encastrement des firmes dans leur champ concurrentiel mondial (Torres, 2002) proposaient
également d’investiguer. Marchesnay (2003) constate également la nécessité de ne plus ignorer
la diversité des petites entreprises avec l’apparition d’entreprises plus « organisées » exploitant
les résultats d’une veille stratégique permanente et affichant un plan d’activité mûrement
réfléchi « de classe mondiale ». À l’instar de cet auteur (Marchesnay, 2003, p.110), en appelant
à un programme de recherche « sur l’identité des petites et très petites entreprises, ce qu’elles
sont et ce qu’elles font », nous proposons d’appréhender la réalité complexe des PME de
biotechnologie 2 « par ce qu’elles font » à la lumière de leur modèle d’affaires, à l’ère de
l’économie-réseau (Magretta, 2002).
1.2. Définir le modèle d’affaires de la PME de haute-technologie
Devant la très grande variété de définitions du concept de modèle d’affaires en provenance des
gestionnaires et des académiciens, en particulier depuis l’avènement de l’ère réseau (Magretta,
2002 ; Maître et Aladjidi, 1999), nous retenons la définition d’Hamermesh et al. (2002) qui
définissent le concept comme une construction dans l’action, constituée d’une série de
compromis négociés par la firme sur la base de compétences clés, orientés en fonction d’une
stratégie et porteurs d’une finalité de profit. Dans la perspective où un bon modèle d’affaires est
d’abord un bon outil de narration (good story) sur la façon dont fonctionne l’entreprise,
Magretta (2002, p.4) évalue la performance d’un modèle d’affaires à sa capacité de répondre
aux quatre questions canoniques de Drucker : 1) Qui est le client ? 2) Que valorise le client ? 3)
Comment fait-on de l’argent dans cette activité ? et 4) Quelle est la logique économique
sous-jacente qui explique que l’entreprise sait fournir de la valeur pour les clients à un coût
approprié ?
En combinant les réponses aux quatre questions précédentes, il s’agit de mettre en évidence les
principales parties du véritable système d’affaires qu’est l’entreprise et la manière dont elles
s’accordent dans un environnement donné pour former un tout cohérent porteur de valeur
(Magretta, 2002). Or, force est de constater que, les modèles d’affaires, en particulier ceux qui
portent sur les firmes de biotechnologie dans la littérature, apparaissent souvent relativement
peu appareillés à ces questions fondamentales. Fisken & Rutherford (2002) identifient deux
modèles d’affaires extrêmes dans les entreprises de biotechnologie essentiellement centrés sur
les modalités de génération de revenus3 : d’une part, dans un modèle risqué de long terme,
inspiré du modèle pharmaceutique intégré, la création de valeur peut être envisagée en
1
Critères : dimension brute (variable en nombre d’employés, quantité d’actifs, de chiffre d’affaires ou de ventes), secteur d’activité
de traditionnel (produits finis) à moderne (ou de pointe, intégrant les produits intermédiaires), marché local et protégé ou bien
ouvert et international, forme de contrôle (indépendante à liée) et organisation (centralisée à décentralisée), stratégie (d’intuitive
et/ou de survie, à formalisée et/ou de croissance et à risque) et enfin technologie (de traditionnelle, issue d’une innovation faible,
spontanée et incrémentale, à une technologie de pointe, issue d’une innovation organisée et radicale).
2
Définition de la biotechnologie (OCDE, 2002) : "The application of S&T to living organisms as well as parts, products and
models thereof, to alter living or non-living materials for the production of knowledge, goods and services" (www.oecd.org).
3
. Avec l'apparition du nouveau paradigme scientifique fondé sur la génomique, en pleine crise de productivité de la recherche
pharmaceutique (il faut plus de dix ans et plus de 800 M$ US (voire 1.7 Milliards de $) pour la recherche (fondamentale,
pré-clinique et clinique de phases I, II, III et IV), le développement et la mise en marché (approbation) d’un nouveau composé
thérapeutique (PhRMA, 2003)), a émergé un nouvel acteur dans le système bio-pharmaceutique : les firmes dédiées de
biotechnologies modernes devenues partenaires incontournables des firmes pharmaceutiques traditionnelles. Nous qualifions pour
partie ces firmes de « néo-technologiques » par contraste avec les firmes valorisant les biotechnologies classiques.
46
capitalisant sur des compétences de développement, plus ou moins internes ou sous-licence,
d’un pipeline de produits thérapeutiques (« Product Business Model ») ; ou bien, d’autre part,
dans un modèle datant de la fin des années 80, la création de valeur peut être envisagée à court
terme par le développement de plate-formes et d’outils hautement technologiques et
spécifiques (« Platform or Tool Business Model ») servant le processus de découverte et la
chaîne de valeur pharmaceutique (bio-informatique, produits et réactifs de laboratoire, etc.). Du
fait néanmoins d’un risque à moyen terme d’obsolescence technique et de banalisation dans ce
second cas, Fisken & Rutherford (2002) constatent la convergence de ces deux modèles vers un
modèle « hybride », fondé sur l’intégration verticale des deux modèles précédents en une
plate-forme technologique capable de générer un pipeline de produits. La portée descriptive,
explicative et référentielle d’un modèle unique orienté produit (Baker, 2003) pour des secteurs
très différents (santé, nutrition, agriculture, environnement) et pour des stades de
développement technologique et d’entreprise variés, devient limitée en proposant une « recette
universelle » s’apparentant à un « One Best Way », centrée sur leur résultat plus que sur une
description contingente de l’agencement des moyens mis en œuvre pour créer de la valeur à la
fois pour l’entrepreneur, l’investisseur et le client.
Aussi, comme Hamdouch & Depret (2003) proposant une approche contingente des modèles de
gouvernance des firmes de biotechnologie en Europe, nous retenons la nécessité
d’opérationaliser plus avant la description des modèles d’affaires des PME à partir d’une
analyse empirique contingente des PME valorisant les biotechnologies au sein d’une grappe
bio-industrielle. Pour cela, nous ne pouvons ignorer les fruits des réflexions récentes portant sur
la gestion de l’innovation dans les secteurs de haute-technologie, en particulier biotech.
1.3. Vers un « Open Business Model »
Dans les secteurs de haute-technologie ou encore fondés sur l’innovation technologique
(« technology-based » et « science-driven », Saives et al., 2005), et selon l’approche
évolutionniste knowledge-based de la firme, une ressource stratégique des entreprises de
biotechnologie est le savoir, ou plus précisément la capacité de créer, d’absorber (Cohen &
Levinthal, 1990) et de monitorer le savoir au sein de réseaux de collaboration et d’innovation
(Powell, 1998). Pour penser davantage la dimension réticulaire en termes stratégiques,
Chesbrough (2003) propose le concept « d’Open Innovation », où la dynamique de
l’innovation “ouverte” est bidirectionnelle : « Open Innovations means that valuable ideas can
come from inside or outside the company and can go to market from inside or outside the
company as well. » (Chesbrough, 2003, p. 43).
Dans la foulée de Pisano (1994) et Powell (1998), qui ont montré que le lieu de l’innovation
réside dans l’échange des savoirs entre les membres d’un réseau dédié, et considérant la
dimension réticulaire de la création de valeur (Venkatraman et al., 2002 ; cf. aussi Catherine et
al. (2003) dans le cas des firmes de biotechnologies en Europe), nous suggérons
qu’instrumenter un modèle d’affaires « ouvert » suppose de caractériser cette logique
réticulaire de la création de valeur faisant fructifier l’innovation et les compétences clés qui y
sont associées sur une base interne et externe à différents stades d’industrialisation, à partir de
connaissances et recherches propres ou développées sous-licences. Aussi, largement inspirés
par Chesbrough (2003, p.64), nous caractériserons un modèle d’affaires à partir de la liste des
fonctions suivantes et notamment les trois dernières rarement intégrées ailleurs :
1. Articuler spécifiquement une proposition pour le client, fondée sur des bénéfices porteurs
de valeur.
2. Identifier un marché cible, c’est-à-dire les consommateurs pour lesquels la technologie, le
produit ou encore le service est utile, et ce, en précisant l’objet de l’utilisation.
3. Définir la structure de la chaîne de valeur de la firme, c’est-à-dire les compétences
distinctives requises pour créer et distribuer son offre et déterminer les actifs
complémentaires nécessaires pour soutenir la position de la firme dans cette chaîne. Baker
(2003) insiste sur les quatre compétences clés des firmes de biotechnologie dans le
paradigme (bio)scientifique actuel : la capacité de détection l’innovation, la capacité de
47
4.
5.
6.
7.
gérer (en interne ou sous-licence) son porte-feuille de produits, la capacité de gérer les
alliances et la capacité de gérer les relations avec les investisseurs.
Spécifier les mécanismes de génération de revenus, estimer la structure des coûts et prévoir
les marges de production de l’offre étant donné la proposition de valeur formulée et la
structure de la chaîne de valeur choisie. Les sources de revenus peuvent varier, par exemple
selon que l’entreprise intègre, orchestre en partie et/ou licence l’innovation (Andrew et al.,
2003).
Suivant les enseignements de Parolini (1999), proposer une vision systémique des activités
créatrices de valeur, décrire la position de la firme dans un réseau de valeur (« Value
Network ») liant fournisseurs, clients, partenaires d’alliances et de collaboration, et
incluant l’identification des compétiteurs potentiels.
Formuler une stratégie compétitive ou encore une stratégie de marché grâce à laquelle la
firme innovante développera des avantages sur ses rivaux. La formulation d’une stratégie
n’est pas toujours intégrée au modèle d’affaires (Magretta, 2002). Néanmoins, elle lui
fournit, selon nous, sa portée dynamique ou encore son ancrage dans l’action.
Enfin, dans la perspective d’entreprises post-modernes ou encore néo-managériales
(Marchesnay, 2003), plus autonomes qu’indépendantes sous l’égide d’investisseurs
externes variés, il faut aussi organiser la gouvernance, c’est-à-dire l’ensemble des systèmes
de surveillance destiné à l’exécution de la stratégie dans une organisation porteuse de
valeur économique et de légitimité sociale.
Le modèle d’affaires “ouvert” d’une entreprise peut alors être défini comme le design d’un
système stratégique qui articule une cabine de pilotage initiée et des compétences distinctives
dans une chaîne de valeur en réseau avec des partenaires choisis (universités, firmes,
fournisseurs) pour offrir des produits et/ou des services valorisés par les clients dans un marché
donné à des coûts appropriés. À partir de cette définition, nous nous pencherons donc sur les
questions de recherche suivantes :
(Q1) : Quels sont les modèles d’affaires des PME biotechnologiques (que font-elles ?) ?
(Q2) : Sont-ils révélateurs d’une spécificité de l’objet-PME (néo)technologique ?
2. Méthodologie
Les firmes du système bio-industriel du Québec, représente la principale grappe industrielle
d’entreprises valorisant les biotechnologies au Canada avec Toronto et Vancouver (Niosi et al.,
2002). Pour analyser les PME de ce système, à partir du cadre théorique synthétisé jusqu’ici,
nous utiliserons quelques unes de nos données tirées d’une vaste enquête par entretiens
semi-directifs menée auprès de 124 entreprises des bio-industries du Québec (soit plus de 52%
de la population estimée dans la province) par une équipe de chercheurs spécialisés sur le
management des entreprises de biotechnologie, associés à l’École des sciences de la gestion de
l’UQAM (Niosi et al., 2002).
Au cours de ces travaux, plus d’une cinquantaine de variables quantitatives et qualitatives ont
été reconstruites pour coder les contenus des entretiens semi-directifs menés auprès des
dirigeants d’entreprises de toutes tailles à partir d’une batterie de critères propres à caractériser
les entreprises de biotechnologie, mise au point par J. Niosi (2003) dans une enquête précédente
au Canada en concertation avec StatCan et largement utilisée également en France par les
équipes spécialisées sur le sujet (Boissin et al., 2002).
Plus spécifiquement, une série de variables qualitatives nominales qualifiant les dimensions
d’un modèle d’affaires, dans une perspective d’innovation « ouverte », ont été utilisées pour
documenter les comportements de 58 petites et moyennes entreprises (PME) interrogées dans
la grappe bio-industrielle du Québec, et mener une analyse multi-factorielle en
correspondances multiples (AFCM) et surtout une classification ascendante hiérarchique
(CAH) de données dans une perspective typologique exploratoire. Ces variables (listées dans le
tableau 1 ci-après) visent à qualifier les 7 dimensions précédentes d’un modèle d’affaires dont :
la proposition de valeur (activité technologique, orientation produit et/ou service), le marché
ciblé (secteur (nutrition, santé humaine, agriculture ou environnement), et géographie des
48
marchés (exportation)), la compétence distinctive dans la chaîne de valeur (possession d’une
plate-forme technologique, effort de R&D, obstacles à la croissance, fidélité des employés et
stabilité des équipes), les modèles de génération de revenus (brevets, licences, etc.), le réseau
de valeur (origine de l’essaimage, réseau d’alliances et de collaborations, objectifs des alliances
et collaborations), permettant l’identification d’une stratégie compétitive, et enfin les éléments
de gouvernance reliés à la vision stratégique (perspectives à 5 ans), au milieu d’encastrement
(facteurs de localisation et d’ancrage) et aux mécanismes de contrôle inhérents aux moyens de
financement (fonds publics de recherche, « seed-money », capital-risque, IPO). Les variables
nominales ont été complétées à titre illustratif par une série de 17 variables continues
comprenant entre autres des variables démographiques classiques (taille, âge). Nous ne
procéderons pas ici à la justification a priori de chacune de ces variables. Nous privilégierons
plutôt une approche plus constructiviste de notre objet en décrivant au fur et à mesure les
observations découlant de leurs agencements différenciés.
3. Observations résultantes
Intéressant de constater tout d’abord que les deux axes factoriels les plus structurants de
l’AFCM 1 relèvent essentiellement de deux dimensions : le premier axe distingue
essentiellement les entreprises selon leur compétence distinctive; selon qu’elles possèdent où
non une plate-forme technologique. Le deuxième recouvre essentiellement des variables
relatives au réseau de valeur des firmes. Il oppose essentiellement les firmes selon qu’elles
possèdent ou non des réseaux d’alliances et collaborations non seulement universitaires mais
aussi inter-firmes. La classification ascendante hiérarchique nous permet plus précisément de
distinguer au moins quatre groupes2 de PME, décrits dans le tableau 1 ci-après.
- La classe 1 (50% du nombre total des PME interrogées) rassemble des
« découvreurs-développeurs », des entreprises « néo-technologiques » ciblant le marché de la
santé humaine, et développant à la fois des plates-formes de technologies et de propositions de
« produits » pharmaceutiques (biomatériaux, produits de diagnostic, candidats et cibles
thérapeutiques potentielles). Ces jeunes entreprises possèdent des compétences distinctives de
recherche et développement inscrites dans des plates-formes à forte intensité et complexité
technologique, le plus souvent essaimées des institutions publiques de recherche, ainsi que dans
des capacités organisationnelles cognitives (équipes de R&D). Dans ce modèle, les firmes
ciblent des niches innovantes sur les différents marchés intermédiaires et thérapeutiques de la
santé humaine, en exploitant des innovations nées à l’externe (licences reçues) comme à
l’interne (importance des brevets) à partir de capacités technologiques complexes (avance
technologique de leurs plate-formes reconnue, légitimée dans des publications, et créditée par
leurs investisseurs en capital-risque) dont la valeur est entretenue par le biais d’un réseautage
actif avec les laboratoires de recherche des universités. Au sein d’un réseau d’alliances de R&D
universitaires et inter-firmes, ces firmes construisent leurs capacités distinctives à innover
(importance des budgets et des effectifs consacrés à la R&D), notamment génératrices de
revenus d’invention (tirés « d’outputs de recherche ») à court et moyen terme sous licence à
des tiers (importance du nombre de brevets par firme).
- La classe 2 (13.8% des firmes) regroupe une série d’entreprises dont la proposition de
valeur pour des clients finaux divers repose sur la fourniture de prestations de services
spécifiques (design et fourniture de produits et réactifs de laboratoire, bio-procédés de
l’environnement). Ces entreprises disposent d’un savoir-faire technologique reconnu quant à
leur capacité de design à la demande, de solutions intégrées, clés en main (séquences de
matériel génétique, produits spécifiques de laboratoire, solution intégrées de dépollution par
exemple). Ces entreprises ne s’intègrent dans un réseau de valeur qu’à titre marchand, ne
pratiquent pas d’alliances et poursuivent plutôt une stratégie de niche sur des créneaux
spécialisés et « sur mesure » à court terme, et d’envergure de marchés géographiques à plus
long terme. Leur situation au sein du milieu bio-industriel québécois facilite surtout leur accès à
1
2
Pourcentage d’inertie sur l’axe 1 : 12.7%, sur l’axe 2 : 10.7%, total sur cinq axes : 43.6%.
Quotient (inertie intra / total) : 30.4%
49
la clientèle (les laboratoires des universités, le milieu industriel local), y-compris à
l’exportation nord-américaine.
- Les entreprises de la classe 3 (15.5% des firmes) sont positionnées sur la fourniture
efficiente de prestations de services génériques (recherche clinique, manufacture à contrat).
Ces entreprises, les plus « anciennes » relativement aux autres dans la grappe bio-industrielle
(près de 13 ans d’âge en moyenne), ne disposent pas de plate-formes technologiques hautement
spécifiques mais d’un savoir-faire reconnu quant à leur capacité de standardisation et à
l’efficience des services fournis, à l’aide d’une main d’œuvre flexible et bon marché (grâce aux
crédits fiscaux). Dans ce modèle également, les entreprises ne s’intègrent dans un réseau de
valeur qu’à titre marchand, ne pratiquent pas d’alliances et poursuivent plutôt une stratégie
d’avantage par les coûts sur des marchés spécialisés (recherche (pré)-clinique, manufacture de
produits de santé naturels) à court terme, et d’envergure de marchés géographiques à plus long
terme. Leur situation au sein du milieu bio-industriel québécois facilite aussi leur accès à la
clientèle (laboratoires des universités, entreprises pharmaceutiques environnantes), y-compris à
l’exportation nord-américaine.
50
Tableau 1 : Typologie des PME en 4 classes1
GOUVERNANCE
RÉSEAU /SYSTÈME DE VALEUR
MODÈLE DE
REVENU
CHAÎNE DE VALEUR DE LA FIRME
PROPOSITION MARCHÉ
de VALEUR
CIBLÉ
(1) Développeurs
néo-technologiques
Dimensions du modèle d’affaires
50% des firmes
Santé humaine***
Marché
(Santé végétale)
Exportation
Activité technologique
Orientation
Plate-forme technologique
% dépenses RD / Ventes
Compétence distinctives
(exemples)
Comp. Distinctive : technol.
Comp. Distinctive : équipe
Obstacle à la croissance
Age
Nb total employés
% d'employés RD / total
Nb gestionnaires
Turn-over total (%)
Chiff.d'aff. / employé(M$)
Brevets
Nb brevets
Nb licences accordées
Nb licences reçues
Publications
Essaimage universitaire
(ou de laboratoire public)
Alliances
Alliances avec des
universités
Alliances avec des firmes
Alliances de recherche
Alliances commercialisation
Allia. Partenaires étrangers
Allia. Partenaires canadiens
Produit (72.4%)
O***
46.7%
O (62%)
O (66%)
Service***
N***
16.2%
Moy. Échan
totale -tillon
Nutrition humaine***
N (50%)
Extraction biologique
d’ingrédients fonctionnels
Formulation
N***
17.4%
O(100%)
N(50%)
N (44%)
O (67%)
N
N
RH (67%)
Coût / tps approbation
réglementaire ***
RH (75%)
8.9
34.5
35.2%
2.9
4.5%
0.197
O (100%)
2.9
0
6.4
O (75%)
12.7
75.5
24%
3.8
12.6% (19% RD)
0.143
N (67%)
1.11
0.44
0.22
N (67%)
10.8
35.75
23.6%
2.9
6.2%
0.299
N (67%)
2
0.08
0
N***
O ***
N (100%)
N (89%)
N (100%)
O***
N
N***
O (92%)
O (66%)
N (75%)
N (67%)
O (75%)
O***
O ***
N
O***
O (93%)
N (63%)
N***
N***
N (56%)
N (100%)
N (89%)
O (92%)
O (92%)
O ***
N (75%)
O (100%)
Pdt en marché (45%)
Croissance interne (31%)
Fusion (31%)
à long terme
Service (50%)
O (100%)
21.6%
CRO***
CMO
(4) Fabricants
spécialistes
20.7% des firmes
7
36.3
54.2%
3.5
2%
0.266
O (72.4%)
5.43
0.44
1.31
O (90%)***
Vision
A court terme
Bioprocédé***
Produits et réactifs
Capital (48%)
Technologie (20%)
Accélérat. innovation***
Financement ***
Complémentarité (72.4%)
Obtention de Capital-Risque
Capital Risque (M$)
Compagnie publique
(3) Fournisseurs
génériques
15.5% des firmes
Santé humaine (67%)
Environnement***
Nutrition hum. (33%)
O (88%)
O(78%)
13% 32.6%
Fermentation bactérienne
Fermentation
Protocoles standardisés
Inhibition d’enzymes
bactérienne
(probiotiques)
de recherche clinique
Hydrolyse enzymatique et
Sélection génétique
Extraction, purification,
(analyses biochimiques,
nanoséparation
Traitements biologiques
stabilisation de
biostatistique, monitoring)
Amplification de la
(air, sol, polluants)
bio-ingrédients
Manufacture normalisée
phytosynthèse, criblage
PCR, Clonage,
Formulation
et efficiente à façon
Contrôle de réplication
séquençage à façon
suppléments
Résultats obtenus des
alliances et partenariats
Facteur de localisation
STRATEGIE DE
MARCHE
Rech. de cibles in silico
et in vitro***
Biomatériaux / DDS
Pdt diagnostic
(2) Designers
spécifiques
13.8% des firmes
N (88%)
N (50%)
10.31 8.9
82.97 42
20.4% 38.2%
3.89 3.4
3.9 4.9%
0.535 0.228
3.4
0.3
1.51
3.67
0.3
1.58
Capacités de
commercialisation ***
Réponse consos ***
Mise au pt nvx pdts**
Pdt en marché (50%)
Alliances (67%)***
O (72.4%)
O (88%)
N (56%)
N***
8.62
7.75
3.98
n/a
4.79
O (28%)
N (100%)
O (22%)
N (100%)
Infrastructures
Avant. fiscaux (79.3%) Laboratoires publics Avantages fiscaux
(25%)
(56%)
services (50%)
Inf. universi. (48%)
Niche ou focalisation Niche ou focalisation Niche ou focalisation Niche ou focalisation
Envergure de produits,
licences, marchés
Envergure de
Avantage par les
thérapeutiques,
marchés
coûts
Envergure de produits
possiblement création géographiques (et
Envergure de
et domination de
sectoriels)
marchés
marché
1
7.57
- Modalités : O (oui), N (non). Les variables nominales actives significative(s) : *** au seuil de 1%, ** seuil de 5%, * de 10%.
- % entre parenthèses : pourcentage de population correspondant aux modalités citées dans la classe
51
Tableau 2 : Typologie des modèles d’affaires des PME technologiques
Dimensions du modèle d’affaires
PME « technologique »
PME néo-managériale
“néo-biotechnologique”
PROPOSITION DE VALEUR
Bénéfices génériques
Bénéfices spécifiques
MARCHÉ CIBLÉ
Sectoriel et géographique
Multi-sectoriel et glocal
COMPÉTENCES
DISTINCTIVES
Organisation scientifique
du travail
Organisation professionnelle
du travail
MECANISMES DE
GENERATION DE REVENUS
Efficience des opérations
Valorisation
des actifs intellectuels (PI)
VALUE NETWORK
Réseau de contacts commerciaux
Réseau ‘expertal’
de connaissances
STRATÉGIE
+/- Rationnelle
Adaptative
Part de marché
Création de valeur
Monocéphale
Bicéphale
Objectif stratégique
GOUVERNANCE
En effet, les PME de biotechnologie peuvent articuler des propositions de valeur alliant des
bénéfices génériques pour le client (cas de la classe 3) ou de plus en plus spécifiques et spécialisés
(classe 4, 2 puis 1). Le marché ciblé est souvent sectoriel et géographique dans le cas des PME
technologiques classiques, il peut prendre une envergure multi-sectorielle et glocale, de « classe
mondiale » (Torres, 2002) dans le cas des PME néo-technologiques valorisant des plates-formes de
technologies et de produits. Il est aussi possible de distinguer des firmes organisées selon les
principes classiques d’inspiration taylorienne de division du travail et gestion scientifique des
intrants, des tâches, et/ou des fonctions versus des firmes néo-managériales ou prime
l’organisation professionnelle du travail (Drucker, 1980) (la bureaucratie de professionnels au sens
de Mintzberg) et une division cogni-productive des savoirs entre « knowledge workers » à l’ère de
l’économie du savoir. Dans le premier cas, les mécanismes de génération des revenus s’appuient
sur la valorisation efficiente d’actifs, le plus souvent tangibles alors que l’art des secondes (PME
néo-technologiques) relèvent de la gestion d’un portefeuille d’actifs intellectuels (brevets, licences
sur les outputs de recherche à tous les stades de développement, avance technologique, secret
industriel).
Plus déterminant encore s’avère le réseau de valeur dans lequel s’insère la PME. Les PME
technologiques s’appuient souvent sur des réseaux de contacts essentiellement marchands quand
les PME néo-technologiques valorisent un véritable capital social (Desmarteau, 2000), à savoir un
réseau de connaissances et d’expertises tout autant académiques qu’industrielles, etc.
La stratégie de ces PME souvent rationnelle est plus encore adaptative dans le cas des PME
néo-technologiques où l’environnement est particulièrement instable et où la sérendipité des
découvertes requiert la flexibilité stratégique. Enfin, la dimension de la gouvernance peut-être très
distinctive entre PME technologiques et néo-technologiques où elle est monocéphale dans les
premières, entre les mains d’un dirigeant autonome, et bicéphale dans les secondes, au sens de
Drucker1 puisque incarnée à la fois par un conseil d’administration et un conseil scientifique,
chargés de limiter les risques techno-scientifiques et financiers associés à la stratégie de savoir de
l’entreprise.
1
« Population dynamics are rapidly transforming traditional organization into a « double-headed monster » in which autonomous
managerial and autonomous professional organizations live together in symbiotic tension. » (Drucker, 1980, p. 78).
52
Conclusion
Dans l’esprit de Catherine et al. (2003b) qui distinguent 4 modèles d’entreprises dédiées de
biotechnologies, essentiellement discriminés par l’axe technologique de l’intensité de l’innovation
et l’orientation produit ou service adoptée par les entreprises1, nous avançons 4 modèles d’affaires
distincts au sein d’une grappe bio-industrielle, discriminés selon les fonctions contingente d’un
business model que sont la proposition de valeur pour le client et le marché ciblé (santé, nutrition,
agriculture, environnement), les mécanismes de génération de revenus (d’innovation) et la stratégie
adoptés à court, moyen et long terme mais surtout les compétences distinctives de la firme (valeur
interne) et la valeur de réseau. Là où la littérature fournit souvent en guise de business model, un
modèle « économétrique » de développement orienté vers la « croissance » des firmes dans des
cycles vertueux de financement (rondes successives de capital-risque puis IPO pour financer la
recherche interne « fermée »), nous décrivons différents modèles d’organisation « stratégiques »
orientés vers la « performance », intégrant la valeur stratégique du réseau de valeur pour capter
l’innovation sur une base interne ou externe dans une logique coopérative, et selon la rationalité
nouvelle de l’open innovation, avancée par Chesbrough (2003).
Ces PME sont-elles contre-nature dans un contexte aussi instable et complexe que celui de la
biotechnologie ? Nous répondons non en avançant par contre leur spécificité par la compréhension
des « pourquoi ? » qui légitiment la manifestation des « comment ?» de ces formes d’organisation.
Pour valider nos conclusions et pallier aux limites idiosyncratiques de ce travail monographique,
une étude à la fois longitudinale et comparative des PME de différents biopoles européens
(Edinburg, Nantes, Milan, etc.) est en cours.
1
Catherine et al. (2003) distinguent les entreprises de produits (innovation moindre, orientation produit), les firmes de « biosanté »
(innovation importante, orientation produit), les prestataires de service (innovation moindre, service à façon) et les entreprises plate-forme technologique (service à haute valeur ajoutée, innovation importante).
53
Références
Andrew, James P. & Sirkin, Harold L., “Innovating for Cash”, HBR (September 2003), 9p.
Baker, Ann, “Biotechnology’s growth-innovation paradox and the new model for success”,
Journal of Commercial Biotechnology, 9(4), (June 2003), 286-288.
Boissin, J-P., et al., « Structure de gouvernance dans les PME high-tech ; caractéristiques des
dirigeants, structure de contrôle et croissance de l’entreprise », rapport au Commissariat Général
au Plan, convention 1999/9, (Décembre 2002).
Catherine, David, Corolleur, Frédéric & Coronini, Roger (coll.), « Les fondateurs des nouvelles
entreprises de biotechnologies et leurs modèles d'entreprise », RIPME, 15(2), (2003), 63-92.
Chesbrough, Henry, Open Innovation, Boston : Harvard Business School Publishing, 2003.
Cohen, Wesley M., & Levinthal, Daniel A., “Absorptive capacity: A new perspective on learning
and innovation”. Administrative Science Quarterly, 35, (1990), 128-152.
Desmarteau Robert H., «Le point: La valeur stratégique du capital social», ASAC-IFSAM, 21 (6),
(2000), 47-60.
Desmarteau, Robert H., & Saives, Anne-Laure, « Les TPE de biotechnologie sont-elles
contre-nature ? », RIPME, à paraître, (2005).
Drucker, P., Managing in turbulent times, New-York: Harper & Row, 1980.
Fisken, Jane & Rutherford, Jan, “Business models and investments trends in the biotechnology
industry in Europe”, Journal of Commercial Biotechnology, 8 (3), (Winter 2002), 191-199.
Hamdouch, Abdelillah, & Depret, Marc-H., “La gouvernance des jeunes entreprises innovantes :
un éclairage analytique à partir du cas des sociétés de biotechnologies », à paraître F.C.S (Juin
2003).
Hamermesh, Richard G., Marshall Paul W., & Pirmohamed, Taz, “Note on Business Model
Analysis for the Entrepreneur, Harvard Business School, January 22nd, 2002.
Julien P-A. (dir)., Les PME : bilan et perspectives. Paris : Economica. 1994.
Julien P-A. (dir)., Les PME à forte croissance. L’exemple de 17 gazelles dans 8 régions du Québec.
Collection PME & Entrepreneuriat, Presses de l’Université du Québec. 2002.
Magretta, Joan, “Why Business Models Matter”, HBR, (May 2002).
Marchesnay M., « La petite entreprise : sortir de l’ignorance », RFG, 29(44), (2003), 107-118.
Niosi, J., "Alliances are not enough. Explaining rapid growth in biotechnology firms", Research
Policy, 32 (5), (2003), 737-750.
Niosi, Jorge E., Cloutier, Martin L., Lejeune, Albert. (Coord.), Biotechnologie et Industrie au
Québec, Montréal: Éditions Transcontinental, 2002.
Parolini, Cynthia, The Value Net, Chichester, England : John Wiley & Sons, 1999.
Powell, Walter W., «Learning From Collaboration: knowledge and Networks in the Biotechnology
and Pharmaceutical Industries», California Management Review, 40 (3), (1998), 228-240.
Saives, Anne-Laure, Territoire et compétitivité de l’entreprise, L’Harmattan, 2002.
Saives, Anne-Laure, Desmarteau Robert H. & Seni, Dan, « Vers une conception des
bio-industries? », à paraître, Économies et Sociétés, « Dyn. agroalimentaires », 27, 2005.
Torres, O., « Pour une approche contingente de la spécificité de la PME », RIPME, 10(2), (1997).
Torres, O., « Small firm, glocalization strategy and proximity », ECSB – Research in
Entrepreneurship and Small Business – 16th Conference (Barcelona, 21-22 november 2002).
Venkatraman, N., & Subramaniam, M., « Theorizing the Future of Strategy: Questions for Shaping
Strategy Research in the Knowledge Economy”, in Pettigrew A., Thomas H., Whittington R.
(ed), Handbook of Strategy and Management, Sage, London, (2002). 461-473.
54
ASAC 2005
Toronto, Ontario
Carole DONADA
ESSEC Business School of Paris
France
Isabelle DOSTALER
John Molson School of Business
LA RESISTANCE D’UN FOURNISSEUR AUX EXIGENCES DE FLEXIBILITE :
L’IMPACT SUR SON SLACK ORGANISATIONNEL
Cette recherche examine quatre antécédents de la résistance d’un fournisseur aux
exigences de flexibilité réclamées par son client. Elle explore également les effets
de cette résistance sur le niveau de slack du fournisseur. L’étude empirique porte
sur 178 entreprises françaises fournisseurs des industries automobile et
aéronautique.
Introduction
La flexibilité est définie comme la capacité à s’adapter facilement aux circonstances. Elle
joue un rôle d'amortisseur des contraintes de l'environnement (Miner et al., 1990). Elle permet de
répondre aux menaces et opportunités qui se posent aux entreprises (Grewal et Tansuhaj, 2001) et
constitue pour cela un facteur clef de succès (Volberda, 1999 ; Sanchez, 1995). La flexibilité doit
donc être recherchée, développée et protégée (De Meyer et al., 1989 ; Gerwin, 1993). Les études
sur l’importance de la flexibilité pour les entreprises clientes qui externalisent leurs activités sont
nombreuses. Leurs résultats montrent que la flexibilité augmente la qualité des échanges (Brown et
al., 2000), leur continuité (Cannon et Homburg, 2001) et la satisfaction des clients (Morgan et
Hunt, 1994). Les conséquences de la flexibilité pour les entreprises fournisseur sont en revanche
peu étudiées et les rares études qui traitent de ce sujet suggèrent que la flexibilité contraint et
diminue l’efficience économique du fournisseur ; qu’elle représente une obligation à laquelle il faut
savoir résister (Moritsen,1999).
Ainsi, dans la lignée des recherches de Kotabe et al (2003) ou de Subramani et
Venkatraman (2003)) qui s’intéressent aux entreprises fournisseurs ne possédant a priori aucun
pouvoir de négociation, notre recherche explore les sources de la résistance des fournisseurs
vis-à-vis de leurs clients. Nous apportons des éléments de réponse aux deux questions : comment
des fournisseurs dépendants de leurs clients parviennent-ils à leur résister et à dire non aux
demandes de flexibilité qui les contraignent ? Quelles sont les conséquences de cette résistance aux
exigences des clients sur le slack des fournisseurs ?
L’article est structuré en deux parties. La première présente le cadre conceptuel de la
recherche. Nous nous appuyons sur les théories du pouvoir et de la dépendance et sur les approches
relationnelles pour identifier quatre déterminants de la résistance ainsi que sur les travaux sur le
slack organisationnel. La deuxième partie présente l’étude empirique.
55
Les antécédents conceptuels de la résistance à la flexibilité
Résistance et dépendance
Résister, c’est exercer un pouvoir. Selon Pfeffer et Salancik (1978), une organisation
exerce son pouvoir pour agir sur son environnement en vue d’acquérir et maintenir dans son
portefeuille les ressources dont elle dépend. Dans cette approche, pouvoir et dépendance sont
indubitablement liés car la dépendance d’un acteur sur un autre détermine les conditions d’exercice
de son pouvoir (Emerson, 1962). Crozier et Friedberg (1977) ont illustré cette relation et montré
comment des acteurs, a priori exclus des sphères du pouvoir, parviennent à développer des
stratégies d’influence afin de limiter l’asymétrie de leur dépendance et sortir des contraintes qui les
limitent. De son coté, Porter (1980) a montré que le lien entre le pouvoir de négociation des acteurs
d’une filière et leur dépendance vis-à-vis de leurs ressources découlent directement de la structure
de l’industrie dans laquelle ils se trouvent. Les propositions de ces approches par le pouvoir ont
souvent été validées dans les études empiriques qui prennent le point de vue d’un client dominant
vis-à-vis duquel des partenaires externes n’exercent pas leur pouvoir pour résister (Lusch et Brown,
1996 ; Provan et Gassenheimer, 1994 ; Kumar, Scheer et Steenkamp, 1995). Dans cette recherche,
nous nous intéressons à la situation inverse et suggérons un lien négatif entre la dépendance d’un
fournisseur et sa capacité de résistance vis-à-vis de son client :
H1a : La dépendance d’un fournisseur vis-à-vis d’un client est négativement associée à sa
résistance aux exigences de flexibilité du client
Résistance et coûts de changement
Les coûts de changement d’un fournisseur représentent l’ensemble des dépenses
nécessaires à un client pour changer de fournisseur. Selon Williamson (1985), les coûts de
changement résultent essentiellement du petit nombre de fournisseurs sur le marché ainsi que de la
spécificité des actifs indispensables aux échanges et détenus par ces fournisseurs. Lorsqu’un
fournisseur dispose d’actifs spécifiques et qu’il est difficile pour le client de trouver des sources
alternatives d’approvisionnement, le fournisseur peut prendre le client en otage et exercer son
pouvoir sur lui (Klein, Crawford et Alchian, 1978). Porter (1980) appréhende également cette
situation en suggérant que le pouvoir de négociation des fournisseurs dépend positivement de leur
taux de concentration, de l’absence de produits de remplacement ou des coûts induits par leur
changement. D’où l’hypothèse :
H1b : Les coûts de changement d’un fournisseur (supportés par un client) sont positivement
associés à la résistance du fournisseur face aux exigences de flexibilité du client
Résistance et autorité
French et Raven (1959) suggèrent que l’expertise et la reconnaissance constituent les deux
sources du pouvoir. En effet, une entreprise disposant d’une expertise rare, non-substitutable et
difficile à imiter, possède une ressource stratégique (Barney, 1991) qui légitime sa capacité
d’influence. De plus, si cette entreprise est reconnue et si elle fait référence dans son domaine, elle
détient une autre base de pouvoir vis-à-vis de ses partenaires externes. S’appuyant sur ces
propositions Frazier (1984) rassemble ces deux sources de pouvoir sous la notion d’autorité.
L’auteur définit l’autorité comme l’ensemble des ressources qui légitiment une organisation et lui
donnent le droit d’en influencer d’autres. En adaptant la proposition de Frazier au contexte des
56
relations client-fournisseur et, plus spécifiquement, au problème de la capacité de résistance des
fournisseurs dépendants, nous suggérons que :
H1c : L’autorité d’un fournisseur vis-à-vis d’un client est positivement associée à sa résistance face
aux exigences de flexibilité du client
Résistance et normes relationnelles
Selon Crozier et Friedberg (1977), l’exercice d’une résistance dépend de la puissance de
ses sources mais aussi du contexte dans lequel elle s’exprime. Dans le cadre d’une relation
client-fournisseur, la qualité du contexte relationnel est définit par les normes partagées entre les
partenaires (Heide et John, 1992). Ces normes sont des valeurs relationnelles communes qui
structurent les échanges, caractérisent leur nature et influencent les conditions de coopération
(Macneil, 1980). Elles reposent sur la solidarité, la flexibilité et la communication des partenaires
ainsi que sur leur attente de continuité de la relation. Sans les normes relationnelles, les relations
client-fournisseur ne sont rien d’autre que des échanges distants exempts de réciprocité (Jap et
Anderson, 2003; Noordewier et al., 1990). La flexibilité étant une norme relationnelle, un
fournisseur respectueux des normes partagées avec son client doit logiquement accepter les
exigences de flexibilité de ce dernier. D’où l’hypothèse :
H2a : L’importance des normes relationnelles dans la relation diminue la résistance du fournisseur
face aux exigences du client
Par ailleurs, la proposition de Crozier et Friedberg (1977) nous conduit à formuler une
hypothèse supplémentaire liant l’effet des normes relationnelles à toutes les sources de pouvoir du
fournisseur. De nombreuses études empiriques ont validé que plus une relation est basée sur le
respect des normes relationnelles, plus les partenaires coopèrent et moins ils exercent leur pouvoir
(Aulakh et Kotabe, 1996 ; Hitt et al., 1998 ; Subramani et Venkatraman, 2003 ; Wathne et Heide,
2004 ; Zajac et Olsen, 1993). Dans la lignée de ces travaux, nous suggérons l’hypothèse
modératrice :
H2b: Les liens entre la dépendance du fournisseur (H1a), les coûts de changement supportés par le
client (H1b), l’autorité du fournisseur (H1c) et la résistance du fournisseur face aux exigences du
client sont modérés lorsque les normes relationnelles de la relation sont importantes.
Les hypothèses précédentes permettent d’identifier des déterminants de la résistance d’un
fournisseur. Nous explorons maintenant les effets de cette résistance sur le niveau de slack du
fournisseur.
Lien entre la flexibilité et le slack du fournisseur
Ne connaissant pas à l’avance les exigences de flexibilité de leurs clients, les fournisseurs
gardent en réserve des ressources de flexibilité appelées aussi ressources de slack (Gerwin, 1983).
Selon Cyert et March (1963:36), le slack correspond aux ressources qui sont stockées dans
l'organisation, mais qui ne sont pas strictement nécessaires pour son fonctionnement normal.
Autrement dit, le slack résulte de la différence entre les ressources dont dispose l’entreprise et les
moyens nécessaires pour maintenir la coalition. Les chercheurs distinguent généralement deux
types de slack : le slack engagé (ou dédié) qui correspond aux ressources supplémentaires ne
pouvant pas facilement être réutilisées, et le slack non-engagé lié aux ressources facilement
réutilisables (Daniel et al., 2004 ; Sharfman et al., 1988 ; Singh, 1986 ; Tan et Peng, 2003). Ces
deux types de slack illustrent la distinction entre : (1) des ressources qui jouent le rôle de tampons
externes et qui aident à répondre aux demandes changeantes des partenaires d’échange et (2), des
ressources supplémentaires qui ne dépendent pas directement des partenaires externes et qui sont à
la disposition l’organisation qui les gère. Le slack d’un fournisseur se compose donc à la fois de
57
slack engagé (qui dépend de ses contraintes de flexibilité vis-à-vis de ses clients) qui menace sa
performance, et de slack non-engagé qui découle de ses choix de gestion et l’autorise à se créer de
nouvelles opportunités. Dès lors, un fournisseur qui peut résister aux demandes de flexibilité d’un
client a besoin de moins de slack engagé qu’un fournisseur incapable de résister. Il peut notamment
réduire ses stocks de produits dédiés et ajuster au mieux son outil de production à ses objectifs de
productivité. En outre, ce fournisseur peut disposer d’un slack non-engagé (par exemple un surplus
de liquidités) qu’il peut utiliser à des fins de développement d’innovations ou à la mise en œuvre de
nouvelles orientations stratégiques. D’où les deux hypothèses :
H3a. La résistance du fournisseur aux exigences de flexibilité du client a un lien négatif avec son
niveau de slack engagé.
H3b. La résistance du fournisseur aux exigences de flexibilité du client a un lien positif avec son
niveau de slack non-engagé.
Etude empirique
Méthodologie
Pour opérationnaliser les variables de notre modèle, nous avons repris des échelles déjà
testées par des chercheurs et nous les avons adaptées au contexte de l’étude. Le tableau 1 présente
les variables retenues et indique les références théoriques qui ont servi à la construction de chaque
échelle de mesure. Trois variables de contrôle ont été prises en compte dans l’étude : le secteur
(automobile et aéronautique), la taille des entreprises (mesurée par le log du nombre d’employés) et
le degré de personnalisation des produits commandés par le client (variable de « customization »
mesurée sur une échelle de likert en 5 points selon Heide et John, 1992). Les répondants devaient
considérer les relations qu’ils avaient avec leur client principal (le client X). Le questionnaire a été
administré en France lors de salons professionnels auprès des représentants d’entreprises
fournisseurs de l’industrie automobile et aéronautique. 85 entreprises automobile et 93 entreprises
aéronautique constituent notre base de données de 178 entreprises (soit 33,6% de la population
totale des entreprises fournisseurs de ces secteurs1).
Tableau 1 – Variables, items et références2
Items
Dépendance (DEP)
Le fournisseur ne peut pas facilement remplacer le client X
Le pourcentage des ventes vers le client X
Le client X contribue fortement au chiffre d’affaires du fournisseur
Le fournisseur est dépendant du client X
Autorité (AU)
Le fournisseur a l’expertise qui lui permet d’exiger
Le fournisseur est perçu comme étant suffisamment expert pour que d’autres
entreprises veuillent s’en rapprocher
Les capacités spécifiques du fournisseur sont reconnues à l’extérieur
Coûts de changement (SWC)
Les coûts de changement du fournisseur pour le client X
1
Références
Cool et Henderson (1998),
Frazier et Rody (1991)
Frazier (1984), Kholi (1989)
Cool et Henderson (1998),
Sur les 22053 entreprises de plus de 20 personnes opérant en France (base EAE du ministère de l’industrie),
418 entreprises composent le secteur des fournisseurs automobile (code NAF 343Z, 316A et 361A) et 112
entreprises composent le secteur des fournisseurs aéronautiques (code NAF 353). Nos échantillons
représentent respectivement 20, 34% et 83% des entreprises de ces secteurs.
2
Les questions ont été formulées en anglais.
58
Le remplacement du fournisseur pour ce produit particulier entraînera des
dépenses et des délais importants pour le client X
Il est facile pour le client X de remplacer le fournisseur
Normes relationnelles (NOR)
La relation avec le client X est basée sur l’entente mutuelle et la confiance
Il est convenu que le fournisseur et le client X communiquent toutes les
informations concernant le produit
Il est convenu que les problèmes survenant sont traités conjointement plutôt
qu’individuellement
Résistance (RES)
Le fournisseur ne s’ajuste pas en cas en changements provoqués par le client
X
Le fournisseur n’accepte pas les changements une fois l’accord signé
Le fournisseur n’accepte pas d’être flexible sur les exigences du client X
Slack engagé (SE)
Le fournisseur opère en dessous de ces capacités productives
Le client X mobilise des ressources qui pourraient être redéployées
autrement par le fournisseur
Stocks/ventes
Créances clients/ventes
Slack non-engagé (SNE)
Working capital/current net asset
Curent ratio
Le fournisseur dispose de ressources supplémentaires non encore dédiées
Wathne et Heide (2004),
Frazier et Rody (1991)
Gundlach, Achrol et
Mentzer (1995), Berthon et
al (2003)
Canon et Homburg (2001),
Berthon et al (2003), Lusch
et Brown (1996),
Noordewier et al (1990)
Tan et Peng (2003), Nohria
and Gulati (1996), Daniel
(2004)
Daniel (2004)
Analyse et discussion des résultats
Une analyse factorielle (rotation varimax) des variables liées à la résistance fait apparaître
6 facteurs orthogonaux correspondant aux quatre antécédents de la résistance des fournisseurs et
aux deux types de slack (tableau 2). La validité des échelles de mesure de chaque variable est
mesurée par l’alpha de cronbach ainsi que par les contributions des items sur les axes factoriels. La
validité de l’échelle mesurant la résistance d’un fournisseur aux exigences de flexibilité de son
client est assurée. L’échelle proposée est unidimensionnelle (les coefficients des items sur l’axe
factoriel sont de .861, .854, .812) et l’alpha de cronbach est de 79,6.
59
Tableau 2 – Analyse des variables (analyse factorielle avec rotation varimax)
Facteurs
SNE
SE
DEP
SWC
NOR
AU
SNE1
.945
.120
-.019
.003
.020
-.048
SNE2
.895
.010
-.011
.036
.111
-.028
SNE3
.891
.094
-.010
-.047
.023
-.049
SNE4
.868
.189
.074
-.049
.037
-.111
SE1
.138
.886
.075
-.089
.085
-.050
SE2
.038
.869
.067
-.108
.171
-.019
SE3
.135
.839
.222
-.144
.190
-.132
SE4
.146
.806
.160
-.191
.167
-.031
DEP1
-.026
.187
.854
-.085
-.003
-.007
DEP2
.005
-.050
.830
-.102
.091
.019
DEP3
.024
.171
.826
-.043
-.050
.140
DEP4
.024
.143
.821
-.168
-.064
-.007
SWC1
-.009
-.195
-.158
.847
-.079
-.057
SWC2
.021
-.179
-.118
.825
.051
-.036
SWC3
-.054
-.053
-.092
.815
-.045
-.137
NOR1
.025
.026
.021
-.037
.846
-.036
NOR2
.134
.224
.006
-.075
.846
-.059
NOR3
.020
.334
-.058
.049
.786
.015
AU1
-.095
-.057
.062
-.083
-.058
.889
AU2
-.140
-.026
.053
-.077
-.053
.800
AU3
.030
-.078
.008
-.055
.027
.795
Valeur propre
3.356
3.285
2.923
2.219
2.198
2.151
Alpha de Cronbach
93.1
91.8
86.9
81.6
81.4
78.9
Les scores factoriels des variables ont ensuite été utilisés dans les différents modèles de
régression linéaire (Tableaux 3 et 4).
Variable RES
(Constante)
DEP
SWC
NOR
AU
NOR*DEP
NOR*SWC
NOR*AU
taille
custom
secteur
R²
Tableau 3 – Régressions sur la variable résistance
Modèle 1
Modèle 2
Bêta
t
sig
Bêta
t
sig
.000
1.0
.000
1.00
-.199
-2.87 .00
-.216
-3.11 .002
.188
2.713 .00
.189
2.718 .007
-.257
-3.72 .00
-.258
-3.73 .000
.175
2.525 .01
.176
2.528 .012
.097
1.365 .174
.121
1.684 .094
.011
.151
.880
17.2
19.9
Modèle 3
t
-2.77
-.192
-3.12
.208
3.286
-.137
-2.16
.115
1.845
.128
2.038
.110
1.716
.024
.390
-.143
-2.23
.015
.232
.458
6.962
39
Bêta
sig
.006
.002
.001
.032
.067
.043
.088
.697
.026
.817
.000
Le modèle 1 teste les quatre hypothèses H1a, H1b, H1c et H2a qui associent les variables
explicatives -dépendance, coût de changement, autorité, normes relationnelles- à la résistance des
fournisseurs. Les résultats de la régression valident ces hypothèses. Ils montrent que les
fournisseurs (même des fournisseurs aussi dépendants des clients que les fournisseurs automobile
et aéronautique) peuvent accroître leur capacité de résistance en s’affranchissant de leurs clients. Ils
doivent pour cela gérer au mieux l’asymétrie de leur dépendance, asseoir leur autorité dans leur
domaine et augmenter les coûts pour les clients qui voudront changer de fournisseurs. Ces résultats
éclairent aussi la prédominance de la variable « norme relationnelle » confirmant ainsi les
60
propositions théoriques de l’approche de l’échange social (Macneil, 1980) et les conclusions des
travaux empiriques d’Andaleeb (1995), de Boyle et al. (1992) ou de Kim (2000). Notre étude
apporte toutefois une contribution supplémentaire à ces travaux en examinant des entreprises
fournisseurs et non plus des clients tout puissants.
Le deuxième modèle teste l’hypothèse H2b qui suggère que le poids des normes
relationnelles structurant le contexte des échanges modère les effets directs des antécédents de la
résistance des fournisseurs. La validation de cet effet doit confirmer la méfiance de certains
fournisseurs vis-à-vis des relations partenariales et de tout ce qu’elles impliquent en termes de suivi
des normes relationnelles. Les résultats de la régression ne valident pas l’hypothèse L’entente de
deux partenaires sur le respect des normes relationnelle impacte donc la résistance du fournisseur
aux exigences de flexibilité du client mais n’affecte pas ses sources de pouvoir.
Le troisième modèle introduit les variables de contrôle illustrant le secteur, la taille des
entreprises et le degré de personnalisation des produits commandés par le client. La régression
présente trois résultats significatifs. Nous observons tout d’abord une relation négative et
significative entre la taille et la résistance, suggérant que les grandes entreprises résistent moins que
les plus petites. Deuxièmement, l’introduction de la variable « taille » a activé la significativité de
la variable modératrice (NOR*DEP) mesurant l’effet des normes relationnelles sur la relation
dépendance-résistance. Enfin, nous observons que la variable « secteur » a l’influence la plus forte
dans la régression. Ce résultat nous encourage donc à tester les hypothèses H3a et H3b en
distinguant les entreprises automobile des entreprises aéronautique.
Les hypothèses sur les liens entre la résistance et le slack du fournisseur ont été testées dans
deux régressions supplémentaires isolant les deux types de slack. Les résultats montrent que la
résistance permet au fournisseur de diminuer significativement ses ressources de slack engagé. La
validation de H3a, apporte ainsi un argument statistique aux résultats qualitatifs de Moritsen
(1999). Si nous prolongeons ce résultat par l’argument de Jensen (1986) qui voit dans la détention
de slack la diminution de la performance de l’entreprise, nous pouvons suggérer que les
fournisseurs qui résistent le mieux aux exigences de flexibilité de leurs clients devraient être aussi
les plus performants. Contrairement à nos hypothèses, nous n’observons pas de lien positif entre la
résistance des fournisseurs et leur niveau de slack non-engagé et, pour les entreprises du secteur
automobile, la régression n’est pas significative. Enfin, le signe négatif du coefficient illustrant la
taille laisse penser que les entreprises de petite taille ne peuvent se permettre d’avoir du slack non
engagé.
Conclusion
Depuis une quinzaine d’années le discours dominant des entreprises clientes porte sur le
respect des normes relationnelles comme première condition de succès de leurs relations avec leurs
fournisseurs. Parallèlement, les plaintes des fournisseurs contraints à la flexibilité, à la transparence
des informations et à la solidarité avec leurs clients se font de plus en plus entendre. Dans
l’industrie automobile, certains analystes prédisent un prochain renversement des rapports de
pouvoir à l’image de celui qui s’est opéré dans l’industrie informatique sous l’impulsion des
fournisseurs de microprocesseurs. Force est de constater que ces fournisseurs sont encore
structurellement dominés par leurs clients. Leur seule marge de manœuvre est de résister aux
clients en refusant de se soumettre à leurs exigences. Pour ces fournisseurs, il ne s’agit pas de
résister par plaisir mais de dire non aux exigences qui pénalisent leur performance et leur survie.
Depuis vingt ans, beaucoup de sous-traitants automobile ont déposé leur bilan parce que leur
niveau de slack engagé pour des clients plombait leur rentabilité. De même beaucoup ont engagé
des ressources trop importantes pour eux dans le seul but de “suivre leurs clients” et répondre à
leurs exigences de délocalisation ou d’internationalisation. Ces fournisseurs ont investi des
sommes considérables dans des implantations de nouvelles unités de production et ont supporté
61
tous les risques économiques financiers consécutifs. Ils n’avaient pas le choix et leur décision
d’investissement résultait davantage d’une obligation à être flexible que d’un calcul positif de
risque-performance. Dans l’industrie automobile, les effets ne sont pas aussi marqués mais la
logique qui les accompagne reste équivalente.
Dans ce cadre, notre recherche peut apporter des arguments supplémentaires à ceux qui
s’interrogent sur les conséquences de la flexibilité. D’un point de vue théorique, nous pensons
également contribuer aux réflexions sur le slack. Le concept de slack n’a jamais cessé d’interroger
les chercheurs comme en témoignent les derniers travaux sur le sujet (Daniel, 2004, Tan et Peng,
2003). Notre recherche éclaire de nouvelles variables explicatives du slack en établissant un lien
entre l’approche de l’échange social, l’approche du pouvoir et de la dépendance et les théories du
slack. Le lecteur pourra regretter l’absence d’un lien final entre la résistance, le slack et la
performance, sujet auquel nous nous attachons désormais.
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64
ASAC 2005
Toronto, Ontario
Dev K. Dutta (student)
Richard Ivey School of Business
WHY DO FIRMS BUILD NETWORK PARTNERSHIPS IN HYPERCOMPETITIVE
ENVIRONMENTS? AN EXPLANATION FROM THE RESOURCE-BASED VIEW
D’Aveni (1994) suggests that the only way for firms to survive in a
hypercompetitive environment is to relentlessly compete against each other. Yet,
we notice that intense competitive conditions lead firms not only to compete but
also cooperate. Using the RBV as a theoretical lens, we examine why firms tend to
form cooperative network partnerships in hypercompetitive environments. We
suggest that by doing so, firms not only reduce environmental uncertainty but also
derive performance benefits.
Introduction
The changing nature of competition and its implications for business strategy has been well
documented (Ghemawat, 2002; Tsaliki and Tsoulfedis, 1998). As competition intensifies and
evolves from static to dynamic, firms demonstrate greater involvement in managing the
competition process (Barney, 1986). There is a growing body of literature on one specific kind of
competitive environment termed hypercompetition (D’Aveni, 1994). It is suggested that under
hypercompetition, the notion of sustained competitive advantage (SCA) has no meaning. In such
environments, firms are continuously engaged in competitive moves and counter-moves, as they
attempt to create and break temporary advantages in the marketplace. Given the high levels of
competitive intensity that prevail in a hypercompetitive environment, firms would be wary of each
other and refrain from forging any kind of collaborative partnerships between themselves. Yet,
paradoxically enough it is seen that under hypercompetition firms engage in a plethora of network
partnerships – sometimes with other firms that happen to be their closest competitors. To
understand what motivates firms to engage in collaborative behavior in hypercompetitive
environments, we use the Resource-Based View (RBV) and explain why firms would engage in
such network partnerships. In doing so, we identify the reasons behind such behavior of firms and
indicate how firms benefit from engaging in these partnerships.
Resource-Based View of the Firm and SCA
According to the RBV, sustained competitive advantage (SCA) accrues to the firm from its
access to and ownership of heterogeneous, immobile, rare, hard-to-imitate and non-substitutable
resource bundles and capabilities (Barney, 1991; Rumelt, 1984; Wernerfelt, 1984). Firm resources
are broadly defined to include assets, capabilities, organizational processes, information and
knowledge – anything that is owned and controlled by the firm and that allows it to create SCA, i.e.
implement a value creating strategy that cannot be simultaneously created or its benefits duplicated
by the firm’s current or potential competitors (Barney, 1991). The link between a firm’s resources
and sustained competitive advantage is complex. It is not easy to be replicated by its competitors.
65
Imperfect inimitability and imperfect substitutability of resource bundles possessed by a firm make
them non-tradable and lead to sustained competitive advantage (Peteraf, 1993). This happens
because of both ex ante and ex post limits to competition arising out of possessing these resources.
On the one hand, ex ante limits to competition ensure that the firm that first develops or secures
access to the resource bundle does so in the absence of competition from others. Only this firm has
the foresight and/or access to certain amenable conditions that make it the possessor of this
resource. Yet, acquisition of the resource bundle also acts as a limiting factor on ex post
competition (or competition faced by the firm after its acquisition of the specific resource bundles),
making it difficult for these resources to be weaned away from the firm. As a result, once it has
been developed, SCA remains within the firm.
Having developed SCA, the firm is able to engage in activities that provide it an ability to
capture economic rents (Amit and Schoemaker, 1993). Not only do the unique nature of these
resources make it difficult for other firms to replicate them, but given that a firm acquires a specific
resource bundle as a consequence of its past managerial decisions and action provides it with a
unique opportunity set for securing advantage in the marketplace in the future (Lockett and
Thompson, 2001). These resource bundles are not static, however. They are shaped and reshaped
continually based on the firm’s organizational processes, specific asset position, paths available to
it and its managerial action (Teece, Pisano and Shuen, 1997). Similarly, resources need not always
be tangible. Intangible resources – both assets and competencies – enable a firm to create
competency differentials vis-à-vis its competitors along functional, cultural, positional and
regulatory dimensions, thus securing for itself competitive advantage (Hall, 1993, 1992).
Knowledge forms the critical element in developing intangible and dynamic capabilities within the
firm, given that this is essentially an evolutionary process (Grant, 1996b). Building dynamic
capabilities involves experience accumulation, knowledge articulation and codification and the
process is shaped by co-evolution of these learning mechanisms (Zollo and Winter, 2002). At the
same time, to protect knowledge from expropriation and imitation, firms use institutional
capabilities such as incentive alignment, employment contract, job design, and reorder rewards
(Liebeskind, 1996).
The RBV provides an internally focused view on building SCA through heterogeneous firm
resources and capabilities by evaluating them for their value, rareness, inimitability and
organizational orientation (Barney, 1991). At the same time, subsequent research has expanded the
coverage to incorporate the role of context and the wider industry into the RBV. There are limits to
the extent that SCA can be developed based on firm-level resources and capabilities. The context of
the firm plays a significant role in deciding whether SCA will accrue to the firm or will it be
invalidated by higher-order capabilities that a competitor secures access to (Collis, 1994). Firm
capabilities and industry co-evolve and acquisition of a competitive position by the firm is based
not only on the firm’s internal resources and capabilities, but also driven by market position and
external relationships (Levinthal and Myatt, 1994). Barney and Zajac (1994) note that there appears
to be a linkage between competition and competence, in that as firms learn to handle specific
competitive challenges, they develop potentially valuable resources and capabilities that, in turn,
provide firms with competitive advantage that enable them to face competitive conditions in future.
In other words, though the RBV begins with the assumption that SCA is an endogenous
characteristic of the firm, it acknowledges the existence of an inextricable link between firm and
industry and suggests that competitive advantage and competitive positioning affect each other on a
dynamic basis (Fahy, 2000). In their study of comparison of firm versus industry specific factors on
SCA, Spanos and Lioukas (2001) note that both effects are important and explain different aspects
of firm performance. Thus, firm performance is affected not only by access to resources but also by
66
competitive rivalry. Even industry structure characteristics are partially endogenously determined
by firms’ specific strategic action. A question that arises is what happens to the notion of SCA
when competitive pressures on the firm intensify. In the next section of the paper, we describe the
competitive context that emerges around the firm in dynamic or fast changing environments. We
focus on a specific type of the environment, viz. under hypercompetition.
From Competition to Hypercompetition – Challenges for the Firm
According to the classical view, competitive behavior on the part of firms arises as a
response to neutralizing inequalities associated with deployment of capital and labor in the
marketplace. It is “… a process characterized by free mobility of capital and labor, and with the
concomitant tendential inter-industry equalization of the rate of profit, as well as of supply and
demand” (Tsaliki and Tsoulfidis, 1998, p. 189). The classical view of competition is cognizant not
only of price and quantity adjustments by the firm to achieve equilibrium but is also concerned with
overall uncertainty and disequilibrium in the industry, which must necessarily be set right through
competitive actions. Contrasted to this, the neo-classical view adopts a static view of competition
and suggests that firms freely enter and exit from the market. Therefore, the intensity of
competition prevailing at any point in time – from monopolistic to perfect competition – depends
on the actual number of buyers and sellers active in the market at that point in time (Tsaliki and
Tsoulfidis, 1998). Thus, the main issue of concern in the neo-classical view of competition is
whether or not there is any persistence of profits above normal, which would indicate that there is a
kind of market imperfection and a degree of monopolistic behavior.
If competition is depicted in terms of its intensity along a continuum varying from
monopoly through oligopoly to perfect competition, then hypercompetition falls in between
oligopoly and perfect competition (D’Aveni, 1994). Characterized by rapid competitive maneuvers
in the marketplace, hypercompetition occurs when a firm intensifies the level of competition in the
marketplace by continuously generating new competitive advantage and destroying, neutralizing or
making obsolete competitors’ advantage such that other firms have no option but to retaliate. Under
conditions of hypercompetition, firms are engaged in redefining the so-called parameters of
competition based on cost-quality balance, creation of know-how and moving into new markets or
geographical territories as a first mover, and deep pockets of resources available (D’Aveni, 1994).
By competing simultaneously on one or more of these parameters, firms create a series of
short-term, discontinuous competitive advantage that always keeps them one step ahead of the
competition.
Craig (1996) distinguishes factors leading to hypercompetitive by classifying them as those
that produce a “round” of hypercompetition versus those that lead to a broader “state” of
hypercompetition. A round of hypercompetition can be initiated by a sudden competitive move on
the part of one firm, which automatically leads to a series of retaliatory moves on the part of the
others, thus creating tension and discontinuity in the marketplace. On the other hand, a state of
hypercompetition is reached when “competitive change is continual and multiple rounds succeed
one another with little respite in between” (p.162). It is brought about by a major shift in technology
and innovation in the industry, which turns the rules of the game upside down as it were, and leads
to a series of follow-up hypercompetitive shifts on the part of all players in the industry, not just the
player that introduced the innovation.
67
Even though hypercompetition primarily is a firm-induced phenomenon, it is also affected
by industry-level parameters. In their study of 352 firms in ten economic sectors between 1977 and
1984, Fombrun and Ginsberg (1990) find that strategic activity in terms of corporate aggressive in
changing environments is conditioned by firm-level and sector level forces that both enable change
as well as disable it. The extent of hypercompetition in an industry depends on the level of dynamic
resourcefulness in the industry, i.e., the innate propensity of an industry to create new strategic
assets (Thomas, 1996). Unstable market conditions brought about by hypercompetition actually
result in firms building their survival strategies based on internal capabilities rather than based on
cues received from served markets (Grant, 1996a). At the same time, however, firms may find it
increasingly difficult to develop all the required capabilities in-house. One reason why this may be
so is because of the bounded rationality of managers, which makes it difficult for them to
accurately predict the content and pace of environmental change and prepare the organization to
adequately respond to these forces. Chakravarthy (1997) suggests that firms do not really create
and/or “manage” turbulence on an ongoing basis; instead they cope with it in the best possible way
they can, sometimes through offensive postures vis-à-vis competition and sometimes through exit
mechanisms.
The environment now becomes a major source of uncertainty (Elenkov, 1997). Not only is
it characterized by changes that managers must make sense of, but also managerial action is
dependent upon their perceptions and interpretation of the environment (Schneider and De Meyer,
1991). Managers interpret and “know” the environment in one of three ways: (i) as an objective
environment out there, given, completely known and with the organization embedded in it, (ii) a
perceived environment, different from the objective environment in that managers are constrained
by their bounded rationality and can, therefore, never completely know the environment in its
entirety, and (iii) an enacted environment, which suggests that the organization and environment
are enacted (or jointly created) as an outcome of managers’ social interaction processes (Smircich
and Stubbart, 1985). Thus, managerial action is directly affected by how managers interpret the
environment and make sense of signals that they perceive as emanating from the environment and
the ways in which they can affect the firm. Environmental uncertainty is also perceived as falling
into one of three categories: (i) state uncertainty, or uncertainty relating to the conditions
emanating in the perceived environment, (ii) effect uncertainty, or uncertainty relating to predicting
what the nature of a future state of the environment will be or how a future environmental change
will affect the organization, and (iii) response uncertainty, or uncertainty associated with
understanding the range of response options an organization has in dealing with the environment
and what the value or utility of each option might be (Milliken, 1987). In other words, managerial
perception of uncertainties associated with the environment is compounded not only by differences
relating to categorization of the environment but also differences associated with understanding of
environmental uncertainty. Under hypercompetition as competitive pressures build up in the
environment and competitive moves intensify in terms of attributes such as disruption, speed,
surprise and dissonance, it becomes increasingly difficult for managers to make sense of the
environmental uncertainty and take appropriate strategic action. This is when managers are
compelled to look beyond the boundaries of their own organization and look for potential coping
mechanisms that may exist or be created in the wider industry network.
68
Meeting the Challenges of Hypercompetition – Benefits of Network Partnerships
Given the high levels of environmental uncertainty, the firm is faced with a gap in the
knowledge it requires to meet emerging market requirements. Hypercompetitive environments
demand of the firm an increased ability to integrate knowledge and constantly combine and
recombine its capabilities. However, to do so firms face a practical constraint – a burgeoning
knowledge gap or what can be termed as a “knowledge trap”. We suggest that firms engage in
network partnership with close competitors in order to get out of this knowledge trap, even though
it involves easing out some of the competitive intensity that is otherwise required. In other words,
in deciding to emphasize collaboration in areas of significance for knowledge gathering with close
competitors, firms make a conscious choice that helps them reduce environmental uncertainty over
creating intensely disruptive competitive conditions in the market.
Appleyard (1996) finds that even in fiercely competitive industries firms use a plethora of
mechanisms, both public and private, for the purpose of reducing environmental uncertainty
through knowledge sharing. For instance, under Schumpeterian competition (Schumpeter, 1942)
firms not only compete against each other but also collaborate with select competitors in order to
earn above normal rents by (i) preventing new firms from entering the industry and sharing the
factors of production, (ii) dissuading infusion of substitute technology, (iii) reducing overall
environmental uncertainty at least in niches where the firms are collaborating, and (iv) agreeing
with rivals in order to more clearly define the boundaries of collaboration and competition (Garud,
1994). Network ties between organizations allow for learning between partners and this helps in
reducing environmental uncertainty and facilitating organizational adaptation (Kraatz, 1998). It has
also been suggested that inter-firm networks improve a member firm’s competitive position by
allowing for cost minimization of transactions even while maintaining flexibility (Park, 1996).
Therefore, in intensely competitive environments it is beneficial for firms to engage in network
partnerships, which lead to reduction in environmental uncertainty. In contrast to this, the
requirement of forming network partnerships will be less in static environments, since the level of
environmental uncertainty in such environments is relatively low. Therefore, we suggest:
Proposition 1: In hypercompetitive environments, firms tend to engage in network
partnerships in order to reduce environmental uncertainty.
Again, under high levels of environmental uncertainty the firm may not be able to plan for
and internally develop its valuable, rare, inimitable and non-substitutable resource bundles. In fact,
it may even be that some of the unique resources required by the firm are available only outside its
organizational boundaries. This possibility may especially arise when the environment is fast
changing and organizational boundaries get blurred. McEvily and Zaheer (1999) suggest that
sources of combinative capabilities of firms can lie outside their organizational boundaries or more
specifically in their network resources comprising bridging ties and relationships with other firms
in the external environment where the firm is embedded. Specifically, in industries characterized
by open systems architecture and network technologies (such as Sun Microsystem’s Open Systems
Strategy) there is evidence that collaborative partnerships and sharing of technical knowledge with
competitors and even facilitation of market entry by them helps the firm in question in the long
term (Garud and Kumaraswamy, 1993). This is a clear example of the benefit of network
partnerships towards preserving SCA in markets that are otherwise highly competitive. Combs and
Ketchen (1999) find that firms tend to go for cooperative mechanisms to build resources in the
69
long-term despite the unfavorable exchange conditions it might bring in the short run. In fact, this
occurs because many of the resources available and used by a firm may not strictly lie within the
firm boundaries. Powell, Koput and Smith-Doerr (1996) suggest that in industries characterized by
a complex and rapidly expanding knowledge base and with dispersed nodes of expertise (e.g.
biotechnology), the locus of innovation is found within networks of firms rather than in individual
firms. This does not mean that these firms are not competitors in the traditional sense of the term.
What this indicates, however, is that to build SCA firms make choices, which enable them to
balance external competitive pressures vis-à-vis needs for developing capabilities or building
competence. In fact, it has been suggested that a firm’s position in the network and the overall
network create resource asymmetries by influencing the flow of assets, information and status, thus
leading to continuous configuration and reconfiguration of competitive positions (Gnyawali and
Madhavan, 2001).
Network relationships facilitate firms to obtain relatively easily and quickly resource
bundles required by them. For instance, firms build capabilities using a socio-cognitive approach;
human and organizational resources combine to form group capabilities, which, in turn, lead to
creation of SCA (Ginsberg, 1994). Similarly, firms form alliance relationships with other firms, in
order to ensure resource complementarity and achieve higher standards of business performance
(Harrison, Hitt, Hoskisson and Ireland, 2001). In their longitudinal study of 1903 competitive
moves undertaken in the software industry, Young, Smith and Grimm (1996) find that as the
number of horizontal cooperative arrangements a firm engages in goes up, the firm performance
improves. In other words, it is natural that as firms engage in consolidating their competitive
advantage vis-à-vis other players in the industry, they will take recourse to occupying network
positions and/or involve in network arrangements with other players. In effect, firm resources such
as relation-specific assets, knowledge-sharing routines, complementary resources/capabilities and
facilitating network governance structures will increasingly be found outside of the firm (Dyer and
Singh, 1998). We posit that in hypercompetitive environments, given the uncertainties associated
with resource requirements, intangibility and dynamic capabilities expected out of resources, and
the higher need for creating influence in the market, will lead to firms looking out into the network
as a possible source for providing such resources. Therefore, under hypercompetition firms make a
conscious choice to forge selective network partnerships that help them to derive superior rent and
preserve their SCA. Therefore, we suggest:
Proposition 2: In hypercompetitive environments, firms that engage in network
partnerships perform better than firms that do not do so.
Discussion and Implications
In this paper, we have argued that though it seems paradoxical why firms would build
network partnerships in the face of relentless competition in a hypercompetitive environment, there
are strong reasons for firms to do so. We have noted that there is empirical support of firms
engaging in cooperative behavior in fast changing environments. Using the RBV as our theoretical
lens, we have explored the reasons why firms happen to be intense competitors in a
hypercompetitive environment would find merit in developing collaborative partnerships. In doing
so, we have provided an argument for why firms engage in both collaborative behavior in an
intensely competitive environment, such as hypercompetition. We used evidence from previous
literature to suggest that not only does SCA accrue to a firm based on its dynamic capabilities and
70
intangible resource bundles but that it is also subject to competitive pressures, especially in fast
changing or hypercompetitive environments. In building our theoretical arguments, our paper
makes three major contributions.
Firstly, we suggested that environmental uncertainty is a critical challenge the firm must
deal with in a hypercompetitive environment. A relentlessly shifting environment faced with high
competitive intensity impinges upon the firm high levels of environmental uncertainty. Multiple
notions of the environment as well as of uncertainty in the sensemaking schema of managers,
coupled with volatile signals emanating out of the environment, create conditions that make it
difficult for managers to develop coherent strategic action plans that can adequately address the
environmental uncertainties. In addition, the increased focus on knowledge and the requirement of
knowledge integration across all competitive activities makes it more difficult for firms to sustain
competitive advantage and avoid lapsing into a competency trap. Secondly, we show how network
partnerships help firms to tackle environmental uncertainty - by sourcing appropriate knowledge
and capabilities that may be available in the wider network and achieve performance benefits. In
doing so, we provide a logic for why firms engage in seemingly conflicting pursuits of
simultaneous cooperative and collaborative relationships with other players in environments that
demonstrate high levels of uncertainty and competitive pressures. In elaborating our argument on
simultaneous cooperative and competitive behavior on the part of firms, we support similar notions
that have emerged in recent literature on firm behavior in fast-changing environments, e.g.
coopetition (e.g. Bengtsson and Kock, 2000) or co-evolution (e.g. Hinterhuber, Handlbauer,
Matzler and Valdani, 1998). The third and foremost contribution of our paper is in the assertion that
firms employ choice in balancing competitive pursuits versus building collaborative arrangements
in order to reduce environmental uncertainty and retain SCA. We suggest that firms make this
decision as a part of their overall strategic choice and action. In drawing this inference, we provide
an explanation of why firms engage in apparently conflicting cooperative and competitive behavior
in hypercompetitive markets.
Our research has several implications for managers. Firstly, it provides a theoretical
explanation for managerial action noticed in hypercompetitive environments, which finds firms
often engage in collaborative partnerships with their close competitors. Secondly, by indicating
that there are strong reasons for engaging in simultaneous cooperative and competitive moves in
the marketplace, our research exhorts managers to consider this as a powerful strategic alternative
to engaging in simply cooperative or competitive behavior. By drawing a reference to network
resources and the possibility that a firm’s critical resources may lie outside the organizational
boundaries, our research suggests to managers to critically examine their firm’s resource position
and source of competitive advantage and take strategic action vis-à-vis competitors in line with that
assessment. Finally, our research offers directions to managers on ways of conceptualizing
hypercompetition as a complex phenomenon. We suggest that not only is hypercompetition always
unavoidable or difficult to deal with, but that it can provide certain new advantages to firms
provided managers unleash the creative forces of hypercompetition and build network partnerships
for mutual benefit.
71
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74
ASAC 2005
Toronto, Ontario
Karen L. Ekstein
Schulich School of Business
York University
ORGANIZATIONAL RESPONSIVENESS:
A CONCEPTUAL FOUNDATION AND RESEARCH AGENDA
The strategy literature is silent about organizational responsiveness and its role in
organizational outcomes. This paper defines organizational responsiveness as an
important concept for strategy researchers. Initial steps are taken in understanding
organizational responsiveness, particularly in dynamic environments. Challenges
facing top managers tasked with creating responsive organizations are specifically
noted.
How firms respond in light of their environments can have implications for firm outcomes.
Works on contingency theory suggest the necessity to create alignments between firms and
the environments; these alignments have implications for various outcomes, including
performance and survival (Morgan, 1997). In his early works, Schumpeter (1942)
considered industry-level change, highlighting that periodic waves of creative destruction
flow through industries, changing their rules and, essentially, change the shape of
industries by determining who stays in and who is squeezed out. The implication of such
works is that firms which are sensitive to their environments and build capabilities to
respond to their environments and its changes will be more likely to benefit competitively
and to soldier through tumultuous periods.
It would seem that organizational responsiveness is a particularly relevant notion in the
current competitive environment – an environment often described as high-velocity,
fast-changing and dynamic (Bennis, Spreitzer & Cummings, 2001; Davenport & Prusak,
1998; Drucker, 1999; Eisenhardt & Martin, 2000; Hesselbein, Goldsmith & Beckhard,
1997; Kotter, 1995; Ray & Rinzler, 1993; Seely Brown, 1997). It would seem that
consideration of how organizations should respond within such environments would be an
important area for organizational researchers to consider, both to remain insightful and
relevant to practice, and to understand the influences on firm-level competitiveness, and
firm survival.
Though scholarly works provide clues about organizational responsiveness, they remain
fairly silent about it as an important strategic management concept and in terms of how it
might operate, and become a firm-level capability. As such, a variety of practical
considerations arise. First, how should organizational responsiveness be defined and
conceptualized? Second, how should firms assess their organizational responsiveness and
develop it or create it? And, how should these questions be approached, assuming the
underlying dynamism and change characterizing the current competitive environment?
Approaching these questions is an enormous, important and complex task which has the
75
potential to pave the way for a new branch of relatively untouched strategic management
research and theory.
This paper takes a modest first step in understanding organizational responsiveness in
dynamic contexts by attending to it at the firm level of analysis. Particularly, it is suggested
that enabling organizational responsiveness at the firm level presents challenges to top
managers, having implications for the creation and development of organizational
competences to support it. It is only by understanding organizational responsiveness that it
is possible to work towards understanding how organizational responsiveness might be
conceived of and operate as an organizational capability.
The paper contributes to the literature in the following way. First, it establishes that indeed,
organizational responsiveness is a noteworthy concept within the strategic management
literature, particularly amidst organizational dynamism. Second, a framework is
established with which future research and theory might be guided and from which a
variety of research questions can be seen to emerge. Third, this paper considers
complexities surrounding how top managers might prepare to conceive of organizational
responsiveness. And fourth, how competences should be developed in light of these
complexities is suggested. Finally, the implications of this framework are described,
primarily in terms of shaping a research agenda.
Foundations for Studying Organizational Responsiveness
The notion of organizational responsiveness and its role in organizational outcomes is
suggested in various works within the strategic management field. Fundamental to the
competitive signaling literature is the suggestion that firms exist within environments
characterized by information asymmetries. Thus, organizational decision makers rely
heavily on interpreting signals within their environments in order to make decisions
regarding investments in other firms (Fombrun & Shanley, 1990) and competitive moves
(Dollinger, Golden & Saxton, 1997). Much of the literature is focused, however, on how
signals can be used or created to attract investment and to motivate purchase decisions (cf.
Weigelt & Camerer, 1988; Grossman & Helpman, 1999; Deutsch & Ross, 2001;
Lounsbury & Glynn, 2001; Stuart, Hoang & Hybels, 1999). Within this literature, it is clear
that how signals are interpreted has implications for decision making and organizational
action. A precise focus on whether, when and how signal interpretation leads to
organizational responsiveness is lacking.
Similarly, the issue interpretation literature provides some insights into organizational
responsiveness. These works focus on whether and how issues are labeled as strategic in
organizations (Dutton, 1986; Dutton & Jackson, 1987). These works further suggest that
there are implications for whether and how issues are labeled as strategic for how top
managers respond in light of these issues; this leads to the suggestion that issue
interpretation leads to differences in responsiveness to the same events across firms
(Jackson & Dutton, 1988). In some works, it is specifically shown that the labeling of
issues as strategic, and whether a strategic issue is labeled as an opportunity or threat, has
influences on how responses are undertaken within an organization and particularly
76
mandated by its leaders (Sharma, 2000; Sharma, Pablo & Vredenburg, 1999). Clearly, the
issue interpretation literature provides an idea as to how issues, if and when they are
labeled as strategic and how they are labeled as strategic (opportunities versus threats) has
implications for motivating organizational responsiveness.
These works are only two examples from the strategic management literature that provide
the impetus for focusing more specifically on organizational responsiveness within the
strategic management literature. It might be noted, however, that neither of these works
focus specifically on organizational responsiveness despite the concept’s centrality to the
works. These works provide initial groundwork and an impetus whereupon to consider the
role of organizational responsiveness vis-à-vis firm-level factors and outcomes. An initial
framework delineating the relationships suggested in the literature is shown in Figure 1.
--------------------------------Insert Figure 1 About Here
--------------------------------As shown in Figure 1, organizational responsiveness can be seen to involve a relationship
between a firm and its environment. The literature that forms the basis whereupon the
framework is developed focuses primarily on the interpretive factors surrounding top
managers and their influence on the relationships between firms and their environments.
Clearly, there is substantial room in which to elaborate on the framework.
It should also be particularly noted that within the framework presented, organizational
responsiveness is seen to lead to firm outcomes rather than performance; this is deliberate,
and based on recognition in recent years that dominant measures of firm performance do
not necessarily capture the range of outcomes that firms might work towards (i.e. works on
triple bottom line, stakeholder theory, works critical of performance measures). With
regards to responsiveness, goals might indirectly be performance-related, but directly are
contingent on the targets of responsiveness (i.e. the customers, employees and industry
trends to which the firm seeks to respond, etc.). It is feasible that the target of
responsiveness defined by a firm has implications for how organizational responsiveness is
characterized and manifested at the firm-level of analysis, how success or failure of
organizational responsiveness is assessed and evaluated and how differences in
organizational responsiveness may be manifested across firms.
Organizational Responsiveness and Dynamic Contexts
A range of factors and trends within organizational environments have led to
characterization of the business context as high-velocity, changing and dynamic. There are
various forces which have led to such changes within business environments, among which
are forces of technology, globalization and economic transformation (Bennis, Spreitzer &
Cummings, 2001; Davenport & Prusak, 1998; Drucker, 1999; Eisenhardt & Martin, 2000;
Hesselbein, Goldsmith & Beckhard, 1997; Kotter, 1995; Ray & Rinzler, 1993; Seely
Brown, 1997). Among the effects of such changes is a suggested need for managers to shift
assumptions about management (Drucker, 1999), to focus their attention carefully
77
(Davenport & Beck, 2001), and to seek methods of achieving current strategies with a
mind towards the future (Christensen, 2004).
Thus there is an urgent need for academics and managers alike to begin to understand the
need for organizational responsiveness within firms and its relationships with
organizational outcomes, competitiveness and survival. It is necessary not only to begin to
understand what organizational responsiveness means in an academic sense, but also to
understand what is expected of it and the top managers responsible for fostering it amidst
the cited dynamism.
Demands on Organizational Responsiveness
In setting the stage for developing organizational responsiveness, top managers play a
crucial role. It is necessary for them to recognize that developing competence around
organizational responsiveness is necessary for competitiveness and survival. It is also
necessary for them to recognize that preparing their firms for organizational
responsiveness requires them to undergo certain changes in mindset and grapple with
certain paradoxes. It is necessary for them to realize how contemplating these paradoxes
and undergoing changes in mindset affects whether and how organizational responsiveness
is fostered within and manifested by their organizations.
Three paradoxes that top managers must understand, consider and deal with in the current
context are: balancing current and future strategies, balancing internal and external
attention and balancing proactive and reactive responsiveness modes.
Balance between current and future strategic orientations
The challenge of balancing current and future orientations has received dominant
attention within various works on innovation. It is suggested that firms seek mechanisms
with which to ensure that decision makers are able to work towards the fulfillment of
current strategic objectives while also remaining sensitive to the need to think long-term.
Balance between proactive and reactive responsiveness modes
Modes of responsiveness, as seen here, refer to how firms relate with their
environments. Though commonly assumed to be equated with reaction, responsiveness
accommodates the consideration of proactive thinking and behavior. While a reactive
mode of responsiveness may be seen as involving responding to that which has already
occurred, a proactive mode of responsiveness entails sensing that which might occur and
devising methods with which to respond prior to possible occurrences. It is in this vein that
another challenge is presented to decision makers within the current environment, as they
seek to be both reactive and proactive in responding to their environments.
Balance between internal and external attention
What is an organizational environment? What is or are the organizational
environments to which decision makers must attend? The concept of organizational
environment, as it is commonly conceived of within the strategic management literature,
refers to the external environment. Yet, the internal organizational environment has also
78
received some attention, as leaders of firms seek to develop mechanisms with which to
develop an orientation toward the future. Thus, in understanding the challenges of focus of
attention, it is necessary for managers to develop a focus of attention that is both internally
and externally oriented and sensitive to features of each.
Organizational Responsiveness: An Initial Framework
Understanding demands for organizational responsiveness in dynamic environments is not
only a conceptual or contemplative activity; rather, it has important implications for how
organizational responsiveness is facilitated and operates. The Organizational
Responsiveness Framework is presented in Figure 2.
--------------------------------Insert Figure 2 About Here
--------------------------------As can be seen from the framework, there are various tasks with which a top manager is
charged with seeking to foster organizational responsiveness within their organizations. It
is necessary for these top managers to develop an underlying organizational
responsiveness mindset as well as to ensure that appropriate mechanisms are developed
within four dimensions of organizational responsiveness. It is in this way that top managers
prepare their organizations for organizational responsiveness in a manner that enables him
or her to envision the relationships between organizational responsiveness, organizational
factors, processes and activities and organizational outcomes. The underlying mindsets and
four dimensions are thus considered.
Underlying Mindset of Organizational Responsiveness
Within the current dynamic business context, the mindset that managers are required to
adopt for responsiveness is one which is oriented towards both the achievement of current
strategies as well as future ones. In this sense, top managers are required to plan for today
with the future in mind. And, as might be imagined, within such a mindset, top managers
must not only recognize, but also attempt to balance both orientations.
Four Dimensions of Organizational Responsiveness
In addition to the overarching mindset that appreciates both an orientation towards
fulfilling current strategy and working toward future strategies, it is also necessary for
organizations to develop organizational capabilities within the four organizational
responsiveness dimensions. The dimensions, depicted in Figure 2, are: external/reactive,
external/proactive, internal/reactive and internal/proactive.
The External/Reactive Dimension
The external/reactive dimension involves an orientation to the firm’s external environment
and reactive responsiveness mode. It is suggested within the literature that while a
capability in this dimension is necessary within a firm, it is not necessarily useful to be or
remain competitive and survive industry upheaval.
79
The External/Proactive Dimension
The external/proactive dimension involves an orientation to a firm’s external environment
combined with a proactive responsiveness mode. This dimension is suggested to lead to
value within the current economy, for it presupposes that firms seek to sense and analyze
trends, patterns and to create linkages to motivate proactive responsiveness to these ideas.
The Internal/Reactive Dimension
The internal/reactive dimension involves an orientation inward, to an organization’s
internal environment, combined with a reactive responsiveness mode. This dimension is
oriented toward detecting and solving problems and barriers to operations and strategic
management as they occur.
The Internal/Proactive Dimension
The internal/proactive dimension involves an orientation inward, to an organization’s
internal environment, combined with a proactive responsiveness mode. This dimension is
oriented toward detecting and solving issues, trends and patterns that might indicate
emergent problems, seeking to deal with these before they become problems.
From Mindsets and Dimensions to Competence
Further, in addition to preparing oneself cognitively for organizational responsiveness, it is
also necessary for top managers to begin to prepare their organization for responsiveness.
This involves auditing the organization with recognition of the precise factors, processes,
activities and mechanisms operating within each quadrant, ensuring that these support
responsiveness in that quadrant. Examples of such factors, processes, activities and
mechanisms are provided in Table 1.
--------------------------------Insert Table 1 About Here
--------------------------------As can be seen within the table, there are three dimensions upon which each quadrant is
evaluated. For the purposes of analysis, these have been described with regards to
information collection methods, modes of inquiry and analytical methodology and
examples. Information collection refers to the ways in which the organization seeks
information for responsiveness within each quadrant. Modes of inquiry and analytical
methodology include approaches to information, for example, which questions are asked?
How the information is approached? Examples are provided to illustrate how each
quadrant relates with responsiveness, and particularly can be seen to contribute to (or
detract from) successful responsiveness.
The framework can also be used by top managers as an auditing mechanism. The
dimensions noted within each quadrant can also be seen as dimensions upon which each
quadrant might be audited within organizations. For example, how information is collected
80
within a firm and whether such methods are working or appropriate might be considered.
In assessing modes of inquiry and analytical methodology it is possible for top managers to
question whether the right questions are being asked in viewing information and in order to
facilitate the goals of responsiveness within that quadrant. Further, specific examples of
when and how mechanisms have and have not worked might also be considered within
each quadrant. These analytical processes can lead top managers to ask necessary
questions about whether the methods of information collection within each quadrant
support the mode of responsiveness and what barriers stand in the way of responsiveness. It
is on this basis that they might seek to correct these and develop measures of success
around responsiveness.
From Relevant Competences to Organizational Capability
Organizational responsiveness is a competitive necessity in dynamic environments. Thus,
while firms might have and develop competences within each quadrant, this does not
necessarily mean that they have a capability which will yield superior outcomes. The
question that thus arises is how might an organizational responsiveness capability be
conceptualized? In order to understand this, it is necessary to first contemplate what
comprises a capability according to the literature. Grant (1991) describes capabilities as
the: “capacity for a team of resources to perform some task or activity” (p. 119). Collis
(1991) describes capabilities as “socially complex routines that determine the efficiency
with which firms physically transform inputs into outputs” (p. 145). Notable, however, is
that the value of resources is seen to be derived from their value, rarity, inimitability and
non-substitutability (Barney, 1991). As Barney (1986) suggests, in the case that a
capability can be devised by using a framework, it is replicable by other firms.
Thus, for organizational responsiveness to become a capability this implies something
grander than a series of competences within the four dimensions outlined. Such
investigations are out of the scope of the current paper, but might be seen to involve
investigations into whether and how firms develop super-competence with regards to one
quadrant or superior alignments with environments as based on patterns of dependency
between firm and environment. Other insights into how firms create organizational
responsiveness capabilities might involve assessing how competences do or should work
together, across the framework; this involves recognizing that each quadrant does not work
independently, but rather, requires an overarching coordination mechanism whereby the
quadrants work simultaneously and movement between these quadrants is facilitated.
Refining the Research Agenda
The question for any work based within a relatively untouched area of research is how to
scope the initial forays into that research area in a manageable fashion. It is in this sense
that it is possible to turn to creating a research agenda within this area of research. While
the current work begins to present and establish responsiveness as a critical strategic
management concept with particular importance in dynamic environments, it does only
represent a first step.
81
Yet, this work asks almost as many questions as it provides answers, as it identifies a
multitude of research areas that might be exploited in future works. The current work
presents a framework to guide such inquiries by proposing constructs and relationships,
though the need for these constructs, relationships and elements of context to be elaborated
is acknowledged. The framework does provide a foundation and springboard for future
works on and inquiries into organizational responsiveness.
This work also specifies the role of top managers in organizational responsiveness, since
they are often cited in the strategic management literature to play a dominant role in setting
the stage for organizations to work in a particular strategic direction. These are the people
who presumably lead to organizational responsiveness decisions and actions and set the
framework wherein organizational responsiveness will occur. As such, the current work
focuses pointedly on the paradoxes that face top managers as they seek to develop
responsive organizations. Three paradoxes have been identified and it is suggested that
whether and how top managers seek to overcome these paradoxes and how they create
mechanisms to deal with these paradoxes has implications for both organizational
responsiveness and organizational outcomes. It has been demonstrated that the
organizational responsiveness framework might be used to ground further studies on
organizational responsiveness as well as the basis upon which top managers might launch
audits into the competences and their applicability for organizational responsiveness to
both occur and help them to achieve organizational goals.
Initial insights are provided into how organizational responsiveness might be
conceptualized as a capability, though it is suggested that to be viewed as a capability,
organizational responsiveness is somewhat more than organizational competences within
the quadrants in the framework. Some recommendations for what comprises an
organizational responsiveness capability and how this might be investigated are provided.
There is clearly substantial room for contributions to the notion of and understanding of
organizational responsiveness and its role in organizational outcomes and in strategic
management in general. This paper lays the groundwork for conceptual, theoretical and
empirical developments in this relatively untouched but critical area of research.
82
Figure 1: Relationships Between Environments and Outcomes
Organizational
Responsiveness
Environments
Outcomes
?
Competitive Signals
Issue interpretation
Figure 2: Organizational Responsiveness Framework
Environmental
Orientation
Modes of Responsiveness
Reactive
Proactive
Internal/Reactive
Internal/Proactive
External/Reactive
External/Proactive
Internal
External
Table 1: Mechanisms within the Dimensions
Information
Collection
Mode of inquiry and
analytical
methodology
Examples of
dimension in action
Internal/Reactive
Through surveys,
surveys, monthly
reports (e.g. on
turnover,
absenteeism, defect
rates)
Most likely shared at
periodic
management
meetings, deductive
approach.
Reacts to problems
after they are
problems.
Introduction of a
comment box for
employees.
Internal/Proactive
Best practices in
operations strategy
Inductive, based on
frameworks like
value chain
Seeks to identify
patterns and trends
before they become
problems or to seek
Feedback sessions
with management,
continual collection
and assessment of
data
83
External/Reactive
External/Proactive
Signals, investment
reports, news characteristically.
On trends, patterns,
uncreated linkages
and fusion
Often directed
information searches
– searching for
particular
information
Deductive,
interpretive
Browsing, fusion of
information across
documents,
organizational units,
etc.
Inductive, based on
frameworks like value
chain, and comparison
to competitors and
other environmental
factors
Initiating a retaliatory
price cut.
Disruptive
technology,
innovation
JIT, Dell, Amazon,
Walmart
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85
ASAC 2005
Toronto, Ontario
Tamiko Hynes (student)
Schulich School of Business
York University
INSIDE THE BLACK BOX: UNDERSTANDING DYNAMIC RELATIONS
AS A SOURCE OF SUSTAINABLE COMPETITIVE ADVANTAGE1
Some resource based view proponents suggest people are a source of competitive
advantage that cannot be easily managed. Others in strategy and HR propose
managing people more strategically. Through micro analysis, a typology of
dynamic relations helps clarify this tension by opening the invisible ‘black box’
contributing to competitive advantage.
“No person is an island.” (Donne, 1975)
The importance of people to organizational success has gained prominence in various
fields in the past two decades, particularly in the field of strategic management. The
resource-based view (RBV) proposes people-based resources are key sources of competitive
advantage yet concludes their social-complexity prevents understanding their link to competitive
advantage (Barney, 1996). Other approaches in strategy and strategic human resource
management (SHRM) match people to strategy but do not focus on relational dynamics among
people (e.g. Eisenhardt & Martin, 2000; Lepak & Snell, 2002). Although a micro analysis
approach would enable a closer look and deeper understanding of social complexity and the role of
people and relations as competitive resources, such an approach has not been used.
Targeting this gap, this paper integrates strategy and micro analysis approaches to explore
interpersonal connecting activities and reveal how people resources are linked to competitive
advantage. It argues that interactions at work are understandable and that some of these, not just
people, are invisible assets fundamental to sustainable competitive advantage. Building on
existing literatures in strategic management, social capital, strategic human resource management
and organizational behaviour, the paper develops an integrative perspective of employees as
critical organizational resources. To do this, this paper conceptualizes dynamic relations between
employees that develop in daily work. Dynamic relations are defined as dyadic interactions (with
internal and external organizational members) that have organizational benefit and occur among
proactive (versus passive) employees, yet are largely unnoticed in organizations. As opposed to
more static, already-developed networks, the concept of dynamic relations reflects employees’
active initiation of and engagement in relations that occur largely unnoticed in organizations.
1
The author thanks Ellen Auster for her helpful comments on drafts of this paper.
86
Theoretical Background
Strategic Views of People and Social Complexity
Strategy recognizes the role of employees in organizational success. The RBV focuses on
idiosyncratic, difficult-to-copy resources (Wernerfelt, 1984) that if valuable, rare, inimitable and
organizationally exploited can be sources of sustainable competitive advantage which cannot be
competitively eliminated (Barney, 1991; 1996). Resources are valuable if they reduce costs or
raise revenues; rare if not commonly found and fewer firms possess them than are necessary for
perfect competition and inimitable if they or their benefits cannot be copied. Inimitability stems
from causal ambiguity or difficulty identifying invisible or taken-for-granted resources and their
link to competitive advantage and social complexity or difficulty shaping such resources (Barney,
1996) due to various intricate social connections. Thus the RBV argues socially complex
resources, including interpersonal relationships such as unique employee-client relationships, may
be organizationally invisible and incredibly hard for any organization to copy. Because how
people and competitive advantage connect and the means to force these emergent, path-dependent
connections is unclear, this view necessarily assumes the preexistence of such invisible resources.
Despite discussions about its deficiencies (see Barney, 2001; Priem & Butler, 2001a &
2001b for tautological debate), the RBV is influential in strategy and other fields such as Strategic
Human Resource Management (SHRM). SHRM argues people are both discretionary and a stock
of capital to be motivated individually and managed collectively (e.g. knowledge base) for
sustainable advantage (see Wright et al., 2001 for a review). Some SHRM and strategy
approaches tie strategy and people, suggesting the ability to fit HR practices to groups of varying
importance (Lepak & Snell, 1999; 2002) or configure human resources to fit strategy (Eisenhardt &
Martin, 2000; Galunic & Rodan, 1998; Teece et al., 1997) gives strategic advantage.
Considering employees collectively or as configurable groups enables managing
observable aspects of people resources to rationally fit strategy yet does not consider the relevance
of hidden activities such as securing a colleague critical for a project. Individual employee
management practices such as work design (Wright et al., 2001) may miss how employees interact
with others to shape their jobs. In other words, managing people as solitary assets or bundles of
resources may overlook hidden interpersonal connecting behaviour and potentially destroy
relational processes. (Notably, a simultaneous individual and collective focus does not coincide
with the RBV’s emphasis on relational complexity and competitive advantage).
Existing Relationship-Oriented Research
Relevant relationship literature considers relationships as a “whole” or as having a
productive function. Social capital literature focuses on relationship networks as valuable
resources (Nahapiet & Ghoshal, 1998) while network theory emphasizes the structure (see Burt,
1992) of relationship networks. As with the RBV, these approaches expose the value of
87
relationships and focus on formed relationships versus relational dynamics. In a recent work,
Lengnick-Hall and Lengnick-Hall (2003) suggest relationships are important and focus on
conventional or productive relationships, such as those formed during training rather than less
typical relational activities lacking mutual goals or seemingly work-unrelated.
Their
relationship-typology does not emphasize taken-for-granted interactions that are not visibly tied to
performance or innovation but that are perhaps more unique and competitively relevant assets.
These approaches – strategy, SHRM and social capital - clearly recognize people and
relationships as resources but suggest resources cannot be decoded, migrate people according to
strategy and potentially separate hidden resources, or consider relationships statically. A micro
analysis approach revealing behaviour at a lower level of analysis, i.e. individual and interactional,
uncovers people-based, invisible, relational activities that create competitive advantage.
Converging strategy and organizational behaviour, this paper builds on current approaches and
argues that focusing on dynamic relations helps us understand and perhaps avoid separating
invisibly connected resources – important sources of competitive advantage.
Dynamic Relations
Although interpersonal relations are said to contribute to competitive advantage there is a
lack of knowledge on how relations develop - perhaps because research often assumes work
relationships are instrumental, pursued strategically and identifiable. The paper now explores
dynamic relations invisible at a macro level to reveal their role in creating competitive advantage.
Types of Dynamic Relations
“…our relationships with individuals and groups constitute the environment in
which we live our professional lives” (Gersick et al., 2000: 1026).
Dynamic relations are aptly described via dimensions of people and work relevance
(Figure 1). A typology may conceal the relations’ active nature but offers a tidy map of these
relations. The first dimension is individual focus, i.e. whether a relational activity is intended to
benefit “self” or “other(s)”. The second is work focus, i.e. whether an activity is “job” or “work
environment” related. These generate four types of dynamic relations: job-self (“creating”),
job-other (“collecting”), environment-self (“connecting”) and environment-other (“caregiving”).
“Creating” dynamic relations are self-benefiting and job specific while “collecting”
dynamic relations are other-focused and job specific. “Connecting” dynamic relations focus on
self and the work environment while “caregiving” relations are environment and other-focused.
The paper now considers each with empirical examples. It is important to note that while
relational work is necessary to develop and maintain relationships (Jacques, 1992), this concept
contrasts with dynamic relations which are not necessarily focused on relationship-building.
Creating. Through job-self or “creating” activities, employees initiate interactions with
colleagues or outside members to create or define their role or do their job. Such interactions help
88
individuals meet needs for control over their jobs and define their work roles. These relational
activities appear similar to role making activities (Graen & Scandura, 1987) and role innovation
(Van Maanen & Schein, 1979) however the former reflects a more formal model of how
individuals create their roles while the latter is mainly limited to reactive versus proactive
behaviour. “Creating” interactions are more transparent to theorists and organizations because
they are not readily associated with creating a role, self image or doing a job yet through
work-shaping efforts, some employees self-define their roles (Wrzesniewski & Dutton, 2001).
There are several empirical illustrations. Gersick et al. (2000) reveal collegial work where
individuals initiated relations with colleagues regarding tasks or projects, producing valuable work.
Here, the initiator actively contributed to and, less obviously, gained satisfaction from the
collegiality of the interaction. Other types of collegial interaction might involve asking a
colleague with whom the individual does not have a relationship for advice on a project.
Fletcher’s (1998) qualitative study of engineers in a hi-tech firm surfaces additional examples of
relational activity. Through relational theory, Fletcher (1998) describes how engineers
respectfully asked for help, shared information and handled upset employees in ways allowing
them to do their jobs and help career progression. Or, engineers empathically coached coworkers
thereby sharing in the learning experience and benefiting from having to explain only once
(Fletcher, 1998). These illustrations that show how employees create and manage their jobs are
not typically associated with job functions and consequently organizational effectiveness.
Although they might remain largely unnoticed at an organizational level and even to initiating
employees themselves, such interactions are intertwined with these employees’ job activities.
Figure 1
Dimensions and Types of Dynamic Relations
Individual Focus
Work Focus
Self
Beyond Self (Other)
Job
Creating
Collecting
Beyond Job (Work Environment)
Connecting
Caregiving
Collecting. Through “collecting” activities, some employees selflessly draw in others to
accomplish a job or task and thus build and sustain bridges to support work. Illustrations reveal
employees collecting input from external and internal members. Benner et al. (1996) and Jacques
(1993) describe how nurses interacted with patients’ families to gather and communicate
nonquantifiable and nonmedical information that improved patient care. Fletcher (1998)
describes how certain individuals secured input from employees critical to but not visibly
connected to a project by expressing thanks. Considering this integral to an effective job, these
individuals had less regard for others who took less care, implying that only some engage in
collecting activities. The study also uncovers selflessly attending to a project versus potential
career gains. Having exposed a problem to her manager, an employee allowed this manager to
89
take a visible role to resolve a problem and keep the project on track. Common in these
work-critical if not work-visible relational activities is the "indirect nature and apparent invisibility
of …activities assumed to be characteristic of their effectiveness" (Fletcher, 1998: 170).
Some collecting examples seem work-unrelated yet smooth interpersonal conflict,
supporting coworkers and enabling continued task-specific input. Star and Strauss describe how
computer technicians’ “articulation work” that gets things back “on track” is invisible to rational
work models (1999: 10). What might be perceived as idle chit chat is actually smoothing a
conflict, creating a relaxed, trusting relationship or screening unnecessary interruptions - which
support other employees and help do a job. Similarly, Fletcher’s (1998) illustrations of smoothing
communication are relation-repairing, other-supportive and job-focused activities in which
employees tracked down coworkers they had offended or made an effort to talk to someone with
whom they had disagreed. Other collecting activities contributing to long-term work outcomes
involve teaching coworkers in a way that does not harm their egos (Fletcher, 1998) and supporting
their skills development (Gersick et al., 2000).
Common in these illustrations are relational activities accomplishing a job while
supporting or benefiting important other(s). They reveal that some employees’ active,
job-oriented or skill-specific relational activities which might not be visibly instrumental to work
do facilitate work deliverables and provide unquantifiable but definite organizational benefits.
These might be overlooked by employees themselves as they disregard social activities as work,
even though work would not get done without this interaction (Nardi & Engestrom 1999).
Connecting. The two remaining types of dynamic relations focus on the work
environment or climate. Through “connecting” activities, employees relate to other(s) and create
an emotionally supportive, socially engaging work atmosphere; thus “connecting” relations
simultaneously benefit the initiating employee and target the work environment. People desire
connection with others (Baumeister & Leary, 1995) and need for social interaction can motivate
joining the workforce (Feldman & Doerpinghaus, 1992). Baumeister and Leary (1995) suggest
social interaction with “a long-term intimate” offers a “sense of belonging that would not be
available in interactions with strangers or new acquaintances” (500). This focuses on the need for
frequent or regular social contact, stability in and the emotional element of interactions. Gersick
et al. show how employees felt emotional support from relational activities that were often “casual
and spontaneous”, such as “having light-hearted fun” with people at and outside work (2000:
1037). Informal work arrangements (Bishop, 1999); informal, undocumented interaction such as
humour and storytelling (Nardi & Engestrom, 1999) and talking about a new haircut and sharing
personal problems (Tschan et al., 2004) demonstrate a need to connect to others. These
self-benefiting activities create a supportive social work environment that supports organizational
functioning through improved job satisfaction, performance and well being (Tschan et al., 2004).
Employees also change their “relational boundaries” or interact with others to compose
their social work environment (Wrzesniewski and Dutton, 2001: 180). Managing interaction with
others, the employee supports his or her own work identity that fits with a desired self image
(Wrzesniewski & Dutton, 2001). By proactively interacting with patients, showing visitors
around, brightening another person’s day and interacting with nurses more often, hospital cleaners
benefited from social interaction while enhancing their work identity (Dutton et al., 2003) and
improving the work climate for coworkers and patients.
90
In sum, connecting interactions are fluid and their work role is often overlooked. Yet they
are fundamental for meeting a need for social interaction and creating a desired work environment.
Such connecting relations can lead to “safe harbour” relationships that further promote and
facilitate relational work (Kahn, 1998). This is distinguished from the earlier-described research
which views relationships as a goal rather than an extra benefit of interaction.
Caregiving. Finally, “caregiving” also has a work environment or climate focus but here,
employees’ activities care for other(s). One caregiving approach involves helping others feel
appreciated, heard, and understood by verbally and nonverbally affirming and empathically
listening to another (Fletcher, 1998), creating a supportive atmosphere. Fletcher’s study reveals
caregiving activities including encouraging comments, maintaining eye contact and genuinely
listening to a senior colleague describe “the good old days” (1998: 173). This supportive
behaviour is likely to contribute to a “zest for interaction and connection” (Miller 1986, c.f.
Fletcher 1998) and the “background conditions in which group life can flourish” (907). Other
caregiving activities such as using collaborative confrontational language (“what I like about
Dave’s idea is”) create a positive group atmosphere and a more cooperative (Fletcher, 1998: 174)
and coworker-supportive environment. By publicly supporting others, employees’ caregiving
activities promote team spirit and embed outcomes in others and in social relations, making
outcomes inseparable from people and relational interactions and ultimately improving
organizational effectiveness and decision making.
Kahn’s (1993) study of “organizational
caregiving” also reveals examples of behaviours involving daily interactions that are work
environment and other focused. Some caregiving behaviour Kahn identifies involves interactions
that support another, such as asking for information that serves another’s emotional needs, showing
“emotional presence” and speaking warmly and expressing affection (1993: 546). Thus, these
specific caregiving activities are not specific to a task or job; rather they help create a trusting,
consistent, supportive work climate that encourages more caregiving toward others.
Insights and Implications
“What is the glue that holds the organization together?” (Lancaster, 1994: B1)
People matter to organizations. Socially complex relationships and connections are said
to lead to superior performance but in indecipherable ways. Consideration of relationships as
static and primarily career-instrumental concepts does not reveal the complex, unnoticed relational
dynamics that are work-supporting and may or may not be relationship-building. Strategic human
resource reconfigurations could unknowingly wipe out value-creating, cost-reducing dynamic
relations and create competitive disadvantage versus advantage. Rationalizing and restructuring
work functions can lessen opportunities for invisible, informal work interactions and create
“worker widgets” (Bishop, 1999: 123) who are incapable of participating in relational activities.
Building on organizational-level insights about strategic advantage, this micro approach
uncovers dynamic relations - unnoticed when only traditional ties and relationships are considered
- yet part of social complexity linked to competitive advantage. While employees use relationships
as exchange mechanisms to transfer such things as knowledge, some may also engage in relational
activities to mold their work and meet human needs. These dynamic relations create sustainable
competitive advantage (Figure 2) because they are valuable, rare inimitable and exploited.
91
Figure 2
Inside the Black Box: Dynamic Relations as a Source of Competitive Advantage
Individual:
Self-Other
Work:
Creating
Collecting
Connecting
Caregiving

Coach others
Task innovation
Gather information
Involve others in project
Smoothing talk
Storytelling, chatting, brighten
person’s day
Supportive communication
SCA

Valuable
Rare
Inimitable
Exploited
Dimensions
Types
Activities
Competitive Advantage
-----------------------------Dynamic Relations--------------------------------Through relational activities, proactive employees interact with others to shape their roles
so they and others more effectively perform tasks (creating); draw in others to accomplish a job or
task, building bridges to support work (collecting); fulfill their needs to connect with others by
creating a supportive work atmosphere (connecting); and provide care and a supportive
environment to others (caregiving). This behaviour directly or indirectly can avoid costs of poor
customer service, project delays and employee burnout and instead grow revenue by attracting
clients and increasing new-project capacity - creating unseen value for organizations. Dynamic
relations are elemental to a proactive employee’s daily work as not all employees will necessarily
be motivated to go to such lengths to support coworkers or clients, do an outstanding job or create
personally meaningful work. Hence dynamic relations are not common among all employees and
are rare. These relational activities occur unpredictably with outcomes embedded in
unpredictable social relations, creating higher-level social complexity and extreme replication
difficulty – they are inimitable. Finally, because they are unrecognizable as an invisible asset,
certain organizations allow these relational resources to flourish (perhaps unknowingly) because
their structure allows interaction and avoids relation-destroying practices. Exploited dynamic
relations are a socially complex resource contributing to sustainable competitive advantage.
Research calls for greater knowledge of sources of superior performance (Mahoney, 1995;
Rouse & Daellenbach, 1999). This paper helps characterize and explain the role of dynamic
relations in competitive advantage, leading to important research and practical implications.
While calling for greater relationship orientation (Lengnick-Hall & Lengnick-Hall, 2003) targets
obvious organizational benefits of relationships, such approaches focus on “visible” activities and
miss the subtle complexities of daily work containing the richness of and key insights into social
interaction, particularly interaction that is unique and hard to reproduce due to its invisibility.
Instead, examining relational dynamics by focusing on interactional “fluidity” uncovers hidden
organizational benefits. Qualitative, rich descriptions (Miles & Huberman, 1994) open the door to
an inside-view of organizations and a grounded understanding of relational phenomena. Since
factors in organizations provide advantage, understanding this advantage must be gained in
organizations (Rouse & Daellenbach, 1999). Research conducted at dyadic levels reveals
relations residing among employees. Further, considering dynamic relations as explanatory
variables may resolve variance unexplained in studies. Using integrative approaches as in this
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paper benefits from “detailed comparative data about organizational processes” and increases
knowledge of sources of competitive advantage (Rouse & Daellenbach, 1999: 491).
Important managerial and practical implications are also evident. Management practices
must enable but avoid micromanaging these relational activities, recognizing that employees
invisibly build interconnections leading to employee and organizational benefit. Managing
employees as individuals or groups by offering employees increased autonomy can destroy
dynamic relations and overlook the work and employee relevance of these relational activities.
Likewise, shifting employees for strategic purpose may disrupt relational work and employees’
needed stable interaction.
Finally, the paper has research limitations. The need to develop a deeper understanding
of dynamic relations requires an approach of depth and thus the study utilizes primarily localized
illustrations of dynamic relations. However, work contexts cannot be ignored in conceptualizing
dynamic relations. A more comprehensive review of dynamic relations in organizations would
result from examining multiple internal and external perspectives. Finally, individual factors and
culture that may be relevant in conceptualizing people dynamics are not considered here.
Concluding Remarks
Existing strategy literature recognizes that employees are fundamental to organizational
success and competitive advantage. Building on existing views, this paper has tried to delve into
employees’ engagement of others in their daily work to understand how employees matter and
reveal invisible activities that contribute to social complexity performance advantage. Through
further integrative research we will continue to advance knowledge of socially complex resources
and the illusive ‘black box’ that contributes to sustainable competitive advantage.
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ASAC 2005
Toronto, Ontario
Mouloud Khelif (student)
HEC Montréal
APPROCHES DE LA GOUVERNANCE ET PERFORMANCE : LE CAS DES
ORGANISATIONS DU SECTEUR PUBLIC
Nous présentons différentes caractéristiques du système de gouvernance d’une
organisation, en dépassant la vision traditionnelle portée par la théorie de l’agence.
L’exemple des organisations relevant du secteur public et des dimensions clés qui
permettent de les distinguer des autres secteurs (privé, non lucratif) nous amène à
approfondir la démarche en nous basant sur plusieurs théories pertinentes en
management stratégique (coûts de transaction, théorie de l’agence, droits de
propriété). Nous examinons enfin plusieurs voies de recherche sur la gouvernance
avec des implications pour les praticiens.
Introduction
Le système de gouvernance et son lien à la performance de l’organisation est un sujet d’une
grande importance pour les chercheurs en management stratégique, mais qui intéresse également et
à juste titre les praticiens. Charreaux (1997) définit la gouvernance de l’organisation comme
l’ensemble des mécanismes organisationnels et institutionnels ayant pour effet de délimiter les
pouvoirs et d’influencer les décisions des dirigeants, autrement dit, qui « gouvernent » leur
conduite et définissent leur espace discrétionnaire. Dans la littérature en stratégie, et dans l’esprit
des praticiens, force est de constater que la vision dominante de la gouvernance des entreprises
reste financière et actionnariale (Shleifer et Vishny, 1997; Daily et al., 2003), basée sur les théories
contractuelles de la firme (Gomez, 1996) et leur corollaire, la théorie de l’agence (Eisenhardt,
1989; Jensen et Meckling, 1976). Globalement, le « système de gouvernance » fait référence au
dispositif institutionnel et comportemental qui régit l’ensemble des relations entre les dirigeants de
l’organisation au sens large et les parties concernées (stakeholders): actionnaires, propriétaires,
créanciers, salariés, et plus généralement agents ou institutions intéressées aux activités de
l’entreprise, et en premier lieu ceux qui détiennent des droits jugés « légitimes » sur celle-ci (Pérez,
2003). Pour une entreprise privée, il fait en général référence aux processus et mécanismes
institutionnels et organisationnels qui délimitent le pouvoir et définissent la marge de manœuvre
des dirigeants de manière à accroître la valeur de l’entreprise. Au centre du concept de système de
gouvernance de l’organisation se trouve toujours une catégorie d’acteurs-clés : les dirigeants de
l’organisation, que cette catégorie soit réduite à une personne, à une équipe dirigeante ou encore à
un ensemble d’organes de suivi, d’évaluation et de contrôle (conseil d’administration, conseil de
surveillance, État-actionnaire, etc…). Ces acteurs sont sensés faire preuve de leadership
organisationnel tout en étant les véritables architectes de la stratégie de l’organisation
(Andrews,1971).
Une autre perspective peu abordée de la gouvernance repose sur l’approche des ressources
et des compétences, selon laquelle l’organisation est un portefeuille de ressources et de
compétences (Barney, 1991). La source de l’avantage concurrentiel de l’organisation réside alors
dans la capacité dynamique de combiner, protéger et renouveler ces ressources et ces compétences
(Teece et al., 1997). L’idée ici est que la gouvernance elle-même peut être appréhendée comme une
capacité dynamique (dynamic capability), propre à l’organisation, et qui lui permet de combiner
des ressources, d’arbitrer et de résoudre des demandes souvent conflictuelles des acteurs internes et
externes.
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Sous l’impulsion de la mondialisation et des vagues de privatisations successives, le
modèle de l’État-providence a été remis en cause dans de nombreux pays développés et moins
développés. Les entreprises du secteur public ont tout naturellement vécu une période de grand
changement technologique et idéologique qui a affecté leurs méthodes de gestion, leur activité
stratégique et leur gouvernance. Si l’on se place dans le contexte spécifique du secteur public, une
perspective de la gouvernance qui semble assez répandue est que si en théorie ces organisations
sont contrôlées par le public (le citoyen), en pratique le lien n’est pas direct. L’État, Les
gouvernements et leurs employés, en tant que garants de l’intérêt collectif, sont sensés contrôler,
voire guider les gestionnaires des entreprises du secteur public, et ainsi assurer l’atteinte des
objectifs et la performance voulue.
Nous commençons d’abord par examiner le lien de base entre gouvernance et performance
organisationnelle selon différentes approches, pour ensuite nous intéresser plus particulièrement au
cas des organisations relevant du secteur public, c'est-à-dire où l’État (et ses représentants) est
l’acteur majeur, en tentant d’examiner ce que plusieurs théories peuvent nous apprendre. Une
conclusion nous amène enfin à ouvrir plusieurs voies de recherche qui nous paraissent
prometteuses.
Système de Gouvernance et Performance Organisationnelle : Les Bases
On peut distinguer au moins deux niveaux du système de gouvernance : le « contenu
institutionnel » et les « comportements ». Le premier concerne la firme et le second les agents,
personnes physiques dont le comportement est influencé par ce contenu institutionnel. Ce dernier
comprend en fait des structures et des procédures. Les structures peuvent être variées : certaines
sont propres à l’organisation (conseil d’administration, assemblée générale etc..), alors que d’autres
sont externes et interviennent de manière ponctuelle (cabinets d’audit, agences de notation,
organismes de régulation etc…). Les procédures sont également diverses et généralement
explicitées dans des codes s’imposant aux acteurs concernés (Pérez, 2003). A l’image de tout
système humain, les « bonnes pratiques » et à l’inverse les déviations jouent un grand rôle dans la
mesure de l’efficacité et de la performance des systèmes de gouvernance.
Gouvernance : Domination de la Théorie de l’Agence
Comme le soulignent Daily et al. (2003), la théorie de l’agence domine à la fois dans la
recherche en gouvernance et dans le monde des praticiens et des entreprises. Selon les mêmes
auteurs, cela est probablement du à la simplicité de la théorie de l’agence (Eisenhardt, 1989; Jensen
et Meckling, 1976) : les organisations sont réduites à deux catégories d’acteurs, le principal et
l’agent. D’autre part, l’idée que les individus se comportent généralement selon leur propre intérêt
est largement répandue depuis longtemps. Pourtant, le système de gouvernance d’une organisation
peut aussi être vu comme une ressource, voire même une compétence clé qui contribue à générer un
avantage concurrentiel durable, dans le sens de la théorie des ressources (Barney, 1991; Wernerfelt,
1984, 1995). Le conseil peut donc contribuer au système d’innovation de l’entreprise et avoir une
conséquence positive en terme de création de valeur. Il est en effet utile de lier la gouvernance à
l’innovation, puisque l’innovation, dans ses différentes phases (formulation, validation, diffusion)
est un processus complexe qui implique plusieurs parties constituantes de l’organisation.
Le Cas du Conseil d’Administration : Organe de Contrôle ou Ressource
En effet si on s’intéresse au cas du conseil d’administration, c’est l’organe de gouvernance
que la théorie de l’agence (Jensen et Meckling, 1976) considère comme un organe et un outil
nécessaire pour réduire l’asymétrie informationnelle. Il permet de superviser et contrôler le
comportement du management (agent) et en théorie, d’éviter les déviances. Le conseil est
responsable de l’adoption de mécanismes de contrôle (évaluation, rémunération, composition,
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comités, séparation entre CEO et Chairman etc…) de manière à s’assurer que les décisions des
dirigeants (surtout du CEO pour une grande entreprise) soient en conformité avec les intérêts des
propriétaires de l’organisation (Fama et Jensen, 1983). Pourtant, vu avec d’autres lunettes, le
conseil d’administration peut avoir d’autres rôles que celui administratif et coercitif. Quant à eux,
Kose et Senbet (1998), estiment que d’une manière générale, l’efficacité d’un conseil
d’administration est déterminée par sa taille, sa composition et son indépendance. Ainsi, au titre de
sa composition (nombre de membres externes et indépendants par rapports aux membres internes),
de la qualité et de l’expertise de ses membres (en d’autres termes ce qu’ils représentent et ce qu’ils
peuvent apporter à l’organisation) un conseil d’administration peut aussi être caractérisé comme
une ressource de l’organisation (plutôt intangible). La théorie de l’agence paraît donc insuffisante
pour tenir compte de l’impact de la composition, du comportement et du rôle des membres du
conseil d’administration sur la création de valeur et la performance de l’organisation. Par exemple,
la théorie standard de l’agence ne tient pas compte du fait que les individus peuvent aussi dans une
certaine mesure exhiber de l’honnêteté et de la confiance (Hendry, 2002). Par ailleurs, si l’on suit le
raisonnement de la théorie de l’agence, les membres externes du conseil (réputés indépendants),
tout comme les managers, vont agir uniquement (et égoïstement) de manière à préserver leur
capital ‘notoriété’ et ‘réputation’ (dont découle leur valeur marchande en tant qu’administrateur),
c'est-à-dire en pratique dans le sens des intérêts des actionnaires. N’oublions pas qu’en réalité, ces
administrateurs externes sont souvent directement choisis ou nommés par le dirigeant exécutif
(CEO) de l’organisation, ce qui peut les amener à servir ses intérêts personnels au détriment de
ceux des actionnaires, ou inversement, agir de manière honnête même si leur compétence peut être
remise en cause. De plus, si on s’intéresse à l’évidence empirique de l’efficacité de la présence de
membres externes par exemple, les résultats sont peu concluants (Shleifer et Vishny, 1997) voire
même négatifs (Agrawal et Knoeber, 1996).
Mais plus important encore, la théorie de l’agence n’informe pas sur le rôle du conseil
comme ressource et stratège (Daily et al., 2003). Le conseil d’administration est situé à la frontière
entre l’organisation et son environnement (économique, légal, institutionnel etc…). Il est l’une des
parties de l’organisation qui joue le rôle de passerelle et de lien (linkage role) entre cet
environnement et les préoccupations internes. Dans cet ordre d’idées, le conseil d’administration,
notamment par la ressource « expérientielle », « relationnelle » et « réputationnelle » qu’il peut
constituer, a la capacité d’identifier les changements qui se produisent dans l’industrie, le secteur,
la société dans son ensemble, et plus particulièrement ceux qui vont avoir un impact majeur sur
l’organisation. Il est sans doute le plus à même de déceler les risques encourus par l’organisation,
identifier les occasions et même contribuer à développer, reconfigurer et renouveler les ressources,
compétences et capacités dynamiques existantes, de manière à contribuer à la dynamique
d’innovation et de création de valeur. En envisageant une coopération entre les membres internes
du conseil, qui ont eux une position avantageuse en terme d’information et de compréhension de
l’organisation à l’interne et ses membres externes, qui constituent à la fois une ressource
stratégique (Barney, 1991), un moyen de sécuriser des ressources non disponibles à l’interne
(Pfeffer et Salancik, 1978), et un levier stratégique pour accroître la légitimité de l’organisation
(Dacin et al., 2002; DiMaggio, 1988; Suchman, 1995). En utilisant de multiples approches, on peut
ainsi concevoir un organe de gouvernance qui contribue à l’innovation et à la création de valeur.
Le sujet de la rémunération des dirigeants est également de grand intérêt quand on
s’intéresse à la gouvernance et à la performance d’une organisation. En effet, pour qu’il y ait
innovation dans une organisation et création de valeur, les managers doivent accepter un certain
degré de risque. Or, si l’on se réfère à la théorie de l’agence, les dirigeants auront plus tendance à
prendre des risques s’ils sont eux-mêmes actionnaires de l’entreprise (Miller et al., 2002). L’autre
manière de lier la compensation des dirigeants à la prise de risques et à la performance à long terme
de l’entreprise (synonyme de création de valeur essentiellement par innovation interne) est
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l’incitation de type « long term pay » (Markman et al., 2001), c'est-à-dire l’utilisation assez
répandue de contrats basés sur les résultats à plus ou moins long terme (Eisenhardt, 1989), qui
combinent rémunération fixe (salaire) et variable (stock options et bonus). Un autre lien entre
gouvernance de l’organisation et sa performance est le processus d’évaluation du CEO. Young et
al. (2000) ont examiné les facteurs associés à l’adoption par le conseil d’administration d’un
processus d’évaluation de la performance du CEO dans le domaine hospitalier. En se basant sur les
apports de la théorie de l’agence (Fama et Jensen, 1983; Jensen et Meckling, 1976) et de la
perspective institutionnelle (DiMaggio et Powell, 1983; Meyer et Rowan, 1977), ils en retirent que
les initiatives nécessaires pour améliorer l’efficacité du système de gouvernance doivent prendre en
compte l’environnement institutionnel spécifique au conseil d’administration.
Le processus par lequel des ressources sont développées et utilisées est central à la
dynamique de l’innovation et de la création de valeur dans les entreprises. Selon O’Sullivan (2000),
les organisations génèrent de l’innovation et de la valeur grâce à des structures de gouvernance qui
leur permettent de soutenir l’intégration organisationnelle et de contrôler « l’argent et le savoir ».
Ces structures de gouvernance varient non seulement selon le type d’activités, mais aussi dans le
temps, le processus d’innovation étant par essence, dynamique. On peut être tenté de relier cette
idée au concept de ‘innovation games’ développé par Miller et Floricel (2002). Le ‘jeu
d’innovation’ est un niveau inter-organisationnel (un peu comme le champ organisationnel de
DiMaggio et Powell) caractérisé notamment par une logique dominante de création et
d’appropriation de la valeur. Les modes de gouvernance adaptés à la création de valeur pourraient
alors être contingents au jeu d’innovation auquel l’entreprise participe.
Gouvernance : la Spécificité des Organisations Relevant du Secteur Public
Au fur et à mesure que le modèle de l’État-providence est remis en cause dans de
nombreux pays (Bernier et Burlone, 2000), les méthodes de gestion du secteur public semblent
évoluer vers une recherche d’une plus grande efficience (Roy et Séguin, 2000) et tendent à se
rapprocher de plus en plus à celles du secteur privé.
Ainsi, le fonctionnement et la composition des conseils d’administrations des entreprises
publiques attirent l’intérêt des chercheurs et praticiens (Bernier et Burlone, 2000), cela d’autant
plus qu’aujourd’hui, les entreprises dont l’état est le propriétaire continuent de représenter une
bonne part de l’économie des pays industrialisés et des pays en développement. Dans un contexte
où les organisations appartenant à l’état, entreprises hybrides par excellence, doivent souvent
réconcilier des impératifs commerciaux avec les objectifs socio-économiques plus ou moins clairs
de leur propriétaire, l’étude des dispositifs de gouvernance trouve tout son intérêt (Bégin, 1998).
D’autre part, si l’étude du cas particulier des entreprises publiques dont les modes de gouvernance
ont connu une évolution sensible sous l’impulsion de nouveaux rapports entre l’État et le marché
est un axe de recherche intéressant, il est assez peu traité (Hafsi et al.,1987; 1988).
Les travaux de recherche sur la gouvernance des organisations publiques trouvent aussi
leur source dans divers questionnements, selon les disciplines des sciences sociales invoquées et les
orientations des chercheurs : distinction public/privé et son utilité dans la recherche en théorie des
organisations (Perry et Rainey, 1988), droits de propriété et privatisations (Vining,
Boardman,1992), performance comparée des secteurs publics et privés (Boardman, Vining, 1989;
Heracleous, 2001), rôle et composition des conseils d’administration des entreprises publiques
(Bernier, Burlone, 2000), évolution de la relation entre le gouvernement et la société d’état (Hafsi,
1988) etc… Cette vision est soutenue par des travaux basés essentiellement sur les théories
économiques de la gouvernance d’entreprise, à savoir la théorie de l’agence, les droits de propriété
et la séparation de la propriété et du contrôle (Alchian et Demetz, 1972; Fama et Jensen, 1983;
Shleifer et Vishny, 1997). Ainsi, les tenants de cette approche affirment que les arguments pour
98
justifier l’existence d’entreprises contrôlées par l’état ne tiennent pas la route et que les entreprises
publiques ne semblent pas mieux servir l’intérêt public que les entreprises privées :
“ …with a few exceptions of activities where the argument for state ownership carries the day,
such as police and prisons, the reality of state ownership is broadly inconsistent with this
efficiency argument.” (Shleifer et Vishny, 1997: 767).
L’autre aspect caractéristique de la gouvernance dans le cadre de la propriété étatique de
l’organisation tient au fait que si ces entreprises sont en théorie contrôlées par le public (citoyens),
en pratique le lien n’est pas direct (Laurin, 1998). En effet, si on suit la logique de la théorie de
l’agence, il devrait y avoir des coûts d’agence (monitoring, detecting etc…). Mais comme
l’explique Aharoni (1986), le problème c’est que ces coûts ne peuvent être clairement définis car le
principal n’est pas directement identifiable. Les entreprises détenues par l’État sont donc ‘des
agents sans principal’. Les gouvernements, agissant en tant que représentants des citoyens et
garants de l’intérêt collectif, sont effectivement sensés contrôler, voire guider les gestionnaires des
entreprises publiques, ce qui pose au moins deux problèmes d’agence, l’un au sens des mécanismes
de contrôle interne et l’autre externe (Fama et Jensen, 1983; Dharwadkar et al., 2000).
Premièrement, au niveau interne, les gouvernements poursuivent des objectifs parfois
contradictoires, confus, dictés à la fois par des considérations de nature sociale, politique et
économique (Laurin, 1998). Le contrôle effectif est souvent entre les mains de bureaucrates
nommés et non élus dont l’objectif n’est pas forcement le bien collectif mais plutôt leur propre
intérêt (Shleifer et Vishny, 1997). Deuxièmement, l’État agissant comme propriétaire entraîne de
facto une protection et une isolation de l’entreprise vis à vis des interventions du marché (hostile
takeovers, LBO, protection des droits des actionnaires minoritaires…) comme mécanisme de
contrôle externe (Laurin, 1998). Enfin, les entreprises publiques oeuvrant souvent dans des
situations de monopole « naturel » (énergie, eau, télécoms), la discipline que le marché et la
concurrence peuvent imposer sur les gestionnaires ne se fait pas sentir de la même manière.
Pourtant, contrairement à la perspective dominante, dans certains pays comme le Canada,
la France ou Singapour, des entreprises publiques présentent des résultats, des profits (parfois une
efficience) et une performance comparables voire supérieurs à des entreprises privées similaires.
Dans son étude de cas sur Singapore Telecom, Heracleous (2001) propose une explication à cette
« anomalie ». En adoptant une perspective de management stratégique basée sur le « strategic
choice » (Child, 1972) et sur la distinction entre stratégies délibérées, réalisées et émergentes
(Mintzberg, 1985), l’auteur dépasse le débat entre propriété privée et publique. Prenant le cas de
l’entreprise publique de Télécoms de Singapour, il nous donne un exemple clair où propriété et
contrôle de l’État peuvent être associés, sous certaines conditions (privatisation limitée, relative
autonomie, politique claire de l’État, stratégie de la firme), à une performance supérieure :
« …draws attention to the fact that performance is ultimately rooted in strategies that are
successfully realized, whether intended or emergent. In this view, what matters to performance is
primarily the strategies chosen and implemented, rather than who owns the organization per se. »
(Heracleous, 2001 : 74). Si le contexte du cas et l’environnement de Singapour peuvent nous
paraître trop spécifique, il n’en reste pas moins que l’idée est ici suggérée que les organisations
étatiques de nombreux pays sont relativement inefficientes, non pas à cause de la nature de la
propriété, mais plutôt à cause d’un déficit en gouvernance, résultant notamment de la confusion
dans les objectifs et les politiques à mener de la part du propriétaire.
Dimensions-Clés de la Gouvernance dans le Secteur Public
En terme de gouvernance, dès que l’on s’intéresse plus particulièrement à des entreprises
du secteur public, aux diverses structures hybrides ainsi qu’aux organismes à but non lucratif, on
peut voir émerger au moins quatre facteurs importants, basées sur les théories de l’approche
contractuelle (droits de propriété, agence et coûts de transaction) et l’approche institutionnelle
99
(recherche de légitimité, accès aux ressources) : la propriété, le contrôle que l’on peut aussi associer
au degré de concurrence/régulation auquel l’organisation fait face dans son environnement, les
objectifs de l’organisation, et le type de financement ou plus généralement la provenance des
ressources. Pour illustrer notre propos, dans la figure 1 ci-dessous, nous avons choisi deux
dimensions, le degré de régulation/contrôle et le type de propriété dans un continuum. On voit bien
apparaître de nombreuses combinaisons possibles, menant à divers degrés d’hybridations.
Figure 1 : Public Vs Privé – 2 Dimensions-clés
Privé pur
Entreprise privée régulée
P
r
o
p
r
i
é
t
é
Entreprise privée dans un
environnement concurrentiel
Contrôle/Régulation
Contrôle/Régulation
pur
Concurrence pure
Entreprise
d’État
comme monopole
Société d’État commerciale
dans
un
environnement
concurrentiel
Public pur
Le tableau 1 ci-dessous reprend de manière synthétique trois dimensions énoncées pour
différents types d’organisations. Ainsi, pour les organisations qui relèvent purement du secteur
public, l’objectif est souvent multiple, voire divergent (Aharoni, 1986), l’État étant propriétaire et
détenteur des ressources, alors que dans le cas une organisation hybride comme une entreprise
commerciale détenue par l’État (par exemple la Société des Alcools du Québec), si l’État est
l’unique « actionnaire », le financement et la provenance des ressources en général est assurée par
le privé (marché), ce qui indique des objectifs organisationnels plus clairs (profit, rente versée à
l’État, disponibilité du produit aux citoyens) mais qui peuvent tout de même être variables et
fluctuer dans le temps.
100
Tableau 1 : Les 3 dimensions selon le type d’organisation
PUBLIC
PRIVÉ
HYBRIDE
NON
LUCRATIF
OBJECTIF
Multiple,
Variable,
Divergent
(Collectivité)
Clair
(actionnaires)
Actionnaires
(État)
Variable
Fluctuant
Membres,
Société
PROPRIÉTÉ
État
Privée
Peut être Mixte
Privée
RESSOURCES
État
Marché
Mixte
Membres, État
L’Apport des Théories Institutionnelles de la Gouvernance au cas du Secteur Public
Nous allons voir de manière succincte comment les perspectives des théories
institutionnelles, droits de propriété, de la théorie des coûts de transaction et de l’agence peuvent
être ajustées pour faire sens dans le contexte particulier des organisations du secteur public et
rendre compte des enjeux qui les concernent.
Théorie institutionnelle
La dynamique qui prévaut dans le secteur public de nombreux pays (réduction des
effectifs, recherche de manières d’augmenter la productivité, innovations organisationnelles,
réingénierie de l’État) fait que les organisations du secteur subissent des pressions normatives et
cognitives. En tant qu’acteurs du champ, elles doivent impérativement rentrer dans cette
dynamique pour maintenir ou accroître leur légitimité vis-à-vis de l’État (politique) et de la société
dans son ensemble (sociale), s’assurer d’obtenir les ressources et l’autonomie nécessaires, et
finalement survivre. Il s’ensuit, selon les termes de DiMaggio et Powell (1983, 1991) des
comportements isomorphiques, à la fois de nature normative et mimétique, puisque les
organisations publiques qui ont une forte légitimité politique et sociale sont le modèle à suivre.
Droits de propriété
La théorie des “droits de propriété” (Coase, 1939; Alchian et Demsetz, 1972) affirme que
ces derniers sont une limite à l’autonomie des acteurs. Ils sont aussi, subjectifs, exclusifs et
cessibles (marché). Comment appliquer cela dans un secteur public où par définition les droits de
propriété n’existent pas, les organisations faisant partie du bien collectif? Ainsi, les dirigeants des
organisations du secteur public sont peu enclins à prendre des risques car ils ne peuvent ‘jouir’ de
leurs résultats. Doit-on alors supposer que les dirigeants qui obtiennent de bons résultats le font de
manière complètement désintéressée? On peut aussi tenter d’adapter la théorie au contexte du
secteur public (et à but non lucratif aussi d’ailleurs) de la manière suivante. On peut considérer que
les managers du secteur public ont ‘intérêt’ à créer de la valeur et à innover dans leur organisation
car, par leurs réalisations et leurs initiatives, ils acquièrent de facto un droit sur la valorisation de ce
résultat. Les notions de prestige, de notoriété et d’expérience acquise peuvent ici être invoquées
101
pour élargir la théorie. Ces ‘récompenses’ individuelles encouragent donc les gestionnaires publics
à expérimenter, car ils vont pouvoir en disposer et même éventuellement les monnayer
(augmentation de la mobilité) sur le marché du travail.
Théorie de l’agence
Le problème d’agence ((Eisenhardt, 1989; Jensen et Meckling, 1976) existe entre un (ou
plusieurs) principal et un agent lorsqu’il y a une divergence d’intérêt entre les deux parties et qu’un
contrat complet ne peut être écrit du fait de l’asymétrie de l’information. Le contrat entre
propriétaire et managers donne ainsi une grande discrétion aux managers. La théorie de l’agence
identifie trois coûts liés à la relation d’agence : les coûts de surveillance (Monitoring), d’obligation
(Bonding) et les pertes résiduelles (Residual Losses). Dans le contexte de gestionnaires du secteur
public, nous avons vu que principal ne peut être clairement identifié. Ces dernières années, la
transparence accrue de la gestion des organismes d’État liée aux développements des technologies
de l’information ont entraîné une baisse significative des coûts de surveillance. Par ailleurs, pour
les agents du secteur public, on note une diminution notable des coûts d’obligation qu’ils
supportent vis-à-vis de leur employeur. Enfin, la remise en cause systématique de l’emploi garanti
pour les employés des nouvelles structures issues du secteur public a pour conséquence de réduire
de manière significative les pertes résiduelles.
Tableau 2 : Approches théoriques institutionnelles adaptée au contexte du secteur
public
PUBLIC
PRIVÉ
Droits de Propriété
Valorisation des résultats,
Appropriation du Prestige,
Valeur marchande
Propriété exclusive et cessible
Coûts de
Transaction
Coûts de coopération Réduction
des coûts (Objectif Politiciens)
Autonomie et Impartition
Rationalité limitée et
Opportunisme
Agence
Réduction des coûts
(surveillance, obligation et
pertes résiduelles)
Surveillance, Incitatifs,
Protection légale
Pression institutionnelle :
Politique (État)
et social (Société)
Encouragement fort à
expérimenter et innover
Pression institutionnelle :
Champ organisationnel
Stratégie des acteurs
contrainte par
l’environnement
Théorie
Institutionnelle
Coûts de transaction
L’Économie des Coûts de Transaction reconnaît le marché et la firme comme deux formes
alternatives essentielles de gouvernance de la production et des échanges (Williamson, 1979, 1996)
102
et les incitatifs du marché et le contrôle managérial comme les deux formes de contrat (Coase,
1937; Alchian and Demsetz, 1972). Comme nous l’avons vu par ailleurs dans la partie 2, cette
approche est basée sur la transaction comme unité d’analyse, et sur les hypothèses de rationalité
limitée des acteurs et d’opportunisme. La structure de gouvernance est sensée s’aligner en
économisant les coûts de transaction. Dans le cadre du secteur public, les structures
bureaucratiques sont de plus en plus remises en cause. Une priorité des politiciens ces dernières
années a été la réduction des coûts par tous les moyens, la création d’agence plus petites et
relativement autonomes, le recours à l’impartition et l’encouragement du partenariat public/privé
ou public/organisme-à-but-non-lucratif, ce qui est en accord avec les exigences d’économies de
coûts dictés par la théorie des coûts de transaction. Puisque les dirigeants du secteur public sont
encouragés à faire preuve d’innovation organisationnelle, tous ces développements vont dans le
sens d’une plus grande action managériale, ce qui augmente sensiblement leurs possibilités
d’initiatives et leur marge de ‘discrétion’.
Finalement, toutes ces approches adaptées ont en commun l’idée que pour les gestionnaires
du secteur public une augmentation potentielle de leur marge de manœuvre, de leur espace
décisionnel et une incitation à expérimenter et à contourner les « rigidités du système ».
Discussion et Conclusion
Comme nous l’avons vu, le concept de gouvernance rassemble plusieurs concepts, idées et
réalités, selon les niveaux d’analyse, les époques, perspectives, le type d’organisation, les contextes
et parfois les auteurs. Parler alors d’une seule « théorie » de la gouvernance qui tiendrait dans un
paradigme intégrateur parait bien dérisoire. L’étude approfondie et la recherche sur les
organisations au contexte spécifique comme les entreprises du secteur public ou les organismes à
but non lucratif est d’un grand intérêt, car ces formes hybrides et complexes montrent les limites
inhérentes aux modèles théoriques les plus répandus de la gouvernance et sont donc une occasion
d’élargir, d’adapter et de tester de nouvelles approches. Au vu des divers mécanismes internes,
enjeux externes, questionnements qui regroupent et définissent la notion de gouvernance, une
approche multi-théorique et multi-niveaux parait être la plus appropriée. Il s’agit, en s’appuyant sur
les théories de base invoquées en management stratégique (théories institutionnelles notamment)
de développer un cadre de référence qui soit suffisamment général pour mériter le qualificatif de
théorique, tout en étant suffisamment précis pour coller aux réalités et aux spécificités des
organisations. A partir de là, on pourra s’aventurer à suggérer des propositions en terme de
management stratégique, ce qui nous ramène ensuite à la possibilité de tester des hypothèses sur le
terrain du système de gouvernance.
La théorie des ressources et ses corollaires (Barney, 1991, 2001; Eisenhardt et Martin,
2000; Teece et al., 1997) permettent d’entrevoir la gouvernance comme une capacité dynamique
source de compétences distinctive pour les organisations relevant de l’État. Mieux comprendre la
nature et la dynamique de la gouvernance des entreprises d’État, surtout si elle sont en situation de
relative autonomie (entreprises commerciales, régies), et comment cette gouvernance détermine
leur performance devrait intéresser autant les chercheurs en management stratégique que les
gestionnaires. Les ressources et capacités spécifiques de la firme mises en avant par l’approche des
ressources (Barney, 1991) peuvent aussi être combinées avec les contraintes formelles et
informelles (générées par un environnement institutionnel donné) auxquelles font face les acteurs
qui prennent des décisions stratégiques (Oliver, 1997; Scott, 2001). Cela permet de donner un
éclairage pertinent à la question du choix stratégique, particulièrement si l’on s’intéresse aux
questions stratégique et de gouvernance dans les contextes autres que ceux des économies de pays
développés. Le rôle du conseil d’administration, comme mécanisme représentatif de la structure de
gouvernance semble un sujet d’étude important, dans la mesure où il est à véritablement à la
frontière entre l’organisation et les forces de l’environnement, là ou le ‘phénomène’ devient
103
intéressant. A ce titre, la complexité de son fonctionnement, ses rôles multiples doivent être mis
sous la lumière de divers approches théoriques, en allant au-delà des classiques de la théorie de
l’agence, de la théorie des parties-prenantes ou de la dépendance des ressources. L’approche des
ressources-compétences-capacités parait être prometteuse, surtout si elle est combinée avec
d’autres perspectives comme la théorie institutionnelle en sociologie et notamment l’idée de
légitimité comme un capital que les organisations peuvent gérer et développer.
Une autre voie qui parait aussi prometteuse, que ce soit pour les chercheurs en management
stratégique ou pour les praticiens est celle de la relation entre modes de gouvernance et stratégies
d’innovation des organisations. Certains pourraient notamment explorer l’aspect contextuel de la
gouvernance en fonction du système d’innovation mis en place par l’entreprise ou imposé par
l’environnement institutionnel, et en prenant un cadre dynamique, intégrer plusieurs facteurs
comme le temps (facteur essentiel dans le processus d’innovation), le degré de dynamisme de
l’environnement (modéré vs high velocity) ou encore la notion récente de ‘jeux d’innovations’
(Miller et Floricel, 2002) qui tente de mieux prendre en compte les enjeux de la création de valeur.
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ASAC 2005
Toronto, Ontario
A.C. Martinet
Professeur des Universités
[email protected]
M.A. Payaud
Maître de Conférences
[email protected]
EURISTIK (IAE – Univ. Lyon3)
15 quai Claude Bernard
69007 Lyon
FRANCE
ENTREPRISE DURABLE ET RESPONSABLE :
MODÉLISATION DE LA STRATÉGIE ET PRINCIPES DE GOUVERNANCE
La communication s’inscrit dans la nécessaire réarticulation de 3 champs de
recherche -le gouvernement d'entreprise, la responsabilité sociale et le
management stratégique- dès lors que l'on s'intéresse au caractère durable du
développement de l'entreprise ("sustainable development"). Dans une telle
optique, la politique générale cherche en permanence les voies et moyens
susceptibles d'éviter les risques de ruptures tant financières -à l'encontre des
trop nombreuses "aventures" récentes- qu’économiques, sociales ou
écologiques. Dans des environnements turbulents, la responsabilisation des
dirigeants et des managers constitue une condition à la construction d’une
entreprise durable.
Middle managers, compétence, plan, apprentissage, savoirs, relations, variation.
La construction d'une entreprise durable suppose la mise en cohérence de stratégies
locales fines, contextualisées, congruentes avec les territoires dans lesquelles elles s'inscrivent
d'une part, d'une stratégie globale ("corporate strategy") soucieuse de la création de valeurs
partenariales ("stakeholders theory") et d'une gouvernance qui incite les dirigeants à celle-ci,
d'autre part.
La communication présente dans un premier temps un modèle synthétique et heuristique
de la formation des stratégies élaboré à partir de recherches cliniques dans de grandes
entreprises de services déployées territorialement (EDF, GDF, Adecco…) qui sont
particulièrement illustratives de la double nécessité de stratégies globales très intégrées et
"mondialisées" et de stratégies différenciées, ancrées durablement dans les territoires avec
lesquels elles doivent coopérer économiquement, socialement et écologiquement.
Ce modèle voit l'entreprise comme entité écologique guidée intentionnellement par le
noyau stratégique et enrichi par l'organisation, il s'inscrit dans une "systémique
ago-antagoniste" où il s'agit de réguler des processus en tension constante : plan/apprentissage,
délibéré/émergent, exploration/exploitation, innovation/continuité… Il identifie les dispositifs,
les variables d'action et les conditions pour que se concrétise un double mouvement :
« l'écologisation » de stratégies plus congruentes avec leur milieu et la « stratégisation » de
l'organisation par le rôle de stratège conféré aux « middle managers ».
Dans un second temps, la communication montre comment cette modélisation guide la
recherche d'une responsabilisation accrue des managers : les cadres intermédiaires d'une part,
appelés à concrétiser et à déployer territorialement les impératifs du développement durable,
c'est-à-dire co-construire des connaissances et des relations avec les parties prenantes locales ;
les hauts dirigeants d'autre part, incités, rémunérés et sanctionnés selon la contribution
effective de leurs actions à la triple performance économique, sociale et écologique de
107
l'entreprise ainsi qu'à l'évitement des risques et des dangers selon les deux principes de
précaution et de responsabilité.
La communication débouche, en conclusion, sur la réforme des cadres institutionnels et
des pratiques professionnelles que peut inspirer la recherche ainsi renouvelée sur la
gouvernance : accroissement du rôle des différentes parties prenantes, renforcement des règles
de prudence, exigences à l'égard des analystes financiers, des agences de notation et des
cabinets d'audit, réforme des règles comptables, refonte du fonctionnement des conseils
d'administration… dont on a vu, a contrario, au cours de la dernière décennie, l'influence sur
l'horizon, la teneur et la robustesse des stratégies de très nombreux groupes de par le monde.
1. Une modélisation de la formation des stratégies de la grande entreprise
D’une manière générale, la relation complexe des éléments constitutifs de la stratégie
présuppose une réflexion a priori, anticipée, afin que l’entreprise soit capable d’une action
dans la durée et non pas d’une soumission aux évènements. Dans le cadre de l’entreprise de
services de réseau, un autre enjeu apparaît, celui d’intégrer les émergences locales. Une
description sommaire – un siège administratif et des unités dispersées sur le territoire—
appellent une réflexion, illustrée dans le schéma page 4 : ce type d’entreprise nécessite
d’articuler, de faire dialoguer des systèmes ago-antagonistes (Bernard-Weil, 1988),
fondamentaux pour faire face aux injonctions paradoxales liées non seulement à son activité
(les services) mais aussi à la répartition de ses infrastructures. Si une stratégie et une ligne
directrice sont identifiées (planning) pour une durabilité de l’action et du sens de l’action, il
nécessite également que les subtilités et singularités des territoires soient prises en
considération ainsi que leurs dimensions sociologiques, écologiques et économiques
(learning).
Effectivement, l’intensité d’investissement et le système d’offre de l’entreprise de services
de réseau justifient une stratégie délibérée planifiée. En effet, pour s’implanter, l’entreprise de
services de réseau doit pouvoir disposer d’un assez grand nombre d’unités qui se traduit par
des coûts fixes élevés. Le retour sur investissement ne pouvant pas se parier sur une absorption
aléatoire des évènements, le chemin à prendre, la destination à atteindre et les moyens pour y
parvenir doivent être explicités et diffusées à l’ensemble de l’organisation. Egalement, le
consommateur ou le client souhaite pouvoir (re)trouver le service d’une enseigne identique
quel que soit l’endroit où il se manifeste. Dès lors, l’entreprise homogénéise l’offre, la manière
de la construire, de la délivrer, autrement dit son « système d’offre » et ce, afin qu’une qualité
de service soit irréprochable sur l’ensemble du territoire. Cette homogénéisation ou
« organisation systématique et cohérente » (Eiglier et Langeard, 1987) est également le fruit
d’une délibération, laquelle constitue la stratégie globale et les compétences globales.
En même temps, l’entreprise de services de réseau, de par sa dispersion géographique est
confrontée à des marchés multiples et mouvants. La diversité, la variété et la dynamique de la
demande requièrent de la part de l’entreprise de l’ambition, une capacité de perception,
d’adaptation, de cohésion et de cohérence. Au-delà et en plus des lignes directrices planifiées
et délibérées, les unités territoriales doivent être capables de capter, d’absorber les émergences
de leur site, tout en les fondant aux exigences requises par le système d’offre. L’adaptation des
pratiques de l’entreprise aux émergences nées localement peut déboucher sur des nouvelles
offres, des nouvelles pratiques, lesquelles sont susceptibles d’être étendues soit à d’autres
territoires, soit à l’ensemble de l’entreprise, soit l’un après l’autre suivant un processus
évolutionniste.
Ainsi, il apparaît des logiques le plus souvent opposées mais que nous pensons
compatibles et plus encore, qu’il est nécessaire d’articuler et de faire coexister dès lors que
l’entreprise se veut robuste, responsable et durable. L’ago-antagonisme planning/learning
sous-entend à la fois un processus descendant et un processus ascendant. Le premier signifie
qu’une équipe managériale inspirée des expériences précédentes, d’une connaissance
sectorielle, structurelle et conjoncturelle délibère de nouvelles stratégies (suivant une logique
téléo) lesquelles favorisent une absorption de l’incertitude macro (Martinet et Payaud, 2004).
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Ces nouvelles stratégies globales sont alors adaptées localement par les middle managers
tenus responsables de l’adéquation de leur unité au système global.
Le second processus, ascendant, traduit le fait que les équipes déployées sur le territoire et
menées par les middle managers en adaptant localement les stratégies globales absorbent
l’incertitude micro lors de négociation et de co-création (« single-loop » d’Argyris et Schön,
1978), elles participent aux stratégies globales lorsque leurs contributions locales sont portées
à un niveau organisationnel (« double loop » d’Argyris et Schön, 1978). Cet apprentissage suit
les phases du processus évolutionniste : variation, sélection, rétention (Nelson et Winter, 1982).
Les équipes en développant un système de relations et de savoirs avec les parties prenantes
locales se mettent en situation de faire émerger des idées. Une zone d’inspiration, désignée
zone de « variation » par les évolutionnistes, où se construisent problématique et ébauche de
réponses. Se créent ce que Nonaka et alii (2000) appellent des « Ba » : des lieux partagés de
relations émergentes, transactionnelles et interactionnelles où peuvent se déployer des
processus d’apprentissage situé. A la connaissance des stratégies, compétences et offres
globales, s’ajoute une connaissance située et contextualisée du marché et des acteurs qui le
composent. La connaissance construite et produite est ensuite soumise et évaluée pour être
retenue ou rejetée dans les phases respectives de sélection et de rétention.
Le système ago-antagoniste planning/learning fait résonner deux autres antagonismes, à
savoir les logiques téléo/écolo et la dialectique continuité/changement. Telle que nous l’avons
décrite, l’entreprise de services de réseau est vue comme un système d’entités
interdépendantes qui créent, partagent et appliquent des connaissances (écolo) pour poursuivre
les objectifs stratégiques et économiques (téléo) (Lovas et Ghoshal, 2000). Une telle
conception permet d’abandonner la distinction entre la formulation de la stratégie et sa mise en
œuvre, pour préférer une formation de la stratégie en temps et lieux qui concilie la continuité et
le changement.
Des systèmes ago-antagonistes fondamentaux planning/learning, téléo/écolo,
continuité/changement, découlent des ago-antagonismes dits « dérivés » qui donnent corps au
référentiel de l’entreprise durable (Martinet, 2002c). Celle-ci privilégie non pas les seuls
résultats économiques, mais son efficacité passe par sa responsabilité et responsabilisation, et
la performance économique ne saurait être sans les performances sociale et écologique.
Cette nouvelle définition de l’entreprise et de sa performance passe par une nouvelle
stratégisation : une formation (≠ de la dichotomie formulation/mise en œuvre) de la stratégie,
laquelle autorise les dialectiques délibéré/émergent, global/local, savoirs/relations,
facteurs/acteurs, technico-économique/socio-politique. Chaque pôle n’inhibe pas l’autre, mais
entretient une relation structurante. Une coexistence des pôles et des paradoxes permet ainsi
l’intégration des subtilités des situations et donc de leur complexité.
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Logique
Téléo
Evolution des
Incertitude
Stratégies Globales
Rétention
TOP MANAGEMENT
=
Absorption
Macro
VIRTUALISATION
OPEN LEARNING / STRAT THINKING
Nouvelles
Stratégies
Compétences
Globales
PLANNING
Sélection
MIDDLE
MANAGEMENT
Adaptation
Locale
des
Stratégies
Globales
Contributions
Locales
aux
Stratégies
Globales
ACTUALISATION
Ba2
LEARNING
Double
Compétences Indiv.
Locales
Ba1
Absorption d’incertitude micro
+
Savoirs
Single Loop
PARTIES PRENANTES
LOCALES
Logique
Ecolo
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Relations
Négociation - stabilisation
ACTION
LEARNING
Co-création
2. Responsabilisation des managers et gouvernance
Quatre principes pour une entreprise responsable.
La modélisation générale qui précède constitue un cadre conceptuel susceptible de guider une
grande variété d’actions et de décisions, toutes plus ou moins contributrices à la construction de
l’entreprise responsable. Il peut permettre de mieux piloter des processus responsabilisants tant au
niveau des hauts dirigeants que des managers intermédiaires. Reformulons les principes
fondamentaux qui fondent leur cohérence et, pourtant, font que l’entreprise responsable augmente
ses chances d’être aussi une entreprise durable.
P1 : Le Principe Ethique
La revendication d’a-moralité de la gestion n’est plus guère recevable tant elle a pu, notamment
ces dernières années, servir de paravent à l’immoralité de nombreuses pratiques des affaires. Au
plan de la recherche, elle a surtout favorisé un scientisme positivisme éloignant la discipline de sa
raison d’être praxéologique contribuant à la production non questionnée d’un « ordre
gestionnaire ».
L’éthique ne peut être mise en marge ni des pratiques, ni de la recherche en gestion. Elle ne
peut, a contrario, être seulement au service d’une critique globale et radicale du « système
capitaliste ». Elle doit leur être pleinement intégrée tant elle est critique pour le devenir des
sociétés libres.
P2 : Le Principe Politique
Reconnaître la dimension politique du management, créer les conditions de son plein exercice
sont le corollaire de fait du pouvoir désormais détenu par les grandes entreprises non seulement
dans la réalisation de leurs missions économiques mais dans la structuration du monde.
Le processus de fixation des buts, les indicateurs d’évaluation et de mesure des performances,
l’intégration ou l’exclusion de telle ou telle dimension ou partie prenante, la récompense ou la
sanction des responsabilités ou des irresponsabilités managériales… sont tellement déterminants
qu’ils ne peuvent rester impensés ou traités de façon purement technique. Si l’on a pu constater la
diffusion massive et fulgurante de « l’ebitda »1 comme indicateur privilégié de performance de
l’entreprise et comme assiette des dirigeants, a-t-on étudié la façon dont il a façonné nombre de
décisions stratégiques ?
La prise en compte explicite du politique dans et alentour de l’entreprise conduit à interroger le
style politique ou, le mode de gouvernement pratiqués ; dans chaque cas sous examen : Quelles
doses de commandement, de négociation ou d’animation ? Quels équilibrages entre l’imposition
ou l’influence ?...
P3 : Le Principe Organisationnel
La grande entreprise actuelle ne peut plus s’en remettre à la seule hiérarchie, à la délibération
au sommet pas plus qu’elle ne peut se satisfaire d’un pilotage à vue et d’un court-termisme sans
cesse remis en cause.
Une structuration souple est nécessaire propice au développement de l’organisant
(« organizing ») plutôt qu’à la cristallisation de l’organisation. Plus la ressource critique devient la
connaissance, plus la politique trouve sa pleine expression, plus l’autonomie mais aussi la
coordination des acteurs s’avèrent déterminants, plus la structuration fonctionnelle et le pilotage
des processus doivent favoriser les apprentissages dynamiques.
P4 : Le Principe Systémique
1
Ebitda : earnings before interest, taxes, depreciation and amortization.
111
Il s’agit ici d’un principe de bouclage de nature évidemment épistémologique. La conviction
affichée est que la responsabilité de l’entreprise se construit dans la durée et par une multitude
d’inter-actions.
Dès lors, des effets de levier doivent être recherchés ainsi que la mise en cohérence de spirales
de développement dont a pu montrer le caractère généralement ago-antagoniste. La recherche
permanente de la composition de l’autonomie et de l’interdépendance marque, au premier chef, ce
principe systémique.
Figure 2 : Quatre principes pour une entreprise responsable
Principe Ethique
Ethique
Politique
Principe Organisationnel
Principe Politique
Style
Politique
Organizing >
Organization
Autonomie /
Interdépendance
Principe Systémique
Des middle managers responsables
Selon la perspective relationnelle de Dyer et Singh (1998), une entreprise s’assure un avantage
concurrentiel soutenable lorsqu’elle développe des relations avec d’autres acteurs. Dyer et Singh
(1998) définissent la rente relationnelle comme un bénéfice substantiel produit conjointement lors
d’un échange et qui ne peut pas être généré par l’une ou l’autre société seule. Elle résulte de
contributions idiosyncrasiques communes relevant d’une alliance spécifique. Les auteurs
considèrent d’ailleurs que les membres de l’échange, de la relation, constituent la source la plus
importante des nouvelles idées et d’information.
Ainsi, si la relation dégage une rente, l’entreprise a tout intérêt à développer et maintenir un
tissu de relations au niveau local, qui contribuent à la performance de l’entreprise. Une personne à
la frontière des mondes internes et externes, un « gatekeepers », intervient : le « middle manager ».
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Les middle managers, alors représentants de l’entreprise, de ses ressources et objectifs, doivent les
concilier avec les logiques des territoires, leurs ressources et objectifs. Les middle managers se
trouvent impliqués dans des relations complexes entre des organisations diverses qui, tout en
poursuivant leurs buts dans des logiques qui leur sont propres, cherchent à construire un intérêt
commun, et réciproque. Dès lors, le middle manager repère et participe à la construction du projet
commun, et est en situation d’identifier les acteurs parties prenantes, pour ensemble, construire
une responsabilité sociale partenariale et non pas de la seule entreprise.
Des précédents travaux (Payaud, 2004) se sont attachés à la problématique des rôles, fonctions
et responsabilités du middle manager dans la formation des stratégies de la grande entreprise de
services de réseau. Nous avons vu que si la structure de l’entreprise l’autorisait et l’encourageait,
les relations inter- et intra-organisationnelles du middle manager lui procuraient une position
favorable pour participer à la co-production de l’offre, à la co-construction des compétences et
donc à la co-évolution de la stratégie. Nos recherches ont alors montré que ses relations inter- et
intra-organisationnelles augmentaient ses savoirs micro et macroscopiques et ainsi, alimentaient
les modèles mentaux (individuels et organisationnels) nécessaires à des processus d’apprentissage
complet. De fait, les relations inter et intra et les savoirs micro et macro le placent comme un
acteur au centre du processus évolutionniste (Nelson et Winter, 1982) : source de variation,
déterminant de la sélection et catalyseur de rétention.
Dès lors, le réseau, comme le territoire, en établissant des relations dans la durée assurent une
évolution de leurs organisations et une progression, un enrichissement de la cause commune. Les
actions économiques et comportements sociologiques des uns sont enchâssés dans ceux des autres.
La notion d’ « embededness » de Granovetter, le plus souvent traduite par « encastrement », est
décisive dès lors que l’on veut lier les relations sociales aux faits économiques. En effet, les
échanges inter-organisationnels développés par le middle manager mobilisent et participent à la
formation de réseaux sociaux, sources de variation. La construction de réseaux sociaux passe par
les échanges inter-organisationnels. Les middle managers sont en position théorique de reconnaître,
d’identifier les signaux susceptibles de conduire à des opportunités ou des menaces de
l’environnement qui peuvent influencer soit la soutenabilité ou la désuétude des compétences
actuelles, soit de révéler des futures compétences pour lesquelles il conviendrait d'investir. Les
middle managers doivent être encouragés à développer et entretenir des relations avec l’ensemble
des partenaires de leur environnement local, afin de pouvoir capter ces signaux.
Des dirigeants, stratèges et gouvernants responsables
Une demande de responsabilisation accrue des middle managers ainsi devenus « stratèges »
ordinaires serait évidemment scandaleuse et obscène si elle n’était orientée, couverte et amplifiée
par une (re)responsabilisation forte, incitée et sanctionnée des managers supérieurs et des hauts
dirigeants.
Cette exigence implique « ipso facto » l’interdépendance entre la stratégie et le gouvernement
d’entreprise, tant au plan des pratiques que des champs théoriques. En effet, et comme l’ont très
bien clarifié Pérez (2002) et le collectif dirigé par Igalens (2004), les trois interrogations
essentielles – de quoi est-on responsable ? Qui est responsable ? Devant qui ? – se voient apporter
des réponses, implicites ou explicites, inconscientes ou conscientes, lors de chaque décision ou
acte managériaux. La qualité de ces réponses est évidemment façonnée par le « modèle » et la
doctrine auxquels se réfère, de façon plus ou moins, le décideur.
Nous avions stylisé et opposé en les tendant au maximum, les deux référentiels fondamentaux
qui peuvent être dégagés de la littérature économique et gestionnaire, que nous avons nommés
« financier » et « durable » (Martinet, 2002a et 2002b). Pour le présent propos, ils se superposent
bien aux modèles de la dissociation et de l’intégration retenus par Pérez. La place manque pour les
détailler ici. Relevons seulement que le référentiel « durable » se nourrit de l’approche
« stakeholders » (Freeman, 1984 ; Martinet, 1984), de la création de valeurs partenariales
(Charreaux et Desbrières, 1998), d’une conception managériale dialogique acteurs/facteurs
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(Martinet, 1984) ou relations/savoirs (Hatchuel, 2000), d’une vision de l’entreprise en « société »
(Perroux, 1973) ou « encastrée » (Granovetter, 2000) tendue par un projet englobant (« affectio
societatis ») bien au-delà du nœud de contrats, qui se forme de façon organique dans la durée. Ce
référentiel donne sens à la notion de responsabilité globale ou élargie où les dirigeants sont
récompensés et sanctionnés sur l’atteinte, lors d’une durée suffisante, d’objectifs économiques,
sociaux et écologiques et non sur la seule maximisation de la valeur actionnariale lors de jeux
courts et reconduits de trois mois en trois mois.
En matière stratégique, ce référentiel conduit à réexaminer, de façon critique, les injonctions
du référentiel financier qui ont eu tendance à s’imposer au cours des années 90. c’est ainsi que le
triptyque « métier unique, rachat de ses propres actions, rentabilité permanente de 15% » et ses
implications directes – suspicion de l’autofinancement et de l’enracinement des dirigeants – doit
donner lieu à des diagnostics et des recommandations beaucoup plus contingentes ; c’est
précisément l’objet de la stratégie bien comprise que de moduler, selon les espaces x temps, les
degré de diversification, de dilution, de rentabilité, d’autofinancement et d’enracinement qu’il est
souhaitable de conduire dans une optique de développement soutenable dans la durée.
La stratégie redécouvre alors les principes fondamentaux d’autonomie – dans ses différentes
dimensions et, notamment, à l’égard des marchés financiers – de responsabilité (Jonas, 1990) et de
précautions (Godard, 2002) pourvu qu’on en fasse pas une lecture intégriste ou radicale mais
raisonnable.
Les décisions stratégiques qui font la vie des sociétés cotées ne sont intelligibles qu’à
condition de réarticuler le contexte stratégique, les critères de gouvernement et les menées
personnelles des hauts dirigeants. En ce sens, elles contiennent inexorablement une dimension
morale (ou a-morale ou immorale) et politique puisqu’il s’agit toujours d’arbitrages et de
négociations entre les intérêts divergents.
La réduction de la raison à la rationalité de l’homo oeconomicus dont les vertus
épistémologiques sont bien connues – simplicité, lisibilité externe, standardisation, calculabilité,
abstraction mimétisme – détruit l’objet même et la raison d’être du gouvernement et de la stratégie
d’entreprise (Williamson, 1991) en même temps qu’elle évacue la dimension politique (Revault
d’Allones, 1999).
Sauf à définir cette dernière comme le serviteur exclusif de la maximisation de l’utilité
économique de l’acteur, quel qu’il soit : consommateur, actionnaire, salarié, citoyen, riverain…
dont les interdépendances sont nulles ou, en totalité, réglées par des marchés. Même la finance
« bien comprise » – c’est-à-dire une dialogique effective entre les deux référentiels retenus – passe
obligatoirement par l’acceptation des rationalités multiples, c'est-à-dire de la raison. N’est-il pas
révélateur qu’un économiste peu suspect d’antipathie à l’égard de la finance, intitule justement son
Xème commandement : « Que tout explose, tu empêcheras » et de conclure : « [l’économie
financière] implique plus de conscience et de clairvoyance de chacun, plus de contrôle et de temps
passé pour en lire les résultats, des sanctions plus nettes pour les mauvaises pratiques, les abus et
les mensonges (…). Cette économie financière qui s’étend, avec ses nouvelles responsabilités et
ses risques, se doit d’intégrer de nouveaux objectifs. L’entreprise peut ainsi être éthique en ne
faisant pas travailler des prisonniers ou en n’intervenant pas dans des pays à moralité douteuse ; ou
responsable, en s’engageant sur des achats de qualité, en prenant en compte l’environnement… »
(Betbèze, 2003, page 294).
Reconnaissance implicite de l’absolue nécessité de la stratégie et de son épistémologie –
complexité, autonomie, irréductibilité au calcul, contextualisation, singularité...—.
CONCLUSION
Le corpus de la stratégie d’entreprise ne s’est explicitement développé et institutionnalisé
qu’à partir des années 60 avec les travaux séminaux de Chandler, Andrews et Ansoff de nature
historique et praxéologique. Sa scientifisation s’est traduite par un fractionnement et des
disjonctions glissantes. Ainsi, la disjonction initiale entre stratégie et management a été largement
114
comblée à partir de 1973, année de naissance académique du management stratégique.
A contrario, la liaison politique-stratégie, centre de gravité du corpus à ses débuts, s’est
affaiblie jusqu’à dissocier les champs de réflexion de la stratégie et du gouvernement d’entreprise.
Dissociation aujourd’hui intenable pour les deux champs. Pour les sociétés et les groupes cotés, les
choix stratégiques deviennent incompréhensibles si l’on n’intègre pas les conditions de
gouvernement – disons pour simplifier avec Gomez (2002), la latitude discrétionnaire des
dirigeants et le mécanisme d’alignement « ex post » par le marché ou « ex ante » par la structure,
la composition et le fonctionnement du conseil d’administration—. Symétriquement, et sauf à
adhérer à une conception orthodoxe de la théorie de l’agence où le gouvernement d’entreprise est
le résultat technique d’une optimisation financière entre les coûts de surveillance et les coûts de
contrôle et le profit que les dirigeants sont incités à produire, toute avancée sur le gouvernement
passe par la prise en compte de formation des stratégies ; ou, dit de façon imaginée, de ce qui se
passe dans la tête et les schémas mentaux des managers comme dans l’organisation.
Nous avons suggéré par ailleurs (Martinet, 2002b) que ces schémas mentaux, comme la
légitimité politique de leur mise en acte, c'est-à-dire dans le langage de Weick le contenu et
l’orientation des « enacting » et « sensemaking », étaient largement façonnés par les institutions et,
plus encore, par les technologies invisibles qu’elles promeuvent. Les systèmes de notation, les
indicateurs de performance, les procédures et les normes jouent aujourd’hui un rôle déterminant.
La phase de capitalisme financier qui prévaut depuis 1990 a imposé une prescription marquée
par cinq caractéristiques : sophistication technique, quantification, vélocité, prescription
oligopolistique et mimétisme autoréférentiel.
On connaît aujourd’hui les effets pervers, les excès, les malhonnêtetés que ces mécanismes ont
favorisés ou, à tout le moins, n’ont pas su endiguer. Dès lors, et si l’on se situes dans un paradigme
organisationnel du gouvernement, de la stratégie et des finances (Charreaux, 1997), on ne peut se
satisfaire de quelques modifications formelles de la composition des conseils d’administration. Si
la séparation des fonctions de président et de directeur général, la présence d’administrateurs
indépendants… sont probablement nécessaires, de telles mesures doivent s’inscrire dans une
re-conception politique de l’entreprise où la participation effectives des parties prenantes, la
négociation sur les voies et moyens du développement, l’accord sur les critères de performance et
d’évaluation… redeviennent premiers.
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ASAC 2005
Porrini
Torronto, Ontario
Patrizia
ARE ALLIANCES A RISKY PROPOSITION? TAKING A CLOSER LOOK AT
ALLIANCES FROM A SYSTEMATIC-RISK PERSPECTIVE
This paper examines whether alliances decrease firms’ systematic risk. Alliances
are popular modes by which firms share resources and capabilities. Alliances can
reduce firms’ risk by decreasing firms’ susceptibility to their environmental
uncertainty, allowing for risk sharing, and allowing for reversibility of
resource-commitments. Thus alliances can limit firms’ exposure to risk as
alliances help firms avoid being locked out of new technologies, and help firms
defend and extend their strategic positions. The study examines 407 alliances
where all partners are public US-based firms and finds that alliances decrease
firms’ systematic risk. Specifically, systematic risk decreases by an average of
17% and 25% for one-year and two-year windows of Beta surrounding alliance
announcements, respectively. Furthermore, different alliance types have different
risk-reduction benefits. These findings have important implications for theory and
practice.
Alliances have become popular forms of exchange relationships by which firms share and develop
resources, capabilities and core competencies (Balakrishnan & Koza, 1993; Kogut, 1988a;
Mowery, Oxley & Silverman, 1996; Teece, 1992). Thus it is not surprising that firms engage in
alliances at increasing rates. Over 20% of the revenue generated from the top 2000 U.S. and
European is generated from alliances (Booz, Allen, & Hamilton, 2003). In fact, 82% of polled
executives believe alliances will be a prime vehicle for future growth (Accenture, 1999).
As alliances have become increasingly popular researchers have examined whether alliances create
value by examining changes in stock prices during short windows surrounding alliance
announcements (Neill, Pfeiffer, and Young-Ybarra, 2001; Anand and Khanna, 2000a; Chan,
Kensinger, Keown and Martin, 1997; Das, Sen and Sengupta, 1998; McConnell and Nantel, 1985).
These studies have shown that share prices react immediately to alliance announcements with most
finding that alliances do create value. However because the window around the alliance
announcement date is usually short the impact of an alliance on value creation appears short-lived.
Although studies have explored immediate stock price movements in response to strategic
decisions, short-term stock price movements do not inform of longer-term risk adjustments in
response to strategic decisions. This study examines whether value created by alliances has a more
enduring impact on firms and their share prices by examining whether alliances decrease firms’
systematic risk.
Alliances can have an enduring impact on firms and firms’ share prices and this can result in a
change in firms’ systematic risk. A firm’s systematic risk is the covariance of the returns of a
security with those of the market, divided by the total variance of the portfolio of stocks that
represent the market portfolio (Markowitz, 1952). A firm’s systematic risk is higher when the
firm’s stock is more volatile and hence riskier than the market portfolio. Hence a firm’s systematic
risk characterizes its relationship with the market over a period of time. When all other factors are
117
held constant, lower systematic risk implies a lower required rate of return, which increases the
value of the firm (Van Horne, 1980: 68). Thus corporate managers can increase the wealth of their
stockholders by pursuing actions that lower firms’ systematic risk.
Alliances can help firms to deal with environmental trends such as the increasing convergence of
high-technology industries, the increasing presence of global competitors, and the speed and cost of
developing new technologies, and environmental uncertainties (Hitt, Hoskisson and Ireland, 2003).
These pressures create uncertainties that require speed, flexibility and innovation for firms to
remain competitive. By enabling firms to share resources and capabilities, alliances can help firms
combat these external pressures. Alliances have the potential to have a more enduring effect on
firms as alliances create the potential for firms to share resources in pursuit of new products,
technologies, and strategies to initiate or adapt to competitive change (Volberda, 1996). Thus
alliances may enable firms to create value for a longer term and can ultimately shape their
systematic risk. This study examines whether alliances create longer-term benefits by examining
changes in firm’s systematic risk.
An investigation of whether alliances decrease firms’ systematic risk contributes to literature on
alliances in several ways. First, as mentioned above previous research on alliances has found that
alliances create value for firms immediately following their announcement. However excess
returns over a short event window are not necessarily indicative of whether alliances affect firms in
the longer-term. Risk is a more permanent attribute of a firm’s stock price behavior whereas returns
measure the immediate impact of the event on the firm’s stock price. Studies in the alliance
literature have found that alliances create learning effects by examining returns, but can alliances
reduce systematic risk? Second, researchers have discussed systematic risk within the context of
corporate strategy and diversification and have argued that managers are not able to influence a
firm’s systematic risk, thus to some extent management theory diverges from financial theory,
which states that only systematic risk matters as unsystematic or firm-specific risk can be
diversified away by investors. By exploring whether alliances can influence firms’ systematic risk
the study contributes to this discussion by investigating whether systematic risk may be managed
by strategic choices such as alliances. Finally, within the literature on diversification there are
discussions of relatedness and their effect on firms’ performance and risk. This study contributes to
this discussion by investigating whether relatedness of alliance partners can lead to differences in
risk reduction. The next section discusses hypotheses about alliances and changes in firms’
systematic risk. Ensuing sections describe methodology and results and the final section draws
conclusions and discusses implications.
THEORY AND HYPOTHESES
Strategic Management and Systematic Risk
The Capital Asset Pricing Model (CAPM) implies that managers should focus on reducing their
firm’s systematic risk (Beta) and not be concerned with unsystematic (firm-specific) risk. One
reason for this is that investors can diversify away unsystematic risk, thus the market will only
reward systematic risk. However, Chatterjee, Lubatkin and Schulze (1999: 556) point out that the
CAPM poses a strong challenge to the field of strategy in that the field of strategy is based on the
assumption that management matters yet management supposedly cannot influence systematic
risk. Chatterjee, Lubatkin, and Schulze (1999) claim that one issue with CAPM is that reducing
systematic risk requires that managers do what they cannot as it requires that managers reduce
investors’ exposure to macroeconomic uncertainties at a cost lower than what it would cost
investors to do so on their own by altering their investment portfolio. The role of managers is to
protect their revenues from market forces in ways that are valuable to investors through strategic
actions. Thus some researchers conclude that the CAPM goes against strategic management theory
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since it implies that managers should focus on that which they cannot influence (Chatterjee,
Lubatkin, and Schulze, 1999; Bettis, 1983).
However, to date researchers have not considered the effect of alliances on firms’ systematic risk.
Alliances are intermediate contracts that are frequently used by firms to limit their exposure to
uncertainties by sharing risks as well as resources with alliance partners (Gommes-Casseres, 2000).
Consequently, alliances may offer a way for managers to reduce systematic risk as managers may
be able to limit firms’ exposure to macroeconomic uncertainties at a lower cost than what investors
can transact on their own. For example, investors aren’t able to form inter-firm alliances on their
own nor can they gain access to or use information and resources that firms can access and use via
alliances. Although investors may form a portfolio of the stocks of most firms in an alliance
network if the firms are public, doing so cannot simulate the value added by inter-firm
relationships. Firms’ alliances can provide risk reduction benefits by providing proprietary access
to new technologies, information, and other firms’ resources. In this regard, alliances may reduce
risk by limiting investors’ exposure to macroeconomic uncertainties at a lower cost than what it
would cost investors to do so on their own by altering their investment portfolio. The next section
discusses how alliances can create value by reducing firms’ systematic risk.
Alliances and Systematic Risk
Researchers have found that alliances can provide many benefits for firms. Alliances allow firms to
learn from each other by providing opportunities whereby firms absorb information, knowledge,
capabilities and skills from partners (Hamel, 1991; Kale, Singh, & Perlmutter, 2000; Khanna,
Gulati, & Nohria, 1998). Alliances also help partners to learn how to manage the collaboration
process and learn how to manage alliances better leading them to build alliance capabilities which
enable firms to access resources from its environment (Amburgey & Dacin, 1996; Arino & de la
Torre, 1998; Doz, 1996; Anand & Khanna, 2000a; Dyer & Singh, 1998; Kale & Singh, 1999;
Lyles, 1988). Exposure to partners’ resources may increase firms’ sensitivity and ability to detect
new opportunities (Cohen & Levinthal, 1990; Lane & Lubatkin, 1998). In all, the benefits of
alliances may enable firms to reduce their risk.
Risk is characterized by the uncertainty related to an outcome. Firms face uncertainty from their
technological, market, and competitive environments (Gommes-Cassares, 2000). Uncertainty and
volatility from firms’ environments can increase firms’ riskiness because firms’ products,
technologies, and core competencies may become uncompetitive or obsolete. To reduce the ratio of
the firms’ covariance with the market to the total variance of the market, alliances must reduce
firms’ susceptibility to environmental changes such as that resulting from economic downturns or
technological obsolescence.
One way that alliances may help firms’ reduce their systematic risk is by providing firms
opportunities to reduce the uncertainty in their immediate environment (Hennart, 1988; Kogut,
1988b). Firms’ access to partners’ skills, capabilities, core competencies, technologies, and
markets not only provide opportunities for learning (Anand & Khanna, 2000a), but have
longer-term benefits that may shape firms’ risk. Alliances give partners the ability to gain tacit
resources such as capabilities, competencies, technologies, and know-how, among many others
(Hamel, 1991; Kale, Singh, & Perlmutter, 2000; Khanna, Gulati, & Nohria, 1998). Furthermore,
alliances allow partners to access information about competitors’ strategic direction or forthcoming
technologies, making firms’ competitive environment less unpredictable (Badaracco, 1991).
Alliances also allow firms to access technologies that firms do not currently have in house thereby
helping firms react more quickly to new innovations (Porter and Fuller, 1986). By providing these
benefits alliances act as a buffer between the firm and the environment. Thus alliances help to
decrease environmental uncertainty by increasing opportunities, increasing resources for dealing
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with environmental threats, and decreasing firms’ susceptibilities to environmental shocks. In this
regard alliances help firms to reduce risk by reducing uncertainties related to competitors’ strategic
directions, forthcoming technologies, and outcomes of strategic investments, actions or decisions.
A second way that alliances may help firms’ reduce their systematic risk is by providing
opportunities for risk sharing. The cooperative nature of alliances allows for risk sharing by
allowing firms to co-develop, co-market or co-fund new projects or innovations. By allowing for
partial commitments alliances allow firms to leave a portion of their resources available for other
investments or projects thereby making firms less susceptible to the repercussions of relying on one
or few major projects. In this regard alliances allow firms to invest a fraction of their net worth
while leaving funds available for additional projects that may become quite crucial to their success.
For example, biotechnology allows for faster development of drugs relative to traditional
pharmaceutical methodologies. This has lead many pharmaceuticals to form alliances with biotech
firms. Although these alliances do not cost much, they offer pharmaceuticals large potential gains
by making pharmaceuticals less susceptible to the threat that biotechnology will emerge as the
primary way to engineer drugs. Similarly, Toyota and GM entered into an alliance to develop
alternative-powered vehicles, which protects each firm’s future competitive position with respect
to this upcoming technology, as well as protects each firm from bearing the total loss of the
technological investment not paying off (Ball, 1999). Thus through alliances firms can benefit from
future gains by securing an investment in a potentially beneficial technology while minimizing
firms’ susceptibilities to repercussions that come with strategic advancement. In this regard,
alliances protect firms’ future positions, allow firms to share losses, and allow firms to invest only
a fraction of their net worth into new projects that may benefit or compromise their future.
A third way that alliances may help firms reduce their systematic risk is by allowing firms to make
incremental and reversible commitments to unfolding strategies. Reversibility is very important for
helping firms avoid being stuck in expensive irreversible commitments that may create additional
risks for the firm in the future. For example, a firm may make an acquisition to acquire needed
technologies. Yet, making an acquisition may lead a firm to pay a sizeable premium, raise external
capital, and create problems associated with integration of the acquired firm (Haspeslaugh and
Jemsion, 1987). Alliances can help firms to secure access to resources or capabilities that may be
useful for their future competitiveness, without creating risks of high exit costs. The open-ended
nature of alliances allows firms to exit alliances with relatively fewer costs than more permanent
arrangements like acquisitions or greenfields, which may lead to divestiture costs or costs and risks
of building new operations from the ground up. Thus firms that need to change strategic direction
or build an international presence to remain competitive can use alliances to ease into new areas or
new markets rather than make irreversible commitments or commitments that are costly to reverse.
In this regard, alliances can help firms to hedge risks as they allow firms to access new technologies
that can help to change firms’ strategic positions, while minimizing the potential repercussions.
In conclusion, alliances can reduce firms’ systematic risk by creating opportunities for firms to
reduce uncertainty, increasing firms’ opportunities to pursue emerging technological trends with
minimum exposure or investment, allowing firms to share risks with other firms by avoiding full
commitments to strategies and reducing exit costs. These benefits can ultimately reduce firms’ total
exposure to market-wide changes and events. By minimizing firms’ exposure to environmental
uncertainties and decreasing firms’ risk exposure, alliances can reduce firms’ systematic risk.
H1: Alliances decrease firms’ systematic risk.
Although, the main premise of the study is that alliances can decrease systematic risk, the inclusion
of data on different types of alliances can lead to more insight. Different types of alliances may
have different benefits for risk reduction because different types of alliances allow firms to
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exchange specific types of resources. For example, research and development (R&D) alliances
allow firms to share their research and development resources and can enable the exchange of
explicit and tacit know-how. A manufacturing alliance allows firms to exchange know-how related
to manufacturing specific products. A technology transfer alliance allows firms to exchange
knowledge relating to a specific technology. A licensing alliance allows members to manufacture
and sell a firm’s products. A marketing alliance allows firms to co-market a product or service.
Alliances of different types increase a firm's exposure to diverse areas of expertise and its ability to
recognize and value new information and resources in those areas and apply them to its current
operations (Cohen & Levinthal, 1990). Each of these different types of alliances allows firms to
gain access to specific aspects of partners’ resources providing partner-specific and type-specific
information, resources, and competencies, which can facilitate different levels of risk reduction.
H2a: Cross border alliances decrease firms’ systematic risk.
H2b: Licensing alliances decrease firms’ systematic risk.
H2c: Manufacturing alliances decrease firms’ systematic risk.
H2d: Marketing alliances decrease firms’ systematic risk.
H2e: Research and development alliances decrease firms’ systematic risk.
H2f: Supply side alliances decrease firms’ systematic risk.
H2g: Technology transfer alliances decrease firms’ systematic risk.
Similarly, prior work has found distinctions between alliance types and levels of learning (Anand
and Khanna, 2000a; Anand and Khanna, 2000b). To date, a main factor of distinction among
learning effects from diverse alliances types has been the type of alliance contract. For example,
Anand and Khanna (2000a) found that learning from alliances is greater in less specific types of
alliances where there is greater contractual ambiguity or relatively less precise criteria available to
guide the alliance. Anand and Khanna (2000b) also found empirical evidence that there is a clear
relationship between the extent of ambiguity in codifying knowledge and the choice of contract in
interfirm alliances. Specifically, licensing alliances are significantly more frequently employed
than other types of alliances in contexts where it is relatively easy to establish property rights over
knowledge and where ambiguity is low (Anand and Khanna, 2000b). Licensing alliances are very
clear and have well-specified dimensions on the calculation of royalty payments, exclusivity
clauses, territorial restrictions and many other variables (Caves, Crookell, & Killing, 1983; Parr &
Sullivan, 1988).
Contract types that are less specific than licensing contracts provide broader access to partners’
resources because there are relatively fewer specifications and restrictions. Consequently, it is not
surprising that prior studies have found learning effects are weaker in licensing alliances than in
other less specific contract-types such as R&D, manufacturing, technology transfer and marketing
alliances for firms in manufacturing (Anand and Khanna, 2000a). Broader access to information
and experience can increase the level of learning from alliances and this may increase the
possibility that what is learned is applicable to future experiences (Cohen and Levinthal, 1990).
Similarly, different types of alliances ought to have different effects on the level of risk reduction.
Specifically in more specific types of alliance contracts such as licensing agreements, risk
reduction ought to be lower than risk reduction from other alliance types. Alliance types that
provide broader access to partners’ resources ought to be more beneficial to acquisition
performance than those that are more specific and restrictive. Broader access to partners’ resources
allows firms to gain more from alliances. Although licensing alliances may also allow firms to
obtain access to firms’ resources, the access may be narrower than that obtained through other
types of alliances such as R&D, manufacturing, supply side, technology transfer or marketing
alliances because of the more specific nature of licensing agreements. As a result, access to
information that can act to reduce uncertainty and can lead to risk sharing is likely to be weaker in
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licensing alliances due to narrower exposure to partners’ resources. Thus, the less specific is the
type of alliance contract the greater the amount of partner-specific information that the firm can
obtain and the greater the possibility for risk reduction.
H3: Risk reduction is greater in cross border, R&D, marketing, manufacturing, supply
side, and technology transfer alliances than for licensing alliances.
A widely held belief among many strategic management theorists is that resource combinations
among related firms or by firms with high business commonality ought to be more advantageous
than combinations by firms with less related businesses (Chatterjee, 1986; Michel and Shaked,
1984; Salter and Weinhold, 1979; Lubatkin, 1983; Bettis and Hall, 1982; Porter, 1985; Singh and
Montgomery, 1987). Some reasons that have been used to support this belief are that combinations
by firms in similar businesses provide opportunities for specialization, improvements in market
power, reduction of costs or enhancement of quality by providing opportunities to exploit scale and
scope economies in tangible areas such as manufacturing, research, and distribution. In addition
combinations by firms in similar businesses allow for greater administrative know-how and the
possibility of obtaining monopolistic influence on pricing or purchasing inputs. Relatedness among
firms has been hypothesized to be beneficial to firms as firms have a common language by which to
exchange resources (Cohen and Levinthal, 1990). Similarly, in alliances business commonality
among alliance partners may also ensure the applicability of one firm’s resources to a partner’s
resources. Firms operating in similar businesses usually have similar resource bases because they
use similar technologies, compete in similar markets, cater to similar customer needs, and serve
similar market segments (Bettis and Prahalad, 1995; Lane and Lubatkin, 1998; Prahalad and Bettis,
1986. Although alliances among related firms are likely to reduce firms’ risk, from a risk reduction
standpoint alliances among unrelated firms are likely to be more advantageous for risk reduction.
Alliances are greatly beneficial when resource endowments among partners are complementary but
not identical or highly similar (Grant, 1991; Hamel, 1991; Khanna, Gulati, and Nohria, 1998; Lane
and Lubatkin, 1998; Mowery, Oxley, and Silverman, 1996). Many theorists have recognized that
collaboration among firms with complementary resources affords firms opportunities to exploit
new opportunities. Dussauge, Garrette, and Mitchell (2000) find that alliances in which partners
contribute different capabilities lead to greater levels of learning and capability acquisition than do
alliances in which partners contribute similar capabilities. As such, combinations via alliances by
unrelated firms may offer greater opportunities from a risk reduction standpoint in the areas of
uncertainty reduction and risk sharing (Amit and Livnat, 1988). For example, combinations among
firms with related resources may result in overly narrow focus, lack of diversification, and lack of
market breadth making firms more sensitive to their environment. Firms often try to reduce their
exposure to risks by diversifying technologies or pursuing new innovations, to recover from
quickly eroding competitive positions. Thus specialization may further increase firms’ exposure to
risk. In this regard, alliances among partners in unrelated businesses may offer an element of
resource diversification by offering know-how and potential for unique strategic development.
Furthermore, access to a broader information and opportunity set may decrease firms’
susceptibility to environmental occurrences and increase the potential for risk reduction.
H4: Risk reduction is greater when members of the alliance operate in unrelated
businesses.
DATA AND METHODOLOGY
Data
The sample consists of alliances announced between January 1, 1996 and December 31, 1998. The
study includes only alliances in which all of the firms in each alliance are U.S. participants and are
publicly held so that stock price data would be available for all alliances and each partnaer. Prior to
1990, SDC did not initiate systematic and comprehensive data collection on alliances and even
122
between 1990 and 1993 not all deals were tracked due to corporate reporting requirements so the
year 1996 was a good starting point for this sample. The sample also eliminates any firms who had
a previous alliance or made an acquisition within a three-year window before and after the alliance
to ensure clean estimates of Beta. The total sample includes 407 alliances, after removing 111 firms
which either had missing financial information or had an alliance within a three-year period before
or after the date of this alliance announcement. Descriptive statistics of the sample of the 111
alliances that were excluded from the statistical analyses were not statistically different from the
sample of 407 alliances used in the statistical analyses. The study includes alliances in from several
industries in manufacturing: software, computer manufacturers, electronics, communications,
defense, food, tobacco, textile, wood, paper, rubber, leather, stone, and metal.
The data mainly come from SDC’s Alliance/JV Database. Anand and Khanna (2000a) find that
SDC data on alliance types and alliance SIC codes is quite accurate based of their extensive
comparison of SDC data to data from non-SDC sources. However, Anand and Khanna (2000a) do
find that in many cases the date of the alliance is misstated and thus alliance dates were verified
using additional sources such as Lexis Nexis, newspapers, and trade publications. Stock price data
was obtained from CRSP and firm-specific balance sheet and income statement data was obtained
from COMPUSTAT and verified using Annual Reports.
Partner similarity represents the level of business commonality between the participants in the
alliance. The sum the primary three-digit SIC codes in common among the members of the alliance
is divided by the total number of members in the alliance. Alliances among members that operate in
diverse businesses may have more benefit for systematic risk reduction.
Methodology
To estimate the change in Beta for each firm in the alliance I estimated the firm’s Beta from a
standard asset pricing model normally used to predict returns (Brown and Warner, 1985). Change
in Beta is the difference between the post-alliance Beta of the alliance partner and the pre-alliance
Beta of the alliance partner. Daily data for each publicly listed firm was used. It has been
conventional in finance to compute Beta based on a time-period of 254 days, approximately one
year of trading days. The one-year post-alliance Beta is estimated based on days +60 to +314 and
the pre-alliance Beta is estimated based on days -314 to -60, with day 0 being the day of alliance
announcement (two-year Betas are calculated using days -568 to -60 and +60 to +568). Given that
this study examines changes in Betas due to alliance announcements, it omits a period of -60 to +60
days around the day of alliance announcement. This is to avoid the inclusion of volatile periods of
adjustment surrounding the day of alliance announcement and exclude temporary reactions in the
measurement of Beta.
The Center for Research in Security Prices’ (CRSP) value-weighted index with dividends was used
to represent the market return. The return on security i for day t, Rit, is:
Rit = (Pit - Pit-1 )/ Pit-1
(1)
where Pit represents the price of security i, for day t. The Beta of stock i, Bi, is:
Bi = ∑ t =1 ..253 {(Rit - Ravgit) (Rmt - Ravgmt)}/ ∑ t =1 ..253 (Rmt-Ravgmt)2
(2)
where Rmt represents the return on the market portfolio for day t, Rit represents the return on
security i on day t, and Ravg represents the average of the returns on security i for days 1 through t.
However, to allow for continuous compounding when calculating Beta, ln(1+R) is used in place of
R.
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Studies in the finance literature have demonstrated that traditional estimates of Beta can be biased
(Scholes and Williams, 1977; Dimson, 1979). Many securities are traded infrequently and few
securities are traded so actively that their prices are recorded almost continuously. As a result, the
use of daily returns to estimate Betas introduces the possibility of downward bias in Beta estimates.
Scholes and Williams (1977) introduced a method to correct for nonsynchronous securities data,
and this study uses their estimation method. Beta is estimated by running a regression of the stock's
return on the return on the market index,
Rit = α + BKitMit+k + e
k = -1, 0, 1
(3)
where R represents the return on security i on day t, BKit represents the estimated Beta for security i,
and Mit+k represents the CRSP value-weighted index with dividends. The corrected Beta, BC, is the
sum of the Beta coefficients estimated by a synchronous, lagged, and leading market return.
BC = ∑ BC / (1+2ρ)
(4)
The corrected (hereafter Scholes-adjusted) Beta is then divided by one plus twice the
autocorrelation, ρ, of the market returns.
RESULTS
Table 1 shows, the descriptive statistics for 407 alliances in the study. The average difference for
Beta for the alliances was -0.24 and -0.37 for the one-year and two-year Scholes-adjusted Betas,
respectively. Furthermore, 57% of firms experienced a decrease in Scholes-adjusted one-year
Betas and 62% of firms experienced a decrease in Scholes-adjusted two-year Betas.
--------------------------------Insert Table 1 about here.
--------------------------------A standard test statistic is used in determining the statistical significance of whether the change in
Beta is not equal to zero. The key test statistic for this study is the difference score which is the
change in one-year and two-year Beta surrounding the alliance announcement. If the alliance
causes a change in the firms’ systematic risk the change in Beta should be different than zero and
this difference should be statistically significant. Table 2 shows the results of these tests.
--------------------------------Insert Table 2 about here.
--------------------------------Hypothesis 1 predicted that alliances decrease firms’ systematic risk and the results show that the
mean differences for the changes in one-year and two-year Scholes-adjusted Betas were each
negative, and statistically and significantly different from zero (p < 0.001 for one-year and
two-year Betas).
Hypotheses 2a to 2e predicted that each of the different alliance types would decrease firms’
systematic risk. Each of the average differences for one-year and two-year Betas for each of the
alliance types are negative, statistically significant and different from zero. Furthermore, the
average difference in Beta for all alliance types indicate that partners experience a greater decrease
in systematic risk for participating in the specific type of alliance than for not participating in the
specific type of alliance.
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More specifically, the results support hypothesis 2a, where participating in a cross border alliance
results in a decrease in systematic risk. Furthermore, the difference coefficients for engaging in a
cross border alliance show a mean change that is large, negative and statistically different than zero.
Furthermore, engaging in a cross border alliance results in a sizable decrease in systematic risk and
this decrease is statistically significant from the decrease in systematic risk that occurs from not
engaging in a cross border alliance for one-year Betas (p < 0.01).
The results also support hypothesis 2b, where participating in a licensing alliance results in a
decrease in systematic risk. All the difference coefficients for engaging in a licensing alliance show
a mean change that is large, negative and statistically different than zero. Furthermore, engaging in
a licensing alliance results in a sizable decrease in systematic risk and this decrease is statistically
significant from the decrease in systematic risk that occurs from not engaging in a licensing alliance
for one-year Betas and two-year Betas (p < 0.01, and p < 0.05).
The results also support hypothesis 2c, where participating in a manufacturing alliance results in a
decrease in systematic risk. All the difference coefficients for engaging in a manufacturing alliance
show a mean change that is large, negative and statistically different than zero. However engaging
in a manufacturing alliance does not result is a statistically distinguishable decrease in systematic
risk from the decrease in systematic risk that occurs from not engaging in a manufacturing alliance.
The results also support hypothesis 2d, where participating in a marketing alliance results in a
decrease in systematic risk. All the difference coefficients for engaging in a marketing alliance
show a mean change that is large, negative and statistically different than zero. Furthermore,
engaging in a marketing alliance results in a sizable decrease in systematic risk and this decrease is
statistically significant from the decrease in systematic risk that occurs from not engaging in a
marketing alliance for one-year Betas (p < 0.10).
The results also support hypothesis 2e, where participating in a research and development alliance
results in a decrease in systematic risk. All the difference coefficients for engaging in a research
and development alliance show a mean change that is large, negative and statistically different than
zero. Furthermore, engaging in a research and development alliance results in a sizable decrease in
systematic risk and this decrease is statistically significant from the decrease in systematic risk that
occurs from not engaging in a research and development alliance for two-year Betas (p < 0.01).
The results also support hypothesis 2f, where participating in a supply side alliance results in a
decrease in systematic risk. All the difference coefficients for engaging in a supply side alliance
show a mean change that is large, negative and statistically different than zero. Furthermore,
engaging in a supply side alliance results in a sizable decrease in systematic risk and this decrease is
statistically significant from the decrease in systematic risk that occurs from not engaging in a
supply side alliance for one-year Betas and two-year Betas (p < 0.001, and p < 0.001).
The results also support hypothesis 2g, where participating in a technology transfer alliance results
in a decrease in systematic risk. All the difference coefficients for engaging in a technology transfer
alliance show a mean change that is large, negative and statistically different than zero. However
engaging in a technology transfer alliance does not result is a statistically distinguishable decrease
in systematic risk from the decrease in systematic risk that occurs from not engaging in a
technology transfer alliance.
Hypothesis 3 predicted that risk reduction is greater in cross border, R&D, marketing,
manufacturing, supply side, and technology transfer alliances than for licensing alliances.
125
Hypothesis 3 was not supported as none of the differences of decreases in Beta between the
alliances types are statistically distinguishable from each other.
Hypothesis 4 predicted that alliances among partners in unrelated businesses will decrease firms’
risk more than alliances among related businesses. The results show that the mean differences for
the changes in one-year and two-year Scholes-adjusted Betas were negative and different from zero
and these differences were each statistically significant. Furthermore a statistical test for the
difference between two means shows that the mean for alliances among partners with business
commonality and the mean for alliances among partners with no business commonality for
two-year Betas are statistically different from each other (p < 0.10).
Discussion
In summary, the findings indicate that on average alliances decrease firms’ systematic risk. These
findings hold true whether testing average one-year or two-year Betas. These findings suggest that
alliances can indeed help firms minimize their risk relative to the market portfolio. Alliances may
provide opportunities for firms to reduce their vulnerability to uncertainty from their environment,
share risks with other firms, and pursue advantageous opportunities with lower exit costs. By
minimizing firms’ systematic risk alliances have the potential to be enduring value-creating events
with risk reduction occurring for a period of two years subsequent to the alliance. Furthermore, the
findings also show that different types of alliances reduce firms’ systematic risk and facilitate
different levels of risk reduction. Specifically, the average difference in Beta for each alliance type
indicates that partners experience a greater decrease in systematic risk for participating in each of
the specific alliance types than for not participating in the specific alliance type. Finally, firms
experience greater risk reduction when they ally with partners in unrelated businesses than when
they ally with partners in related businesses, indicating that risk reduction is more likely when firms
diversify their resources. Overall, the results indicate that alliances can reduce firms’ systematic
risk.
This study also has some limitations that if acknowledged can improve the applicability of the
results. One potential limitation is that the study does not consider the duration of the alliances that
were included or account for informal ties, which may also be important when examining changes
in Beta due to alliances (Coleman, 1990). One issue with using data on the duration of alliances or
informal ties is that data on the duration of the alliances and informal ties is not regularly available
for all alliances. Thus including such data would create bias in the results because the study would
include only the few alliances that accurately report alliance duration and informal ties. Second
while the study tries to limit the influence of other events on the Beta estimation by controlling for
previous alliances and acquisitions, there may be events that are not reported by firms that can
influence Beta estimates. Third, the study does not consider the quality of the alliance relationship
and its effect on Beta, nor does it consider the impact of the alliance on the firm’s total operations.
For example, trust between partners, previous ties and many other factors that have been linked to
the quality of alliance relationships may play a role in Beta changes. This may be a venue that
future studies may further explore. Lastly, the results are specific to alliances by firms in
manufacturing and these results may or may not replicate for alliances by firms in services or other
industries.
In all the study contributes to research on alliances by finding that alliances decrease firms’
systematic risk. First, the results of this study indicate that alliances can create value by reducing
firms’ riskiness, and the risk-reducing benefit of alliances extends beyond a short event window
surrounding announcement. The study shows that risk reduction benefits continue for at least
two-years beyond alliance announcement. Second, managers’ strategic decisions such as the
decision to form strategic alliances can influence a firm’s systematic risk. Management theory may
126
not entirely diverge from financial theory as systematic risk may be managed by strategic choices
such as alliances. Finally, relatedness can also play a role in alliance benefits and the relatedness of
alliance partners ought to be a consideration for managers and may warrant further investigation.
On a more practical level, firms’ systematic risk reduction is an important factor for both managers
and investors. First it is important for managers to be aware of their potential to decrease firms’
systematic risk via alliances and how reducing risk can benefit a firm. Risk is an important attribute
of a public firm. For example, firms that investors perceive as being risky incur higher costs when
raising capital. Additionally, riskier firms sell equity at lower prices or pay higher prices when
incurring debt and borrowing at higher rates may limit a firm’s ability to pursue some of its
opportunities. Higher costs of capital may put firms at a competitive disadvantage when compared
with competitors with lower costs of capital. Thus systematic risk can have an adverse effect on a
firm’s strategic opportunity set (Copeland & Weston, 1991). Furthermore because higher risk
impacts firms’ cost of capital, this can lead to valuations that discount future earnings more
severely than they would be discounted at lower costs of capital, which may ultimately place more
emphasis on firms’ short-term earnings. Ultimately systematic risk can impact firm value, as the
lower is the systematic risk of the firm the lower the required rate of return and the higher the value
of the firm (Van Horne, 1980: 68). From a managerial perspective, firms with lower systematic risk
present less managerial risk for firms’ managers. In conclusion it seems beneficial for firms to
pursue strategic actions that lower their systematic risk and thus managers ought to pursue actions
that lower the level of their firm’s risk in the eyes of the financial community.
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129
Table 1. Descriptive Statistics
Pre-alliance
Scholes-Adjusted
1-year Beta
Post-alliance
Scholes-Adjusted
1-year Beta
Difference
Scholes-Adjusted
1-year Beta
Percentage
Decrease
in 1-year
Beta
Pre-alliance
ScholesAdjusted
2-year Beta
Post-alliance
ScholesAdjusted 2-year
Beta
Difference
ScholesAdjusted
2-year Beta
Percentage
Decrease in
2-year Beta
All Alliances
Mean
Median
Variance
Total alliances
1.46
1.18
1.25
407
1.23
1.13
0.88
407
-0.24
-0.20
1.23
407
-16.71%
-16.74%
1.52
1.28
1.17
407
1.17
1.05
0.75
407
-0.37
-0.26
1.16
407
-24.58%
-20.38%
Basic-tech Alliances
Mean
Median
Variance
Total alliances
1.22
0.98
1.27
117
0.89
0.84
0.43
117
-0.33
-0.17
1.16
117
-27.09%
-17.42%
1.24
1.08
1.17
117
0.84
0.81
0.30
117
-0.41
-0.18
1.14
117
-33.06%
-16.96%
High-tech Alliances
Mean
Median
Variance
Total alliances
1.56
1.30
1.22
290
1.37
1.27
1.00
290
-0.21
-0.20
1.26
290
-13.44%
-15.25%
1.63
1.44
1.14
290
1.30
1.19
0.87
290
-0.36
-0.27
1.17
290
-22.00%
-18.99%
130
Table 2. T tests of Difference in One-Year and Two-Year Scholes-Adjusted Betas
Difference in
Scholes-Adjusted
1-year Beta
Difference in
Scholes-Adjusted
2-year Beta
Variance
Scholes-Adjusted
1-year Beta
Variance
Scholes-Adjusted
2-year Beta
Number
Included
All firms
-0.24***
-0.37***
1.23
1.16
407
Partner Business Commonality No
-0.27***
-0.41***
1.21
1.10
290
Partner Business Commonality Yes
-0.18*
-0.29**
1.30
1.33
117
Cross Border No
-0.24***
-0.37***
1.24
1.18
397
Cross Border Yes
-0.48*
-0.45*
0.71
0.69
10
Licensing Agreement No
-0.16**
-0.31***
1.05
0.95
255
Licensing Agreement Yes
-0.39***
-0.48***
1.51
1.51
152
Manufacturing Agreement No
-0.21***
-0.36***
1.27
1.17
277
Manufacturing Agreement Yes
-0.31***
-0.4***
1.15
1.16
130
Marketing Agreement No
-0.21***
-0.36***
1.30
1.25
309
Marketing Agreement Yes
-0.34***
-0.42***
0.99
0.89
98
Research and Development No
-0.24***
-0.35***
1.21
1.16
367
Research and Development Yes
-0.33*
-0.55***
1.42
1.14
40
Supply Agreement No
-0.24***
-0.37***
1.24
1.17
398
Supply Agreement Yes
-0.53**
-0.63**
0.36
0.67
9
Technology Transfer No
-0.24***
-0.36***
1.25
1.17
332
Technology Transfer Yes
-0.26*
-0.43***
1.16
1.15
75
† p < .10 ,
* p < .05,
** p < .01, *** p < .001
131
Difference in
1-Year Betas
Between
Participants and
Non-Participants
Difference in
2-Year Betas
Between
Participants and
Non-Participants
-0.09
-0.12†
0.24**
0.08
0.23**
0.17*
0.1
0.04
0.13†
0.06
0.09
0.20**
0.29***
0.26***
0.02
0.07
ASAC 2005
Toronto, Ontario
Patrizia Porrini
ARE INVESTMENT BANKERS TO BLAME FOR ACQUISITION PREMIUMS?
IF ACQUIRING PROCEED WITH CAUTION!
Since the 1980s, the number of acquisition deals has increased as has the use of
investment bankers. Among their many strategic and financial advisory roles,
investment bankers negotiate acquisition premiums. Studies have found support
for agency conflicts between acquirers’ bankers and their acquiring clients,
resulting in bankers being associated with acquirers’ payments of higher
acquisition premiums. This study investigates the transaction-specific attributes
under which acquirers’ bankers are associated with greater acquisition premiums
and whether bankers’ first-tier status attenuates the premium paid by acquirers
when they use bankers. The study examines a sample of 481 acquisitions
completed between 1988 and 1998 and finds the presence of acquirers’ bankers
along with transaction-specific attributes can lead acquirers to pay greater
acquisition premiums. These findings have implications for theory and practice.
Since the 1980s, the number of acquisition deals has increased, as has the use of investment
bankers. Between 1981 and 2002, the use of investment bankers on acquisitions went from 78% in
1981 to a peak of 88% in 1999. Among their many strategic and financial advisory roles,
investment bankers negotiate acquisition premiums. An acquisition premium is the percentage
increase between the share price the acquirer pays for the target and the target's share price four
weeks before the acquisition announcement. Between 1990 and 2002, acquisition premiums
averaged 53.2% with 40% of acquirers paying premiums of over 50% and 10% of acquirers paying
premiums over 100%. If markets are efficient and investors and managers have all publicly
available information then any premium that is above what the acquirer needs to pay in order to
secure the deal is likely too much.
Through their advisory roles, investment bankers can influence premiums as they advise acquirers
and targets during the acquisition process. Specifically, targets hire bankers to get the highest
premium for their firm, while acquirers hire bankers to pay the lowest premium for the target.
However, fee structures motivate acquirers’ bankers to increase acquisition premiums because
bankers’ fees are a percentage of deal size, and deal size increases with acquisition premium.
Acquirers’ goals of minimizing premiums inherently conflict with acquirers’ bankers’ goals, which
include increasing their payoff. Accordingly, it is not surprising that researchers have expressed
skepticism towards acquirers’ investment bankers’ advisory roles on acquisition transactions
(Kesner, Sharma, and Shapiro 1994; Lax and Sebenius, 1986; McLaughlin; 1990).
Studies have found support for agency conflicts between acquirers’ bankers and their acquiring
clients. For example, Kesner, Sharma and Shapiro (1994) find that premiums correlate positively
with bankers’ fees—for both targets and acquirers, leading them to the conclusion that there is
misalignment between acquirers’ bankers’ interests and acquirers’ interests. Furthermore, studies
that examine whether the presence of investment bankers influence performance have also found
that cumulative abnormal returns to acquirers that hire bankers are lower than those to acquirers
that use in-house acquisition teams (Servaes and Zenner, 1996). Another concern of researchers has
132
been that overpayment can have serious implications on acquisition performance. For example,
studies that have correlated variables with acquisition performance have found a statistically
significant negative correlation between premium and performance (Lubatkin, 1983; Sirower,
1997; Varaiya and Ferris, 1987). In all, acquisition premiums represent difficult financial hurdles
for acquirers to overcome given the many other pressures on performance in the post-acquisition
phase. Large premiums can take cash away from other potentially profitable projects and raising
debt to cover premiums places unnecessary burden on the combined firm post-acquisition.
Acquisition premiums are important aspects of deals thus it is important to investigate the
conditions under which bankers can cause acquirers to pay greater acquisition premiums. This
study re-examines prior findings that there is misalignment of interests between acquirers’ bankers
and acquirers by testing whether the presence of acquirers’ bankers correlates positively with
acquisition premiums. Furthermore, the study extends this premise by exploring which
transaction-specific attributes allow experts such as investment bankers to inflate premiums most
and also explores whether bankers’ first-tier status attenuates the premium paid by acquirers when
using bankers. The study contributes to existing literature by exploring whether clients’ reliance on
experts and experts’ influence is greater under conditions of transactional uncertainty. Servaes and
Zenner (1996) find that firms are more likely to hire bankers in situations where there is greater
transactional ambiguity and information asymmetry. However, from their findings, it is not clear to
what extent bankers along with transaction-specific attributes play a role in inflating premiums.
The study also contributes to existing literature by further investigating the role of professional
experts as advocated by Hayward (2003: 797). It is of importance for researchers and practitioners
to know whether and when investment bankers have most influence over acquisition premiums.
The next section discusses hypotheses regarding acquirers’ investment bankers, transaction
attributes, and their effect on acquisition premiums. Ensuing sections describe methodology and
results. The final section draws conclusions and discusses implications.
THEORY AND HYPOTHESES
Acquirers and targets often employ investment bankers for their expert knowledge about
acquisition transactions, skills in structuring acquisitions, access to potential buyers and sellers,
strategic advice, ability to negotiate premiums, or because they lack the resources to complete deals
in-house (Benston and Smith, 1976; Hayward, 2003; Hunter and Walker, 1990; Smith 1986;
Titman and Trueman, 1986). Investment bankers can provide increased legitimacy and signal deal
quality to stakeholders by their presence (DiMaggio and Powell, 1983; Meyer, 1994; Meyer and
Rowan, 1977; Pfeffer, 1981; Zucker, 1977). In all, clients use bankers to gain professional advice
and improve performance from their decisions (Eccles and Crane, 1988; Hayward, 2003; Maister,
1993).
However, researchers have found that there is misalignment between acquirers’ bankers' interests
and acquirers' interests (Kesner, Sharma, and Shapiro, 1994). Researchers have posited that fee
structures and asymmetric information may be reasons for misaligned interests between acquirers
and their bankers (Kesner, Sharma, and Shapiro, 1994; Hayward, 2003; Servaes and Zenner, 1996).
For example, bankers’ fees are based on deal size, which increases as premiums increase. Thus,
acquirers’ bankers are motivated to increase premiums in spite of their clients’ interests of paying
less for targets. Furthermore, bankers’ payoffs and reputations are not influenced by the long-term
performance of the deals they advise. If extant theory and research holds true, acquirers’ bankers
should correlate positively with acquisition premiums as payment structures and asymmetries in
expertise and information create incentives for acquirers’ bankers to allow acquirers to pay more
for targets to increase their own payoff.
H1: Acquirers’ investment bankers will correlate positively with acquisition premiums.
133
Given bankers’ expert power, clients are more likely to rely on bankers’ expertise under conditions
of informational and experiential disadvantage. Often transaction-specific attributes create the need
for acquirers to use experts over their in-house acquisition teams. Accordingly, Servaes and Zenner
(1996) find that firms are more likely to hire bankers in situations where there is greater
transactional ambiguity and information asymmetry in the form of acquirers purchasing unrelated
targets, targets that operate in many business areas, and in non-cash financed acquisitions.
However, it is not clear to what extent these transaction-specific attributes play a role in increasing
the potential for agency conflicts, resulting in acquirers paying higher premiums.
Specifically, when acquirers are at an informational disadvantage, they are likely to be more reliant
on bankers’ professional contributions (Servaes and Zenner, 1996). Similarly, in situations where
there is greater transactional ambiguity, ambiguity about the value of targets, or ambiguity about
financing acquisitions with stock, acquirers are more likely to rely on their bankers’ judgments than
their own. In this regard, disparity in the form of information, knowledge and experience between
bankers and acquirers, may give bankers expert power or undue influence over their clients.
Acquirers’ may unquestioningly rely on bankers’ advice because of bankers’ expert or referent
power (French and Raven, 1968; Pfeffer, 1981). Conversely, in situations where acquirers have
greater information about valuing targets than do their bankers, they are more likely to consider
their own judgment as well as or more than their bankers’ judgments. Consequently, if acquirers’
bankers’ interests are misaligned with those of their acquiring clients, the inflation in premiums
should relate to transaction-specific attributes that cause information deficiency, which may
increase acquirers’ reliance on bankers. Researchers have speculated that the degree of disparity in
information, knowledge, or experience between acquirers and their bankers offers greater potential
for bankers to act in their own best interests rather than acquirers’ best interests (Kesner, Sharma,
and Shapiro, 1994; Servaes and Zenner, 1996). Acquirers routinely hire bankers for their expert
advice and studies have shown that clients are likely to trust professional experts’ advice (Hayward,
2003). Thus in situations where there are greater disparities in information, knowledge, or
experience acquirers are more likely to trust investment bankers.
Relatedness of Targets
The greater the degree of business commonality between acquirers and targets, the more
information acquirers have about targets’ resources and value, and the less asymmetry between
bankers and acquirers (Coff, 1999; Servaes and Zenner, 1996). Similarly, the greater the acquirer’s
familiarity with the target’s business areas, the less is the acquirer’s needs to rely on experts’
opinions regarding the target’s value. For example, acquirers of targets in different areas of
expertise may not be able to value the targets’ resources accurately and precisely (Servaes and
Zenner, 1996). Thus, if acquirers’ bankers have misaligned interests, which results in acquirers
paying higher premiums, buying a target in unrelated businesses creates the potential for actual or
perceived informational asymmetry on the part of the acquirer. This actual or perceived
informational disadvantage can increase the acquirer’s reliance on bankers’ advice regarding the
premium necessary to secure the acquisition.
H2: Acquirers will pay more for targets when they hire investment bankers and targets operate
in unrelated businesses than when acquirers hire investment bankers and targets operate in
related businesses.
Targets’ Business Areas
When targets operate in many business areas, it is likely more difficult and complex for acquirers to
value targets (Servaes and Zenner, 1996). Targets that operate in many business areas have greater
complexity in that acquirers must accurately asses the combined value of many business areas and
it is less likely that the acquirer has detailed knowledge of the operations in all business areas.
Accordingly, there is greater uncertainty with respect to evaluating the financial and strategic
134
benefits of such targets. Acquirers are more likely to use the professional valuation of investment
bankers to assist their decision-making (Servaes and Zenner, 1996). Similarly, if acquirers’ bankers
are associated with increasing the premiums paid by acquirers, the informational disadvantage of
the acquirer that may result from valuing a target in multiple business areas creates the potential for
bankers to inflate the premium paid for the target.
H3: Acquirers will pay more for targets when they hire investment bankers and targets operate
in many business areas than when acquirers hire investment bankers and targets operate in
relatively fewer business areas.
Non-Cash Financing
Researchers have associated the need for investment bankers on acquisition transactions with
non-cash financing. Stock-financed acquisitions are more complex transactions than cash-financed
acquisitions transactions as they require greater use of bankers’ professional expertise (Brealey and
Meyers, 1996; Hayward, 2003). Stock-financed acquisitions not only require valuation of the
targets’ stock but also require valuation of the acquirer’s stock and determination of an exchange
rate that convinces the target’s shareholders to give up their stock for a set portion of the acquirer’s
stock. Exchanging stock also requires acquirers to choose whether they will set a fixed exchange
rate or fixed value pricing (see Hayward (2003) for a more complete discussion). Because stock
prices change, especially after acquisition announcements, it is more difficult to value
stock-financed acquisitions than those using cash. Researchers have found that there is greater risk
transfer from the acquirer to the target when there is stock financing rather than cash financing.
Thus it is no surprise that studies have found that non-cash financing is positively associated with
the need for investment bankers as banks can more extensively apply their expert knowledge of
equity securities in stock financed acquisitions (Brealey and Meyers, 1996; Hayward, 2003;
Servaes and Zenner, 1996). As non-cash financing requires the financial expertise of bankers, there
is likely greater reliance on experts’ opinions. In situations where acquirers are better able to
evaluate the financial aspects of funding the transaction they are less likely to rely exclusively on
bankers’ advice. As such, if acquirers use bankers on non-cash acquisitions, they are more likely to
rely on bankers professional assessments in non-cash deals, and if there is misalignment of
interests, they are likely to pay a greater premium.
H4: Acquirers will pay more for targets when they hire investment bankers and use non-cash
financing, than when acquirers hire investment bankers and use cash to finance acquisitions.
Intermediaries' First-Tier Rank
Investment bankers’ first-tier status can affect their ability to influence acquirers’ decisions
regarding acquisition premiums. Investment bankers’ first-tier status is determined from league
tables which rank investment banks by number of deals or deal value1. For example, popular press
sources often publish league tables and/or cite investment banks' relative standing and often the
focus of attention is on the top five M&A advisory firms. League table standing is an important
aspect of reputation and studies have found that wealth gains are greater to acquirers or targets that
use first-tier bankers (Bowers and Miller, 1990). Investment bankers' reputations for advising
success can signal negotiation ability and access to networks of targets', acquirers', investment
banks, information that can be useful to the deal, financial expertise and in-house services that are
useful to deal making.
Acquirers and targets may associate greater professional expertise with bankers’ first-tier rankings.
For example, Servaes and Zenner (1996) ran analyses of clients' likelihood to choose first-tier (top
five firms in the league table) or second-tier investment bankers (firms other than top five) and
found that first-tier bankers are more likely to be chosen over second-tier bankers with larger
1
Rankings only include the number of deals that were completed.
135
transactions completed by acquirers with little acquisition experience1. Acquisitions advised by
first-tier intermediaries may receive more attention by investors and the intermediaries' peers and
thus first-tier intermediaries ought to be more conscientious of the quality of their advice.
Additionally, their limelight status may create incentives for top-tier intermediaries to preserve
their reputations (Roberts and Dowling, 2002). Thus, although transaction-specific attributes may
intensify the effect of misaligned interests on the part of bankers, when investment bankers'
reputations are at stake, the incentive to uphold reputation may minimize agency conflicts. Their
public status may make first-tier investment bankers more conscientious of their advisory roles.
Thus, even though acquirers may associate greater expertise with first-tier bankers, acquirers’
first-tier bankers may be less likely to pursue self-interest and demonstrate their negotiation
expertise by not recommending higher premiums at the expense of client interest.
H5: The presence of acquirers' first-tier investment bankers correlate negatively with
acquisition premium.
METHOD
The sample consists of public acquisitions of public targets in manufacturing completed between
January 1, 1988 and December 31, 1998. The sample was limited to public acquirers and public
targets so that financial data would be available on both firms. The total sample consisted of 607
acquisitions before the exclusion of 126 acquisitions due to missing data, leaving an effective
sample of 481 acquisitions. Of the acquisitions removed, either targets or acquirers had missing
data or acquirers were themselves acquired within one year of the acquisition. The data are from
SDC’s Merger and Acquisition Database, Compustat, CRSP, Annual Reports, Lexis Nexis, and
Datastream. Data were primarily collected using the SDC databases and then checked using two
additional sources from those listed above. If there was a discrepancy, I used an additional source.
The dependent variable, acquisition premium, is the percentage increase between the price paid for
the target’s stock and the target's stock price four weeks before the acquisition announcement.
Acquisition premium is a percentage representing the fraction of overpayment relative to the
starting price and is an accurate way to capture overpayment (Cotter & Zenner, 1994; Hayward and
Hambrick, 1997; Jerrell and Poulson, 1989; Jerrell, Brick, and Netter, 1988; Kesner, Shapiro &
Sharma, 1994; Sharma, Shapiro, and Kesner, 1991). For example, a $5 million premium on a $50
million market value of equity is much different than a $5 million premium on a $10 million market
value of equity. In the former, the premium is 10% of the market value of equity whereas in the
latter the premium is 50% of the total equity value.
The independent variables in the study focus on the use of investment bankers on acquisition
transactions. Acquirer investment banker indicator is coded 1 if the acquirer used an investment
banker and 0 otherwise (Servaes and Zenner, 1996)2. Target investment banker is similarly
measured. When the investment banker variable takes the value of zero, acquirers or targets are
likely using in-house advisory teams that perform due diligence and advisory roles that bankers
usually perform. Thus, firms that use in-house counsel do not face the agency risks that firms that
use outside advisors face.3 Further investigation revealed that none of the investment bankers
included in this study served both sides of the same transaction. Acquirer first-tier investment
banker indicator is coded 1 if any of the investment bankers used by the acquirer were among the
top five bankers by value of the transaction in league tables for the year prior to the transaction year
1
This study controls for both of these factors.
I also ran regressions using the number of investment bankers. The results were analogous to those presented here.
3
The average premium for the portion of deals in this sample where acquirers do not use a banker was 50.65 and the average premium
for acquirers that used bankers was 51.02. These groups are not statistically different, and this lends support to the conclusion that the
results are not spurious or endogenous in that it does not seem that bankers are used on deals that are likely to require bankers larger
premiums to close deals.
2
136
(Bowers and Miller, 1990; Servaes and Zenner, 1996). Target first-tier investment banker is
measured similarly.1
Transaction-Specific Variables SIC Relatedness between the acquirer and the target is the
number of three-digit Standard Industrial Classification codes that the acquirer and the target have
in common (Servaes and Zenner, 1996). The level of relatedness between acquirer and target can
affect information asymmetry, the acquirer’s need to rely on bankers’ valuations, and the acquirer’s
valuation of the target. Target number of SIC codes is a count variable representing the number of
business areas that the target operates in. Acquiring, integrating, and valuing targets that operate in
multiple business areas is more complex than acquiring targets that operate in fewer business areas
(Servaes and Zenner, 1996). Method of payment is a variable coded 0 if a cash offer is made and 1
for any other form of payment such as cash and stock (Hayward and Hambrick, 1997; Servaes and
Zenner, 1996). Non-cash financing is more likely to require the use of outside advisors. Acquirers
who have enough cash on hand to buy the target may be more willing to pay a higher premium to
prevent or in response to a bidding war because they do not have to finance the payment.
Control Variables Value of the Transaction is the total dollar value of the transaction (Servaes and
Zenner, 1996). Larger transactions may be more complex and may be more likely to require the
help of bankers. Challenged deal is an indicator variable coded 1 if the acquisition was challenged
by another bidder, and 0 otherwise. Bidding wars usually require the winning bidder to pay a larger
premium to outbid other bidders (Varaiya, 1987). Attitude is an indicator variable coded 1 if the
acquisition was friendly and 0 otherwise (hostile). Non-friendly acquisitions may lead targets to
implement defense measures that cause higher premiums in an effort to prevent acquirers from
buying them. Target is a high-tech firm is an indicator coded one if a target is a high-tech firm.
Acquirers buying high-tech targets may have greater uncertainty about targets’ value as their
resources are largely tacit as well as explicit, likely requiring bankers’ advice (Coff, 1999).
Acquirer’s debt to assets ratio is the debt to assets ratio of the acquirer averaged over a three year
period prior to the acquisition. Acquirers’ debt ratio may affect their willingness to pay large
premiums as well as their ability to pursue non-cash financing. Defense measure is an indicator
variable coded 1 if the target has defense measures in place and 0 otherwise. Targets employ
defense measures such as poison pills and lockup options can make the target more expensive to
acquirers (Varaiya, 1987). Defense measures have been associated with higher premiums.
Acquirer's and target's acquisition experience is the number of acquisitions completed during the
four-year period prior to the acquisition (Kesner, Shapiro & Sharma, 1994; Haleblian and
Finkelstein, 1999; Hayward, 2003). Premiums may be affected by prior acquisition experiences.
Furthermore acquirers’ and targets’ acquisition experience may affect their decision to hire
bankers. Relative size of acquirer to target represents the ratio of the acquirers’ sales to targets’
sales (Hayward and Hambrick, 1997; Servaes and Zenner, 1996). Relative size may be an
important aspect of whether firms choose to hire bankers.
I controlled for macroeconomic effects by entering the years as a set of indicator variables. I created
indicator variables for 10 of the 11 years in the sample, with 1998 as the omitted year. Sensitivity
analysis revealed that omitting any other year would have produced similar results. The indicator
variables were not statistically significant and the results were substantially unchanged when I
removed them from the analysis. To keep the results simple, the year of acquisitions indicator
variables are not included in the tables that follow.
1
Note that these variables function as interaction effects or moderators in that if there are no investment bankers, they take the value of
zero, and if they are first-tier the variable takes the value of one.
137
RESULTS
Table 1 shows the descriptive statistics and correlations among the variables for the acquisitions in
this study. On average, the acquisition premium is 50.86, which is consistent with the average
premium reported by other studies (Hayward and Hambrick, 1997; Varaiya and Ferris, 1987). I
used ordinary linear regression to analyze the data and Table 2 shows the results of the regression
analyses. Model 1 includes only control variables and yields an R-square of 9.2% (p < 0.002).
Model 2 includes control variables and the independent variables representing whether the acquirer
and the target used investment bankers and yields an R-square of 9.8% (p < 0.002). Hypothesis 1
predicted that acquirers’ bankers will correlate positively with acquisition premium and the
coefficient was positive and statistically significant (p < 0.01). The actual value of the coefficient
was 6.91, which is 13.6% of the average premium (50.86).
------------------------------Insert Table 1 about here.
Insert Table 2 about here.
------------------------------Models 3 through 5 include variables that represent transaction-specific attributes.1 Hypothesis 2
predicted that acquirers pay less for targets when they hire investment bankers and targets operate
in related businesses than when acquirers hire investment bankers and targets operate in unrelated
businesses. The coefficient for this interaction effect is negative and statistically significant (p <
0.001) confirming that as acquirers hire investment bankers and targets have business
commonality, premiums decrease. Hypothesis 3 predicted that acquirers pay more for targets when
they hire investment bankers and targets operate in a larger number of businesses than when
acquirers hire investment bankers and targets operate in relatively fewer businesses. The
coefficient for H3 was positive and statistically significant (p < 0.10). Interestingly the interaction
of targets’ investment bankers and targets’ number of SIC codes is positive and statistically
significant as well. Hypothesis 4 predicted that acquirers pay more for targets when they hire
investment bankers and acquirers use non-cash financing than when acquirers hire investment
bankers and use cash to finance the acquisition. The coefficient for the interaction effect testing H4
was positive and statistically significant indicating that as acquirers hire investment bankers and
use non-cash financing their premiums increase. Model 6 includes the first-tier variables.
Hypothesis 5 predicted that the presence of first-tier investment bankers would correlate negatively
with acquisition premium and the coefficient was not statistically significant. Surprisingly, the
opposite is true in that when acquirers use investment bankers and those bankers have first-tier
status, this further inflates premiums (p < 0.001).
Exploratory Analyses
As an experiment, I ran exploratory regressions including the presence of legal advisors. Research
on principal-agent relationships has led researchers to advise the use of monitors to prevent abuse
of power by agents (Bazerman, Neale, Valley, Zajac, and Kim, 1992; Eisenhardt, 1989; Sharma,
1997). Legal advisors are paid on an hourly basis so acquirers’ legal advisors have less incentive to
recommend higher premiums however they too are experts and potential monitors, yet their
presence may reduce adverse behavior by acquirers’ bankers. Acquirers’ and targets’ legal advisors
are coded 1 if the acquirer used a legal advisor and 0 otherwise. The coefficient for acquirers’ legal
advisor is –2.709 and is statistically significant (p < 0.01). Interestingly, the presence of acquirers’
legal advisors can lower the inflationary effect that acquirers’ bankers have on premiums.
Discussion
1
I ran separate models to avoid bias in the results resulting from potential inter-correlations among the interaction variables, as they
were all based on investment bankers’ presence.
138
The results of this study extends results of prior studies by finding that when acquirers do use
bankers, transaction-specific attributes are associated with greater acquisition premiums and
bankers’ first-tier status inflates the premium paid by acquirers. Specifically this study finds that
acquirers’ investment bankers correlate positively with acquisition premiums, even when
controlling for the presence of targets’ investment bankers. Controlling for targets’ investment
bankers is important as targets hire bankers to increase the premium obtained by targets—however
prior studies have not controlled for the presence of targets’ bankers even though both acquirers
and targets hired bankers in 68.1% of the deals in this study. Furthermore, the results of this study
support hypotheses that assert premiums are greater in situations where transaction-specific
attributes create informational disadvantages for acquirers, relative to their bankers. Specifically,
acquirers pay more for targets when they use investment bankers, and targets operate in unrelated
businesses, targets operate in many business areas, and acquirers use non-cash financing to
complete deals. Acquirers also pay more for targets when they use investment bankers and the
bankers have first-tier status. However, based on the results of the exploratory analysis, it appears
that the presence of expert monitors such as legal advisors, can alleviate the aforementioned
inflammatory effects of bankers and transaction-specific attributes on acquisition premiums.
This study extends current knowledge by finding that investment bankers and transaction-specific
attributes have an inflammatory effect on acquisition premiums in two ways. First, Servaes and
Zenner (1996) find that transaction-specific characteristics such as acquirers’ relatedness with
targets, targets’ multiplicity of businesses, and type of acquisition financing are all positively
associated with the choice to use investment bankers. However, the results of this study show that
the use of bankers, combined with transaction-specific attributes, correlates with acquirers paying
greater premiums. It appears that the same factors that cause informational disparities causing
acquirers to use investment bankers in the first place are the factors leading acquirers to pay more
for targets—even though acquirers hire bankers for their expertise and to negotiate better deals for
them so that they ca pay less for targets.
Second, Hayward (2003) concludes that as managers defer to professional advice, their firms’
decisions become more representative of professional biases. He states that by leading clients
toward complex decisions that apply professional expertise, professional firms gain greater control
over such decisions and clients may risk overestimating the efficacy of professional expertise.
Thus, Hayward calls for more attention to the role of professional advisors on these decisions
(2003: 797). This study both gives more attention to the role of professional advisors on acquisition
decisions and also finds that in decisions where professional expertise is retained by acquirers,
transaction-specific attributes appear to increase the premium paid when managers hire
professionals such as bankers. Furthermore, when acquirers’ hire bankers and their bankers have
first-tier status there in an inflationary effect on acquisition premium and this may lend support to
Hayward’s theory that clients may overestimate the efficacy of professional expertise—especially
as first-tier advisors are symbolically more experienced. Conclusively, conditions of informational
disparity may increase acquirers’ reliance on experts and can be detrimental.
This study has some limitations that should be acknowledged. First, the study examined a
time-period where there were a large number of acquisitions. Perhaps high acquisition activity led
to higher premiums becoming more acceptable as firms scrambled to maintain scale relative to
competitors. Therefore, it is not clear that these findings would replicate in other time-periods.
Second, the study includes only public deals as financial information is not available for non-public
deals. Third, the study examines only completed deals. Although, it is difficult to investigate the
effect of investment bankers on acquisitions for deals that were not completed, perhaps acquirers’
bankers’ roles on deals that were not completed is different from their role on completed deals, as
bankers may have advised firms not to make the acquisitions. It is also important to recognize that
139
the findings apply to deals in manufacturing. Acquisitions in services may have different
characteristics than those in manufacturing and may require different services from bankers.
This study has several practical implications. For one, it is of value for investors and managers to be
aware of how the presence of bankers and transaction-specific attributes can cause informational
and experiential disparities for acquirers and may lead to inflated acquisition premiums. The use of
professional experts in acquisition transactions is not necessarily beneficial, thus it is important for
managers to question experts’ advice in order to decide what is best for their firm. It may also be
beneficial for one-time or repeat acquirers to form an in-house acquisition team that can monitor,
supplement, or substitute for investment bankers. Second, acquirers and targets can conduct their
own due diligence to reduce informational disadvantages and thus reduce their reliance on bankers’
advice. One way would be for acquirers to form a strategic alliance with a target prior to acquiring
so they can gather information and gain experience that can enable more objectivity about the
benefits of the acquisition, more informed target choice, and more accurate target valuation. Third,
the use of legal advisors as monitors or neutral third parties in acquisition negotiations may be very
important because mediators can more objectively evaluate deal attributes leading to decisions that
serve the long-term best interests of acquirers, targets, shareholder, and other stakeholders. These
findings should also appease acquirers' and targets' concerns regarding the use of in-house
acquisition teams. Some firms may be skeptical to use their own in-house acquisition team,
thinking that they will be at a professional, informational, and experiential disadvantage but this
may not be the case. In all, these findings should motivate researchers and managers to further
examine the role of professional experts such as investment bankers and legal advisors on
acquisition transactions.
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141
Table 1
Descriptive Statistics and Correlations Among the Variables
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Value of Transaction
Challenged Deal
Friendly Acquisition
Target is a High-Tech Firm
Acquirer Debt/Assets Ratio-3yr
Defense Measure
Relative Size
Acquirer's Acquisition
Target's Acquisition Experience
# 3-Digit SIC Codes in Common
Target Number of SIC codes
Cash Transaction
Target Investment Banker (IB)
Acquirer Investment Banker
Target IB*Relatedness
Acquirer IB*Relatedness
Target IB*Cash Payment
Acquirer IB*Cash Payment
Target IB *Target # of SIC Codes
Acquirer IB *Target # of SIC
Target First-tier IB
Acquirer First-tier IB
Acquirer Legal Advisor
Target Legal Advisor
Premium
*
p < 0.05, ** p < 0.01
Mean
704.02
0.13
0.91
0.53
0.49
1.80
0.78
0.27
0.07
0.70
2.87
0.67
0.68
0.67
0.53
0.57
0.48
2.47
2.07
0.47
0.25
0.26
0.71
0.66
50.77
Std.
2470.18
0.33
0.35
0.50
0.20
0.86
4.23
0.66
0.26
0.46
2.33
0.47
0.47
0.47
0.50
0.50
0.50
2.47
2.51
0.50
0.43
0.51
0.46
0.48
42.67
N
481
481
481
481
481
481
481
481
481
481
481
481
481
481
481
481
481
481
481
481
481
481
481
481
481
1
1.00
-0.03
-0.05
-0.03
0.08*
0.01
0.03
0.09*
0.05
0.05
0.23**
0.07
0.14**
0.14**
0.13**
0.11**
0.14**
0.25**
0.28**
0.00
0.21**
0.27**
0.15**
0.15**
-0.06
2
3
4
1.00
-0.30**
-0.18**
0.07
-0.21**
-0.02
-0.04
0.32**
-0.11**
0.20**
-0.13**
-0.14**
-0.15**
-0.09*
-0.11**
-0.13**
0.10**
0.09*
-0.16**
-0.06
0.02
-0.12**
-0.13**
0.14**
1.00
0.01
-0.06
0.23**
0.01
-0.02
-0.63**
0.12**
-0.10**
0.14**
0.05
0.05
0.06
0.13**
0.10*
-0.03
-0.07
-0.01
0.08*
-0.06
0.07
0.03
-0.11**
1.00
-0.31**
0.01
0.00
0.08*
-0.09*
0.14**
-0.19**
0.15**
0.10*
0.06
0.14**
0.16**
0.16**
-0.14**
-0.11**
0.88**
-0.02
-0.01
0.01
0.09*
-0.03
142
5
6
1.00
-0.07
1.00
0.11** -0.03
-0.08
0.04
0.13** -0.30**
-0.08* 0.15**
0.27**
0.06
-0.21** 0.74**
-0.01 0.14**
0.04
0.17**
-0.07 0.14**
-0.16** 0.63**
-0.12** 0.52**
0.24** 0.12**
0.20** 0.14**
-0.26** 0.01
0.07
0.03
0.14**
0.06
0.07
0.12**
0.00
0.12**
0.07
-0.02
7
8
9
1.00
-0.03
0.00
-0.03
0.07
-0.04
0.00
-0.04
-0.03
-0.05
-0.06
0.06
0.06
0.00
-0.06
-0.05
-0.05
0.00
0.02
1.00
-0.01
0.12**
0.08*
0.10**
0.11**
0.07
0.15**
0.10**
0.13**
0.05
0.09*
0.10**
0.12**
0.04
0.09*
0.09*
-0.02
1.00
-0.15**
0.14**
-0.15**
-0.15**
-0.11**
-0.11**
-0.16**
-0.13**
0.01
0.02
-0.06
-0.11**
0.05
-0.14**
-0.13**
0.06
10
11
1.00
0.09*
1.00
0.06
-0.04
0.24** 0.10**
0.18** 0.05
0.69** 0.14**
0.15** 0.00
0.19** 0.05
0.17** 0.88**
0.20** 0.79**
0.16** -0.15**
0.12** 0.10**
0.12** 0.18**
0.23** 0.09*
0.24** 0.11**
0.03
0.01
Table 1
Descriptive Statistics and Correlations Among the Variables (continued)
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Cash Transaction
Target Investment Banker (IB)
Acquirer Investment Banker
Target IB*Relatedness
Acquirer IB*Relatedness
Target IB*Cash Payment
Acquirer IB*Cash Payment
Target IB *Target # of SIC Codes
Acquirer IB *Target # of SIC
Target First-tier IB
Acquirer First-tier IB
Acquirer Legal Advisor
Target Legal Advisor
Premium
*
p < 0.05, ** p < 0.01
12
1.00
0.06
0.08*
0.10**
0.80**
0.67**
-0.05
0.02
0.11**
0.03
-0.03
-0.01
0.04
-0.09*
13
14
15
16
17
18
19
20
1.00
0.53**
0.72**
0.28**
0.63**
0.29**
0.57**
0.22**
0.39**
0.29**
0.51**
0.95**
0.00
1.00
0.36**
0.31**
0.35**
0.26**
0.32**
0.20**
0.23**
0.35**
0.72**
0.55**
0.05
1.00
0.26**
0.51**
0.26**
0.47**
0.23**
0.31**
0.25**
0.38**
0.69**
0.00
1.00
0.75**
0.17**
0.15**
0.30**
0.12**
0.07
0.27**
0.33**
-0.04
1.00
0.14**
0.34**
0.23**
0.25**
0.13**
0.29**
0.58**
-0.10*
1.00
0.85**
-0.02
0.17**
0.25**
0.32**
0.33**
0.03
1.00
-0.04
0.27**
0.30**
0.33**
0.55**
0.04
1.00
0.03
0.04
0.19**
0.27**
0.02
143
21
22
1.00
0.29** 1.00
0.22** 0.30**
0.36** 0.31**
0.01
0.07
23
24
25
1.00
0.57**
0.03
1.00
0.00
1.00
Intercept
Value of
Challenged
Friendly
Target is a
Acquirer
Defense
Relative Size
Acquirer's
Target's
# 3-Digit SIC
Target
Cash
Target
Acquirer
Target
Acquirer
Target
Acquirer
Target IB
Acquirer IB
Target
Acquirer
Target Legal
Acquirer Legal
Model 1
Coeff.
S.E.
57.911*** 5.363
-0.002*** 0.000
18.971*** 3.138
-12.150*** 3.119
-0.471
1.937
13.383** 5.055
1.737
5.192**
-0.001** 0.000
-0.162
1.515
-1.219
4.885
2.547†
1.965
-0.487
0.447
-7.190** 2.990
R-Squared:
0.092
F-statistic:
2.215
p-value
0.002
Increase in
†
p < 0.10, * p < 0.05,
Table 2
Results of Ordinary Linear Regression
Model 2
Model 3
Model 4
Model 5
Model 6
Model 7
Coeff.
S.E.
Coeff.
S.E.
Coeff.
S.E.
Coeff.
S.E.
Coeff.
S.E.
Coeff.
S.E.
47.676*** 6.116 40.765*** 6.367 53.692*** 6.427 51.429*** 6.184 50.614*** 6.207 49.127*** 6.364
-0.002*** 0.000 -0.002*** 0.000 -0.002*** 0.000 -0.002*** 0.000 -0.002*** 0.000 -0.002*** 0.000
17.877*** 3.215 17.896*** 3.210 16.891*** 3.220 18.162*** 3.209 17.522*** 3.219 18.981*** 3.248
-10.554*** 3.154 -10.320*** 3.153 -10.147*** 3.170 -10.976*** 3.151 -11.100*** 3.170 -11.313*** 3.172
-0.012
1.953
0.198
1.969
0.346
1.973 -16.733*** 4.294
0.062
1.975
-0.620
1.988
**
**
**
13.714
5.074 13.977
5.067 13.473
5.078 14.792** 5.106 12.731** 5.092 14.647** 5.090
5.300**
1.737
5.340**
1.737 5.687*** 1.737
4.757**
1.740
4.838**
1.754 5.602*** 1.742
**
**
**
**
**
-0.001
0.000 -0.001
0.000 -0.001
0.000 -0.001
0.000 -0.001
0.000 -0.001** 0.000
-0.065
1.527
0.223
1.523
-0.183
1.523
-0.471
1.525
-0.079
1.528
-0.138
1.524
-2.483
4.904
-2.385
4.895
-2.329
4.963
-3.974
4.929
-4.160
4.953
-2.138
4.931
2.203
1.983
2.665†
1.994
2.098
1.995
1.689
1.985
2.059
1.985
2.645†
2.002
†
†
-0.482
0.447
-0.516
0.447
-1.868
1.187
-0.424
0.448
-0.583
0.449
-0.414
0.448
-7.361** 3.003
3.788
4.473 -8.338** 3.012
-5.994*
3.013
-6.849*
3.012 -8.231** 3.035
-0.178
2.307
9.958**
3.373 -9.484** 3.413
-5.081*
2.992
-1.729
2.441
0.968
2.387
**
**
***
6.911
2.292
6.738
2.402 7.792
2.425
5.295*
2.338
5.446*
2.360 10.220*** 2.654
-0.161
3.622
-16.353*** 4.157
-1.697*
1.034
3.891*** 1.000
13.487*** 4.153
7.718*
4.104
2.018
2.290
5.267**
2.077
-1.596
3.161
-2.709** 1.054
0.098
2.076
0.002
0.070
**
p < 0.01, *** p < 0.001
0.106
2.060
0.002
0.147
0.105
2.048
0.002
0.141
144
0.106
2.078
0.002
0.155
0.102
1.978
0.003
0.106
0.102
1.973
0.003
0.103
ASAC 2005
Toronto, Ontario
Laurent Renard
Gilles St-Amant
Département Management et Technologie
Université du Québec à Montréal
CAPACITÉ ORGANISATIONNELLE INTERNET ET CAPACITÉS DYNAMIQUES :
LE CAS D’UNE ORGANISATION DE L’INDUSTRIE DU TOURISME AU CANADA
On présente les résultats d’une recherche qualitative menée auprès d’une
entreprise canadienne de l’industrie du tourisme qui a mis en œuvre différents
projets de commerce électronique de type entreprise à consommateurs (B2C) et
interentreprises (B2B), de 1998 à 2004, dans le cadre de sa stratégie Internet.
L’objectif de la recherche est de comprendre le processus de création et de
développement de la capacité organisationnelle Internet en caractérisant son cycle
de vie (Helfat et Peteraf, 2003) et le rôle joué par les capacités dynamiques dans ce
processus (Eisenhardt et Martin, 2000; Teece et al. 1997; Winter, 2000; Zollo et
Winter, 2002).
L’industrie du tourisme illustre très bien les changements induits par l’avènement des
technologies Internet 1 . En effet, bien que le produit touristique final prenne la forme d’un
assemblage de différents éléments, l’information y occupe un rôle de premier plan. Cette
particularité a pour conséquence que les technologies Internet vont jouer un rôle important dans la
transformation structurelle qui est observée dans l’industrie du tourisme canadienne (Buhalis,
2003; Werthner et Klein, 1999). Ces technologies Internet permettent l'adoption de nouveaux
standards transactionnels autorisant des innovations à dominante technologique, commerciale,
organisationnelle et institutionnelle. Toutefois, Porter (2001) rappelle que les technologies Internet
en soi apportent rarement un avantage concurrentiel, mais que leur utilisation rend encore plus
importante la nécessité d’avoir une stratégie Internet 2 . D’autre part, la mise en œuvre d’une
stratégie Internet pose également le problème de la manière dont une organisation pourra intégrer
ces technologies au cœur de ses activités. En d’autres termes, l’organisation devra posséder une
capacité organisationnelle particulière que l’on appelle capacité organisationnelle Internet et que
l’on définit comme étant une habileté pour déployer, combiner et coordonner des ressources
(notamment les technologies Internet) et des compétences à travers différents flux de valeur (donc
des processus de commerce électronique) pour mettre en œuvre sa stratégie Internet. Cependant,
cette capacité organisationnelle Internet n’est pas présente la plupart du temps dans une
organisation qui n’est pas née « point com », ce qui implique qu’elle devra être créée et développée.
D’où la première question de recherche : comment une organisation qui œuvre dans l’industrie du
1
Les technologies Internet sont une sous-catégorie des technologies de l’information et de communication. Elles
comprennent d’une part, un ensemble d’éléments techniques matériels et logiciels constitutifs des réseaux Internet,
intranet, extranet et d’autre part, les applications informatiques qui utilisent ces réseaux pour faire transiter de
l’information nécessaire aux activités d’affaires.
2
On considère la stratégie Internet tout autant sous l’angle de sa formation, de son implantation que de son évolution
puisque les résultats obtenus, c’est-à-dire la stratégie réalisée et les retours d’expérience qui y sont associés, vont
transformer la stratégie initiale. La stratégie Internet de Zêta est « tâtonnante » (Avenier, 1997) dans la mesure où elle
repose sur la mise en œuvre de projets de commerce électronique qui sont des actions délibérées, qui reposent sur une
rationalité procédurale et sur une dialectique continuelle entre les fins visées et les moyens utilisés au sein de situations
émergentes qui imposent une révision constante de la stratégie initialement formée.
145
tourisme crée-t-elle et développe-t-elle sa capacité organisationnelle Internet? Ce processus de
création et de développement de la capacité organisationnelle Internet nécessite la présence au sein
de l’organisation de capacités dynamiques (Eisenhardt et Martin, 2000; Teece et al., 1997; Zollo et
Winter, 2002). Les capacités dynamiques vont déterminer la façon dont l’organisation va changer
et se transformer dans le temps étant donné sa dépendance de sentier et les positions de marché
qu’elle occupe (Teece, et al., 1997). Elles vont permettre d’identifier et d’exploiter les opportunités
d’affaires qui s’offrent à l’organisation en ce qui concerne l’utilisation des technologies Internet,
d’une part, et de réaliser l’intégration, la reconfiguration et l’acquisition des ressources nécessaires
à la création et au développement de la capacité organisationnelle Internet, d’autre part. Les
capacités dynamiques sont exprimées dans les différents processus de gestion (Eisenhardt et
Martin, 2000), qui se retrouvent tant au niveau stratégique qu’opérationnel1. Ceci amène à poser la
seconde question de recherche : quelles sont les différentes capacités dynamiques qui sont
mobilisées et quel est leur rôle dans le processus de création et de développement de la capacité
organisationnelle Internet?
Le texte est organisé en quatre parties. Dans une première partie, on présente le cadre conceptuel de
la recherche, dans une deuxième, le cadre méthodologique, dans une troisième, les résultats. On
termine par une conclusion.
Modèle théorique de la capacité organisationnelle Internet et des capacités dynamiques
On aborde cette recherche en faisant référence à un modèle théorique qui puisse rendre
compte de la dynamique du changement et l’on s’est inspiré de la démarche contextualiste
(Pettigrew, 1987) qui se compose de trois grandes dimensions interreliées entre elles : le contenu, le
contexte et le processus (Pettigrew, 1987). Le modèle théorique a émergé de façon inductive de la
recherche.
Contexte
Le contexte externe renvoie à l’environnement concurrentiel (Amit et Schoemaker, 1993; Porter,
1991) et technologique (Cummings et Doh, 2000) qui va déterminer les conditions du jeu
concurrentiel dans lequel évolue l’organisation de même que la nature des ressources et capacités
organisationnelles (Internet et fonctionnelles) qui vont s’avérer être des actifs stratégiques (Amit et
Schoemaker, 1993; Peteraf, 1993). Quant au contexte interne, il renvoie d’une part à la stratégie
générale de l’organisation et à sa stratégie en systèmes d’information et d’autre part, aux différentes
capacités organisationnelles qui sont disponibles à l’organisation pour mettre en œuvre les
capacités dynamiques qui vont permettre la création et le développement de la capacité
organisationnelle Internet. Ce modèle repose sur une vision systémique d’une organisation qui est
envisagée comme un ensemble de capacités organisationnelles interreliées entre elles. On postule
ici à l’existence de relations entre les capacités organisationnelles de l’organisation et les capacités
dynamiques, les premières servant de « toile de fond » aux secondes (Zollo et Winter, 2002). Les
éléments du contexte qui viennent d’être définis vont jouer un rôle d’inhibiteur ou de facilitateur
dans la mise en œuvre de la stratégie Internet et dans le processus la création et de développement
de la capacité organisationnelle Internet.
1
On adopte ici la position de Eisenhard et Martin (2000) en ce qui concerne la définition des capacités dynamiques. Pour
ces auteurs : “ First, dynamic capabilities consist of specific strategic and organizational processes like product
development, alliancing, and strategic decision making that create value for firms within dynamic markets by
manipulating resources into new value-creating strategies. Dynamic capabilities are neither vague nor tautologically
defined abstractions. Second, these capabilities, which often have extensive empirical research streams associated with
them, exhibit commonalities across effective firms or what can be termed ‘best practice’. (p.1106)”.
146
Contenu
La dimension contenu fait référence à la capacité organisationnelle Internet, que l’on a défini
précédemment comme étant l’habileté pour déployer, combiner et coordonner des ressources et des
compétences à travers différents flux de valeur (donc des processus de commerce électronique)
pour mettre en œuvre une stratégie Internet de type B2C ou B2B. Cette habileté peut être évaluée en
regard de l’atteinte ou non des objectifs de performance initialement définis. D’un point de vue
analytique, il est raisonnable de penser qu’il existe un niveau minimum de résultats ou niveau de
performance, sous lequel les aspirations de l’organisation ne peuvent plus être rencontrées (Winter,
2000). L’évolution de la capacité organisationnelle Internet peut être représenté selon un modèle du
cycle de vie de la capacité organisationnelle (Helfat et Peteraf, 2003).
Figure 1 Modèle théorique de la recherche
-
Environnement concurrentiel
Stratégie de l'organisation
-
Contexte Externe
Contexte Interne
+
+
Environnem ent technologique
Stratégie Systèm e d'information
Ressources et com pétences
Capacités organisationnelles
Fonction SI
de
n
Pr
de o c e
la s s
s t us
ra d
té e
g i fo
e rm
In
t e a t io
rn n
et
Capacité organisationnelle
Internet
ti o
A
la pp
s t r en
ra t
t é is s
gi a
e ge
In
te e t
rn év
e t ol
u
Niveau stratégique
Fonctions m étiers
Projet de commerce
électronique
de
Pr
o
de c e
la s s u
st s
ra d
t é ' im
gi p
e la
In n t
t e at
r n io
et n
n te
t io In
u a ie
al é g
év t
d' ra
s st
s u la
es d e
oc ts
P r lt a
su
re
Niveau opérationnel
s
rn
et
Processus
On s’intéresse aux capacités dynamiques qui sont mobilisées par l’organisation pour
maintenir son adaptation aux conditions changeantes de son environnement qui découlent de
l’arrivée des technologies Internet et de leur utilisation par des organisations concurrentes. En effet,
les actions des organisations concurrentes vont venir modifier la dynamique concurrentielle qui
prévaut dans l’industrie du tourisme, ce qui nécessite de la part de l’organisation de réagir pour
contrecarrer ces menaces et pour saisir les opportunités stratégiques qu’elle découvre. Dans ce cas
précis, la problématique de l’organisation à l’étude va être de former, d’implanter, d’exploiter et de
faire évoluer sa stratégie Internet, ce qui nécessite de créer et de développer sa capacité
organisationnelle Internet. Pour parvenir à cet objectif, l’organisation devra réaliser quatre types
d’activités spécifiques, qui se retrouvent dans des processus de niveau stratégique et opérationnel.
Ces processus expriment et mettent en œuvre les capacités dynamiques de l’organisation. On
précise que l’organisation, au départ, n’a pas de stratégie Internet, et en corollaire, qu’elle ne
possède pas de capacité organisationnelle Internet. Elle devra donc: 1) former sa stratégie Internet,
c’est-à-dire qu’elle devra identifier les opportunités stratégiques qui s’offrent à elle en ce qui
concerne l’utilisation des technologies Internet en définissant un problème stratégique qui va
nécessiter d’élaborer un plan d’action stratégique; 2) implanter sa stratégie Internet pour apporter
une réponse au problème stratégique, c’est-à-dire qu’elle devra réaliser l’intégration, la
147
reconfiguration et l’acquisition des ressources et des compétences nécessaires à la création et au
développement de sa capacité organisationnelle Internet ce qui va lui permettre par la suite
d’exploiter sa stratégie Internet en assurant le passage entre le « vouloir faire », « le pouvoir faire »
et le « faire » de l’organisation; 3) Évaluer la performance atteinte par l’exploitation de sa
stratégie Internet, c’est-à-dire qu’elle devra colliger des informations formelles et informelles en ce
qui concerne le pilotage du projet, les problèmes rencontrés, les opportunités découvertes et la
performance atteinte. Ces informations sont également essentielles pour évaluer le niveau
d’apprentissage de la capacité organisationnelle Internet et décider des modifications et
ajustements à apporter en conséquence. 4) Faire évoluer sa stratégie Internet, c’est-à-dire qu’elle
devra réaliser des activités d’apprentissage stratégique qui porte sur l’intégration des retours
d’expérience qui proviennent de l’évaluation de la performance en évitant de refaire les mêmes
erreurs et en prenant en compte les transformations qui se sont déroulées au niveau du contexte
interne et externe de l’organisation. C’est à ce moment que l’organisation choisit de faire évoluer sa
stratégie Internet et de continuer ou non son apprentissage de la capacité organisationnelle Internet.
On précise également que la manière dont l’organisation réalise ces quatre processus est
contributive de la « qualité » de la capacité organisationnelle Internet qui sera créée et développée.
En effet, ces processus peuvent être plus ou moins formalisés et structurés, et utiliser différentes
méthodologies de gestion (Eisenhardt et Martin, 2000). De même, la réalisation de ces processus va
se traduire par un ensemble d’apprentissages (Zollo et Winter, 2002), qui permettront d’en
améliorer leur réalisation dans une étape subséquente de développement de la capacité
organisationnelle Internet.
Cadre méthodologique
Pour répondre aux deux questions de recherche, on réalise une étude de cas (Yin, 1994) en
profondeur d’une organisation de l’industrie du tourisme canadienne. L’organisation choisie, que
l’on nomme Zêta, occupe une position dominante dans son industrie. À l’intérieur de ce cas, l’unité
d’analyse retenue est tous les projets de commerce électronique B2C et B2B qui découlent de la
stratégie Internet. Trois grandes sources d’évidence ont été employées: la documentation relative à
l’organisation, les données archivées et les entrevues. 30 entrevues semi-directives ont été réalisées
auprès de 20 membres de l’organisation. Les répondants ont été choisis en regard de deux grandes
dimensions : selon leur position hiérarchique et fonctionnelle dans l’organisation, selon la nature
de leur participation à la stratégie Internet et aux projets de commerce électronique. Dans un
premier temps, et comme phase préparatoire, une étude de cas a été réalisée. Dans un deuxième
temps, à partir de l’étude de cas préliminaire, on est passé à une étape supplémentaire dans
l’agrégation des données et leur synthèse en recourant à une approche de représentation graphique
de type organigramme (visual mapping) (Langley, 1999). La dernière étape consistait à comparer
les résultats obtenus avec le cadre d’analyse provisoire et produire une synthèse théorique.
Plusieurs principes ont été respectés durant la recherche pour assurer sa validité et sa fiabilité (Yin,
1994). Premièrement, différentes sources d’évidence ont été utilisées ce qui a permis une
triangulation des données pour permettre de corroborer le phénomène à l’étude. En second, on a
créé une base de données de l’étude de cas de façon à la rendre disponible pour tout autre
chercheur. Troisièmement, on a utilisé la technique de la répétition du codage après trois semaines.
Quatrièmement, les résultats de la recherche ont été validés par la personne ressource de
l’organisation à l’étude. Finalement, la fiabilité a été assurée par une documentation des procédures
qui ont été suivies durant tout le déroulement de la recherche.
148
Résultats
On présente tout d’abord, l’organisation à l’étude, puis, en second, la stratégie Internet qui a
été poursuivie par Zêta. Par la suite, on présente le cycle de vie de la capacité organisationnelle
Internet et le rôle joué par les capacités dynamiques.
Présentation de l’organisation
Zêta est une organisation qui se spécialise dans l’organisation, la commercialisation et la
distribution de produits touristiques, notamment des voyages vacances. Elle a vu le jour, il y a une
quinzaine d’années, avec la fusion de deux voyagistes expéditifs et la création d’une compagnie
aérienne spécialisée dans les vols nolisés. Depuis ses débuts, elle a connu un développement
continu en adoptant une stratégie d’intégration verticale (voir tableau 1 et 2 en annexe). Elle réalise
des revenus, pour l’année 2003, de plus de deux milliards de dollars canadiens, et elle intègre une
vingtaine de filiales qui lui appartiennent soit en pleine propriété soit en partie. Cette organisation
est structurée autour de trois grandes activités qui composent sa chaîne de valeur, à savoir des
activités de distribution de produits touristiques, des activités de création de produits touristiques et
des activités de transport aérien. On précise toutefois que son cœur de métier est composé des
activités des voyagistes expéditifs et réceptifs.
Stratégie Internet et chemin d’évolution de la capacité organisationnelle Internet
La stratégie Internet de Zêta est étudiée sur une période de temps de quelque 6 années,
c’est-à-dire, de 1998 à 2004 (voir figure 1 en annexe). Zêta met d’abord en œuvre un projet de
commerce électronique B2C qui verra la création de l’agence de voyages virtuelle Oméga
(1998-2002). Les technologies Internet vont donc être exploitées localement c’est-à-dire
uniquement au sein de cette agence de voyages virtuelle (Venkatraman, 1995). À partir de 2002, la
stratégie Internet va évoluer progressivement vers une stratégie de distribution multicanal qui va
miser sur les synergies entre le canal de distribution électronique (sites Web transactionnels et
agence de voyages virtuelle), physique (l’agence de voyages ayant pignon sur rue), et un centre
d’appels, et ce, pour soutenir les activités de distribution de ses différentes filiales (réseaux
d’agences de voyages, compagnie aérienne, voyagistes). Les technologies Internet vont donc être
intégrées à l’interne (Venkatraman, 1995), toutefois, on précise que cette intégration ne vient pas
bouleverser les processus opérationnels de ces filiales. À partir de 2003, la stratégie de Zêta évolue
de façon plus importante puisque l’organisation va mettre en œuvre un projet de commerce
électronique B2B orienté distribution. L’objectif sera de réviser les processus de distribution des
produits touristiques entre les voyagistes, qui sont les producteurs de produits touristiques et les
réseaux de distribution physiques et électroniques qui appartiennent ou non à Zêta. En d’autres
termes, ce projet marque une étape importante puisque les technologies Internet sont dorénavant
utilisées au sein des activités des voyagistes qui composent son cœur de métier. Elles deviennent un
des moteurs de la révision des processus de distribution avec l’objectif d’en améliorer l’efficacité et
l’efficience. On assiste donc à une recomposition des processus de gestion de Zêta à l’aide des
technologies Internet (Venkatraman, 1995).
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Figure 2 : Chemin d'évolution de la stratégie Internet
Étendue
Fort
Degré de transformation de l'organisation
4. Reconception du réseau de gestion: CE interentreprises orientés
fournisseurs (à venir)
3. Reconception des processus : CE interentreprises orientés agences de
voyages
2. Intégration interne: distribution multicanal
Niveaux
révolutionnaires
Niveaux
évolutifs
Locale
1. Exploitation en local : agence de voyages virtuelle
Faible
Faible
Capacité organisationnelle Internet
Redéfinition des objectifs de l'organisation (une entreprise en réseau à
venir)
Fort
Éventail des bénéfices potentiels de
l'utilisation des technologies Internet
De façon générale, on retiendra qu’avant la création de son agence de voyages virtuelle
Oméga, Zêta n’a aucune expérience dans le domaine du commerce électronique : sa capacité
organisationnelle Internet est donc inexistante. Sur une période de quelque six années, cette
capacité organisationnelle va être créée et développée à mesure que cette organisation met en
œuvre différents types de projets de commerce électronique. Ce processus d’évolution témoigne
également de la place qu’occupe progressivement la capacité organisationnelle Internet par rapport
aux autres capacités organisationnelles de Zêta. Cette capacité organisationnelle Internet, qui, au
départ, n’est utilisée qu’à la marge des activités traditionnelles de Zêta, c’est-à-dire au sein de
l’agence de voyages virtuelle Oméga, devient de plus en plus importante en évoluant
progressivement vers une capacité organisationnelle cardinale (Hamel et Prahalad, 1995). En effet,
elle se trouve dès lors mobilisée dans de nombreux processus critiques de l’organisation, tant au
niveau des processus de distribution vers les clients finaux que des processus de distribution vers
les différents réseaux de distribution de Zêta. Elle participe directement à l’atteinte des objectifs
stratégiques qui sont poursuivis en étant intégrée au modèle d’entreprise (Rapport annuel, Zêta,
2003). Cette figure porte également l’emphase sur les apprentissages qui sont réalisés par Zêta en
ce qui concerne la création et le développement de sa capacité organisationnelle Internet et le rôle
joué par les capacités dynamiques dans ce processus. Ces apprentissages témoignent du
développement d’une compréhension collective partagée en ce qui concerne la stratégie Internet et
l’utilisation des technologies Internet au sein de Zêta (Zollo et Winter, 2002)
Cycle de vie de la capacité organisationnelle Internet et capacités dynamiques
On utilise le cadre d’analyse présenté précédemment pour étudier le cycle de vie de la
capacité organisationnelle Internet et le rôle joué par les capacités dynamiques. On présente le
contexte interne et externe qui définissent les conditions de l’action stratégique ainsi que les
différents processus qui expriment et mettent en œuvre les capacités dynamiques de Zêta.
150
Figure 3 Cycle de vie de la capacité organisationnelle Internet de Zêta (1998-2004)
Étapes du développem ent de la capacité organisationnelle Internet
Étape de la création
et du
développement
Étape du
redéploiement et
de la réplication
Étape du
déploiement
Étape de la
maturité
Com merce électronique d'entreprise à consom m ateurs
1ière période
1ière période
-
concurr entiel
-
Stratégie de l'organisation
Ressources
Conte xte Inte rne
+
Envir onnement
Stratégie Système d'infor mation
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1995
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2000
2003
2002
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2005
2006
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Projet
Création et de développement de la capacité organisationnelle Internet (1998-2002)
Il s’agit d’une étape importante durant laquelle Zêta va commencer son processus
d’accumulation des ressources et compétences qui sont nécessaires à l’exploitation de sa stratégie
Internet qui renvoie à l’exploitation d’une agence de voyages virtuelle. Ces ressources et
compétences vont avoir une influence sur les étapes suivantes d’évolution de la capacité
organisationnelle. Durant cette étape un certain nombre de connaissances vont être créées et
cristallisées dans le système technique qu’est l’agence de voyages virtuelle et qui définit un
archétype de connaissances (Nonaka et Takeuchi, 1997).
Contexte externe et interne. En 1998, les concurrents traditionnels de Zêta n’ont pas encore de
stratégie Internet. L’environnement technologique qui prévaut à cette époque est dominé par des
systèmes d’information légués qui ne sont pas ou peu compatibles entre eux. Il existe donc peu de
normes technologiques communes pour les communications à part dans le domaine de la
distribution électronique via les Systèmes Mondiaux de Distribution (Werthner et Klein, 1999). De
nouveaux joueurs apparaissent au Canada à partir de 1998, qui capitalisent sur les technologies
Internet pour proposer une nouvelle façon de distribuer les produits touristiques au moyen de sites
Web transactionnels et ils sont considérés comme une menace par Zêta (ex : Expedia; Travelocity,
etc.). Durant la période qui s'échelonne de 1997 à 2001, la stratégie d'intégration verticale de Zêta
arrive à maturité (voir tableau n°2 en annexe). On assiste au prélude d’une transformation
structurelle de première importance qui se traduit par l’embauche de nouveaux gestionnaires
d’expérience au niveau du siège social pour seconder la haute direction du groupe. L’objectif est
d’introduire les « meilleures pratiques » de gestion ce qui va se manifester par une amélioration
progressive des capacités organisationnelles métiers et en gestion des SI (voir tableau n°3 en
annexe) et, en corollaire, de passer progressivement d’une culture entrepreneuriale à une culture
corporative qui reflète davantage le niveau de développement du chiffre d’affaires de Zêta.
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Formation de la stratégie Internet de commerce électronique d’entreprise à consommateurs
autour d’une agence de voyages virtuelle. Ce processus débute par une série de discussions
informelles entre le chef de la direction des systèmes d’information qui a été embauché en 1997 et
le vice-président exécutif en charge de la distribution des produits touristiques de Zêta. Ces
gestionnaires prennent alors conscience de l’importance stratégique de la distribution en direct des
produits touristiques du groupe de même que les bouleversements induits par l’avènement des
technologies Internet. Rapidement, la réflexion se structure et focalise sur la création d’une agence
de voyages virtuelle qui serait une nouvelle entité organisationnelle autonome pour vendre des
produits touristiques, notamment des forfaits vacances, en provenance des filiales de Zêta et des
organisations concurrentes en adoptant une position de premier entrant (Lieberman et
Montgomery, 1988). Cette stratégie Internet particulièrement ambitieuse et innovatrice en regard
de l’inexpérience de Zêta dans le domaine du commerce électronique B2C est caractéristique d’une
part de sa culture entrepreneuriale qui prévaut à cette époque et d’autre part, de la croyance
partagée, qui va d’ailleurs s’avérer sans fondement par la suite, que les technologies Internet sont
des technologies perturbatrices (Christensen, 1997). Ce processus de formation de la stratégie
Internet est un processus structuré qui va nécessiter la recherche, l’organisation, la diffusion et la
discussion de nouvelles connaissances pour alimenter la réflexion stratégique puisque
l’organisation n’a pas d’expérience dans le domaine. Progressivement un univers de discours
propre au domaine du commerce électronique se développe au sein de Zêta.
Processus d’implantation de la stratégie de commerce électronique bâtie autour d’une
agence de voyages virtuelle. Ce processus qui se trouve à l’interface des niveaux stratégiques et
opérationnels va exprimer ce que l’organisation sera capable de faire, donc son « pouvoir faire »,
en ce qui concerne l’implantation de la stratégie Internet qui a été formée précédemment. Ce
processus correspond à la phase de cristallisation des connaissances dans un système technique qui
est un archétype de connaissances (Nonaka et Takeuchi, 1997). Toutefois, ce processus
d’implantation de la stratégie Internet ne se fait pas sans heurts ce qui révèle l’inexpérience et le
manque de maturité de Zêta au niveau de sa capacité organisationnelle de gestion de projet qui est
insuffisamment maîtrisé par la fonction SI. En d’autres termes, on note un décalage très important
entre le « vouloir faire » de Zêta et son « pouvoir faire » en matière de stratégie Internet.
Processus d’exploitation de l’agence de voyages virtuelle : mise en œuvre de la capacité
organisationnelle Internet. L’agence de voyages virtuelle est officiellement mise en ligne le 1er
février 2000 mais elle connaît des difficultés techniques très importantes qui mettent en lumière les
différentes erreurs de conceptualisation qui ont été commises au niveau de l’architecture du moteur
de recherche et de réservation sur lequel repose le site Web transactionnel. Même si les attentes en
termes de performance de la capacité organisationnelle Internet ne sont pas atteintes, les
gestionnaires de Zêta ne décident pas d’abandonner purement et simplement ce projet stratégique
(Helfat et Peteraff, 2003). Au contraire, ils vont relancer un nouveau cycle d’apprentissage, qui va
consister à résoudre les problèmes techniques qui sont apparus au niveau du moteur de recherche et
de réservation sur lequel repose le site Web transactionnel. D’autre part, conscient des lacunes de la
fonction SI en ce qui concerne la gestion de projet, Zêta va choisir d’impartir le développement de
cette seconde version du site auprès d’un fournisseur. Le nouveau site Web transactionnel et le
moteur de recherche sont mis en ligne le 1er septembre 2000.
Cette première étape de création et de développement de la capacité organisationnelle
Internet témoigne de la nature des capacités dynamiques de Zêta qui sont exprimées et mises en
œuvre dans les différents processus de gestion que l’on a présentés précédemment et des difficultés
rencontrées par Zêta pour implanter sa stratégie Internet. Plusieurs éléments vont permettre
d’expliquer ces difficultés. Au niveau du contexte externe, on mentionne le manque de maturité des
technologies Internet et la difficulté de trouver des partenaires qui les maîtrisent à cette époque. Au
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niveau du contexte interne, en premier lieu, on trouve les pressions liées à la volonté d’être un
premier entrant sur le marché. En second lieu, si l’arrivée de nouveaux gestionnaires d’expérience
au niveau du siège social, qui ont été engagés pour améliorer les pratiques de Zêta, a permis de
rehausser le niveau de compétence de la haute direction, leur impact au niveau opérationnel est
encore faible. En conséquence, il se crée un déséquilibre entre le processus de formation et le
processus d’implantation de la stratégie Internet qui exprime un manque de cohérence entre le
« vouloir faire » et le « pouvoir faire » de l’organisation. En d’autres termes, si Zêta a pu
rapidement définir une stratégie Internet, son implantation va mettre en relief le manque de
maturité de la capacité organisationnelle de gestion de projet. Cette situation témoigne également
du niveau de développement insuffisant des capacités organisationnelles de la fonction SI qui sont
critiques dans toute stratégie technologique. Cependant, la résolution de ces problèmes sont des
sources d’apprentissage et donc de création de nouvelles connaissances qui vont être incorporées
au stock de connaissances que possède déjà Zêta, ce qui va permettre d’améliorer la réalisation de
ce processus critique de gestion de projet dans la phase suivante de développement de la capacité
organisationnelle Internet.
Redéploiement et réplication de la capacité organisationnelle Internet (2002-2004)
Après avoir réalisé la création et le développement de la capacité organisationnelle Internet
qui permet l’exploitation de l’agence de voyages virtuelle, les gestionnaires vont donc être
confrontés à un choix qui porte sur la suite à donner à ce processus de développement (Hamel et
Prahalad, 1995). Plusieurs options s’offrent alors à eux : soit redéployer, renouveler ou recombiner
la capacité organisationnelle, soit la répéter, soit l’abandonner de façon immédiate ou progressive
(Helfat et Peteraf, 2003). Plusieurs éléments vont influencer la prise de décision concernant la
relance ou non de l’apprentissage de la capacité organisationnelle : 1) l’analyse de la performance
obtenue par l’agence de voyages virtuelle Oméga, à un moment donné, en fonction de l’atteinte ou
non d’objectifs définis dans des plans, des cibles et des seuils de succès (Winter, 2000). 2) l’analyse
de l’évolution du contexte interne et externe dans lequel l’action stratégique s’est produite. On va
voir dans la suite du texte que Zêta va choisir de redéployer sa capacité organisationnelle d'une part,
mais aussi de la répliquer, d’autre part.
Contexte externe et interne1.Le marché du tourisme au niveau mondial et au niveau des marchés
de Zêta se dégrade singulièrement de la fin de l’année 2001 jusqu’en 2003 ce qui va nécessiter une
réaction rapide de la part de Zêta pour maintenir son adaptation au contexte externe. Zêta va alors
accélérer la mise en œuvre des changements qu’elle avait débutés dans la période précédente,
notamment au niveau de la révision de sa structure organisationnelle et de ses processus pour
obtenir des gains d’efficience et d’efficacité. La transformation de la stratégie générale va avoir
aussi un effet sur la stratégie Internet qui doit être adaptée à ce contexte de rareté des ressources
financières. Le marché canadien du commerce électronique B2C dans le domaine touristique
continue à se développer à un rythme soutenu. Les principaux joueurs qui se posent en concurrents
directs d’Oméga sont bien installés sur le marché (Expédia, Travelocity, Destina). En ce qui
concerne l’environnement technologique, les technologies Internet sont de mieux en mieux
maîtrisées au niveau des organisations. Les fournisseurs de technologie les intègrent dorénavant au
cœur de leurs applications commerciales et proposent des solutions complètent pour faire du
commerce électronique, pour améliorer la gestion des inventaires ou pour supporter la réalisation
des forfaits vacances.
1
La présentation du contexte externe et interne vaut également pour la stratégie Internet qui met en oeuvre un projet de
commerce électronique interentreprises orienté distribution.
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Processus d’évaluation de la stratégie Internet bâtie autour de l’agence de voyages virtuelle
Oméga. Du lancement de la deuxième version de son site Web transactionnel, qui a lieu en
septembre 2000, jusqu'à l'automne 200, l’agence de voyages virtuelle Oméga est quand même
exploitée. Les gestionnaires d’Oméga vont procéder à l’évaluation des premiers résultats
d’exploitation en regard des objectifs de performance qui étaient consignés dans le plan d’affaires.
Zêta visait à s'accaparer 50% du marché du voyage en ligne au Canada et devenir ainsi le principal
distributeur de produits touristiques du groupe. Cependant, ses premiers résultats d’exploitation
sont modestes par rapport aux objectifs stratégiques. Entre septembre 2000 et février 2001, l'agence
de voyages virtuelle a fait voyager 15 000 personnes. Alors que le plan d'affaires initial avait prévu
des revenus de 6,7 millions de dollars à la fin de l'année 2000, les revenus de commission n'auront
été que d'un million de dollars. À la fin de l'année 2001, les revenus de commissions vont atteindre
2,7 millions alors que les prévisions étaient de 29 millions de dollars dans le plan d'affaires.
Processus d’évaluation et d’évolution de la stratégie Internet, formation de la stratégie de
distribution multicanal. Le processus d’évaluation de l’exploitation de la stratégie Internet a
permis la création des connaissances « de qualité » qui sont maintenant disponibles pour les
gestionnaires de la haute direction ce qui permet de faire baisser l’ambiguïté et l’incertitude dans
leur prise de décision. Ils décident alors d’opérer une transformation de la stratégie Internet initiale
afin de l’adapter au nouveau contexte externe et interne. Celle-ci va évoluer vers une stratégie de
distribution multicanal de type « clic, talk, walk ». Zêta abandonne donc l'idée de faire d'Oméga la
marque phare du groupe dans le domaine du commerce électronique d’entreprise à consommateurs
puisqu’elle ne peut pas soutenir la compétition avec les grands joueurs de ce domaine, notamment
Expedia et Travelocity étant donné le manque de moyens marketing dont elle dispose. Du point de
vue de Zêta, il semble plus avantageux de capitaliser sur l’image de marque des autres filiales qui
sont déjà bien établies sur leur marché respectif, qui deviennent des ressources complémentaires
(Teece et al., 1997).
Processus d’implantation de la stratégie de distribution multicanal . Le processus
d’implantation de la stratégie se fait en suivant ces deux grands axes. On précise que les
apprentissages réalisés lors de la mise en œuvre de l’agence de voyages virtuelle ont pour
conséquence que cette implantation de la stratégie se déroule sans problème. En premier lieu, on
assiste à la restructuration et au repositionnement de l’agence de voyages virtuelle Oméga qui va
devenir une agence de voyages virtuelle qui vend à rabais des produits touristiques de dernière
minute, ce qui va nécessiter de redéployer la capacité organisationnelle Internet dans un nouveau
couple produit-marché (Helfat et Peteraf, 2003). En second lieu, on assiste à la mise en oeuvre,
auprès de certaines filiales de Zêta d’un ensemble de sites Web transactionnels, ce qui nécessite
dans ce cas-ci de répliquer la capacité organisationnelle Internet. Cela signifie que celle-ci va être
utilisée pour produire un même type de produit mais dans un autre marché que celui qui était visé
au départ (Helfat et Peteraf, 2003). La réplication nécessite d’abord une phase d’exploration (Helfat
et Peteraf, 2003). Cette phase d’exploration va être réalisée au niveau du premier site Web
transactionnel de la compagnie aérienne canadienne qui va être créé à partir du moteur de recherche
d'Oméga au début de l'hiver 2002. Les gestionnaires de Zêta vont alors décider par la suite de
mettre en œuvre les autres sites Web transactionnels au niveau de leurs différents réseaux de
distribution et de leurs principaux voyagistes. Le processus d’implantation devient alors un
processus routinier (Zollo et Winter, 2002) qui se fait de manière progressive jusqu’à l’automne
2003.
Processus d’exploitation de la stratégie de distribution multicanal. À la fin de l’année 2003, les
processus de restructuration et de repositionnement de l’agence de voyages Oméga sont achevés et
on entre dans une phase de routinisation de son exploitation. L’agence de voyages virtuelle va
évoluer maintenant sans faire appelle aux capacités dynamiques de Zêta. L’exploitation des sites
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Web transactionnels devient également une activité routinière pour les différentes filiales de Zêta.
L’exploitation des sites Web transactionnels permet aussi d’exposer les gestionnaires et les
employés de ces filiales aux technologies Internet et à la problématique du commerce électronique
d’entreprise à consommateurs. La capacité organisationnelle Internet dans le domaine du
commerce électronique d’entreprise à consommateur arrive alors à maturité (Helfat et Peteraff,
2003).
En ce qui concerne les capacités dynamiques qui sont mobilisées durant cette phase, on remarque
des différences par rapport à la phase précédente de création et de développement de la capacité
organisationnelle Internet. Les transformations observées dans le contexte interne et externe vont
avoir une influence sur la manière dont sont réalisés les différents processus qui expriment et qui
mettent en œuvre les capacités dynamiques de Zêta. En premier lieu, le processus de formation de
la stratégie multicanal implique moins de participants et il est moins structuré. Il repose davantage
sur des routines de résolution de problème qui dépendent des compétences individuelles puisque
les gestionnaires possèdent des connaissances qui proviennent directement de l’exploitation de
l’agence de voyages virtuelle Oméga ce qui améliore la qualité de leur prise de décision.
Également, le contexte externe va nécessiter des actions stratégiques rapides ce qui explique la
nécessité de recourir à des routines de résolutions de problème plus simples (Eisenhardt et Martin,
2000). En second lieu, le processus d’implantation de la stratégie Internet est un processus itératif et
répétitif qui est réalisé au niveau de la fonction SI. Ce processus routinier repose, lui aussi, sur les
apprentissages qui ont été faits durant la première période notamment en ce qui concerne la gestion
de projet qui est mieux maîtrisé maintenant et sur la connaissance des fournisseurs de technologie
qui ont en charge le développement du moteur de recherche et de réservation. D’autre part, la
fonction SI a connu une amélioration significative de la maturité de ses capacités organisationnelles
fonctionnelles qui sont exprimées et mises en œuvre dans les différents processus que l’on retrouve
au niveau de la gouvernance et de la gestion des ressources informationnelles (voir tableau 2 en
annexe). En troisième lieu, à mesure de l’exploitation de la stratégie Internet, les connaissances
opérationnelles sont crées et diffusées et elles viennent renforcer le cadre mental des gestionnaires
de Zêta dans ce domaine qui est maintenant institutionnalisé (Montealegre 2000). On en retrouve
des traces dans les rapports annuels qui brossent à grand trait les activités réalisées durant l’année
financière.
Renouvellement de la capacité organisationnelle Internet vers le commerce électronique
interentreprises (2001-)
La stratégie Internet de type commerce électronique interentreprises est envisagée comme le
prolongement de la stratégie de commerce électronique d’entreprise à consommateurs dans la
mesure où Zêta va capitaliser sur la capacité organisationnelle Internet précédemment développée
pour mettre en œuvre ses différents projets de commerce électronique interentreprises. Cependant,
cette stratégie Internet va nécessiter le renouvellement de la capacité organisationnelle Internet
(Helfat et Peteraf, 2003) ce qui nécessite la relance d’un nouveau cycle d’apprentissage. En
d’autres termes, le passage du commerce électronique B2C au commerce électronique B2B marque
une étape importante dans l’utilisation des technologies Internet chez Zêta et donc en corollaire, en
ce qui concerne la capacité organisationnelle Internet.
Formation de la stratégie Internet de type commerce électronique interentreprises. La
formation de cette stratégie se déroule selon deux grandes périodes. La première période débute à
l’hiver 2001 et se termine à l’été 2003. On assiste aux prémices d’une réflexion stratégique sur ce
que pourrait être le commerce électronique interentreprises chez Zêta mais sans que cela ne
débouche sur des projets à réaliser d’une part, parce que la situation du contexte externe et la
nécessité de s’y adapter est un enjeu prioritaire pour les gestionnaires, d’autre part, par ce que ces
155
derniers n’ont pas encore une compréhension très fine des enjeux stratégiques qui découlent de
l’utilisation des technologies Internet. La fonction SI va alors réaliser durant cette période un travail
« d’éducation » auprès de ces gestionnaires, en diffusant des connaissances pertinentes. La
deuxième période débute en novembre 2003 et se termine en décembre 2003. Un comité
stratégique est créé pour réfléchir à ce type de stratégie Internet qui est alignée maintenant avec la
stratégie générale de l’organisation. L’objectif est de procéder à une réduction des coûts
d’opération et d’améliorer l’efficience et l’efficacité des processus opérationnels. Deux types de
commerce électronique interentreprises sont alors définis selon qu’ils peuvent être orientés
distribution ou fournisseur. Dans un premier temps, les gestionnaires choisissent de mettre en
œuvre un projet de commerce électronique interentreprises orienté distribution. En résumé, durant
cette période, la stratégie de commerce électronique interentreprises est formée. Le concept est
défini précisément de même que les objectifs à atteindre et les projets qui vont avoir la priorité.
Implantation de la stratégie Internet de type commerce électronique interentreprises. (cette
phase d’implantation est toujours en cours). Le coût relativement élevé d’un tel projet et ses
conséquences sur les modes opératoires des processus de l’organisation nécessitent que ce
processus d’implantation de la stratégie soit très bien structuré et maîtrisé. Les membres de l’équipe
projet vont donc utiliser une nouvelle méthode de gestion de projet qui a été élaborée par la
fonction SI. Dans un premier temps, l’objectif va être de réaliser une étude de faisabilité en
précisant l’architecture technologique et les modalités du développement technologique,
l'identification des besoins d'affaires. Un comité « aviseur » va être constitué pour chapeauter
l'ensemble du projet. Son rôle est de s’assurer que les décisions prises dans le cadre de ce projet
soient en ligne avec les besoins actuels et futurs du marché.
On remarque que les processus de gestion qui expriment et qui mettent en œuvre les
capacités dynamiques de l’organisation ont gagné d’une part en maturité et d’autre part en
structuration, surtout si on les compare aux deux périodes présentées précédemment. Le
déséquilibre qui existait entre le processus de formation de la stratégie et celui de l’implantation
s’est estompé en raison des efforts qui ont été entrepris pour améliorer les capacités
organisationnelles de la fonction SI et des différentes fonctions métiers. Également, une pression
supplémentaire s’ajoute à la nécessité d’améliorer la réalisation de ces processus. Elle provient du
fait que les transformations qui vont être occasionnées par la mise en œuvre de ce type de stratégie
Internet sont beaucoup plus importantes que les précédentes. La gestion du changement est alors
une problématique de première importance pour Zêta puisque la mise en œuvre de cette stratégie
Internet va toucher aux processus opérationnels de son cœur de métier et ceux également du réseau
de distribution.
Conclusion
De façon générale, Zêta fait preuve de clairvoyance, car dès la fin 1998 elle débute
l’apprentissage de la capacité organisationnelle Internet avant certains de ces concurrents
traditionnels. En effet, Si les organisations concurrentes n’ont pas débuté à temps leur processus
d’accumulation des ressources, il leur sera difficile de combler rapidement leur retard étant donné
les déséconomies liées au temps nécessaire pour les accumuler. En effet, la problématique de
l’apprentissage ne peut être éludée par les organisations concurrentes. Le temps nécessaire à
l’accumulation des ressources confère alors un avantage à l’organisation qui est la première à les
avoir acquis (Lieberman et Montgomery, 1988). Une fois développée, la capacité organisationnelle
devient un actif stratégique qui peut être utilisé dans différents contextes et pour différentes
stratégies Internet. Cependant, il y a dépendance de sentier dans la mesure où les phases liminaires
de création et de développement, et l’accumulation des ressources et compétences qui en résultent
156
vont contraindre le développement ultérieur de la capacité organisationnelle Internet et donc la
stratégie Internet
La stratégie Internet débute par un projet de commerce électronique de type entreprise à
consommateur qui marque l’étape de création et de développement de la capacité
organisationnelle Internet. L’objectif est de proposer un nouveau canal de distribution électronique
aux consommateurs canadiens de produits touristiques. Zêta va alors exploiter une agence de
voyages virtuelle qui se trouve en marge des filiales traditionnelles du groupe. Par la suite, cette
stratégie va évoluer vers une stratégie de distribution multicanal de type « clic, talk, walk » qui
marque l’étape de redéploiement et de réplication de la capacité organisationnelle Internet. En
effet, Zêta, en même temps qu’elle repositionne son agence de voyages virtuelle qui devient
spécialisée dans la vente à rabais de produits touristiques de dernière minute, va mettre en œuvre
plusieurs sites Web transactionnels pour soutenir les activités de distribution de ses différentes
filiales. La stratégie Internet va connaître une évolution plus radicale par la suite, puisque
l’organisation va mettre en œuvre un projet de commerce électronique interentreprises orienté
distribution qui renvoie à la phase de renouvellement de la capacité organisationnelle Internet.
L’objectif visé est de réduire les coûts d’opération ainsi que l’efficience et l’efficacité des
processus de distribution des produits touristiques de Zêta vers les différents réseaux d’agences de
voyages qui lui appartiennent ou non.
Le processus de création et le développement de la capacité organisationnelle Internet est un
processus complexe, itératif et cumulatif, qui renvoie aux différentes dynamiques
organisationnelles à l’œuvre au sein de l’organisation à l’étude. Ce processus nécessite la présence
des capacités dynamiques qui sont exprimées et mises en œuvre dans quatre différents processus de
gestion qui sont respectivement : les processus de formation, d’implantation, d’évaluation et
d’évolution de la stratégie Internet. Ces processus sont soumis à l’apprentissage et donc, chacun à
leur manière, lors de leur mise en œuvre, ils vont permettre la création de connaissances. La qualité
de la réalisation de ces processus est influencée par plusieurs éléments; 1) par le contexte externe
qui définit la nature du défi stratégique à relever par l’organisation de même que la rapidité pour le
relever; 2) par le contexte interne qui définit la maturité des capacités organisationnelles
fonctionnelles qui servent de « toile » de fond aux capacités dynamiques; 3) de la cohérence
affichée entre les processus qui expriment et qui mettent en œuvre les capacités dynamiques.
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Tableaux
Tableau 1 Périodes et axes stratégiques suivis par Zêta, (1986-2004)
Périodes
Cycle de
vie du
modèle
stratégique
1986-1989
Prémices de la
stratégie
d'intégration
verticale
1998- 2001
Maturité de la stratégie
d’intégration verticale
2002-2004
Révision de la
stratégie d’intégration
verticale
Entrepeunariale
1989-1997
Développement de
la stratégie
d’intégration
verticale :atteinte
de la masse
critique
Entrepeunariale
Culture
dominante
Marchés
Entrepeunariale/corporative
Corporative
Québec/France
Canada/France
Canada/France
Canada/France
(Europe/Etats-Unis)
Marché de
masse (+++)
Marché de masse
(+++)
Marché de masse (+++)
Marché de niche (+)
Conquête de
marchés
Processus
Croissance par
acquisition (++)
Diversification et
conquête de
marchés
Diversification et conquête
de marchés
Marché de masse
(+++)
Marché de niche (+)
Croissance par
acquisition (+++)
Croissance par acquisition
(+)
Révision du
positionnement des
marques
Stabilisation de la
croissance
Diversification
des activités le
long de la chaîne
de valeur
Diversification des activités
le long de la chaîne de valeur
Optimisation de la
structure
Recherche de
l’efficience et de
l’efficacité pour
réduire les coûts
d’opération et
améliorer la
rentabilité
159
Périodes
Approche
Tableau 2 Évolution de la fonction SI (1987-2003)
- 1997
1997-2000
2000-2003
Répondre aux
Améliorer les
Améliorer les
besoins
capacités
capacités
techniques des organisationnelles de
organisationnelles de
filiales selon
la fonction SI et son
la fonction SI et la
une approche
arrimage sur les
qualité des services
empirique
besoins des clients.
Participer à la
restructuration des
processus de Zêta
TIC
Systèmes
hérités
Gouvernance
des SI
Gestion
décentralisée
au niveau des
filiales
Pas de fonction
SI au siège
social
Pas
d’alignement
stratégique
entre fonctions
métiers et SI
Gestion des SI
comme un
centre de coûts
Orientation
technique
Systèmes
hérités/technologies
Internet
Gestion centralisée des
SI au niveau du siège
social de Zêta
Organisation par
directions
informatiques filiales
Création du poste de
VP exécutif et chef de
la direction des SI
Prémices à la gestion
de l’alignement
stratégique métiers et
SI
Mise en place de la
relation :
client/prestataire
Systèmes
Internet
Gestion centralisée de
la fonction au niveau
du siège
social de Zêta
Organisation par
domaines d’activités
Création du poste de
VP-SI
Prémices à la gestion
de l’alignement
stratégique métiers et
SI
Relation
client/prestataire
Relation de partenaire
Pérenniser les équipes
Supporter les
applications
160
2003Améliorer les
capacités
organisationnelles de
la fonction SI et
réduire les coûts de
fonctionnement
Participer à la
restructuration des
processus de Zêta
Systèmes
Internet
Gestion centralisée de
la fonction SI/TI au
niveau du siège social
Organisation par
services partagés et
domaines de
compétences
Favoriser l’alignement
stratégique métiers
Relations de
partenariat entre
fonction SI et
fonctions métiers
Gestion de la
gouvernance et
contrôle financier
(Comité de
gouvernance des SI)
ASAC 2005
Toronto, Ontario
Suhaib Riaz (Student)
CAN ELEPHANTS DANCE? A LOOK AT THE ‘MAHOUTS’ FOR SOME ANSWERS
The impact of outsider versus insider CEO successions is considered in the
context of turnarounds, and TMT changes are discussed as a possible moderator
of the CEO changes – performance relationship. The paper suggests that
turnaround situations are best handled with an insider/outsider mix of CEO
change and TMT change combinations.
Turnarounds have been a subject of fascination for business executives and a frequent source of
enthusiasm for investors (Furman & McGahan, 2002). The phenomenon is of wide interest as
many organizations go through major performance declines at some point during their evolution
and have to deal with the issue of how to get back to leadership positions (Barker & Barr, 2002). I
use the word ‘turnaround’ here in its broadest sense, as representing a period of severe
performance decline followed by a lasting performance improvement. The existing literature on
the subject employs a variety of terms for closely-related phenomena, such as organizational
change (Mintzberg & Westley, 1992), strategic change (Boeker, 1989; Boeker, 1992; Boeker,
1997a, b), organizational transformation (Romanelli & Tushman, 1994), organizational renewal
(Barr, Stimpert, & Huff, 1992; Hurst, Rush, & White, 1989), etc. These terms have overlapping
content and are also considered to be finer refinements of a broader concept that can be thought of
as an organizational ‘turnaround’. For definitional purposes, following earlier studies, a
turnaround can be thought of as a severe and prolonged downturn in performance followed by a
lasting upturn; for example: four consecutive years of declining performance followed by four
consecutive years of improved performance (Hambrick & Schecter, 1983).
Turnarounds and Top Management: Can elephants dance? 1 In other words, can large,
established organizations with well-set routines / capabilities change with the times and get back to
leadership positions after going through periods of severe performance downturns? I argue that
elephants can indeed dance, but we need to look at the mahouts2 for some of the key answers. The
mahout that keeps and drives an elephant possesses deep knowledge about the elephant and shares
an intricate relationship with it. The elephant could learn to dance, but it would take the
understanding and trust of the current mahout, and some help from outside, to accomplish this. In
other words, I will argue that to understand organizational turnarounds, we have to consider the
role of both current top executives who have been with an organization for a reasonable length of
time and possess knowledge about the ‘dance routines’ of the organization, and newer top
executives who can bring change and teach the organization a few new ‘dance routines’.
In general, top management and its relationship with organizational performance has been a much
researched area in studies of organizations (Lieberson & O'Connor, 1972; Smith, Carson, &
Alexander, 1984; Thomas, 1988; Weiner & Mahoney, 1981). Researchers have also argued that top
management assumes great importance in organizational renewal (Hurst et al., 1989) and that it is
the executive leadership of an organization that initiates and directs turnarounds (Barker et al.,
2002). In this vein, some researchers have considered top management related issues in
organizations going through turnaround type situations (Barker et al., 2002; Barker & Patterson,
1
I use the metaphor from Louis Gertsner’s book on IBM’s turnaround “Who says elephants can’t
dance?”
2
Mahout: keeper and driver of an elephant (from Sanskrit “maha’matra”: one having great measure)
161
1996; Boeker, 1997a, b; Boeker & Goodstein, 1993; Goodstein & Boeker, 1991; Mueller & Barker,
1997; Schwartz & Menon, 1985; Virany, Tushman, & Romanelli, 1992). In this paper, I focus on
changes in the top management of organizations and place this issue in the context of turnarounds.
Changes in top management have been discussed as an important response to problems for
organizations going through performance downturns (Daily & Dalton, 1995). Empirical studies
have shown that changes in top management were far more prevalent in distressed organizations
than in healthier ones (Hambrick & D'Aveni, 1992; Schwartz et al., 1985). While a large stream of
literature exists on top management changes and CEO succession (Cannella & Lubatkin, 1993;
Cannella & Shen, 2001; Shen & Cannella, 2002), there are relatively fewer works that look at CEO
succession and top management changes with a focus on turnarounds and the impact these changes
might have on success or failure of turnaround attempts. My research question is thus: What
impact do CEO succession and top management changes have on organizational turnarounds? In
studying this, I will develop arguments related to CEO succession and top management changes in
the context of turnarounds, using the robust theoretical lenses of resource-based view (RBV) and
institutional theory. I will argue that RBV logic implies rebuilding the organization through
making use of the capabilities already established over a period of time, and that current top
management has a vital role to play in this effort, since it has intimate knowledge of existing
organizational capabilities. However, in later sections, I complement the RBV logic with
theoretical insights from institutional theory and discuss how changes to top management could
provide fresh blood to the organization, which is much needed for effecting successful turnarounds.
Finally, I bring these arguments from RBV and institutional theory together to formulate
propositions about CEO change, TMT change and firm performance for firms attempting
turnarounds.
Turnarounds and Top Management: An RBV Analysis
The resource-based view (RBV) of the firm developed through the works of several authors over a
period of time (Barney, 1986, 1991; Barney & Arikan, 2001; Peteraf, 1993; Rumelt, 1984;
Wernerfelt, 1984), and has emerged as the major theoretical counterpoint to the earlier IO based
framework (Caves & Porter, 1977; Porter, 1981) in strategic management. The key assumptions of
RBV are that firms may have resource heterogeneity i.e. possess different bundles of resources,
and that these resources may be immobile i.e. the resource differences may persist. In addition,
similar to other organizational economics theories, RBV assumes that firms are profit-maximizing
entities and that managers in firms are boundedly rational (Barney et al., 2001). According to RBV
logic, firms acquire or develop their resources (tangible and intangible assets) in strategic factor
markets (Barney, 1986) to conceive of and implement their strategies (Barney et al., 2001). Since
resources could be inelastic in supply in imperfectly competitive (Barney, 1986) or incomplete
(Dierickx & Cool, 1989) strategic factor markets, resources that are valuable (V), rare (R),
inimitable (I) and can be exploited by the organization (O), are a source of sustained competitive
advantage (Barney, 1991; Barney, 2002). While much debate exists on dynamic capabilities in the
literature (Eisenhardt & Martin, 2000; Teece, Pisano, & Shuen, 1997), following Barney (Barney
et al., 2001), I consider the dynamic capabilities literature as an expansion of the RBV domain and
essentially included in the RBV logic. I thus argue considering RBV / Dynamic Capabilities as an
integrated literature base for the purpose of this paper.
RBV studies have considered managers as important, building on Penrose’s idea that managerial
resources are one of the most critical for the firm (Penrose, 1959). Researchers have argued that
organizational rent stems from the discretionary decisions of top managers to deploy selected
resources and capabilities (Amit & Schoemaker, 1993). Top managers constitute an important firm
resource that, as part of the entire bundle of resources of the firm, could enable the it to generate
rents (Castanias & Helfat, 1991, 2001). Recent research has shown that ‘dynamic managerial
162
capabilities’ embodied in the top management of the firm are associated with time-varying
corporate effects and are related to firm performance, where firms face the same external
environments (Adner & Helfat, 2003). This is particularly relevant to the case of turnarounds
where firms going through performance declines face the same external environment as their
competitors, and suggests that top level managerial decisions could have an impact on firm
performance over time in such situations. Drawing upon related RBV based studies (Barney &
Tyler, 1992; Berman, Down, & Hill, 2002; Castanias et al., 1991, 2001; Wright, Smart, &
McNahan, 1995), I discuss in more detail below the importance of existing top managers to the
firm, and how they can be a source of improved performance. I thus consider the question of VRIO
(Barney, 1991) with respect to the existing top management of the firm.
The question of value of a resource has been discussed in the RBV literature, particularly with
respect to the value being exogenously or endogenously defined with respect to RBV analysis
(Barney, 2001; Priem & Butler, 2001). Following Barney (Barney, 2002), I consider this question
in terms of whether the top managers can enable the firm to respond to external demands. Top
management decisions operate on the resource and capability base of an organization (Adner et al.,
2003), and it takes time for newer managers to fully understand the organization-specific resource
and capability base (Hambrick & Fukutomi, 1991; Shen et al., 2002) or learn about management
control systems and formal information-based routines in order to change patterns of firm behavior
(Simons, 1994). Existing top managers, who have intricate knowledge of the existing
organizational capabilities, therefore have value in terms of enabling the organization to respond to
external demands in the context of turnarounds.
It could also be argued that managers who have served in top roles in a particular organization
would be rare, particularly since they are the only ones who posses important firm-specific skills,
as distinct from industry-specific or generic skills (Harris & Helfat, 1997), and typically top levels
of a particular organization comprise of a handful of individuals. Top managers possessing
firm-specific skills are therefore a rare resource for the organization. In addition, the important
question of inimitability can also be argued in favor of existing top management in an organization.
Top management and its relations within the organization and with external constituents comprise
a socially complex phenomena (Barney et al., 1992) that emerges over time, subject to
time-compression diseconomies (Dierickx et al., 1989). Since top management acts on the
resource and capability base of the organization and is intricately woven with them, issues related
to interconnectedness of asset stocks also become important (Dierickx et al., 1989). Finally, the
development of relationships within the top management and their relationship with organizational
and external constituents is subject to the complexities of human behavior, suggesting the causal
ambiguity surrounding the phenomenon (Barney, 1991; Dierickx et al., 1989). In addition to the
above, the issue of ‘tacit knowledge’ with respect to the top management has also been raised in
the literature. Idiosyncratic knowledge that accrues to top management of an organization is both
articulate and tacit, and the tacit knowledge component that is of vital importance (Athanassiou &
Nigh, 1999, 2000) could be lost in case of top management changes. The concept top management
based tacit knowledge is therefore another aspect that adds to the inimitability of the top
management.
Barney also suggests that the organization’s other policies and procedures should be organized in
order to effect full exploitation of the valuable, rare and costly to imitate resource (Barney, 2002). I
argue here however, following earlier research related to top management within the RBV stream
(Adner et al., 2003; Amit et al., 1993), that as top managers effect changes in the organization’s
existing resource and capability base, the question of ‘O’ (other resources / capabilities being
organized) is largely dependent upon the top management itself. Top management then, could be
considered a special case of resources as they can be argued to be ultimately responsible for the
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other resources / capabilities of the organization (Adner et al., 2003; Amit et al., 1993). This also
avoids the problem of endlessly recursive capabilities that has been discussed in RBV literature
(Collis, 1994). In sum, RBV arguments suggest that as a ‘VRI’ resource, existing top management
has an important role to play in enabling the organization to achieve improved performance, which
is the need of the hour for an organization going through a performance decline and attempting a
turnaround.
Turnarounds and Top Management: Complementary Analysis using Institutional Theory
While RBV essentially developed from the organizational economics stream, institutional theory
brings in a more sociological analysis to the study of organizations (Scott, 2001). Institutional
theory holds that organizations operate as part of a wider social framework comprising norms,
values and taken-for granted assumptions about what is acceptable or not-acceptable behavior.
Organizational success is incumbent not only upon strictly economic factors, but also on
conformity to social expectations. Conformance to institutional pressures occurs through
institutional isomorphism processes that could be coercive, mimetic or normative (DiMaggio &
Powell, 1983). This conformance is achieved through ‘myths’ and ‘ceremonies’ that get
institutionalized as organizational structures and processes over time (Meyer & Rowan, 1991).
This conformance to institutional pressures confers legitimacy to the organization (DiMaggio et al.,
1983). However, organizations can also strategically respond to institutional pressures (Oliver,
1991) and manage their legitimacy (Suchman, 1995).
Internal rigidities: Recent work by Oliver has placed institutional theory as complementary to
RBV and has provided a combined analysis of the two theories with respect to competitive
advantage (Oliver, 1997). Arguments from institutional theory apply to RBV in terms of providing
the context in which individual, firm and interfirm processes take place. While resource-based
determinants suggest that managerial choice would be influenced by economic rationality,
institutional determinants suggest that normative rationality might also influence this choice
(Oliver, 1997), and that over time, the nature of the decision process related to acquiring,
maintaining and combining resources could become habitual, unreflective, and embedded in
norms and traditions. These arguments parallel the research on the development of ‘rigidities’ in
organizations which suggests that core organizational capabilities, over a period of time could
become ‘core rigidities’ (Leonard-Barton, 1992). In particular, in organizations going through
severe performance declines, inertia takes root (Tripsas & Gavetti, 2000), and external threats do
little to shake off rigidities (Staw, Lance, & Dutton, 1981). Patterns of activities become routinized
and cannot always be easily changed (Nelson & Winter, 1982). While these rigidities could be
thought of as existing across various levels of the organization, my focus in on rigidities at the top
management level, particularly in terms of how these affect top management decision making. As
suggested by Oliver, where top management decision processes operate within historical and
normative contexts with the objective of justifying prior resource choices, suboptimal resources
allocations result and there is resistance to change (Oliver, 1997). The rigidity argument thus
applies to top management decision making and could be a major source of problems for the firm
attempting turnaround. Unless top management mental models change, organizations can go
further into decline (Barr et al., 1992).
However, troubled firms operating in hostile environments do break away from past behaviors and
are able to accumulate innovative resource bundles and re-build industry leadership (Baden-Fuller
& Stopford, 1994). Efficiency increases based on cutback actions might not be enough and
strategic reorientation is needed (Barker & Mone, 1994; Pearce & Robbins, 1994; Robbins &
Pearce, 1992). Given that top management decisions ultimately determine resource allocations of
strategic importance (Adner et al., 2003; Amit et al., 1993), important change essentially has to
164
start with top management in the organization. Changes in top management are one way of
overcoming organizational rigidities, since new management could effect resource allocations
independent of historical and normative contexts, without having to justify prior resource choices
(Oliver, 1997). Paralleling these arguments, earlier research suggests that top management changes
are likely to lead to organizational transformations (Romanelli et al., 1994) by bringing in new
ideas to counter internal cognitive biases and consensus (Weitzel & Jonsson, 1989). The
discussion here thus suggests that top management changes could be of key importance for
effecting successful turnarounds.
Signal to external constituents: While countering internal rigidities is important from a long term
perspective, for organizations undergoing performance downturns and hoping to turnaround,
immediate actions also assume a symbolic importance (Hambrick et al., 1992). Creating positive
impressions of the organization to both internal and external constituents is important (Flynn &
Staw, 2004), and social construction activities are needed to influence stakeholders to accept that a
change is underway (Gioia & Chittipeddi, 1991). External constituents need special attention
during turnaround attempts and changes to the top management team could be a symbol of major
change underway (Weitzel et al., 1989). Top management changes could have an important impact
on external constituents, particularly stockholders (Friedman & Singh, 1989; Lubatkin, Chung,
Rogers, & Owers, 1989), in effect impoving the chances of the firm to manage a successful
turnaround. These arguments parallel research that suggests a relationship between top
management and legitimacy of the organization (Hambrick et al., 1992; Lynall, Golden, &
Hillman, 2003; Zajac & Westphal, 1996). Thus, I argue here that these top management changes
can be an important signal of conformance to external constituents and could help with legitimacy
related issues that the organization faces in times of severe performance declines. In sum, top
management changes would help improve the chance of a successful turnaround by improving the
organization’s legitimacy with external constituents at a critical time. However, while signals to
external constituents could be important in the short-term, the turnaround attempts must also be
substantive (Weitzel et al., 1989), and therefore the arguments related to dispensing with unwanted
rigidities in the earlier section remain very important from the long-term perspective.
Propositions
I have argued above that in the current scenario being analyzed i.e. an organization attempting
turnaround, arguments from RBV logic could suggest retaining existing top management as an
important and unique resource, whereas arguments from institutional theory suggest the
development of rigidities that can be overcome through top management changes. Further, these
top management changes are needed as a signal to external constituents. Based on these competing
arguments from the two theoretical lenses built in the preceding sections, I will develop testable
hypotheses in this section related to top management change and organizational turnaround. The
preceding discussion has referred to ‘top management’ of the organization in general. Here I
introduce a refinement of ‘top management’ into CEO (Chief Executive Officer) and (TMT) Top
Management Team. This refinement does not subtract from the theoretical arguments developed
above for ‘top management’ in general as similar arguments could be built for both the CEO and
TMT separately along the above lines. I have omitted separate arguments for the sake of brevity.
The CEO position is explanatory, but the TMT requires definition.
TMTs: I define TMTs as those reporting directly to the CEO, as these are likely to constitute an
important part of the dominant coalition (Cyert & March, 1963) and are responsible for most
organizational decision making (Hambrick & Finkenstein, 1987; Hambrick & Mason, 1984). In
this paper, I use the term TMT to mean top management excluding the CEO.
TMT changes: A top management team is considered changed when either (i) a new member has
165
been inducted in addition to the existing members, or (ii) a new member has been inducted as a
replacement for an earlier team member (as a follow-up to a non-voluntary dismissal of the earlier
team member). Cases such as voluntary departures and retirement situations are excluded as they
are generally of less theoretical interest (Boeker, 1992; Frederickson, Hambrick, & Baumrin, 1988)
and are of less relevance to our arguments here. Earlier researchers have argued for distinguishing
between CEO change and top management change (Shen et al., 2002; Tushman & Rosenkopf,
1996; Virany et al., 1992). In keeping with these arguments, I distinguish CEO changes from TMT
changes and study these as two separate components.
Insiders versus outsiders: In discussing CEO changes, I also introduce a refinement in terms of
‘insider’ versus ‘outsider’ succession or changes. Insider replacements are those where members
are changed from within the firm, and outsider replacement pertains to changes made by inducting
individuals from outside the firm. Earlier studies have considered the insider versus outsider
distinction as important (Bailey & Helfat, 2003; Lubatkin et al., 1989; Shen et al., 2002). In
particular, this distinction has been considered important in the context of organizations with
performance downturns (Datta & Guthrie, 1994) and is therefore relevant to our focus on
turnarounds. While the insider and outsider distinction can be drawn for TMTs as well, for
purposes of simplicity in this paper, I consider outsider TMT changes versus ‘insider TMT change
/ no TMT change’. In other words, TMT promotions from within are considered together with no
TMT change situations and these are together contrasted with outsider TMT change situations.
This does not conflict with our logical arguments under RBV or institutional theory sections, but
rather, helps to draw a sharper contrast than if we had considered outsider versus insider TMT
changes, as the distinctions between outsider TMT changes and no TMT change situations are
expected to be more stark, based on our earlier logic.
Performance: Firm performance is a multidimensional construct and has been measured with both
operational and market based measures (Shen et al., 2002). Earlier studies focused on top
management changes have looked at either operational performance (Shen et al., 2002) or
market-based performance (Friedman et al., 1989; Lubatkin et al., 1989). However, in the context
of top management changes for turnaround firms, both operational and market-based measures
would be important. Financial markets have not always accurately identified turnarounds (Furman
et al., 2002), and a focus on only operational measures might not capture all effects relevant to my
arguments above, such as the impact of signals to external constituents. Lubatkin and Shrieves
make similar arguments for reconciling market based performance measures with strategic
management research (Lubatkin & Shrieves, 1986). In the context of turnarounds, it is important
to see performance changes at both an operational level inside the firm, and also through
market-based measures. This study would be among the first to consider CEO / TMT changes for
turnaround firms and consider both market and operational performance measures to understand
the phenomena better. My concern thus is to study the impact of CEO change (insider versus
outsider) and TMT changes (insider / no change versus outsider) on both market based and
operational firm performance measures for turnaround firms.
Consider CEO changes made to a firm undergoing a performance downturn. From arguments
discussed based on RBV logic above, a change in CEO would mean the loss of a valuable and
unique resource that can have an important impact on helping the firm turnaround at this crucial
time. However, following earlier arguments under the RBV section on social complexity, causal
ambiguity, tacit knowledge, etc. related to the top management, if the CEO change is made from
inside the firm rather than outside, the impact would be less disruptive as the new CEO possesses
some of the intricate knowledge related to established organizational capabilities and control
systems that would be needed to effect a turnaround. Parallel arguments by earlier researchers also
suggest that insider CEO changes result in less disruption (Boeker et al., 1993; Wiersema & Bantel,
1992) and thus, following my earlier arguments for preserving some continuity based on RBV
logic, I expect that, ceteris paribus, an insider CEO would be more likely to effect a successful
166
turnaround than an outsider CEO. Similarly, one could argue based on the same RBV logic, that
insider TMT change / no change would be less disruptive, as opposed to outsider TMT changes,
and would thereby be more likely to effect performance improvements leading to a turnaround.
However these arguments are countered by the institutional theory perspective discussed earlier.
According to the arguments under the institutional theory section, the need is to get rid of internal
rigidities (Oliver, 1997; Weitzel et al., 1989), and therefore changes to CEO or TMT through
outsiders are more likely to achieve better performance and effect successful turnarounds. Clearly,
these two opposing arguments suggest that while some change is certainly needed to overcome
rigidities (institutional theory based arguments), some continuity is also necessary to enable the
top management to perform the necessary turnaround on an organization that they know best
(RBV based arguments). Based on these two divergent arguments from RBV logic and
institutional theory logic, I posit that a mixed approach to the two priorities would achieve the best
results rather than an exclusive approach. In other words, situations where the CEO is changed
from outside, but the TMT has low outsider representation; or the CEO is changed from inside, but
the TMT has high outsider representation, are most likely to lead to successful turnarounds. I
discuss these scenarios in further detail below.
Consider the first scenario: While an outside change to the CEO ensures the loss of debilitating
internal rigidities and a fresh cognitive outlook (Tushman et al., 1996; Virany et al., 1992),
continuity in the TMT through high representation of inside members ensures that vital tacit
knowledge (Athanassiou et al., 1999, 2000), firm-specific skills (Harris et al., 1997), and an
intricate understanding of the firm’s unique resources and capabilities (Simons, 1994) is not
completely lost. This argument is similar to Barney’s call that firms are most likely to succeed by
first looking at and understanding what they already possess (Barney, 1986; Barney et al., 2001).
In other words, based on knowledge of the organization’s exiting resources and capabilities
(through insider TMT members), and ensuring that a new perspective is also in place (outsider
CEO), the organization is likely to achieve successful turnaround. In other words, an outsider CEO
under the condition of low outsider representation on the TMT, is more likely to achieve
turnaround than an outsider CEO under the condition of high outsider representation on the TMT.
In the latter case, the outsider perspective dominates, and as discussed above, vital firm specific
knowledge is lost. The above discussion is essentially an argument for the moderating effect of
outsider TMT representation on the relationship between CEO change and firm performance
during a turnaround. In line with my earlier discussion, I examine effects on both operational and
market based performance. In the long term, the impact of undoing internal rigidities while
utilizing the organization’s unique resource and capabilities would be expected to have positive
impact on both operational and market based performance. These discussions lead to an interesting
set of propositions:
P1a. Firms undergoing turnarounds are more likely to improve operational firm performance
through outsider CEO succession than insider CEO succession, under condition of low outsider
changes to the TMT.
For market based performance measure, we would investigate:
P1b. Firms undergoing turnarounds are more likely to improve market based firm performance
through outsider CEO succession than insider CEO succession, under condition of low outsider
changes to the TMT.
The second scenario in which the CEO is changed from inside while the TMT has a high
representation from outside is similar to the first scenario in terms of achieving the ‘best of both
worlds’: continuity and change, and arguments similar to the first scenario would apply. Thus:
P2a. Firms undergoing turnarounds are more likely to improve operational firm performance
through insider CEO succession than outsider CEO succession, under condition of high outsider
changes to the TMT.
167
For market based performance measure, we would investigate:
P2b. Firms undergoing turnarounds are more likely to improve market based firm performance
through insider CEO succession than outsider CEO succession, under condition of high outsider
changes to the TMT.
How do the two scenarios (P1a, b and P2a, b) compare? I do not offer propositions separately on
this for the sake of brevity, but do mention that this would be an interesting question to investigate.
Broadly, I expect the first scenario (P1a, b) to be more effective in achieving turnarounds
compared to the second (P2a, b), considering that the first one provides a radical change at the
topmost level (CEO) while preserving a varied set of knowledge related to the organization
through the TMT. The moderation effects would be graphed (revealing whether the moderation is
ordinal or disordinal) to clearly show which CEO / TMT change combination is the most effective
recipe for a turnaround. We also investigate the legitimacy based argument discussed under the
institutional theory section. From the arguments under ‘signal to external constituents’ section,
outsider CEO succession is likely to send a more positive signal to external constituents, and
would therefore have a more positive impact on market based performance than insider succession.
This would be manifested in short term market based measures of performance (Friedman et al.,
1989). Thus, in the short term:
P3. Firms undergoing turnarounds are more likely to improve market-based firm performance
through outsider CEO succession than insider CEO succession.
Note that several other propositions are possible based on the logic developed in this paper (for
example: CEO insider change versus no CEO change), but for purpose of brevity, I have confined
the discussion to the interesting propositions outlined above. This research could help improve our
understanding of the turnaround phenomenon and have important practical implications for how
CEO / TMTs are changed during turnaround situations.
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ASAC 2005
Toronto, Ontario
W. Glenn Rowe
Michael J. Rouse
Suhaib Riaz (Student)
The University of Western Ontario
SOURCES OF COMPETITIVE ADVANTAGE AND ABOVE NORMAL
PERFORMANCE: AN EMPIRICAL TEST
In this paper, we isolate a critical organizational resource – the general manager –
and empirically demonstrate its linkage with value generation using a
disaggregated dependent variable. In the process, we make a contribution to the
literature on a number of methodological issues that have plagued empirical work
in RBV: level of analysis, selection and specification of the dependent variable,
controlling for industry effects and unobserved heterogeneity, and the call for
longitudinal studies. The results of the study suggest that general managers with
different organizations have been a potential source of competitive parity,
competitive disadvantage or competitive advantage which in turn lead to normal,
below normal and above normal performance, respectively.
The resource-based view of the firm (RBV), while theoretically compelling, has not
received empirical support for the linkage between critical resources and the generation of value
(Peteraf & Barney, 2003). The RBV has been difficult to test empirically precisely because,
theoretically, the tacit dimensions of resources that are valuable, rare, inimitable, and
non-substitutable are, methodologically, difficult to operationalize (Barney, 1997; Barney, Wright
& Ketchen, 2001). The very nature of the resources of interest makes it difficult to test using large,
multi-industry samples from secondary data sources to isolate potential sources of advantage
(Rouse & Daellenbach, 1999; 2002). Indeed, “…the effects of the resource-level have not been
analyzed directly…” (Peteraf & Barney, 2003: 312, italics ours). In this paper we tackle this issue.
We isolate a critical organizational resource and empirically demonstrate its linkage with value
generation.
We begin by briefly stating the core of the RBV and its empirical support focusing
particularly on the empirical difficulties which our study seeks to address. We then discuss the
utility and relevance of using professional sports businesses for our analysis. Next we turn our
attention to the general manager of the organization as a theoretically valuable, heterogeneous
resource and the focus of our attempt to isolate that resource as a potential source of organizational
advantage/disadvantage/parity. The next sections set out our methodology and discuss the results.
Finally, we offer some conclusions and implications of our empirical findings for a resource-based
view of the firm. In summary, we examine a specific organizational resource – the general
manager – which we isolate and explicitly link to performance. In so doing, we make four
substantial contributions to the RBV literature: 1) empirically test the linkage between a critical
organizational resource and performance; 2) demonstrate the importance of selecting and
operationalizing a disaggregated dependent variable at the resource level; 3) provide support for
controlling for industry effects and unobserved heterogeneity in RBV studies; and 4) underscore
the importance of using longitudinal studies.
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The resource-based view of the firm predicts that organizations generate competitive
advantages by using valuable, inelastic resources (Wernerfelt, 1984; Barney, 1986, 1991; Peteraf,
1993; Ray, Barney & Muhanna, 2004). From a central insight of Penrose (1959) that
organizations are heterogeneous bundles of resources, organized within an administrative
framework, the RBV developed into a major analytical perspective (Wernfelt, 1984; Barney, 1991;
Peteraf, 1993). The theoretical status of RBV continues to generate considerable debate (Godfrey
& Hill, 1995; Barney et al., 2001; Priem & Butler, 2001; Foss & Knudsen, 2002), yet there is
general agreement that the RBV is a useful perspective for strategic management research (Barney,
2001).
Methodological Issues in RBV Studies
While empirical tests of the major tenets of the RBV have been growing (Barney & Arikan,
2001), few stand out as rigorous RBV studies; exceptions being Henderson and Cockburn’s (1994)
research in the pharmaceutical industry, and Makadok’s (1999) money market mutual fund study.
However, a number of empirical issues continue to plague RBV research. Below we describe four
issues that are key to the RBV that, to-date, have been problematic for researchers:
1. level of analysis
2. selection and specification of the dependent variable
3. industry effects and unobserved heterogeneity
4. need for longitudinal studies.
Level of analysis
Few studies have been able to isolate potential sources of competitive advantage at the resource
level (Peteraf & Barney, 2003). This issue is important in any attempt to test the RBV empirically.
We know that performance is generated at multiple levels: industry (Porter, 1980), strategic group
(Dranove, Peteraf & Shanley, 1998) and firm level (Rumelt, 1991; Peteraf & Barney, 2003).
Research also suggests that firm level effects account for a large portion of performance variation
(Rumelt, 1991). Since the RBV predicts that resources within business units generate value, it is
important to examine the value generated by specific, critical resources, yet these effects have not
been analyzed directly (Peteraf & Barney, 2003). Precisely because the RBV asserts that the
resources of interest are characterized as valuable, rare, inimitable and inelastic, research methods
need to be able to tap into the resource level for analysis. Since the very nature of the resources of
interest makes it difficult to test using large, multi-industry samples from secondary data sources to
isolate potential sources of advantage, Rouse and Daellenbach, (1999; 2002) called for research
directed explicitly at the resource-level. They further suggested that intrusive field studies within
organizations might be the only way to get at and begin to understand those resources and how they
might be linked to performance. On the other hand, Levitas and Chi (2002) suggest that in order to
avoid some of the problems inherent in intrusive methods, researchers should strive for creativity in
operationalizing constructs and empirically measuring value generation predicted by the RBV.
Peteraf and Barney (2003) go so far as to suggest that no studies have been able to rise to the
challenge. We believe that in this study we have risen to the challenge with some interesting
results.
Dependent variable
Closely linked to the level of analysis is consideration of the dependent variable. Ray, Barney and
Muhanna (2004) make a strong case for careful selection and operationalization of the dependent
variable. Using a highly aggregated dependent variable such as firm performance may obscure
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the contribution of a particular resource to competitive advantage. For example, one resource that
has the potential to generate competitive advantage may be offset by another that has negative
effects. Conceivably there are numerous other scenarios in which the potential of valuable
resources is not realized due to countervailing, neutralizing, appropriation (e.g., Coff 1999), or
obscuring effects. What this means is that it is theoretically more valid to operationalize the
dependent variable at the same level as the resource of interest and, further, to disaggregate that
dependent variable so that the potential impact of other resources and processes are controlled for
(Barney 2001; Henderson & Cockburn, 1994; Priem & Butler, 2001; Rouse & Daellenbach, 1999).
In this study we disaggregated the dependent variable by controlling for as many performance
effects as possible in order to maximize the likelihood that the performance we capture was linked
with general manager effects.
Controlling for industry and unobserved heterogeneity
Firm performance is influenced by industry (Dess et al., 1990). Cross-industry studies, therefore,
that do not control for industry effects may lead to misleading resource effects (Makadok, 1999).
An easy way to control for industry effects is to use a single industry study approach, though this
may have an impact on generalizability of results. Even though Barney (2001) explicitly avoids
tackling the complex issue of defining industry boundaries, partly on the basis that the
resource-based logic takes the firm as its unit of analysis, industry plays an important role in
organizational performance. Industry attributes have an effect on strategy decisions (Mascarenhas
& Aaker, 1989) and affect organizational culture (Huff, 1982; Gordon, 1991). Hrebiniak and Snow
(1980) show that perceptions of environmental uncertainty, intra-organizational influence and
degree of structural decentralization vary by industry. Organizations compete within industries
and share strategic factor markets (Barney, 1986). Taken together, these and similar studies
suggest the importance of controlling for industry effects.
Not only does industry impact organizations and their performance, but the value of a
resource may be more generally context dependent (Powell, 1992; Barney, 2001; Priem & Butler,
2001). If context is considered more broadly than just industry, other controls may be required.
According to Rouse & Daellenbach (1999), there may be implications of membership in a strategic
group. In this study we have taken these issues on board and have limited, therefore, our study to
one industry (professional sports) and one strategic group, the National Hockey League (NHL) in
order to control for possible industry level and strategic group level effects.
A similar argument holds for unobserved heterogeneity (Levitas & Chi, 2002).
Henderson & Cockburn (1994) note that it is notoriously difficult to identify and to measure
resources and other effects. To control for team level effects and unobserved heterogeneity, we
included 29 organization (team) variables.
Longitudinal research design
Time is not only a factor in the path-dependent generation or development of resources (Dierickx &
Cool, 1989), but there may be a time-lag between resource utilization and performance (Priem &
Butler, 2001). Barney (2001: 51) agrees that, "dynamic research – where the conditions under
which resources are developed or acquired in one period have implications for the strategic
advantages of firms in subsequent periods – is particularly important…" Our study is longitudinal.
It utilizes data for the population of organizations (NHL teams) for 60 years: from the 1942/43
season to the 2001/2002 season. We also measure potential for competitive disadvantage,
competitive parity, and competitive advantage during the NHL regular season and associated
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performance during the Stanley Cup playoffs, the "second season" as playoffs are called in
professional sports.
On the Use of Sports Teams in Organizational Analysis
The empirical examination of the linkage between an isolated critical resource with value
generation requires a sample that meets three criteria. First, we wanted a single industry from
which to select a definable, valid strategic group in order to control for as much context dependent
variation as possible. Research at the level of strategic groups controls for some variation in
strategies available to competitors. By using a strategic group composed of professional sports
teams, that control is arguably greater. All teams are regulated by the same set of game and other
rules (e.g., player trades and selection) which are closely monitored by a powerful, neutral
authority and by competitors, their fans and pundits. This, in effect, generates an enforced, shared
consensus about the types of actions and strategies that can be used (Wright, Smart & McMahan,
1995).
Second, sports teams have the advantage of sharing fundamental objectives – maximize
games won and win the Stanley Cup – to an extent that is not necessarily so for businesses which
may have more complex goals. Third, the study demanded a comprehensive, longitudinal data set,
that was fine grained enough both to provide data at the resource level and that would enable us to
disaggregate the dependent variable.
Finally, professional sports constitute a recognizable industry. Single industry studies
such as those in airlines (Gimeno & Woo, 1996), banks (Fox-Wolfgramm, Boal & Hunt, 1998),
hotels (Ingram & Inman, 1996; Baum & Ingram, 1998), and trucking (Silverman, Nickerson &
Freeman, 1997), have made positive contributions to general management research.
The Role of the General Manager
The general manager of an NHL team occupies a position central to the fortunes of the team. The
general manager is responsible for building the actual team that competes in its respective division
each year. This involves selecting and hiring (and firing) the coach as needed, determining which
players to select in the annual draft, trading players and negotiating the terms of contract with each
player. The general manager is thus the senior person responsible for making and implementing the
strategic and operational decisions that are critical to the operation of the team in the NHL. While
earlier studies focusing on sports settings have looked at various position holders within sports
teams, the role of the general manager in sports settings, despite its obvious importance, has been
the most under-researched.
The above explication of the role of the NHL general manager suggests that the role is
conceptually comparable to the top management / CEO of other types of business organizations,
e.g., directing and organizing resources and activities, and making and implementing strategic and
operational decisions (Castanias & Helfat, 1991). Further, the CEO / general manager has the
potential to generate rents through his or her activities (Castanias & Helfat, 1991). In the case of
NHL teams specifically, such an executive is clearly the general manager of the team. The general
manager can therefore be conceptualized as a managerial resource that theoretically has been
identified as a key contributor to the organization's ability to generate rents (Castanias & Helfat,
2001).
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The managerial resource would be expected to vary across teams / firms in terms of quality
because of variation in the type and degree of skill and skillfulness (Castanias & Helfat, 1991;
2001), and they may differ in terms of the specific combination of skill types and levels they
possess (Bailey & Helfat, 2003). Since differences in managerial skills theoretically leads to
differences in the variability of firm performance (Castanias & Helfat, 2001), in the sense that a
particular resource is a source of performance that is aggregated into firm performance, we expect
that general managers of NHL teams would have a differential impact on team performance,
especially after firm performance is disaggregated into performance associated with the particular
resource. It is the differential disaggregated impact of this organizational resource – the general
manager – that we investigate in this paper.
Methods
As stated earlier, the purpose of this study is to isolate a critical resource and study its impact on a
disaggregated dependent variable, and thereby, test the assertion in Barney (1997, 2002) and
Peteraf and Barney (2003) that resources which are sources of competitive disadvantage lead to
below normal performance, resources which are sources of competitive parity lead to normal
performance, and resources which are sources of competitive advantage (temporary or sustained)
lead to above normal performance. To test this assertion we needed to operationalize competitive
disadvantage, competitive parity and competitive advantage. In this section we describe the
methodology we used to achieve this.
We started with the observation that if a resource creates value less than that expected by
the owners of that resource, it is a source of competitive disadvantage. In addition, if a resource
creates value equal to that expected by the owners of a resource then that resource is a source of
competitive parity. Finally, if a resource creates value greater than that expected by the owners of
the resource it is a source of competitive advantage (Barney, 1997, 2002).
We decided to use the residuals from the model described below as our starting point to
operationalize value. To obtain these residuals, we regressed the number of points gained divided
by the number of points available during the regular season (our dependent variable) on the
independent variables described below. We considered that the residuals from this analysis closely
approximate value created versus expected value. Similar to proponents of the RBV, we believe
that value created is similar to actual values and expected value is similar to predicted values.
Therefore, using the residual is a good approximation of value creation. As mentioned, we used the
number of points gained divided by the number of points available during the regular season as our
measure of value. In addition, we used playoff performance, or how far a team went in the
post-season, as our measure of performance. Note that even though NHL teams are business
organizations, we have purposely not used "firm" performance in terms of some profitability metric
precisely because a disaggregated dependent variable is required to disentangle critical resource
effects (Peteraf & Barney, 2003). We used playoff performance as our measure of performance
since this ‘second season’ is generally accepted as the ultimate measure of performance for NHL
teams and, further, would seem to be a more valid outcome of interest since, on the face of it, it
seems more directly linked to the general manager resource than an aggregated measure of
organizational performance. This is consistent with Peteraf and Barney’s (2003) argument that a
firm’s competitive advantage is an “indicator of the firm’s potential [italics in original] to best its
rivals in terms of rents, profitability, market share, and other outcomes of interest.” For us the
regular season demonstrates the potential for an outcome of interest – performance in the Stanley
Cup playoffs.
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As mentioned earlier, the resources we focus on are the general manager (GM) of each
NHL team from the 1942/1943 season to the 2001/2002 season. We chose the general manager
because he (no woman has ever served as the general manager of a hockey team so we use the male
pronoun in our paper) is the senior person in each team responsible for hockey operations. The
purpose of our analyses, therefore, was to develope residual measures for the regular season and
post-season after including as many explanations as possible for performance in the regular season
and in the post-season. We wanted to disaggregate the impact of the general manager on each
team’s regular season potential for value creation and on each team’s post-season performance.
General Managers in the NHL
During the sixty seasons of our data set, there were 122 general managers and 166 general manager
spells (a spell is a measure of time viz. GM tenure/season). The spells ranged from a partial season
(coded as 0.5) to 28.5 seasons. The average spell was 5.61 seasons. The average total time as a
general manager was 7.64 seasons. One general manager, Bobby Clarke, had the most spells as a
GM in that he filled this position for Philadelphia twice (1984/1985 to 1989/1990 and 1994/1995 to
present), for Dallas once (1990/1991 to 1991/1992) and for Florida once (1993/1994) for a total of
four spells. There were eight GMs who had three spells each, twenty-seven who had two spells
each and eighty-four who had one spell each. No GM worked for more than three different teams.
There were six GMs, including Bobby Clarke, who worked for three teams, twenty-five who
worked for two teams and ninety-one who worked for one team.
We considered that GMs with less than three full, contiguous years as a GM would only
allow us to average residuals over two years and that it would be better to have at least three full,
contiguous years to average for each GM. There were 80 GMs who had a total of 96 GM spells and
who met this stringent criterion. One GM, Emile Francis had three stints of eleven seasons, seven
seasons and six seasons with three different teams. There were another fourteen GMs who had two
stints of three or more years and sixty-five who had one stint of three or more years. It was this
group of 80 GMs we used to test the assertion that competitive disadvantage leads to below normal
performance, competitive parity leads to normal performance and competitive advantage leads to
above normal performance.
The Sample
As already mentioned, we examined teams from the National Hockey League, observed
continually, from the 1942–1943 through to the 2001–2002 seasons. We collected the data from
Total Hockey: The Official Encyclopedia of the National Hockey League (2nd Edition), published in
2000, the annual NHL Official Guide & Record Books, and Total NHL (2003) all published by Dan
Diamond and Associates, Inc. Where information was not available from these publications, we
sourced data from the NHL website, and from individual teams. Data were collected from The
Internet Hockey Database (www.hockeydb.com) to develop number of assists (an assist is a
league-standard measure for a player who helped another player score a goal for the team) and team
member turnover variables.
We dropped the Oakland Seals team (entered the NHL in the 1967-1968 season) from the
analysis because it folded after the 1977–1978 season. We subsequently included thirty teams in
the study, even though only six were present in the 1942–1943 season. When team names were
changed or teams changed cities or both, we treated them as the same team. During the 60-year
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period, there were 878 team-season observations. We dropped eleven when we dropped the
Oakland Seals. In addition, we dropped 24 team-seasons because they were first-year teams. This
left 843 team-season observations in our data set. The data were ordered in alphabetical order
starting with the Anaheim Mighty Ducks and finishing with the Washington Capitals. For each
team the data were ordered from 1942–1943 to 2001–2002. For all teams except the “Original Six,”
the data were ordered from the second year they entered the NHL.
The Analyses
We conducted two analyses. In the first analysis, we regressed the number of points gained by a
team versus the number of points available (we called this actual value created) during the regular
season on several variables to explain as much variance as possible. The independent variables
controlled for regression to the mean, the external environment, and internal team attributes. In the
second analysis, we regressed how far each team progressed in the playoffs on the same variables
we used in our first analysis with one exception. In the second analysis we used lagged playoff
performance not lagged actual value created.
Actual value: Our dependent variable was measured as the number of wins times two plus the
number of tied games with the total divided by the number of games played times two. We used this
measure because the number of games played changed from 50 in 1942/1943 to 82 in 2001/2002.
There were only 48 games in 1994/1995 because of an owners’ lockout and prior to this season
teams played 84 games for several seasons. This measure intrinsically gauges the level of
performance, relative to other teams in the same season, and is consistent with other sports-team
studies (Brown, 1982; Cannella & Rowe, 1995; Pfeffer & Davis-Blake, 1986; Rowe et al., 2005).
Lagged actual value: This variable was measured the same as the dependent variable in the first
analysis and was included to control for regression to the mean.
Playoff performance: For each season we coded this variable as follows. When a team won the
Stanley Cup we gave this variable a value of 4; when a team lost in the Stanley Cup finals, we gave
this variable a value of 3; when a team made it into the playoffs but did not make it into the final
series, we gave this variable a value of 2; and when a team did not make it into the playoffs we gave
this variable a value of 1. We treat this variable as a continuous variable because it is univariate
normal (see Table 1).
Lagged playoff performance: This variable was measured the same as the dependent variable for
the second analysis and was included to control for regression to the mean.
League reorganization: The league expanded from six teams to thirty teams over the period of our
study. Therefore, each season teams were added we coded reorganization as 1; otherwise it was
coded as 0. This was important as we could not use the first year teams that were added to the
league in our study as we needed to use the data from each new team’s first year to develop several
of our variables. This meant that in these years the average points gained in the regular season
relative to those available of the older teams left in our study would be higher than in other years
when new teams were not added. In addition, we expected that newer teams would be likely to
achieve worse performance by not advancing as far into the playoffs.
Location: During the 60 seasons of our data set, several teams changed cities. When they did, we
treated these as the same teams. However, we controlled for change of location by coding all
observations for each team after a location change as one and all observations for those teams and
all other teams as zero.
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Intensity of rivalry: Sports teams compete in a manner that makes the level of rivalry among
teams an important concern. We define rivalry in our study as the degree to which competitors in
the same division have equal capabilities. In the NHL, as in other professional sports leagues, teams
are arranged into divisions for league play, and, although teams sometimes play other teams outside
of their division, competition within the division is the most important factor for determining the
final number of points achieved. We measured intensity of rivalry in the following manner. For
each division, each season, we calculated the standard deviation of performance for all teams in the
division. Then we divided this value by the idealized standard deviation as recommended by Quirk
and Fort (1992).
The idealized standard deviation presumes that each team has playing strength equal to all
other teams. It equals 0.5 divided by the square root of the number of games played during the
regular season. The number varied from 50 games played in the 1942–1943 season to 84 in the
early 1990s. By the end of the 2001–2002 regular season each team played 82 games. Our measure
of rivalry estimates the equality of proficiency across teams that play in the same division and are,
therefore, in direct competition. The intensity of rivalry in our sample varied across divisions as
well as across seasons.
All stars: The quality of players can affect the number of points a team gains during the regular
season and how far they progress in the playoffs. Consequently, we coded this variable as the
number of players voted to the all-star teams by the Professional Hockey Writers’ Association at
the end of each current regular season from each team.
Player turnover: We coded player turnover in the following manner. We counted the number of
players on each team at the end of each season. We then assessed the number of players from this
group no longer on the team at the beginning of each current season. We divided the latter by the
former to determine the percentage of player turnover from the end of each previous season to the
beginning of each current season.
Teamwork: Teamwork was measured as the number of assists divided by the number of goals
scored for each team for each current season. We considered that teams with better teamwork
would score more points during the regular season and progress further in the playoffs.
Coach ability: We measured coach ability at the end of each previous season as the proportion of
regular season points gained divided by the regular season points available for the total number of
games coached during his entire career. In the instances where a coach had no previous NHL head
coaching experience, we assigned a value of 0.500.
New Coach: When we assigned a value of 0.500 because the coach was new to the NHL, we
included a dummy variable to indicate the coach’s first season in the NHL. A "1" indicated that the
coach was in his first season, and a "0" indicated otherwise.
Coach tenure: Coach tenure was operationalized as the number of games coached with the same
team during that current coaching spell, and was measured at the end of each previous season.
GM and coach same person: For some teams in some seasons, the coach and general manager
was the same person. When this was the case, we coded this dummy variable as "1" and "0"
otherwise.
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Succession variables: We included six succession variables in our study to control for any impact
of succession on points gained and progression in the playoffs. For teams where the coach at the
end of the previous season was different from the coach at the beginning of the previous season,
coach previous-season succession was coded as "1" otherwise it was coded as "0". When the coach
changed during the period from the end of the previous season to the beginning of the current
season we coded coach between-season succession as "1", otherwise it was coded as "0". When the
coach changed during the current season, we coded coach within-season succession as "1",
otherwise it was coded as "0".
The same procedure was followed for general manager previous-season, general manager
between-season, and general manager within-season successions. There were 155 within-season,
216 between-season, and 158 previous-season coach successions in our data set. In addition, we
found 36 within-season, 102 between-season, and 32 previous-season GM successions.
Team: To control for team-level effects and unobserved heterogeneity we included 29 team
variables with the Buffalo Sabres as our reference group. We randomly chose the Sabres as the
fixed-effects procedure requires that the number of dichotomous variables used be one less than the
number of teams. These 29 team variables were not included in our tables to conserve space.
Time: We considered that it was necessary to control for calendar time (operationalized as 1 to 60
for each year in the data set). Consequently, we adjusted the data set for the effect of calendar time
prior to running the two analyses. All continuous variables were regressed on calendar time. When
the association between each of these variables and calendar time was significant we used their
residuals for our two analyses. We did this for two reasons: to reduce the variance in the data set
due to calendar time, and because there was an increase in the number of teams in the league during
our observation period. We found that seven of the ten continuous variables related significantly to
calendar time. These were playoff performance, lagged playoff performance, intensity of rivalry,
all stars, player turnover, teamwork, and coach ability. Actual value created, lagged actual value
created and coach ability were not associated with time.
Analytical methodology: We used a panel data and regression methodology to analyze our data.
The data were structured as an unbalanced, pooled, cross-sectional time series with the data
sequenced by team and within team, by season. By controlling for calendar time we were able to
treat all 843 observations as independent and homoscedastic and use OLS regression as our
analytical methodology.
We did not find multicollinearity to be a problem in our two analyses (Aiken & West,
1991) as the variance inflation factors ranged from 1.0 to 3.0. This is well below 10.0, the accepted
maximum. A visual check for heteroscedasticity revealed that this was not a problem. Finally, the
Durbin-Watson for our multivariate analyses revealed that autocorrelation was not a problem. In
the two analyses, the Durbin-Watsons were 1.991 and 2.108, respectively, indicating no first-order
autocorrelation. With these three key problems (autocorrelation, heteroscedascity, and
multicollinearity) resolved, we felt confident in using OLS regression for our analyses.
Between analysis one and analysis two: After analysis one, we saved the residuals as the
operationalization of actual value created minus value expected to be created. Then we identified
the GM for each team for each season and averaged the residuals for each GM with three or more
full contiguous seasons with the same team. For example, Harry Sinden was the GM for the Boston
Bruins for 28.5 seasons. We averaged the residuals for the 28 full seasons that he was Boston’s
GM. In this manner we associated each of our 96 GM’s spells that were three full seasons or longer
with an average residual value. We then compared each of these averages to the average of all other
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residual values. For example, we compared the average of Harry Sinden’s 28 seasons to the average
of the other 817 residual values. Where a spell was three seasons, we compared the average of the
three seasons to the average of the other 840 residual values. We used the appropriate one-tailed
t-test to make the comparison after assessing whether the variance for each of the two groups in
each t-test was equal or unequal.
When a GM’s residual average was significantly less than the residual average of all other
observations, we coded all of his years as one signifying that he was a source of competitive
disadvantage. We coded five GM spells this way for a total of 35 team-season observations. When
the GM’s average residual equalled the residual average of all other observations, we coded all of
his years as two signifying that he was a source of competitive parity. We coded 84 GM spells this
way for a total of 616 team-season observations. When the GM’s average residual was significantly
greater than the residual average of all other observations, we coded all of his years as three
signifying that he was a source of competitive advantage. We coded seven GM spells this way for a
total of 77 team-season observations. The 115 observations that were left were coded as zero and
signified all observations associated with GM spells of less than three full contiguous seasons.
Analysis two: As we mentioned above, we regressed playoff performance on lagged playoff
performance and all of the other independent variables described above with the exception of
lagged actual value. From this analysis we saved the residuals as we consider them to be a close
approximation of performance as described by Barney (1997, 2002) in that low residuals are
similar to below normal performance, medium residuals are similar to normal performance and
high residuals are similar to above normal performance.
After analysis two: We used a oneway analysis of variance test to assess whether the residuals
from analysis two were significantly different for groups one, two and three as identified in analysis
one. For groups two and three, the variances were unequal so we used Dunnett’s T3 test. For groups
one and two, the variances were equal so we used Scheffe’s and Bonferroni’s tests.
Results
Table 1 reports the mean, standard deviation, skewness and kurtosis for all continuous variables
used in the two multivariate analyses. As mentioned earlier, seven variables were significantly
related to calendar time and the standardized residuals saved from regressing each of these
variables on calendar time were used in the multivariate analyses. We also report the skewness and
kurtosis for all seven standardized residual variables. The values for skewness and kurtosis in Table
1 indicate that each continuous variable was univariate normal.
-------------------------------------------------Insert Tables 1-3 about here
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Table 2 contains the results from our two multivariate analyses. We report unstandardized
betas. Both models were significant with the model from analysis one explaining 61.9 percent of
the variance in actual value created and the model from analysis two explaining 34.3 percent of the
variance in playoff performance. To conserve space we do not comment on these models as they
are not the intent of this study.
Table 3 presents the results of the oneway analysis of variance. We report the number of
observations, means, standard deviations and whether groups were a source of competitive
disadvantage, parity or advantage. In addition, we report the results of the contrast tests and post
hoc tests used to ascertain whether the residualized playoff performance (after controlling for
lagged playoff performance, several environmental and organizational variables and time) was
significantly better for Group 2 than Group 1 and for Group 3 than Group 2. Using two-tailed
significance tests we see that Group 2’s average residualized playoff performance is better than
Group 1’s and that Group 3’s is better than Group 2’s.
Discussion
What do these results suggest about the relationship between a critical organizational resource that
is a source of competitive disadvantage, parity or advantage, and associated performance?
Looking at Table 4, these results support the argument made by Barney (1997, 2002) and Barney
and Peteraf (2003) that a source of competitive disadvantage will be a source of below normal
performance, a source of normal performance will be a source of competitive parity, and a source
of competitive advantage will be a source of above normal performance. This is an important
finding. It supports the heretofore assertion of the RBV that – at the resource-level – critical
resources have the potential to generate competitive advantage and be a source of above normal
performance.
The results also suggest that it is uncommon for a GM to be either a source of competitive
disadvantage or a source of competitive advantage. In the case of competitive advantage
particularly, it suggests that GMs who generate competitive advantage are relatively rare. These
results also suggest that the competitive advantage generated by these GMs may be
non-transferable. This is suggested from Table 3 where we see that none of the GMs who were a
source of competitive advantage for their team were a source of competitive advantage for another
team. In the case of four of them (Allen, DelVellano, Pollock,and Schmidt) they only had a GM
spell with one team. The other three had multiple GM spells (Bowman – St. Louis and Buffalo;
Fletcher – Calgary and Toronto; and, Francis – New York Rangers, St. Louis and Carolina). This
may suggest that in the context of the NHL it is very difficult for a GM to transfer the tacit set of
skills, knowledge and abilities that made him a source of competitive advantage and above normal
performance with one team.
Another interesting note from Table 3 is that Frank Selke is found to be a source of
competitive disadvantage even though he is widely considered as one of the great GMs in NHL
history. During his 18 year tenure as GM, Montreal won six Stanley Cups and was in the finals
another five times. In addition, he led Montreal to eight first place finishes and six second place
finishes in a tough six team league in regular season play. However, being a great GM is different
from being a source of competitive advantage, competitive parity or competitive disadvantage
(Barney & Tyler, 1991). He was found to be a source of competitive disadvantage in our study
because, on average, the actual value created was significantly less than the expected value. His
average residual regular season value was negative. This indicates that during regular season play
182
he achieved less with the players and coaches he brought to Montreal than he should have achieved
as predicted by the model in analysis one.
Some limitations of our study should be recognized. Our study and its findings only
addressed the linkage between the GM as an example of a critical organizational resource and
performance within the context of the NHL. This means that generalizability to competitive
advantages of CEOs of large corporations and other organizations is limited. Internal validity is,
however, a necessary condition for external validity and limiting our study to a single industry and
strategic group provides many advantages in terms of internal validity: objective measures of
disaggregated performance, longitudinal data, and the ability to control for many potentially
confounding and alternative explanations of performance variation. Given these strengths, we can
make very strong inferences based on our results and while we may not be able to generalize to
other kinds of organizations, we can generalize back to theory (Stinchcombe, 1968), thereby
claiming empirical support for a core theoretical concept of the RBV.
The RBV has been difficult to test empirically because of methodological issues associated
with untangling resource effects at the resource-level and linking those to a theoretically
appropriate measure of performance (Barney, 1997; Barney et al., 2001; Peteraf & Barney, 2003).
Following the advice of Rouse and Daellenbach (1999), we used a longitudinal data set confined to
a sole strategic group within a single industry to control for as much extraneous variation as
possible. However, we stopped short of Rouse and Daellenbach's (1999) full methodology and as
suggested by Levitas and Chi (2002), tried to be creative in operationalizations and in measuring
theorized outcomes in order to avoid intrusive research methods. The results suggest that we were
successful even though our data are unique in many respects and such data are not available for
most industries.
Our results suggest that we were successful in demonstrating empirically the link between
a critical resource and that resource being a source of either below normal, normal or above normal
performance. Our results underscore the importance of selecting and operationalizing a
disaggregated dependent variable that is theoretically relevant at the resource-level. The results
allowed us to make some inferences because we were able to control for industry and strategic
group effects as well as unobserved heterogeneity.
In the end we think that our results provide, perhaps the first empirical support, for
the theoretical assertion that some resources have the potential to generate competitive
advantages, and by extension to explain inter-firm performance differences, ceteris
paribus, that are directly attributable to differences in resources.
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186
Table 1
Means, Standard Deviations, Skewness and Kurtosis for all Continuous Variables
Variable
Actual value (t+1)
Actual value (t-1)
(R) Playoff performance (t+1)1
(R) Playoff performance (t-1)1
(R) Rivalry (t+1)1
(R) All stars (t+1)1
(R) Player turnover (t)1
(R) Teamwork (t+1)1
(R) Coach ability (t-1)1
Coach tenure (t-1)
Mean
.506
.502
1.900
1.890
1.959
.850
.321
1.626
.513
138.6
Std Dev
.113
.116
.813
.815
.707
1.249
.114
.097
.085
169.3
Skew
-.100
-.147
.990
.998
.397
1.706
.371
-2.432
-.273
2.111
Kurtosis
-.075
.026
.918
.923
.224
2.712
.333
8.732
.731
5.174
Skew2
Kurtosis2
.854
.863
.422
1.258
.289
-1.280
.783
.786
.201
1.732
.158
5.297
1.852
4.646
1) (R) means that the variable was regressed on calendar time and the standardized residual used in the
multivariate analysis.
2) The skewness and kurtosis for all residualized continuous variables after they were regressed on
calendar time. This means that all variables used in the analyses had acceptable levels of skewness
(< 2) and kurtosis (<7).
187
Table 2
OLS Regressions
Variables
Intercept
Lagged actual value
(R) Lagged playoff performance
League reorganization
Location
(R) Intensity of rivalry
(R) All stars
(R) Player turnover
(R) Teamwork
Coach ability
Coach new
(R) Coach tenure
GM Coach same person
Coach previous-season
Coach between-season
Coach within-season
GM previous-season
GM between-season
GM within-season
R2
Adjusted R2
F
Durbin-Watson
Analysis One
Dependent Variable
Actual value (t+1)
B
Sig.
.285
.000
.405
.000
----.015
.009
.024
.069
.002
.351
.040
.000
.003
.378
.004
.122
.080
.032
.014
.136
.003
.359
.003
.737
.016
.026
.002
.799
-.048
.000
.023
.086
-.003
.676
-.038
.003
.639
.619
30.7
1.993
.000
188
Analysis Two
Dependent Variable
(R) Playoff performance (t+1)
B
Sig.
-.918
0.001
----.096
.010
-.002
.977
.252
.101
.023
.432
.307
.000
-.056
.088
.026
.387
1.766
.000
-.007
.953
.100
.007
.015
.871
-.080
.323
.149
.117
-.319
.000
.108
.482
-.029
.747
-.264
.075
.379
.343
10.6
2.108
.000
Table 3
The Oneway Analysis of Variance
Group
N
115
35
616
77
Mean
-.059
-.489
-.019
.463
Std Dev
.718
1.042
.965
1.157
Contrast Tests
Groups 1 & 2
Groups 2 & 3
Variance
Equal
Unequal
Value of Contrast
.470
.482
t-test
2.824
3.505
Sig (2 Tail)
.005
.001
Post Hoc Tests
Groups 1 & 2
Groups 2 & 3
Variance
Equal
Unequal
Scheffe – Sig
.047
---
Bonferroni - Sig
.029
---
Dunnett T3 – Sig
--.004
0
1
2
3
189
CDA, CP or CA
CDA
CP
CA
ASAC 2005
Toronto, Ontario
Richard Soparnot
Groupe ESCEM Tours-Poitiers
Mail : [email protected]
Eric Stevens
Groupe ESCEM Tours-Poitiers
Mail : [email protected]
PEUT-ON OPÉRATIONNALISER L’APPRENTISSAGE ORGANISATIONNEL ?
UNE ANALYSE DU PROCESSUS D’INNOVATION DE SERVICES
Le concept d’apprentissage se situe à la confluence de nombreux champs
d’étude (la gestion de projet, le changement organisationnel, l’innovation, le
management des savoirs, le benchmarking…). Il apparaît comme un concept
« carrefour ». Situé à l’interface de nombreuses pratiques de management, il est
difficile de saisir l’influence du phénomène d’apprentissage sur ces pratiques.
De même, l’abondance des écrits sur l’apprentissage rend peu aisée une
délimitation précise du concept. Afin de mieux cerner l’objet et évaluer son
influence sur les pratiques managériales, une réflexion sur son
opérationnalisation nous paraît essentielle. Dans cette perspective, nous
recourons à « l’observation » de situations d’apprentissage : les processus
d’innovation constituent de tels « moments organisationnels ». De là, nous
formulons une série de propositions sur l’opérationnalisation de l’apprentissage
dans la perspective des processus d’innovation de services.
Introduction
Le concept d’apprentissage a fait l’objet d’une littérature particulièrement abondante (Leroy,
1998). Pour reprendre l’expression de Koenig (1996) à propos du changement, l’apprentissage se
caractérise par un ensemble de travaux « dont la richesse et la variété sont parfois confondantes ».
Même s’il renvoie à la Resource Based View (RBV) et notamment la branche des Dynamic
Capabilities (DC) (Durand 1 , 2001), le concept d’apprentissage se situe à la confluence de
nombreux champs d’étude (la gestion de projet, le changement organisationnel, l’innovation, le
management des savoirs, le benchmarking…). L’apprentissage apparaît ainsi comme un concept
« carrefour », situé à l’interface de nombreuses pratiques de management. Il est souvent difficile
de saisir l’influence du phénomène d’apprentissage sur ces pratiques. De même, l’abondance des
écrits sur l’apprentissage rend difficile une délimitation précise du concept (Leroy, 1998). Tout
d’abord, la nature immatérielle de cette aptitude la rend insaisissable, difficilement contrôlable,
voire parfaitement évanescente. Le manque de clarté sur l’objet théorique justifie cette
contribution. Afin de mieux cerner l’objet et évaluer son influence sur les pratiques managériales,
une réflexion sur son opérationnalisation nous paraît essentielle. Cela contribuerait à stabiliser
l’objet théorique et à le rendre plus actionnable. Dans cette perspective, nous recourons à
« l’observation » de situations d’apprentissage : les processus d’innovation constituent de tels
« moments organisationnels ». Le projet apparaît alors comme un support à l’apprentissage. Afin
1
L’auteur note que « le courant des ressources dynamiques tente de repenser à la fois les origines de la
compétitivité et les moyens de gérer le futur. L’apprentissage, tant individuel qu’organisationnel, est à la
base de la création des ressources et des aptitudes stratégiques » (Durand, 2001, p.150).
190
de réaliser un « premier repérage » des variables opératoires du phénomène, nous nous attachons,
donc d’abord, à clarifier les contours théoriques du concept d’apprentissage. Puis, nous soulignons
la nature des liens qu’entretiennent innovation et apprentissage en nous fondant sur le corpus
théorique. De là, nous formulons une série de propositions sur l’opérationnalisation de
l’apprentissage dans la perspective des processus d’innovation de services.
I
L’apprentissage : quels contours théoriques ?
La variété théorique du concept d’apprentissage en rend l’opérationnalisation particulièrement
difficile. Les premiers pas vers son opérationnalisation nécessitent de mettre en évidence le sujet et
l’objet d’apprentissage (qui apprend quoi ?), les modes d’apprentissage (comment apprendre ?) et
les déclencheurs de l’apprentissage (quand apprendre ?). Dans un dernier temps, nous verrons si le
concept d’organisation « apprenante » permet une avancée dans l’agrégation des différentes
dimensions du concept. Ce recours à la littérature nous permet de mieux saisir les différentes
facettes du concept.
1.1 Les sujets et objets d’apprentissage : de l’individu à l’organisation, de la connaissance à
la compétence
L’apprentissage aborde la question essentielle de l’acquisition des connaissances et
compétences (Kim, 1993 ; Mack, 1995 ; Schein, 1993). Il met en jeu le capital cognitif, son
potentiel d’enrichissement et de renouvellement et la régénération des schémas de l’action.
L’apprentissage concerne deux sujets principaux : l’individu et l’organisation.
L’apprentissage individuel est le processus par lequel les individus acquièrent des
connaissances nouvelles. Deux courants principaux, le béhaviorisme et le cognitivisme, ont étudié
la manière dont les individus apprennent (Leroy, 1998 ; Fillol, 2004). Pour les béhavioristes,
l’apprentissage se fonde sur le concept de stimulus-réponse et se produit lorsque les
comportements effectifs sont ajustés. Pour les cognitivistes, l’apprentissage n’est pas
exclusivement comportemental. Piaget (1959), auteur représentatif de cette école, met en exergue
deux processus d’apprentissage. L’assimilation consiste à intégrer une information et enrichir les
schémas de pensée. L’accomodation est un renouvellement des modèles mentaux qui intervient
lorsque l’assimilation n’est plus possible. L’apprentissage, dans une perspective cognitiviste,
conduit alors à un enrichissement des connaissances et/ou à une modification des systèmes de
croyances. Les deux dimensions de l’apprentissage, comportementales et cognitives, se
complètent toutefois plus qu’elles ne s’opposent. En effet, un apprentissage comportemental,
fondé sur la répétition et les automatismes, risque de demeurer superficiel et limité s’il n’intègre
pas une connaissance poussée de ce qui dicte ce même comportement. Il semble plus approprié
d’utiliser les termes d’apprentissage à dominante cognitive ou comportementale 1 (Leroy et
Ramanantsoa, 1997 ; Leroy, 1998).
Concernant l’apprentissage organisationnel, Koenig le définit comme « un phénomène
collectif d’acquisition et d’élaboration de compétences, qui plus ou moins profondément, plus ou
moins durablement, modifie la gestion des situations et les situations elles-mêmes » (Koenig, 1994,
p.78). On considère ici que l’organisation apprend. Cette conception est pour le moins
problématique car les organisations n’apprennent pas par elle-même, seuls ses membres
apprennent. « L’organisation est composé d’individus et donc l’apprentissage individuel est
1
Cette réflexion souligne le caractère plus ou moins actionnable de ce qui est appris. Leroy note ainsi : « l’apprentissage
à dominante cognitive concerne en priorité les compétences axées sur la connaissance dont le contenu est articulé ou
articulable. Il passe par une explicitation ou même une formalisation de la connaissance. L’apprentissage à dominante
comportementale apparaît plutôt quand la connaissance n’est pas articulée ou articulable mais peut cependant être
enseignée, de façon moins directe et moins explicite » (Leroy, 1998, p.18).
191
nécessaire à l’apprentissage organisationnel ; cependant, l’organisation est capable d’apprendre
indépendamment de chaque individu mais non de l’ensemble des individus » (Fillol, 2004, p.37).
L’apprentissage organisationnel ne saurait donc être considéré comme la somme des
apprentissages individuels. S’il est admis que les organisations apprennent (Kim, 1993), il est
essentiel d’expliciter comment s’opère le passage entre les deux sujets d’apprentissage car il ne
suffit pas qu’un individu ait appris pour que la compétence de la firme s’en trouve améliorée. Pour
Argyris et Schön (1978), de l’apprentissage individuel dépend celui de l’organisation. C’est ainsi
que les auteurs se fondent sur les théories de l’action1 pour soutenir leur théorie de l’apprentissage.
Selon nous, pour saisir la tension entre l’apprentissage individuel et l’apprentissage
organisationnel, il convient de s’interroger sur son objet. En effet, l’individu peut apprendre de
nouveaux savoirs (connaissances) et raisonnements (programme maître ou représentations) et de
nouvelles routines2 comportementales (compétences). Ces résultats d’apprentissage alimentent le
niveau supérieur : les connaissances et compétences des individus peuvent enrichir celles de
l’organisation (profiter aux autres acteurs), qui à leur tour enrichissent celles des individus. Les
routines sont, à cet égard, très révélatrices. Elles correspondent à des savoir-faire, précisément à un
« modèle d’activité répétitif pour l’organisation toute entière » car « ce qui est central pour la
performance organisationnelle dans la production est la coordination ; ce qui est central dans la
coordination est que les individus connaissent leur travail, interprètent et répondent correctement
aux messages qu’ils reçoivent » (Nelson et Winter, 1982, in Coriat et Weinstein, 1995, p.116). La
firme se dote ainsi d’un répertoire ou un portefeuille de réponses, de solutions prêtes pour l’action
qui acquiert un caractère « d’automaticité » pour les acteurs. « Bien formés et entraînés, ils puisent
spontanément dans le répertoire de réponses dont ils disposent pour fournir la réponse correcte,
sans être nécessairement capables d’expliquer ni leurs choix, ni en quels savoir-faire particuliers
ces choix consistent » (Coriat et Weinstein, 1995, p.117). Ces propos soulignent bien le « chemin »
de ce qui est appris entre ceux qui apprennent. Ce sont les relations entre les individus qui
constituent ce chemin entre l’apprentissage individuel et collectif.
Pour mieux comprendre ce « chemin », émanant de la complémentarité entre sujets (et objets)
d’apprentissage, le groupe constitue une unité d’observation intéressante. Un espace restreint de
l’organisation peut apprendre et le contenu d’apprentissage se diffuser. Emerge alors une
« géographie » de l’apprentissage. En effet, apprendre localement ne signifie pas apprendre
globalement. Pour que l’apprentissage soit véritablement organisationnel et confère à l’entreprise
la maîtrise d’une capacité nouvelle, il doit se répandre dans le tissu organisationnel. Ce « voyage »
n’est en aucun naturel. « Il ne suffit pas de mener des expériences locales jugées comme des
réussites par ceux qui les ont approchées pour croire qu’elles vont faire école : ces jugements ne
sont-ils pas partisans ? Les conditions de la réussite sont-elles transférables ? Les critères
d’évaluation sont-ils bons ? Ce qui est valable à échelle réduite le reste t-il lorsqu’on le
généralise ? » (Midler, 1993, p.192). Démultiplier les dynamiques locales implique pour les
fonctionnels de devenir les promoteurs de leurs initiatives, mais cette multiplication doit être
organisée par des dispositifs de globalisation des apprentissages. Se référant à la gestion de projet
« concourante », Midler montre comment les apprentissages issus du projet Twingo se sont
diffusés dans d’autres espaces de l’organisation. « L’apprentissage de la logique projet chez
1
« Relève d’une routine défensive toute action, toute politique ou toute pratique, qui évite aux membres d’une
organisation d’éprouver un embarras ou de ressentir une menace et les empêche en même temps d’en découvrir les
causes » (Argyris, 1995, p.70). Ces routines sont surprotectrices, elles contribuent au maintien du statu quo
essentiellement parce que, face aux situations embarrassantes et menaçantes, les individus pratiquent l’esquive (et la
dissimulation de l’esquive). Les acteurs deviennent ainsi d’habiles joueurs qui pratiquent deux théories d’action. Les
théories professées sont celles « dont les gens rendent compte ou qu’ils décrivent ». Les théories d’usage sont celles que
« les gens utilisent en fait pour élaborer et mettre en œuvre leur action » (Argyris 1995, p.83).
2
Les routines correspondent à « des modèles d’interaction qui constituent des solutions efficaces à des problèmes
particuliers » (Dosi, Teece et Winter (1990) cité par Coriat et Weinstein, 1995). Elles sont des résolutions aux problèmes
récurrents.
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Renault a ainsi mis en jeu divers agents de capitalisation. Ainsi […], le responsable de la
formation au management a été l’instigateur du Club de Montréal […]. Enfin, un groupe de
responsables de hauts niveaux, le groupe Delta, a été constitué, précisément, pour catalyser,
systématiser et démultiplier les avancées diverses réalisées chez Renault dans la conduite de
projet » (Midler, 1993, p.192).
In fine, les sujets d’apprentissage entretiennent des relations que l’objet d’apprentissage nous
permet de mieux cerner. L’individu, le groupe et l’organisation sont susceptibles d’apprendre selon
des modalités dont nous avons tracé les grandes lignes. La diffusion des savoirs s’effectue ainsi par
échange et partage, c'est-à-dire par socialisation. La « spirale du savoir » chez Nonaka (1991)
reposant sur la conversion de la connaissance1 en est une parfaite illustration. La question des
modalités d’apprentissage est toutefois jusqu’ici resté en suspend. En effet, quels processus
caractérisent l’apprentissage ? Y a-t-il des types ou niveaux d’apprentissage ? Autant de questions
auxquelles nous tentons d’apporter quelques éléments de réponse.
1.2 Les modes d’apprentissage ou comment les firmes apprennent-elles ?
A partir de Koenig, nous avons posé que l’apprentissage « modifie la gestion des situations et
les situations elles-mêmes » (Koenig, 1994, p.78). Cependant comment se produit le renouveau
dans la gestion des situations et les situations ? Deux phénomènes expliquent la régénération des
pratiques et de leur contexte d’émergence : l’accumulation d’expérience et l’intelligence
d’expérimentation.
Par l’expérience, la répétition, ou « l’exploitation des régularités » (Koenig, 1994, p.77), les
individus et les organisations apprennent en améliorant constamment les pratiques. L’expérience
correspond à un mode d’apprentissage lié à la révision et l’interrogation des pratiques courantes.
Lorsque les résultats s’éloignent des objectifs, la détection des écarts conduit à adopter des
aménagements, à réviser la pratique afin de la perfectionner. Ce processus correctif, fait
d’ajustements réguliers, amène à les retoucher en fonction de la capacité à réduire l’écart entre le
résultat et l’objectif. L’organisation apprend dans une succession d’erreurs et d’essais, par
réplication. Cet apprentissage correspond à un apprentissage en simple boucle, ou opérationnel,
dans lequel sont modifiées les stratégies d’action (Argyris, 1995). Il répond à une logique
d’expérience car les fondements des stratégies d’action ne sont pas remis en cause ; les valeurs qui
permettent de construire les théories d’action demeurent inchangées. En apprenant à modifier ses
stratégies d’action, l’organisation consolide les processus d’exploitation de ses activités.
Par l’expérimentation, les individus et les organisations modifient leur mode
d’interprétation du monde, les schémas dominants, le cadre cognitif au sein duquel s’élaborent
les réponses. Il s’agit d’une « philosophie pratique où les connaissances sont celles produites
dans et par l’acquisition d’un savoir-faire et la réflexion dans l’action » (Koenig, 1994, p.77).
L’expérimentation traduit un apprentissage dans lequel les valeurs directrices qui conduisent à
l’adoption des pratiques organisationnelles sont interrogées et mènent au renouvellement du
paradigme managérial. En s’en éloignant, cette forme d’apprentissage permet la mise en place
de pratiques innovantes car il s’agit d’une réinterprétation et d’une reconstruction des
modalités de l’action. Comme le précise Midler, « d’un coté, l’action est structurée par les
savoirs existants ; mais d’un autre, elle constitue une mise à l’épreuve de l’applicabilité et de
la légitimité de ce dispositif cognitif » (Midler, 1994, p.347). Cet apprentissage est en double
boucle car il modifie les pratiques organisationnelles grâce à l’interrogation des valeurs
directrices qui les déterminent (Argyris, 1995). Ainsi, les organisations qui expérimentent, en
adoptant des pratiques qui se situent à l’extérieur du paradigme managérial, enrichissent leur
portefeuille de réponses aux sollicitations de l’environnement. Thiétart souligne « le besoin
1
Cette conversion s’effectue par le passage du tacite à l’explicite par l’étape de l’extériorisation et par celui de l’explicite
en tacite par l’intériorisation.
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qu’ont les organisations de développer de nouvelles réponses afin de pouvoir réagir à des
situations que l’on ne peut prévoir. De même, Weick (1977) et March (1981) suggèrent que les
activités qui ne sont pas directement liées à la mission de l’organisation sont des moyens pour
améliorer sa capacité de réponse à la complexité et aux conditions changeantes » (Thiétart,
2001, p.367).
Ces deux formes d’apprentissage peuvent sembler paradoxales 1 . L’expérience invite à
exploiter les régularités, l’expérimentation à s’en éloigner. La gestion de l’apprentissage consiste
alors à concilier les exigences contradictoires des logiques d’expérience et d’expérimentation. Il est
donc question de gérer deux forces en tension ; l’ordre et la stabilité qui se situent dans le registre
de l’opération et le désordre et l’instabilité qui se situent dans celui du projet (Mbengue, 1997,
Thiétart, 2001). En effet, l’ordre et la stabilité reposent sur des dispositifs de planification, de
contrôle et de structure. Ils permettent aux organisations d’assumer leur mission, aux acteurs de se
positionner au sein d’une structure et de réduire une complexité problématique pour l’être humain
aux capacités cognitives limitées, voire de créer une certitude imaginaire mais rassurante,
permettant de mieux affronter les aléas du jeu des affaires. A l’opposé, l’instabilité et le désordre
résultent des initiatives individuelles. Les espaces de liberté permettent l’innovation par
l’expérimentation de l’inconnu et la nouveauté. L’organisation se construit un catalogue de
réponses qui pourra être mobilisé lorsque des demandes, inconnues aujourd’hui, les solliciteront
demain. Des modes de travail expérimentés dans le passé peuvent devenir dominants dans le futur.
L’antagonisme de l’apprentissage par l’expérience et l’expérimentation se retrouve, par
exemple, dans le paradoxe de la mémoire. « La mémoire peut être la meilleure et la pire des
choses. D’un côté, elle permet de gagner en efficience par l’exploitation des régularités et des
répétitions de l’histoire. D’un autre côté, elle peut être un obstacle à la découverte de
modalités d’action plus efficaces, comme elle est susceptible d’empêcher une appréciation
judicieuse de ce qui est véritablement nouveau » (Koenig, 1994, p.81). La mémoire résultant
de l’expérience accumulée par l’organisation permet d’éviter de répéter les erreurs du passé,
réduit les coûts de réflexion et de mise en œuvre de solutions et constitue un puissant guide
pour l’action. De tels atouts peuvent conduire à l’inertie, au maintien de la stabilité par
aveuglement et à l’incapacité à sortir du paradigme (Laroche, 1997).
La gestion des tensions entre stabilité et instabilité, ordre et désordre, expérience et
expérimentation, exploitation et exploration, se trouve au cœur des modalités de
l’apprentissage. Il s’agit alors de maintenir le dialogue entre ces attracteurs et d’assurer entre
eux une dialectique permanente. In fine, il est question de gérer les tensions inhérentes à
l’exploitation et l’exploration (March, 1991). Si expérience et expérimentation doivent se
concilier pour produire des apprentissages, il convient de s’interroger sur leur déclenchement.
Comment l’exploitation et l’exploration naissent-elles ? Quels sont les déterminants d’un
processus d’apprentissage ?
1.3 Les déterminants de l’apprentissage : occasions et déclenchement du processus
Leroy et Ramanantsoa (1997) proposent d’identifier les déclencheurs d’apprentissage à partir
de leur source. En effet, la firme peut apprendre dans le cadre des relations avec l’environnement,
de soi-même et de ses partenaires. Ces sources constituent des occasions d’apprentissage
auxquelles correspondent des déclencheurs, des stimuli. Ainsi, la firme peut apprendre de son
1
Pour autant, ces deux formes d’apprentissage ne sont pas mutuellement exclusives. « Faire ce que l’on a toujours fait
est nécessaire dans l’adaptation à court terme. Faire ce que l’on n’a jamais fait est nécessaire dans l’adaptation à long
terme et les deux sont nécessaires simultanément » (Weick, 1977 cité par Thiétart et Forgues, 1993, p.14).
194
milieu dès lors que des changements environnementaux se produisent et exigent une adaptation.
De même, la firme peut apprendre d’elle-même lorsqu’elle connaît des échecs sur certains projets.
En pratiquant le retour d’expérience, elle ajuste ses méthodes et déclenche un apprentissage. Enfin,
les relations avec les partenaires sont sources d’apprentissage. Lorsque des différences
organisationnelles sont repérées, l’un des partenaires peut chercher à les comprendre et à modifier
sa propre organisation pour bénéficier des avantages identifiés. Le tableau suivant propose une
synthèse des sources et déclencheurs principaux de l’apprentissage.
Tableau 1 : Les sources et déclencheurs d’apprentissage
Apprendre à partir de ses Apprendre de soi-même Apprendre dans le
relations avec le milieu
cadre
des
partenariats
Différence
Changements
dans Echecs
Déclencheurs
organisationnelle
Dysfonctionnements
l’environnement
d’apprentissage
Compétences
Mauvaise
performance Erreurs
recherchées
Crise
expliquée par l’externe
Créativité
Source : Inspiré de Leroy et Ramanantsoa (1997).
Source
d’apprentissage
Cependant s’interroger sur les déterminants de l’apprentissage ne saurait se limiter à en
identifier les déclencheurs. Si la crise, l’erreur… constituent des stimuli d’apprentissage (et de
désapprentissage), la saisie des occasions doit retenir notre attention. En effet, il n’est possible de
comprendre ce qui déclenche le processus sans appréhender le contexte dans lequel il prend place.
C’est plus l’interprétation du signal qui déclenche l’apprentissage que le signal lui-même. Extraire
l’occasion d’apprentissage de son contexte consisterait à éliminer le rôle de l’activité de
fabrication de sens. Or l’environnement de l’action n’est pas parfaitement objectif et extérieur
(Daft et Weick, 1984), « il est dans l’organisation ». C’est donc plus l’activité d’interprétation du
réel qui produit la saisie de l’occasion d’apprentissage que le réel lui même. De même, cette
interprétation doit être suffisamment collective pour pouvoir enclencher une réponse
organisationnelle. L’absence de consensus dans l’interprétation limite la production d’un
comportement correctif ou de recherche de nouveaux savoirs. Mais alors comment permettre que
les membres de l’organisation saisissent ces occasions et déclenchent des apprentissages ?
Selon Pascale (1990), c’est la capacité d’interprétation et d’initiatives qui est au cœur du
déclenchement de l’apprentissage. Or ces deux aptitudes relève d’un même phénomène : le
maintien de la diversité. Celle-ci se caractérise par « l’incitation faîte aux employés de
remettre en cause la routine et la statu quo ; un degré d’autonomie et de délégation d’autorité
suffisant à tous les niveaux de l’organisation ; l’absence d’une domination trop marquée d’un
cadre de référence au travers duquel se règlent les décisions ; la capacité à intégrer et prendre
en compte une grande diversité d’informations externes… » (Pascale, 1990, p.236). De même,
selon Thiétart (2000, p.7-8), « la décentralisation, l’autonomie, la liberté d’initiative et
l’acceptation de déviances doivent être recherchées et favorisées ».
La diversité interne est donc le résultat de l’autonomie, elle-même favorisée par l’espace
de liberté dont disposent les acteurs, leur donnant à la fois le droit et le devoir de résoudre les
problèmes auxquels ils sont confrontés dans l’action. Selon Alter (1999), le management doit
faire « trembler » et réagir l’organisation pour entretenir la diversité. « En tentant de
programmer et de contrôler la « culture de l’entreprise », le management verrouille les
négociations de fond. Il interdit, par la neutralisation du conflit, l’apparition et le
développement de logiques nouvelles. A l’inverse de cette perspective, l’entreprise pourrait
positivement s’ouvrir à tous ceux qui, par « manque de conformité » sont mis à l’écart du
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système social et même de l’organisation » (Alter, 1999, p.170). Le fameux « work-out » de
General Electric illustre une telle volonté. Il réunit le personnel et les dirigeants à tous les
échelons pour critiquer, débattre, échanger et suggérer. Le débat ouvert permet de discuter des
normes établies, de les éprouver et de les modifier (Pascale, 1990). « L’exclusion des conflits
n’est en effet pas plus salutaire que la volonté de fusion culturelle : le conflit représente un
moyen de mise en œuvre de l’innovation » (Alter, 1999, p.184). Le conflit est alors vertueux
car il amène les individus à agir conformément aux théories professées. En corollaire,
l’organisation apprend lorsque ses membres prennent conscience de la part de responsabilités
qui leur incombe et modifient alors leur façon de raisonner. Comme le note Hodgson (1988,
p.128), « l’utilisation habituelle de concepts particuliers et de modes de pensée peut masquer
les hypothèses cachées et les axiomes qui ont été employés. Nous pouvons apparaître
« persuadés » par l’évidence ou par un argument sans se demander si leur utilisation est
légitime ».
Dans cette optique, le rôle du dirigeant est de « fabriquer » des valeurs fortes axées autour
du débat et de la confrontation. Le manager incite ses salariés à ne pas sombrer dans la
répétition et la routine paralysante. Il garantit les expérimentations, les valorise et les
symbolise. Il ne doit pas être le gardien des croyances organisationnelles, lui plus que tout
autre est celui qui s’éloigne des pratiques conservatistes sans les ignorer. Il est un manager
« passeur » ; il sert de « guide dans l’évolution des représentations et des identités » (Laroche,
1997, p.188). Il connaît les représentations dominantes, déploie des dispositifs d’apprentissage
aptes à les renouveler de manière progressive et permet l’expression des diversités
d’interprétation des problèmes et de variabilité des solutions proposées. Un tel management
induit chez les individus l’acquisition d’une capacité d’interrogation des prémisses qui servent
de base à leurs décisions : ils questionnent la logique sous-jacente à leurs actes.
Les déterminants de l’apprentissage dépendent donc plus de la capacité d’interprétation des
occasions que des occasions elles-mêmes. En effet, les déclencheurs offrent une explication trop
réductrice des déterminants de l’apprentissage. Leur saisie s’avère un objet d’étude plus éclairant
mais aussi plus complexe à appréhender. Elle trouve son origine dans le contexte de l’organisation
et en particulier dans le maintien et la recherche de la diversité interne.
Jusque là, le concept d’apprentissage apparaît de manière fragmentée formant une mosaïque
théorique. Ses contours théoriques sont épars et sa dimension opérationnelle et instrumentale
demeure limitée. Cependant, le « concept » d’organisation apprenante semble prometteur. Il laisse
espérer l’agrégation des connaissances relatives au phénomène d’apprentissage et entrevoir un
objet théorique aux contours délimités.
1.4 L’organisation « apprenante » : un concept intégrateur ?
Le concept d’organisation apprenante laisse penser qu’il existe une approche théorique
stable du phénomène. Qu’en est-il exactement ?
L’organisation « apprenante » apparaît comme le concept fédérateur des différents angles
d’attaque (sujet, objet, processus et déterminants) de l’apprentissage pour former un objet
théorique stable. Il permet d’approcher le phénomène dans sa complexité. Pour Senge, une
organisation apprenante est un lieu « où les personnes augmentent continuellement leurs
capacités de créer les résultats qu’ils désirent vraiment, où de nouveaux modèles de pensée
sont développées, où les aspirations collectives sont encouragées et où les individus
apprennent continuellement comment apprendre ensemble » (Senge, 1990, p.1). Les principes
fondateurs d’une organisation apprenante sont alors les suivants :
•
les salariés sont engagés dans une dynamique permanente d’auto-apprentissage,
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•
l’organisation est capable de générer des nouveaux comportements en mettant à l’épreuve
ses modèles mentaux et cadres d’interprétation,
• il existe un ensemble de normes communes autour d’une vision,
• la démarche d’analyse des problèmes est systémique.
Cette conceptualisation est pour le moins fragile (Baumard, 1995 ; Leroy, 1998). On
attendrait une agrégation harmonieuse des connaissances relatives à l’apprentissage, on se
retrouve avec une série de principes dont on saisit mal à la fois la nature et les connexions.
D’une part, les principes restent assez vagues et relève même d’une forme d’idéalisme
managérial (un one best way organisationnel). Leur contenu opérationnel reste à préciser, son
pouvoir d’instrumentation est faible. S’agissant du second principe, il est légitime de
s’interroger sur la manière dont la firme parvient à la mise à l’épreuve des modèles mentaux.
D’autre part, les liens entre les principes sont inexistants, or ils permettent d’agréger les
connaissances pour former un objet théorique stable. La mesure du phénomène demeure donc
problématique car ses déterminants et ses composants sont nombreux, imbriqués et
entretiennent des relations complexes dans le mécanisme de structuration (l’objet pouvant être
structurant et structuré). A titre d’exemple, la tension entre les deux sujets d’apprentissage est
esquivée, de même que l’articulation entre l’exploitation et l’exploration.
L’approche de l’entreprise apprenante montre des insuffisances manifestes et suscite des
espoirs vite déçus. En tout cas, elle témoigne de l’existence d’un champ de recherche à
explorer. Il semble donc difficile de parler d’un concept fédérateur, tout au plus s’agit-il d’un
concept en devenir, d’une esquisse théorique. Incontestablement, le pouvoir instrumental de
l’organisation « apprenante » est limité.
Dans cette première partie, nous avons défini les contours de notre objet théorique.
L’apprentissage revêt quatre dimensions dominantes : le sujet (qui apprend ?), l’objet
(qu’apprennent les sujets ?), les modalités et processus (comment les sujets apprennent-ils ?)
et les déterminants (quand les sujets apprennent-ils ?). Le caractère multiforme et
multidimensionnel de ce concept le rend particulièrement problématique à saisir. Le recours à
« l’organisation apprenante » s’est avéré infructueux pour l’appréhender de façon plus
opérationnelle. Or, ce détour par l’instrumentalisation nous semble indispensable pour le
rendre actionnable. Les premiers pas vers cette opérationnalisation procèdent, selon nous, de
l’étude de situations d’apprentissage. Dans ce qui suit, après avoir souligné que les processus
d’innovation constituent des moments d’apprentissage intéressants, nous dégageons les
premiers éléments d’opérationnalisation du concept.
II
L’innovation comme situation d’apprentissage collectif
S’il existe un relatif consensus autour de l’innovation, c’est bien dans la reconnaissance de
l’incertitude inhérente au concept lui-même. Dans la perspective ouverte par Schumpeter (1942),
la capacité à élaborer de « nouvelles combinaisons » entre les ressources de l’entreprise, leur
rapport au marché et l’usage social qui en établit l’adoption, doit être conçue comme à la fois
destructrice et créatrice, l’un et l’autre mouvement étant générateurs d’incertitudes. Deux
dimensions caractérisent alors la situation de l’innovateur : l’incertitude par rapport au résultat
final et l’incertitude quant aux moyens à mettre en œuvre pour atteindre cet objectif (Pearson,
1991). Comme l’a illustré Callon (1988, p.5): « pour avoir une idée de l’extrême complexité du
processus d’innovation, il faudrait imaginer une fusée pointée vers une planète à la trajectoire
inconnue, et décollant d’une plateforme mobile, aux coordonnées mal calculées ». L’incertitude
des organisations face à l’innovation est donc élevée et se matérialise par un déficit d’information
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de deux natures. Il y a déficit d’information sur ce que devraient être des choix se rapportant à une
solution qui n’existe pas encore. Il y a également un déficit d’information sur les règles de
fonctionnement que l’organisation devrait adopter pour produire cette solution. L’existence d’un
niveau élevé d’incertitude consubstantielle à l’innovation pose la question de la rationalité du
processus.
Choisir, parmi les multiples options de développement, celles qui conduiront à l’optimum se
révèle, à l’examen des situations managériales, un idéal impossible à atteindre. Comme le souligne
Alter (2003, p.26) : « l’acteur ne peut jamais utiliser toutes les informations disponibles : ou parce
qu’il ne peut les traiter pour cause d’incompétence, ou parce qu’elles sont trop coûteuses, ou
parce qu’il est difficile d’en connaître l’usage, ou parce que d’autres font de la rétention
d’information. La rationalité est donc objectivement limitée parce que l’information est rarement
parfaite, même par rapport à un état donné du savoir ». Dans cette perspective formulée par
Simon (1955, 1991), où le choix ne peut être défini a priori, l’innovateur aura nécessairement
recours à des heuristiques dites de « rationalité limitée » ; l’acteur recherche non pas une solution
parfaite mais une solution satisfaisante, ou de « rationalité procédurale » ; l’acteur construit sa
décision en découvrant les difficultés et les ressources qui se présentent à lui. Le processus
d’innovation devient un processus de réduction d’incertitude. Au fur et à mesure de l’avancement,
l’acteur découvre tout à la fois les problèmes, les moyens de réponses et les solutions elles-mêmes.
Les opérations d’interprétation des situations, les « épreuves » ou tests des représentations formées,
la formalisation des options et les choix, les essais-erreurs sont tout à la fois des étapes
d’apprentissage et des étapes potentielles du projet. Faire avancer une innovation, c’est faire
progresser les connaissances relatives au projet de telle sorte que les impasses aient pu être évitées.
Ce processus est en outre collectif. Comme le soulignent Lenfle et Middler (2003), un succès
est le résultat de la combinaison de nombreux paramètres : « il s’agit toujours d’un compromis
entre les logiques différentes des marchés, des études, de la recherche et de la production » (Lenfle
et Middler, 2003). A l’incertitude quant aux objectifs et aux moyens se rajoute le manque de
lisibilité des objectifs de chacun des acteurs associés au processus, la difficulté d’imaginer a priori
leur compétences et contributions potentielles, et enfin l’interprétation qu’ils feront des projets qui
vont leur être soumis. L’apprentissage en situation d’innovation est à poser dans un ensemble intra
et inter organisationnel.
Progresser dans le projet d’innovation, c’est donc réduire le niveau d’incertitude relatif aux
processus de production, aux réactions du marché, aux comportements des acteurs du processus,
en dégageant, par apprentissages successifs, les voies qui permettront la réalisation de solutions
acceptables par tous. Tout au long des deux dernières décennies, un flux continu de travaux
empiriques a progressivement confirmé la pertinence de ce cadre d’analyse. Etudiant les processus
d’innovation, Maidique et Zirger (1985) constatent que l’échec d’un projet d’innovation, parce
qu’il entraîne une dynamique d’apprentissage renouvelée, conduisait au succès du projet suivant.
Situant l’apprentissage au cœur du projet innovant, Madhavan et Groover (1998) observent que :
« chaque individu apporte dans une situation ses compétences, connaissances et actions qui la
transforment et sont transformées en retour. L’interaction des individus dans les situations de
gestion se traduit par la performance cognitive du groupe ». Les travaux de Nonaka et Takeuchi
(1995) démontrent comment les processus de création de nouveaux produits sont indissociables de
la création de connaissances. L’expérimentation, la formalisation, le partage et l’internalisation des
connaissances sont les processus qui vont aboutir directement ou indirectement à la transformation
de combinaisons productives et à leur mise en marché (Nonaka, 1994). Les travaux de Callon et al.
démontrent bien l’importance de « l’enrôlement », c'est-à-dire de l’association et de la prise d’un
rôle de chacun des acteurs de l’innovation au sein du projet auquel ils doivent contribuer (Callon,
Latour et al., 1998). Enfin, Lenfle et Middler (2003) soulignent que « l’épreuve », c'est-à-dire la
vérification de la pertinence des représentations, des actions et des solutions, permet tout au long
du processus à la fois de valider les choix, de créer des connaissances et de coordonner l’action des
acteurs.
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L’ensemble de ces travaux conduit à penser que les phénomènes d’apprentissage et de partage
de connaissances se trouvent au cœur des processus de création de l’offre. L’identification des
variables d’opérationnalisation de l’apprentissage organisationnel peut ainsi passer par
l’observation empirique des processus de création de l’offre. Nous nous proposons donc de
travailler dans cet objectif sur le cas particulier des innovations de service.
2.1 L’intérêt des travaux sur l’innovation de service
A la suite de Gallouj (2003), on peut affirmer que la faible reconnaissance de l’innovation au
sein des services provient plus d’une méconnaissance des spécificités de ces activités que d’un réel
déficit d’innovation. Les entreprises de services innovent et contribuent, comme dans les secteurs
industriels, à la création d’avantages concurrentiels et de valeur ajoutée ainsi qu’au développement
de la compétitivité de la firme. Quand bien même la protection de l’innovation de service est faible,
l’étude longitudinale d’un secteur démontre les bénéfices tangibles pour les entreprises innovantes
(Roberts et Amit, 2003). La faible visibilité des travaux sur l’innovation de service, qui trouve sans
doute ses sources dans une tradition de recherche centrée sur les entreprises industrielles, provient
également du nécessaire renouvellement des cadres d’analyse de l’innovation, rendu inévitable par
trois caractéristiques très différenciantes de ces activités.
Tout d’abord, les activités de service se définissent à travers le caractère intangible de l’output,
poussant les auteurs à la métaphore autant qu’à la définition. Berry (1980) les décrit comme « des
actes, des processus ou des représentations1 ». Le caractère intangible de l’activité de service pose
problème. Ainsi, Quinn, Baruch et al. (1987) proposent-ils de définir les services comme : « toutes
les activités économiques dont le résultat final n’est ni un produit ni une construction, qui est
généralement simultanément produit et consommé, et qui produit une valeur ajoutée à son
acheteur sous une forme intangible (comme la praticité, le confort, le gain de temps, la santé) ».
Le caractère intangible des services pose le délicat problème de l’identification de l’innovation
tant dans sa description, comme son degré de nouveauté par exemple, que dans l’évaluation de ses
effets économiques.
Au-delà des questions de l’identification elle-même, l’intangibilité induit l’impossibilité de
dissocier l’acte de production de l’acte de consommation. Les conséquences de ce simple constat,
rapportées à l’innovation, sont de trois ordres. Callon et al. (1995) le soulignent : « cette
affirmation conduit à identifier trois différences majeures entre innovation de produit et de service:
la première est qu’il y a en même temps innovation de produit et de processus, la seconde est
qu’on ne peut opérer de séparation entre innovation de produit et innovation organisationnelle, et
la troisième est qu’il ne peut y avoir de distinction entre la création de l’offre et l’activité de
production et de commercialisation ». Innover dans le domaine des services consiste, de par la
nature de l’output, à modifier les processus d’interaction par lequel est obtenu la satisfaction du
client, et de le faire en modifiant l’organisation productrice de ce processus. L’objet de
l’innovation n’est donc pas d’intégrer une technologie, ou un savoir scientifique, dans une
organisation existante mais de considérer l’organisation comme la technologie elle-même, et sa
modification comme l’élaboration d’une nouvelle technologie qui permettra de renouveler la
valeur créée.
A ce constat, qui évoque la nécessaire rupture avec les modèles d’innovation technologiques, il
faut ajouter la position bien particulière du client au sein même du processus de production de la
firme. Lors du délivrement d’un service, le client participe à l’achèvement de certaines séquences
d’action au point que celles-ci ne sauraient se dérouler sans sa présence (Zeithmal et Bitner, 2003).
Poussant l’analyse au-delà de la simple présentation des flux d’interaction, Gallouj et Weinstein
1
Traduction de « deeds, process and performances ». Le terme représentation renvoie au vocabulaire du théâtre ou du
film. On pourrait également traduire dans ce contexte par le mot scénario.
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(1997) montrent que dans la production d’opération de conseil, c’est l’articulation des
compétences des clients et de celles apportées par les consultants qui génère l’utilité produite au
client. La prestation de service est alors définie comme : « la mobilisation simultanée de
caractéristiques techniques (matérielles et immatérielles) et de compétences (internes et externes)
pour produire les caractéristiques de service » (Gallouj et Weinstein, 1997, p.118).
On le voit, les caractéristiques particulières de l’offre de service mettent les questions
d’apprentissage organisationnel au cœur du processus de création de nouvelles offres. Nous nous
proposons donc de restituer les travaux portant sur l’innovation de service et d’utiliser ceux-ci
dans un deuxième temps comme révélateur des dimensions mesurables de l’apprentissage
organisationnel.
2.2 Développement d’offre de service et apprentissage organisationnel
Dans une logique managériale, le principal objectif des premiers travaux de recherche vise à
l’identification des facteurs pouvant induire le succès ou l’échec dans le développement de
nouveaux services. Le travail de Cooper et al. (1994) est représentatif d’un ensemble de travaux
effectués pour la plupart dans le domaine des services financiers (Brentani, 1989, 1993;
Easingwood et Storey, 1995; Edgett et Parkinson, 1994). Les méthodologies quantitatives visent à
identifier, par comparaison de succès et d’échec, les facteurs positivement ou négativement
corrélés au résultat, puis à comparer les résultats obtenus pour les services avec ceux obtenus pour
les produits. Au-delà des limites méthodologiques de l’approche, les résultats communs à
l’ensemble des travaux révèlent que les synergies (synergies marketing, managériales et
financières) établies entre les offres existantes et les innovations, ainsi que l’intégration inter
fonctionnelle (communication interne, gestion du projet) se révèlent être fortement corrélées au
succès. Dans une perspective « Resource Based View », non développée par les auteurs, ces
résultats peuvent s’expliquer aisément. Plus les nouveaux services font appel aux répertoires de
connaissances individuels et organisationnels existants, plus l’incertitude et les risques sont réduits.
Les facteurs qui apparaissent corrélés au succès soutiennent une explication du succès par les
compétences de l’organisation et du client.
A ces premiers résultats, qui ne font pas référence explicite à un cadre d’apprentissage
organisationnel, viennent s’articuler des travaux empiriques qui cherchent à donner un contenu au
processus de développement lui-même et des travaux plus quantitatifs portant sur les processus de
communication interne. Hart et Service (1993) ont cherché à analyser le processus de
développement lui-même. En conduisant une recherche action au sein d’une entreprise de
distribution de composants électromécaniques et électroniques, ils mettent en évidence les
composantes organisationnelles de l’innovation de service. D’une part, les divergences de vision
entre les différents départements de l’entreprise peuvent avoir un effet considérable sur les durées
de développement. D’autre part, l’innovation induit un changement dans les processus de
délivrement, cette transformation entraînant à son tour un changement organisationnel. Les auteurs
suggèrent alors qu’une approche des processus par « intégration fonctionnelle » forte, reposant sur
une communication inter fonctionnelle riche et informelle, sur le partage d’information, et sur du
partage de décision doit conduire à plus d’efficience.
Dans une perspective similaire, les travaux de Raesfeld et al. (1996), s’appuyant sur une étude
de cas longitudinale, analysent les flux de communication en démarrage et en fin du processus
d’innovation sur deux dimensions : la fréquence de communication entre les membres de
l’organisation et le degré de similarité des affirmations relatives au projet. Les résultats montrent
un changement profond dans les flux de communication : la fréquence de communication et la
similarité des perceptions sont profondément altérées au point de voir apparaître, en fin du
processus, des personnes littéralement exclues des réseaux établis, celles-ci jouant un rôle
déterminant dans la production des nouvelles offres. Les auteurs concluent en justifiant de l’échec
du projet par le déficit de « sens partagé » résultant lui-même de l’absence de communication.
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Faisant suite à l’ensemble de ces travaux, Lievens et al. (Lievens et Moenaert, 2000; Lievens,
Blazevic et al., 2003) adoptent une perspective similaire en lui ajoutant une méthodologie de
mesure quantitative. La communication inter et intra organisation est conceptualisée comme
permettant de réduire l’incertitude relative au client, aux concurrents et à la technologie. « La
qualité de l’ajustement entre la communication liée au projet et le champ d’incertitude rencontré
induit l’efficacité des flux de communication sur la réduction de cette incertitude » (Lievens et
Moenaert, 2000). En communiquant tout au long du projet, les équipes transfèrent les constats,
idées et apprentissages en tous points de l’organisation, permettant ainsi une meilleure
coordination intra/inter fonctionnelle. En ce sens, il est possible de démontrer, comme le font les
auteurs, que la dynamique de communication est directement facteur de succès ou d’échec dans la
création et mise en marché de nouvelles offres.
Ces premiers travaux ne suffisent cependant pas à fournir un cadre théorique intégrateur. En
effet, les flux de communication ne permettent pas en soi de réduire l’incertitude. Pour cela il faut
que, en amont et en aval du transfert d’information, il y ait eu apprentissage, c'est-à-dire
production d’une première interprétation, de la « mise à l’épreuve » de celle-ci, et enfin de la
formalisation qui permettra le partage. Ce constat conduit à considérer le processus d’innovation
sous l’angle de l’apprentissage organisationnel. Dans cette lignée, les travaux de Stevens (2002),
Stevens et Dimitriadis (2002, 2004) centrés sur l’observation empirique et longitudinale de
processus d’innovation, mettent en évidence tout à la fois le rôle de la communication, mais
également des opérations de transformation des représentations et de l’organisation impliquée
dans le projet.
Les observations peuvent être regroupées en quatre principaux constats. Tout d’abord,
l’initiation du processus repose sur la perception de menaces ; remise en cause des recettes
existantes créant de fait une tension à l’action justifiant l’ouverture d’un nouveau projet. Le
management utilise alors sciemment un vocabulaire flou, permettant à chacun de construire une
représentation individuelle de la solution au problème évoqué. L’absence de directives précises, la
tension générée, la réappropriation par les individus de la problématique dans leur propre
perspective vont permettre de déclencher le démarrage plus ou moins formel du projet, lancer la
production d’interprétation des situations et des solutions à apporter et un premier flux d’échanges
informels autour de « l’objet » en cours de construction.
Puis, en parallèle, tant par des processus formels qu’informels, les acteurs vont mettre les
premières représentations à l’épreuve suivant des modalités très diverses. De la simple
conversation à l’essai grandeur nature, chacune des parties impliquées par l’énoncé du problème
va chercher à partager son interprétation de la façon la plus large possible. En ce sens, l’offre finale
est façonnée par ses multiples allers et retours entre imagination et réalité, entre premières
formalisations et prototypes. Il y a, bien sûr, mise à l’épreuve par le client, mais également par les
autres services impliqués dans la nouvelle offre. A ce stade, la communication a pour fonction de
permettre l’intégration des apprentissages multiples, localisés en de nombreux lieux, en un tout
cohérent. Loin d’être un processus linéaire, ce flux de confrontations à la réalité, permet de faire
les apprentissages dont émerge progressivement, par touches successives, une image de plus en
plus nette de ce que pourrait être l’offre.
Ce processus s’accompagne d’une transformation organisationnelle. En effet, choisir de
transformer une séquence de production pour pouvoir produire un output différent suppose
d’adapter le travail d’un département, d’en modifier les contours, d’en adapter les compétences et
le rôle de chacun. En retour, les résultats des apprentissages sont formalisés, « figés » dans les
bibles de procédures, les logiciels informatiques, l’agencement des surfaces de vente et
progressivement routinisés. Sans plasticité organisationnelle, la production de l’innovation est
rendue impossible. Sans modification de l’organisation, de ses structures et de ses routines,
l’apprentissage ne sera pas mémorisé sur le moyen terme.
Enfin, il faut noter que la reproduction de l’innovation de service sur des sites multiples
conduit à la multiplication des apprentissages. Quand bien même le projet est dessiné au niveau
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national pour l’ensemble des magasins, son implantation sur chaque lieu induit un nouvel
apprentissage : celui des hommes qui s’approprient un objet complexe, celui de la mise en place
dans un espace de contraintes différentes (géographie des magasins, systèmes d’information non
homogènes, répertoires de compétences différentes, interaction avec l’ensemble des autres projets
existants), celui des clients qui doivent redécouvrir les nouveaux contours du service proposé.
In fine, les processus d’innovation et particulièrement d’innovation de services sont, comme
nous venons de le démontrer, des situations d’apprentissage. Pour autant, dans quelle mesure est-il
possible d’opérationnaliser l’apprentissage organisationnel ? L’ensemble de ces travaux montre à
l’évidence qu’une mesure de l’apprentissage par l’output s’avérerait vaine. Définir a posteriori s’il
y a eu ou non apprentissage est difficile voire impossible sans connaître le processus, ou plutôt les
étapes du processus qui ont été mobilisées pour aboutir au résultat. En observant les actions qui ont
été menées sur un processus et en observant l’atteinte ou non des objectifs qui ont émergé du
processus, on peut conclure au succès de l’apprentissage. L’opérationnalisation du concept, si
complexe soit il, est alors envisageable.
III Les premiers pas vers l’opérationnalisation du concept d’apprentissage
L’ensemble de ces observations permet de constater que les apprentissages, loin d’être une fin,
sont conçus comme un moyen de réduire l’incertitude. On peut regrouper les principales axes
d’opérationnalisation autour de quatre dimensions principales : l’implication dans les projets
d’innovation, l’adoption d’une gestion systémique des projets, le degré d’ouverture et
d’expérimentation et le partage et l’intégration des connaissances acquises.
3.1 L’implication dans les projets
Cette dimension est sans doute délicate à mesurer. Elle se situe dans les phases amont des
projets. Elle consiste clairement en l’identification d’un problème ou d’une difficulté provenant
soit de l’environnement ; les compétiteurs innovent ou gagnent des parts de marché, soit de
l’interne ; les secteurs/produits ne produisent pas assez de résultats par rapport au reste du magasin.
A ce stade, il n’y a pas encore de projet et tous les constats de problème ne déboucheront pas
nécessairement sur un projet. Cependant, dans les cas étudiés (Stevens, 2002), lorsqu’un projet
émerge en tant que tel, il repose sur le premier partage des constats qui justifient un investissement.
Sans préjuger de sa légitimité, la formulation et le partage de la problématique de départ
constituent un premier critère qui permettra de juger de la dynamique d’apprentissage collectif.
Tout aussi délicate est l’ouverture d’un processus d’interprétation. Il faut entendre par là la
possibilité donnée aux acteurs du projet de sortir des routines organisationnelles pour initier l’offre
à venir. Il ne suffit pas en effet d’annoncer l’ouverture d’un projet pour qu’un processus
d’apprentissage soit déclenché. Il s’agit tout en initiant le projet de laisser chacun des acteurs libre
de produire une/des solutions, basées sur une interprétation personnelle du problème. Cette
production repose sur la formulation d’une règle explicite ou implicite : les acteurs du projet
doivent produire des solutions, mais la nature des solutions à produire ne peut être formulée au
stade du démarrage du projet. L’existence de règles tacites ou explicites, reconnues par les acteurs
en situation, et permettant ou facilitant l’expérimentation est à ce titre une des dimensions
permettant d’opérationnaliser le concept.
La formulation et le partage d’un problème ainsi que l’ouverture formelle d’un projet, par
lequel l’organisation peut répondre, conduit à la création de réseaux d’acteurs, formels et
informels qui, dans une logique d’apprentissage, vont permettre de gérer l’ensemble des réponses
organisationnelles à apporter au projet.
3.2 L’adoption d’une gestion systémique du projet
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La gestion du projet doit permettre de couvrir l’ensemble des dimensions organisationnelles
du problème abordé. L’analyse des raisons d’échec met en relief une pratique ou une vision
compartimentée du projet. L’action localisée, non coordonnée au reste de la structure, génère de
l’échec par déficit d’intégration. Un projet qui n’intégrerait pas toutes les dimensions de
l’organisation va générer un apprentissage localisé, valable pour quelques individus, mais qui se
révélera insuffisant pour porter la pratique de l’organisation dans son ensemble. Il y a donc dans
l’ambition du projet, le champ des questions traitées, la position des acteurs impliqués le moyen de
matérialiser la dimension systémique de celui-ci. Une vision d’ensemble du projet, partagée par les
acteurs impliqués dans celui-ci doit conduire à un apprentissage intégrateur de l’ensemble des
contraintes et non à une vision partielle et réduite des problèmes posés.
La conduite systémique du projet va soutenir un ensemble d’expérimentations et l’élaboration
de solutions tirées de l’expérience.
3.3 Le degré d’ouverture et d’expérimentations
Le degré d’ouverture et d’expérimentation peut se mesurer sur trois dimensions principales : le
climat d’ouverture, le nombre et la nature des expérimentations, la diversité des compétences
associées au projet. Le climat d’ouverture est nécessaire en ce que tout apprentissage remet en
cause les schémas et modes de fonctionnement existants. Il se traduit par le fait que les acteurs
acceptent de remettre en cause les modes de fonctionnement existants, prennent en compte les
expériences, remarques et avis de l’ensemble des acteurs, acceptent le décentrement des points de
vue. Sans ce qu’il faut appeler un état d’esprit réaffirmé implicitement ou explicitement dans la
gestion du projet, il n’est pas d’expérimentation concevable. Celle-ci requiert, en effet, d’admettre
l’erreur comme source d’apprentissage et, par conséquent, de tolérer le risque. Enfin,
l’expérimentation signifie la mise en place d’actions concrètes et mises à l’épreuve des solutions
imaginées.
Le nombre et la nature des actions d’apprentissage constituent, sans doute, la partie la plus
visible du processus. Il s’agit sur cette dimension d’observer les moyens, formels et informels, par
lesquels les acteurs mettent à l’épreuve les affirmations, hypothèses et solutions élaborées tout au
long du processus. La fréquence des observations et la diversité des méthodologies doivent
logiquement être corrélées au niveau d’apprentissage. En questionnant les acteurs du projet sur les
modalités d’acquisition d’informations et sur les modalités de mise à l’épreuve des hypothèses et
des solutions imaginées, il est possible de reconstituer une dimension importante de
l’apprentissage.
La mesure des actions d’apprentissage ne serait cependant pas complète sans l’analyse des
compétences associées au projet. L’apprentissage peut, en effet, résulter de l’apport de
compétences nouvelles requises pour une tâche ou une mission particulière. Dans ce cas, les
connaissances ne sont pas créées par test d’une hypothèse mais par adjonction de nouveaux
répertoires de savoir, par extension interne ou externe du réseau d’acteurs associés au projet. Le
choix d’équipes multifonctionnelles, et plus précisément le recrutement des membres de l’équipe
basé sur une analyse des compétences attendues doit permettre l’apport des connaissances
préalablement existantes sur un sujet donné.
Dans ce dernier cas en particulier, mais aussi de façon plus générale, les mises à l’épreuve et
l’apport de compétences ne résulteraient pas dans la production de nouvelles connaissances sans le
partage de celles-ci et leur transformation en actions de l’organisation.
3.4 Le partage et l’intégration des connaissances
Les travaux, tant théoriques qu’empiriques, mettent l’accent sur la socialisation comme l’un
des facteurs clef de réussite des projets d’innovation. Un projet a d’autant plus de chance de
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réussite s’il est porté par un réseau d’acteurs en communication étroite, et capables de transformer
les échanges et expérimentations en décisions et actions. Ce constat se comprend d’autant mieux
que l’on adopte la perspective de l’apprentissage organisationnel comme cadre intégrateur. Le
concept même repose sur une extension des savoirs créés au niveau de l’ensemble de
l’organisation. Il induit dans son objet même le partage des connaissances. Nous pouvons
cependant distinguer plusieurs niveaux de partage.
En premier lieu, la formalisation et l’échange contribuent à l’élaboration d’hypothèses. Par la
discussion ou l’échange d’informations, les équipes confrontées à un problème cherchent à
construire une première interprétation du problème posé en des termes qui permettent sa résolution.
En second lieu, la communication permet de réaliser un test informel par la discussion. Par un
simple échange, l’individu va pouvoir faire valider une première idée à moindre coût. Par partages
et adoptions successives, la communication va permettre de tester l’idée, puis de la « tangibiliser ».
En effet, la décision d’engager des ressources à plus grande échelle va reposer sur une décision
collective d’avancement. L’ensemble de ces ajustements mutuels va permettre l’élaboration de
décisions partagées puis la mise en œuvre des solutions, leur routinisation.
Le fonctionnement efficace des nouvelles solutions repose en effet sur la reproduction en tous
les points de délivrement de l’offre des actions décidées suite aux apprentissages. Sans mise en
œuvre résultant des opérations précédemment décrites, on ne peut parler d’apprentissage
organisationnel. La transformation des processus d’interactions avec le client, la réécriture des
programmes informatiques, la modification des tâches de chacun, la réorganisation des
départements font partie du processus d’apprentissage lui-même. La capacité de l’organisation à
traduire des expérimentations en comportement ainsi que les moyens utilisés pour obtenir les
comportements attendus doivent être considérés comme étant le processus d’apprentissage à part
entière.
Ces quatre pistes, identifiées à partir de la littérature sur l’innovation de services et
l’apprentissage, constituent un premier pas vers l’opérationnalisation du concept. Elles permettent
de mieux saisir le contenu théorique de l’apprentissage en relation avec les pratiques d’innovation.
Le tableau suivant reprend nos quatre propositions et les met en relation avec les facettes de
l’apprentissage traitées dans la première partie.
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Tableau 2 : Quatre pistes d’opérationnalisation de l’apprentissage en regard de ses
dimensions théoriques
Sujets et objets : qui ?
Implication Les individus et groupes
fonctionnels
dans
un
dans les
contexte de sollicitations
projets
organisationnel
Les individus et groupes par
Gestion
cheminement
de
systémique le
du projet l’apprentissage du local vers
le global
Modalités : comment ?
Déterminants : quand ?
Par une réflexion liée à un
projet
d’amélioration
potentiel préalable à son
déclenchement
Par une vision d’ensemble
du projet dans une
perspective intégrative
En Formulant et partagent
la problématique pour
initier
un
processus
d’interprétation
En faisant se confronter les
positions et contraintes des
acteurs impliqués dans le
projet pour une intégration
respective
En valorisant la diversité
interne, la recherche de
l’erreur et l’acceptation du
risque.
En assurant l’adjonction
de compétences nouvelles
par greffe.
Les individus et groupe Par la recherche des
Degré
remarques et avis sur le
d’ouverture fonctionnels
problème et les solutions,
et
la
promotion
des
d’expérimen
initiatives, leur mise à
tations
l’épreuve, soutenus par des
moyens
formels
et
informels
(réunions,
discussions,
débats,
rapports…)
Partage et Les individus en position de Par la mise à l’épreuve, la
la
intégration transformer les échanges en validation,
décisions et actions.
« tangibilisation » et la
des
diffusion
des
connaissance
connaissances
et
s
compétences nouvelles.
En organisant le partage et
l’échange d’informations
et de solutions par
l’existence de liens de
communication
Conclusion
Dans ce travail, nous avons souligné les différentes manières d’approcher l’objet théorique
qu’est l’apprentissage organisationnel. Aussi avons-nous mis en évidence l’absence d’un cadre
théorique intégrateur. Dès lors, il est relativement difficile de donner une dimension opérationnelle
au concept. En conséquence, au niveau instrumental, l’apprentissage s’avère d’une portée limitée.
Afin de mieux cerner l’influence de l’apprentissage sur les pratiques de gestion et de clarifier le
contenu opérationnel du concept, l’analyse des travaux sur l’innovation de services a été
particulièrement éclairante. Nous avons à la fois démontré l’intérêt de l’apprentissage pour
expliquer les logiques de succès et d’échecs des processus d’innovations et mis en perspective
quelques pistes pour opérationnaliser le concept.
Les apports se situent tant dans le champ du processus d’innovation que dans celui de
l’apprentissage. Les retombées de ces mesures pour l’évaluation des succès et échecs dans le
développement de nouvelles offres de service est à l’évidence l’un des champ d’application du
concept. L’opérationnalisation des variables, en permettant de mesurer l’apprentissage sur ses
principales dimensions, doit permettre aux gestionnaires en charge des développements de l’offre
205
d’améliorer la probabilité de succès. Sur le plan théorique, la mesure des variables permettra
également clarifier le rôle joué par l’apprentissage. Son influence sur le processus d’innovation est
explicite. Dans le champ de l’apprentissage organisationnel, ces premiers pas vers
l’opérationnalisation visent à le rendre plus actionnable. L’instrumentaliser constitue une avancée
managériale car les managers pourraient mieux le gérer. En en connaissant les finalités, ils
pourraient accéder à une pratique dont les effets bénéfiques sur nombre de pratiques d’entreprises
sont réels. Mais ces premiers pas vers l’opérationnalisation constituent une modeste avancée vers
l’intégration théorique d’un concept particulièrement complexe à cerner. L’Eden de l’organisation
apprenante est à ce prix.
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ASAC 2005
Toronto, Ontario
Sujit Sur (student)
FURTHER ON THE THEORY OF STAKEHOLDER SALIENCE:
DEFINING WHY AND WHEN DOES THE WHO REALLY COUNTS1
It is proposed that firms identify and revise their salient stakeholders (thus their
institutional structure) contingent on the interests of (and the firm’s interest in)
their salient stakeholders. Culture, industry, life-cycle stage and firm size
determine this process, and this process is preceded by changes in cooperative
agreements with stakeholders.
Ever since Freeman (1984) made a persuasive case for attention to stakeholder interests as
critical to firm success overriding the erstwhile dominant shareholder model, a debate has raged
consistently about which aspect is central to the stakeholder theory, and more importantly, what
might be the process of stakeholder identification (Berman et al., 1999). The recent increase in
awareness of corporate governance issues led the proponents of stakeholder theory to focus
primarily on the normative model which is concerned with how should the managers of firms deal
with corporate stakeholders (Collins & Porras, 1994; Freeman, 1994; Paine 1994, Donaldson &
Preston, 1995), neglecting the instrumental and descriptive realms which address the why and when
the managers deal with such issues. The normative stakeholder model is widely accepted by
researchers, however some questions remains as to how do firms identify their stakeholders, and
what factors determine the institutional structure they adopt to reflect their interests in these
stakeholders. Furthermore, once adopted, is this structure immutable or is there a convergence
amongst the different institutional structures; and finally what factors cause this modification and
what actions predict this process.
This paper strives to address these questions by arguing that a firm initially adopts its
institutional structure based on its circumstances and thereafter modifies its structure contingent on
the changes in those circumstances. It also asserts that the identification and salience of stakeholder
groups by a firm is dependent on its circumstances and its strategic choice. It also proposes that the
modification of institutional structure by firms is not unidirectional as claimed by convergence
theorists (Boyer, 1996; Coffee 1999; McCahery 2002), and the direction and extent of modification
is unique to each firm. The factors that might shape these circumstances are explored and based on
the relationship between the firm and its circumstances, some tentative propositions predicting the
direction and the process of the modification are offered.
This study thus is an important first step in furthering the understanding the stakeholder
phenomenon in three distinct ways. Firstly, it builds a theory explaining the how, why and when
firms chooses one structure over the other. Secondly, it advances a tentative rationale for the mixed
1
Inspired by Mitchell, Agle and Wood’s (1997) “Towards a Theory of Stakeholder Identification and
Salience: Defining the Principle of Who and What Really Counts” and aspiring to “further” their theory of
stakeholder salience. The invaluable mentoring by Dr. Jean McGuire and Dr. Rick Molz is gratefully
acknowledged and has greatly enhanced this paper - all persisting errors of course, are my creation.
209
results of the studies by the convergence researchers. And finally, it explores the causality of the
process of modification of institutional structure and attempts a prediction of this process.
Institutional Structure: Defining the domain
Historically, strategic literature has been grounded in industrial organizational economics.
Sloan’s strategy-structure-systems trilogy, like the Taylorian managerial system, of breaking down
complexity into simple components to make them systematic and predictable, served firms well from the 1920s, through the conglomerate diversification of the 60s, up to the start of globalization
in the 70s and 80s. The theories and doctrines of this era essentially focused on the firm as the
central institution (Berle and Means, 1932; Cyert and March, 1963; Porter, 1980). Everything else
as viewed merely as its sub-components, either within or outside of the firm. ‘Objectives’ of firms
were perceived as purely economic and the ‘responsibilities’ were secondary, modifying and
constraining social influences (Ansoff, 1965).This was an era of tremendous growth especially in
the Anglo-American firms; however as growth slowed, some of the inherent flaws in this doctrine
started to become apparent (Ghoshal, Bartlett and Moran, 1999). The growing impact of the
‘extraneous’ elements on a firm led to a more encompassing view of a firm. There was also a
movement towards including outside ‘clientele groups’ (King and Cleland, 1978) and stakeholders
(Mason and Mitroff, 1982) as integral to the firm’s objectives. Despite some dissenting views
(Friedman, 1970), maximizing profit was no longer perceived as the sole issue for firms.
Management researchers started to seek more holistic approaches towards strategy and its
implications in firms (Ackoff, 1974; Davis and Freeman, 1978; Trist, 1981). This resulted in the
view of a firm as an institution within an overarching institution or a system. Since Freeman (1984)
seminal work on ‘stakeholder theory’, this model was devoutly embraced and in spite of sporadic
calls for rejections of the stakeholder model (Weyer, 1996; Key 1999, Gregg, 2001), this theory
became entrenched in management literature.
However, the large body of work that this interest produced often led to diverse and
contradictory evidences and arguments on the understanding of the stakeholder concept.
Donaldson and Preston (1995) asserted that the normative aspect of stakeholder theory was the
most relevant, and as this view was also of most interest to the ethics and corporate governance
researchers, the instrumental and descriptive aspects were largely ignored. The normative
stakeholder concept was intriguing, the appeal across disciplines and the tenets juxtaposed to the
erstwhile dominant shareholder model; thus the ensuing multi-disciplinary literature on the issue
saw widely conflicting and sometimes contradictory views on both models (Jones, 1995; Wicks &
Freeman, 1998; Kaler, 2003). Despite a few attempts at ‘merging of the two’ (Weaver & Trevino
1994; Blair, 1995; Shankman, 1999), stakeholder-shareholder centered structures were commonly
understood as dichotomous edifices (Milgrom & Roberts, 1990; Charreaux & Desbrieres, 2001).
This led to convergence theorists researching worldwide movement towards a single institutional
structure amongst the two. Zingales (2000) asserts that as firms evolved from the capital intensive,
manufacturing focused stage to the human capital and service industry stage, the focus shifted from
the shareholders to the stakeholders. Of late the research points to convergence from stakeholder
centered model to the shareholder centered one (Trevino & Weaver, 1999; Yoshikawa & Phan,
2001). Becht et al. (2003) find that the direction of ‘convergence’ is in fact towards whichever is
the dominant economy of the period – towards stakeholder model in the 80s, to the shareholder
model in the 90s and recently, back towards the stakeholder model. The results thus, so far have
been mixed at best, and there seems to be no clear resolution to the debate in sight, at least not in the
near future (Macharzina, 2000; McGuire and Dow, 2003). Thus the causes, direction and extent of
changes in the stakeholder orientation and consequent institutional structure of firms remain
unclear.
210
This paper asserts that this polarized view is a consequence of accepting the normative
aspect as central to the stakeholder theory. The drawback of accepting stakeholder-shareholder as
dichotomous and the resulting unidirectional convergence rationale is that acceptance of one
structure meant overlooking its limitations and the strengths of the other. For example, if we
accept that the normative stakeholder model as the only ‘viable’ model, we face the problem of
identifying all relevant stakeholders, and such an aspirational standard will fail to provide
managers and directors with any meaningful guidance, and is considered difficult to implement and
enforce (Sternberg 1999). Such a model also poses a threat to private-property rights (Barry 1998)
and distorts traditional notions of accountability in the firm (Gregg 2001). It might also lead to ‘rent
seeking’ attempts by some to capture the wealth created by others on a grand scale (Barry 2002).
Key (1999) also attacked the normative stakeholder model for its insufficient attention to the
system within which business operates and the levels of analysis within the system. Taken to its
extreme, the stakeholder model might end up being a ‘collectivist’ approach, thereby creating an
untenable artificial market like those of the communist states (Weyer 1996).
Clearly the normative stakeholder model or the IO shareholder model by themselves fails to
provide either practitioners or researchers with a satisfactory resolution of the issues. Attempts at
a convergent (normative & instrumental) stakeholder theory (Jones and Wicks, 1999) was strongly
contested by others (Freeman, 1999; Gioia, 1999; Trevino et al., 1999; Donaldson, 1999) The few
studies that argued for the instrumental or descriptive stakeholder model (Mitchell, Agle and
Wood, 1997; Berman, Wicks, Kotha and Jones, 1999; Jawahar, and McLaughlin, 2001), though
furthering the understanding of stakeholder management, were still unable to resolve some of the
key issues. Berman, Wicks, Kotha and Jones (1999) conducted an empirical study that found no
support for the normative (intrinsic) stakeholder model, while their proposed strategic stakeholder
management model was seen as a robust and predictive model of firm performance. This study thus
clearly demonstrated the importance of stakeholder orientation in the selection of institutional
structure, however, the issues of stakeholder identification, variation in stakeholder salience, and
more importantly, the cross cultural and industry level effects on this process were not addressed.
Fact remains that firms do pay differing attention on their constituents. Thompson (1967) proposed
that when the organization cannot show improvement on all dimensions, it seeks to show its
improvement on the elements of interest to those on which it is most dependent and emphasize scoring
well on those criteria which are most visible to important task-environment elements. Davis (2003)
illustrates this point as follows:
“In 1998 when the Coca Cola Company had achieved its historical high share price and
shareholder dominance was at its zenith, its mission statement was: “We exist to create value
for our share owners on a long-term basis by building a business that enhances the Coca-Cola
Company’s trademarks.” In 2003, with its price at half the apex it had reached, it was “The
Coca-Cola Company exists to benefit and refresh everyone who is touched by our business.”
Also at its 1998 price peak, “Sara Lee Corporation’s mission is to build leadership brands in
consumer packaged goods markets around the world. Our primary purpose is to create
long-term stockholder value.” In 2003, “Sara Lee Corporation’s mission as a company is to
feed, clothe and care for consumers and their families the world over.”
The oft cited study by Mitchell, Agle and Wood (1997) addresses this issue of stakeholder
salience and offers a model wherein the stakeholder salience is related to the cumulative number of
stakeholder attributes of power, legitimacy and urgency. They propose that the process of
stakeholder salience is dynamic in nature and is caused by the changes in these three attributes.
Thus the stakeholder with more attributes will be perceived as more salient. However, as they
themselves admit as a limitation of their study, the attribute of legitimacy might be subsumed
211
within the attribute of power, thus drastically reducing the explanatory value of the model. Oliver
(1991) recognizes that these opposing forms of organizational behavior, passive conformity
(legitimacy) and active resistance (power) actually represent two ends of the same continuum.
Also, the Mitchell et al. (1997) model does not address the issue of managerial action with the
stakeholders who vary in terms of salience (Jawahar et al., 2001). Furthermore, the fact that the
relations with some of the stakeholders (e.g. special interest groups, environmental groups, and
media) are based upon ill-defined and changing expectations, implicit contracts, and culturally held
normative beliefs makes assessment of power, salience, and urgency more difficult than Mitchell et
al. (1997) might imply. Jawahar and McLauglin (2001) better address these issues by proposing a
descriptive stakeholder theory based on the life-cycle stages of a firm. They draw on resource
dependence and prospect theory to propose that depending on the firm’s life-cycle stage, the firm
will choose either a gain frame, i.e. risk averse (all stakeholders oriented) strategy; or a loss frame,
i.e. risk seeking (only primary stakeholder oriented) strategy. They utilize Clarkson’s (1991, 1995)
RDAP (reactive, defensive, accommodating, and proactive) scales of strategy for stakeholder
management, and propose that firms adopt proactive or accommodating strategies with their salient
stakeholders and reactive and defensive towards the others. This study lends support to the concept
of firms’ strategically identifying their salient stakeholders and also encompasses the dynamic
nature of variation in stakeholder salience, and furthermore, it also explains the managerial action
towards these salient stakeholders. However, as this study limits itself to the life-cycle stage of the
firm as the sole determinant factor for stakeholder salience, it does not address the relevant issues
beyond the firm level. As Roberts and Greenwood (1997) proposed in their constrained-efficiency
framework, strategic choice and organizational transformation are complicated by institutional
contexts. Davis’ (2003) illustration of Coca Cola’s and Sara Lee’s drastic change in focus on
stakeholder groups within a relatively short period also suggests involvement of
macro-environmental factors beyond the firm level. Thus Jawahar et al. (2001) model will be
unable to explain variation in stakeholder orientation of firms that might be at the same life-cycle
stage but in different industries and nationalities (or cultures), or the similarity between firms at
differing life-cycle stage but in the same industry or culture.
This paper attempts to address this gap in the literature and offers a descriptive model that
integrates both firm level and institutional level forces, and offers possible factors that determine
the process of identification and variation in salient stakeholder groups across these levels.
The ‘Contingent’ Stakeholder Model
This paper argues that the salience of the stakeholder, and the resulting institutional structure
that a firm adopts to reflect its interest in (or the interests of) this stakeholder group, is contingent
on its circumstances as determined by the interaction between the following factors:
Life-cycle stage of the firm
Industry life-cycle stage
Culture (including regulations)
Industry type
It is also argued that firms modify their structure depending on its emergent circumstances that
results from a change in any of the determining factors. This process of modification is preceded by
changes in the cooperative agreements between the firm and its stakeholder groups. This model is
asserted to be better representative and descriptive of firms’ institutional structure and offers a
rationale for the adoption and modification of its institutional structure. This model builds on the
instrumental stakeholder aspect of the stakeholder theory to explore why and when different
212
stakeholders gain in salience for firms. The premises for this model are developed further in the
following propositions section.
-----------------------------------insert figure 1 here
------------------------------------
Propositions
Industry and organizational life cycle stage as a determinant factor: Chandler (1962) right at the
very introduction of ‘stages of life-cycle’ model notes that as stages changed, so did firm’s
strategies and structure. Further theory and research suggest that the pressures, threats, and
opportunities in the environment of a firm vary with its life cycle stages (Anderson & Zeithaml,
1984; Dodge & Robbins, 1992). Jawahar et al. (2001) argue that at any given organizational
life-cycle stage, certain stakeholders become more important than others. Their propositions state
the nature of the changing importance of stakeholder groups to an organization at every stage of its
life-cycle. While in full agreement with this assertion, we argue that this process is applicable for
industries also. An illustrative example can be the Computer and Information Technology industry.
At the onset, this industry were focused primarily on gathering financial resources and competitive
analysis and thus were near exclusively shareholder oriented due to cognitive and resource
limitations (Bourgeois & Eisenhardt, 1988), much like the neoclassical Input–Output (shareholder)
model firms. No environmental impact of such firms was even envisaged at that stage. At its
intermediate stage, this industry pioneered stock options in view of the invaluable contribution of
its employees, and thus the industry norm became inclusive of employees as a major ‘shareholder’
or a highly salient stakeholder. The industry also thereafter actively involved its suppliers in its
strategies and operations (Burt, 1989). As the industry further matured, the unforeseen problem of
environmental pollution caused by the exponentially growing obsolete computers led these firms to
hitherto include the EPA and other bodies into consideration (Knemeyer et al., 2002). Another
example is the automobile industry. This was a classical Taylorian industry at its inception; in fact
most of the early management models were based on the Ford assembly line functionality, wherein
the most primary of stakeholders – the firm’s employees, were considered as replaceable parts.
However, with this industry approaching its mature stage, automobile companies like GM are one
of the only few corporations offering ‘lifetime employment’ to its employees (Zellner & Berstein,
1987).
We build on the rationale and propositions of Jawahar et al. (2001) by including the
industry life-cycle stage as a determining factor, and also utilize the same Clarkson (1995) RDAP
scale to reflect stakeholder salience (The proactive strategy is to anticipate responsibility,
accommodative is to accept responsibility, defensive is to admit responsibility but fight it, and
reactive is to deny responsibility). We also expand the ‘environmental group’ as described by
Jawahar et al. (2001) to ‘special interest group’ so as to include the stakeholder groups of ‘media’,
‘political groups’ and ‘environmental groups’ as defined by Freeman (1984). Thus we propose:
Proposition 1a: Firms and industries in the startup stage of their life-cycle will tend to be
proactive towards shareholders, creditors and customers; accommodative towards employees and
suppliers; reactive towards trade associations and special interest groups; and defensive towards
government and community stakeholders.
Proposition 1b: Firms and industries in the growth stage of their life-cycle will tend to be
proactive towards creditors, employees, suppliers and trade associations; accommodative towards
shareholders, customers, government, special interest groups and community stakeholders.
213
Proposition 1c: Firms and industries in mature stage of their life-cycle will tend to be proactive
towards shareholders, employees, suppliers, customers, trade associations, government, special
interest groups and community stakeholders; and accommodative towards creditors.
Proposition 1d: Firms and industries in decline/ transition stage of their life-cycle will tend to be
proactive towards shareholders, creditors and customers; accommodative towards employees and
suppliers; reactive towards trade associations and special interest groups; and defensive towards
government and community stakeholders.
Culture as a determinant factor: The cultural influence on the institutional structure adopted by
corporations in a country is well researched (Nakane, 1970; Kitano, 1970; Kumagai, 1992). Many
scholars have found support for the notion that society is a composition of institutional logic and
this is the underlying basis for the organizations therein (Galvin, 1999). These institutions in the
firm’s external environment place pressures and constraints upon organizational behavior by
supporting the enforcement of rules, laws, values, and social norms (North, 1990; Scott, 1990;
Coffee, 2001). Leontiades (1990) and Nonaka (1990) pointed out differences in national
orientations towards addressing even the overseas subsidiaries by a firm. Thus clearly all the
institutional structures adopted by a firm are dependent on the national culture of the firm. The
national regulatory structures that govern firms are also derived from the national culture per se
(Dammann, 2003). Dooley (1995) further argues that in the individualistic cultures like US,
maximizing shareholder wealth is by far the most important goal of US corporate law. Others too
support this notion (Bainbridge, 1993; Black & Kraakman, 1996). Similarly, there is ample support
for the notion that in the collectivist cultures like Japan (Nagai & Bennett, 1953; Bhappu, 2000) and
Germany (Schmidt, 1997; Bradley, 1999; Cunnigham, 1999), the corporate law emphasizes the
maximization of stakeholder values, especially the interests of employees, suppliers and creditors
(Becht, 2003). Hart (1992) also finds that Japanese corporations are firmly enmeshed with the
government, trade associations (Keidanren), political groups (MITI) and the community. In view
of the above, it is proposed that:
Proposition 2a: Firms in individualist cultures will tend to be proactive towards shareholders,
creditors and customers; accommodative towards employees and suppliers; reactive towards trade
associations and special interest groups; and defensive towards government and community
stakeholders.
Proposition 2b: Firms in collectivist cultures will tend to be proactive towards employees,
suppliers, government, and community stakeholders; and accommodative towards shareholders,
creditors, customers, trade associations and special interest groups.
Type of Industry as a determinant factor: Brammer and Millington (2002, 2003) in their
empirical study of UK firms found that the choice of institutional structure by a firm reflected
distinct industry characteristics. Fineman and Clarke (1996) also found that firms in different
industries encounter different intensities and types of stakeholder pressures. Adams and Mehran
(2003) also found firms in the financial industry showed distinctly different institutional structure
vis-à-vis those in the Manufacturing industry. Also firms in ‘politically sensitive’ industry (e.g.
nuclear power generation firms, mining, and firms in heavy effluence producing industries) are
perforce required to pay particular attention to the Environment Protection and Community
Protection groups. McLarney (2002) found that community action groups not only targeted
‘defaulting’ firms in the canning industry (those who were dumping effluents into a lake), but also
included the ‘non-defaulting’ firms. Thus the action was industry wide and not firm specific.
Likewise, Heugens, et al. (2002) found that the Dutch food industry as a whole tried to establish
structural linkages with the national government bodies and Consumer League to preserve its
214
autonomy in biotechnology-related (for genetically modified food products) affairs. These
‘additional’ pressures are not felt by firms in more ‘mainstream’ industries as their narrower focus
and impact perforce reduces the extent of pressure from their relevant stakeholders. Firms achieve
this by means of professional associations that bargain with governmental agencies on standards of
service and accountability (Oliver, 1991). Likewise, firms also exert important effects on
governmental structures by means of petitioning, lobbying and “expert” testimonies (Dacin,
Goodstein & Scott, 2002). Therefore, it is proposed:
Proposition 3a: Firms in ‘sensitive’ industries will tend to be proactive towards government,
trade associations, special interest groups, customers and community stakeholders; and
accommodative towards shareholders, creditors, employees and suppliers.
Proposition 3b: Firms in ‘mainstream’ industries will tend to be proactive towards
shareholders, creditors and customers; accommodative towards employees and suppliers; reactive
towards trade associations and special interest groups; and defensive towards government and
community stakeholders.
Interaction between the determinant factors. Each of the abovementioned determinant factors
by itself will merely indicate the tendency of the firm’s stakeholder orientation. It is argued that the
actual structure that a firm will adopt will be determined by the interaction among these factors. As
Rowley (1997) stated, organizations do not simply respond to each stakeholder individually; they
respond to the interaction of multiple influences from the entire stakeholder set. Tylecote et al.
(1998) found differences among Britain and Japan in the financial systems, and amongst industries.
Dodge et al. (1994) also found interaction between organizational life cycle and size of firms that
dictated the institutional structure of the firm. Ely & Pownall (2002) found similar
stakeholder-related incentives among Japanese firms co-listed in US, when matched by industry
and size. Gioia (1999) asserted that the firm’s strategic choices are affected by the sociopolitical
stakeholder network, and the network is changed over time as a result of the firm’s strategic
interaction with sociopolitical actors. In other words, both the external influences and the strategic
choice of which stakeholder group to target, influences the adoption of its institutional structure by
a firm. Thus, it is proposed that:
Proposition 4: Firms adopt its institutional structure contingent on its strategic choice and the
interactions between the determinant factors.
Modification of institutional structure. It is further argued that firms modify their adopted
structure dependent on the emergent changes in its determinant factors. Convergence theory
considers this modification as unidirectional – in the mid 80s as towards shareholder model
(Harbison, 1959; Dunphy, 1986), 70s to mid 90s as towards the stakeholder model (Vogel, 1979;
Ouchi, 1981) and of late back towards the shareholder model (Yoshikawa & Phan, 2001). A similar
finding is reported by Becht et al. (2003). However, the evidence for such a unidirectional
movement is mixed at best (McGuire & Dow, 2003; Gifford & Kudrle, 2003). This paper argues
that this movement is not unidirectional and is in fact is a dynamic process, unique to each firm,
caused due to the series of ongoing modification because of the variation in the stakeholder salience
caused by the interaction between the above mentioned factors. It is thus proposed:
Proposition 5: Firms modify their institutional structure and the extent and direction of this
modification is dependent on the variation in stakeholder salience caused by the emergent changes
and interactions within the determinant factors
215
Cooperative arrangements as precursors of modification. Downsizing literature (Morris et
al., 1999; Laabs, 1999; Beylerian & Kleiner, 2003) is replete with studies finding firms moving
towards greater profitability by downsizing despite a booming economy (indicating a shareholder
orientation) and this process involved systematically reducing cooperative arrangements with
erstwhile partners.
-------------------------------insert figure 2 here
--------------------------------On the other hand, Deri (2003) argues that today’s firms need to ‘befriend’ all relevant
stakeholders in order to sustain growth by means of ‘enlisting and engaging multiple partners and
perspectives’ in the proposed movement towards a more stakeholder oriented model. Dyer and
Singh (1998) also asserted that cooperative strategy adopted by firms led to a relational view that
allowed interorganizational competitive advantages over the traditional resource based firms
(shareholder model). Savage et al. (1991) while asserting that effective strategy requires consensus
from a plurality of key stakeholders, proposed the following diagnostic typology for identifying
and managing stakeholders. Such a typology implies that as a firm moves towards a stakeholder
oriented institutional structure, it will collaborate or involve its salient stakeholder groups; and as it
moves towards a shareholder centered structure, it will adopt a defensive strategy with low
cooperation with the stakeholder group. Nasi et al. (1997) assert that issues are driven by
stakeholder groups (and their alliances) that are constantly negotiating for support from external
stakeholder groups and from within firms, and that firms manage the issues by a process of
negotiation and communication to satisfy critical stakeholder group as a means of reducing the
legitimacy gap. Wolfe & Putler (2002) suggest options such as coalition building to form priority
based clusters of stakeholders. Thus it is proposed that:
Proposition 6a: Modification towards stakeholder oriented institutional structure will be
preceded by increase in cooperative arrangements with stakeholder groups that are increasing in
salience
Proposition 6b: Modification toward shareholder oriented institutional structure will be
preceded by decrease in cooperative arrangements with stakeholder groups that are decreasing in
salience
Research and Managerial Implications
The dyadic shareholder-stakeholder oriented institutional structures can be argued to be
interrelated – the differences being conceptual in design, and artificial in practice. For example,
maximizing stakeholder loyalty is with the goal of improving business performance (Wheeler and
Sillanpaa, 1997). Berman et al. (1999) also assert that firms view stakeholders as part of an
environment that must be managed in order to assure returns to shareholders. Freeman’s (1984)
model included the ‘investor’ stakeholder group. Similarly, the shareholder model also did
encompass stakeholders - although as constraining (Ansoff, 1965), conflicting or competing forces
(Gregg, 2001). The model as presented in this paper enables clarity in comprehending of a firm’s
institutional structure vis-à-vis its shareholder-stakeholder orientation. We assert that the firm
strategically chooses its institutional structure to reflect its interest in (or the interests of) its salient
stakeholders while working within its institutional environment, or in other words, the structure of
a firm is not only based on endogenous factors (life-cycle stage), but is also embedded in its
multilayered institutional context (culture, industry, and industry life-cycle). This paper thus
216
furthers the dynamic stakeholder identification and salience model proposed by Mitchell et al.
(1997), and Jawahar et al. (2001), by including the institutional and industrial-level factors that are
extraneous to the firm, but nevertheless impact its stakeholder orientation. Thus this model offers a
comprehensive method of identifying the salient stakeholders for any given firm. This model also
meets Gioia (1999) call for “adequately representing the complex social and organizational
realities that management faces”; and offers a tool to enable managers, special interest groups,
industry associations, and regulators to effectively target their interventional efforts towards the
appropriate stakeholders. A major managerial implication of this study is the fact that managers are
not solely responsible of choosing the stakeholder orientation, and thus the institutional structure of
their firm – in contrast to the exhortations of the proponents of normative stakeholder theory; and
thus influential stakeholders groups like government, political groups, special interest groups and
media also need to bear responsibility for shaping the stakeholder orientation and thus the
institutional structures of the firms within their domain.
For researchers, a possible research interest may be exploring additional factors that determine
the firm’s stakeholder orientation. The determining factors as proposed are by no means claimed to
be exhaustive. Of special interest might be the role and effect of (i) ownership and (ii) competitive
dynamics between firms, on salient stakeholder identification and the adoption and subsequent
modification of institutional structure because of these factors. We opine that competition
dynamics might very well be a major influential factor for the change in stakeholder orientation of
Coca Cola and Sara Lee, as illustrated by Davis (2003) between 1998 and 2003. Also, further
research investigating and refining the model, and operationalizing these factors to empirically
study the model might be of interest. By understanding that the process of identification of salient
stakeholder operates on multiple levels, and thus utilizing appropriate statistic tools like
hierarchical linear modeling, we may be able to distinguish between the firm, industry and
organization level effects and hence better understand the interaction between these factors.
Limitations
All the arguments in this paper are based on the basic premise that the stakeholder orientation
of a firm defines the institutional structure adopted by the firm and not vice versa. However, if the
institutional structure is viewed as a consequence of the ownership structure of the firm, then the
ideology and norms and beliefs of the dominant owner or ownership group might become the most
important deterministic factor. In such a case, the existing corporate ‘morality’ and ethics will
define the strategic choice of the firm, and thus the normative (intrinsic) aspect of stakeholder
theory will be salient. However, Berman et al. (1999) found no support for such a normative
stakeholder model. Further research investigating firm ownership as a factor determining
institutional structure is certain to lead to a better understanding of such a relationship, if indeed it
exists. Another limitation of this paper is the fact that the relationship between firm size and its
institutional structure has not been considered. It might well be that the firm size will moderate the
stakeholder orientation – institutional structure relationship. However, it is also possible that this
effect might be the result of the interaction between firm size and firm life-cycle stage, which are
generally closely related. Further analysis of this issue is called for and this again might be a useful
focus of further research studies.
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Figure 1: The Contingent Stakeholder Model
Life Cycle Stage
of the Firm
Firm Size
Type of Industry
Stakeholder
Orientation
Institutional
Structure
Industry Life Cycle Stage
Culture
(including regulations)
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1
Savage et al. Academy of Management Executive. Vol. 5 Issue 2 (1991)
225
ASAC 2005
Toronto, Ontario
Sujit Sur (student)
GOVERNANCE BEYOND AGENCY THEORY: THE TALE OF DUAL CLASS FIRMS
This paper looks beyond agency theory and utilizes multiple theoretical lenses to
explore governance in firms adopting dual class share structure. A model is offered
that proposes dual class share structure as a contingent governance mechanism.
Governance is asserted to operate at individual, industry and national levels under
different rationales.
This paper attempts to investigate the theoretical underpinnings for the reasons why firms
frequently adopt the dual class equity structure, i.e. a capital (or ownership) structure based on the
issuance of shares with differential voting rights (DeAngelo et al. 1985). Such an ownership
structure is justified by some researchers as a defensive structure adopted by the directors and
managers of a firm to prevent hostile acquisitions and takeovers by corporate raiders (Grossman
and Hart, 1988; Harris and Raviv, 1988), and as a means of wealth enhancement of all shareholders
(Alchain & Demsetz, 1972; Gromb 1993; Zingales, 1995). Many researchers however, assert that
dual class shares are a mechanism by which insiders expropriate value from the minority
shareholders, extract private benefits of control and ensure managerial entrenchment (Jarrell and
Poulson, 1988; Gompers et al., 2004). The rationale for both of these assertions, as for most
corporate governance mechanisms, is based on the principles of agency theory (Shleifer & Vishny,
1997; Becht et al., 2003). However, numerous studies have pointed out inconsistencies in the dual
class ownership mechanism that cannot be explained by agency theory (Lease, 1984; DeAngelo
and DeAngelo, 2000; Faccio and Lang, 2002). Thus the governance models based solely on the
tenets of agency theory based does not seem to suffice in explaining many of the relevant issues of
the dual class firms. Understanding the governance issues in ownership structures that enable
controlling shareholders voting/control rights significantly in excess of their cash flow rights (and
thus the issues of control within ownership), is considered to be of importance as such structures are
common in firms globally (La Porta et al, 1999) and are the predominant structure outside of US
and UK (Gompers et al., 2004). However, most researchers continue to focus on separation of
ownership and control for studying governance mechanisms issues of these firms. This paper
addresses this gap in literature and looks beyond agency theory to seek alternative rationales
specifically for the adoption of dual class ownership structure by firms, with a focus on exploring
the theoretical underpinnings of rationales for control issues within ownership.
We argue that firms adopt dual class ownership as a contingent governance mechanism,
and this phenomenon can be best understood only when examined by a multi-theoretic lens. We
assert that the contingent governance mechanism operates at multiple levels and at each level
differing attributes are salient. The propositions explore how and why firms adopt dual class
structure as a governing mechanism. Such a framework for understanding control issues within
ownership is opined to be generalizable beyond dual class structure and thus has strong
implications for other corporate governance mechanisms as well. This study thus furthers
understanding of the issues of dual class shares in three distinct ways. Firstly, it advances a
tentative rationale for explaining the contradictory findings in literature on dual class shares by the
researchers. Secondly, it builds a model explaining how and why firms adopt dual class capital
structure as a contingent governance mechanism. And finally, it offers an alternative model for
understanding corporate governance beyond agency theory, especially in case of firms with
concentrated ownership.
226
Dual Class Equity: Defining the Domain
Dual class firms offer researchers a unique opportunity to separate the effects of voting
(control) incentives from cash flow incentives (Gompers et al., 2004), and thus enables a
fine-grained examination of principal-principal governance issues. In one of the oft cited studies on
dual class shares, DeAngelo and DeAngelo (1985) study managerial stock holdings in dual class
firms and find that corporate officers and their families hold voting stock in excess of common
stock. They also find significant family involvement, and document explicit acquisition premiums
paid for superior voting shares. This premium, examined solely in terms of agency theory, is
assessed as private benefit of control. Subsequent studies report similar findings (Bergstrom and
Rydqvist, 1990; Becht et al., 2003; Gompers et al., 2004). Implicit in such a view is the assumption
that the owner-managers or controlling shareholders as the ‘other principal’, because of their
additional managerial function or voting control, will usurp ownership ‘rights’ of the
non-controlling shareholders. This private ‘benefit of control’ is reflected as the premia paid for the
voting shares. Even when viewed in terms of such Principal-Principal Agency (PPA) – a term first
used only in 2000, numerous studies report confounding and contradictory findings that can not
explained by agency theory including the PPA perspective. Prior to exploring these findings in
detail, we first revisit agency theory and its underlying premises.
Agency Theory Revisited
Simply put, agency theory is a principal-agent control conflict, and corporate governance
is the mechanism by which owners minimize agency costs Daily et al. (2003b). Wide acceptance of
this theory as per them is thus: “First, it is an extremely simple theory, in which large corporations
are reduced to two participants - managers and shareholders, and the interests of each are assumed
to be both clear and consistent. Second, the notion of humans as self-interested and unwilling to
sacrifice personal interests for interests of others is both age old and widespread”. Once thus
entrenched in the very definition of corporate governance, agency theory became the de facto
underlying principle of all corporate governance mechanisms. Shleifer and Vishny (1997)
categorically state that ‘‘Corporate governance deals with the agency problem: the separation of
management and finance, or – in more standard terminology – of ownership and control”. They
then go on to illustrate this point by stating:
“An entrepreneur, or a manger, raises funds from investors either to put them to productive
use or to cash out his holdings in the firm. The financers need the manager’s specialized
human capital to generate returns on their funds. The manager needs the financer’s funds,
since either he does not have enough capital of his own to invest or else wants to cash out his
holdings.”
The dominant model of the 90s perhaps was an entrepreneurial manager seeking ‘seed
capital’, and this might explain equating entrepreneur with manager in the above illustration,
however, in such a case of an existing owner raising capital, the governance issue at best will be
that of control between principal owners and not of “ownership and control” between principal and
agent – the basic tenet of agency theory. Most firms prior to the 90s might have had limited
managerial ownership, thus the governance problems might have been seen as issues of ‘ownership
and control’ but using this ‘agency’ lens to examine the issues of control within ownership is
puzzling. This inconsistency might not be of major consequence if a typical firm reflects the
Berle-Means’ basic premise of diffused ownership, whereby the majority of the governance issues
might still concern the ‘principal-agent’ problem. However, of late there have been recent
challenges to this Berle-Means perspective (La Porta et al., 1999; Faccio et al., 2002), who argue
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that the Berle-Means firm with widely dispersed ownership is the exception rather than the rule for
industrialized and industrializing economies, US and UK being the notable exceptions. However,
corporate governance in all firms worldwide were still viewed in terms of ‘principal–agent’ agency
issues, and agency theory based on the basic premise of separation of ‘ownership and control’ was
used to explain control issues within ownership. It was only in 2000, that Dharwadkar et al (2000)
proposed the term “principal-principal agency” (PPA) problem to define problem centered on
conflict between two types of principals in the context of post-privatization emerging economies.
Faccio et al (2001) thereafter utilized PPA problem to address expropriation of minority
shareholders’ value by controlling shareholders. Defined in terms of PPA, agency theory thus
might have some explanatory powers for governance issues of dual class firms; however numerous
studies have found inconsistent and contradictory findings even from this perspective. In the
following section we examine the accepted justifications for adoption of dual class share structure,
and contrast the findings that support agency theory (inclusive of PPA problems), to those that
stand in contradiction.
The Justifications and the Inherent Contradictions
As expropriation of minority shareholder returns: In accordance with Jensen and Meckling
(1976): With increase in control, the private benefit of control rises proportionately. It also lead to
hidden action (moral hazard) by a controlling shareholder with a low capital investment, as he has
incentives to make decisions which are favorable to himself but which will lower the value of the
firm and the returns of minority shareholders. Viewed only from this perspective, firms with
increasing concentrated ownership (like those with dual class capital structure) will increasingly
expropriate non-voting shareholders returns, freeze out the minority, or sell control. Some
researchers do find supporting evidence for such behavior by firms with dual class share structure
(Bebchuk, Kraakman, and Triantis, 2000; Amoako-Adu and Smith, 2001). However, Faccio and
Lang (2002) find no extra benefit for controlling shareholders, while Cornett and Vetsuypens
(1989) find that outside shareholder value actually increases when firms adopt dual class share
structure. Dimitrov and Jain (2004) also find shareholder value enhancement when firms
recapitalize to dual class. Bergstrom and Rydqvist (1990) find that large shareholders own much
more equity than required for control, inconsistent with the expropriation hypothesis. Thus overall,
there is mixed evidence on dual class structure as an expropriation mechanism.
As firm value enhancing: Proponents of concentrated ownership (Jensen and Meckling, 1976;
Leland and Pyle (1977) also utilize agency theory to state that the value of the firm will increase
with the controlling shareholder’s ownership fraction of the firm. As per this perspective, benefits
from holding a large equity fraction should induce the controlling shareholder to invest in more
shares than required merely for control, and thus the controlling shareholder should not be
interested in creating dual-class shares for the purpose of holding control with a minimum of
equity. However, owners in dual class firms continue to hold sizable equity in these firms. The
empirical literature is also quite mixed regarding the effect of dual class share structures on firm
performance. Proponents of agency theory are divided whether dual class structure leads to
increase or decrease in firm valuation. Agency theory might explain Harris and Raviv (1988)
assertion that issuing dual class of shares will increase firm valuation, and Claessens et al. (2002)
finding that firm value increases with the cash flow ownership of the largest shareholder but
decreases when the voting ownership exceeds the cash flow ownership, or even Lins (2003) finding
of decreasing firm value with increasing voting ownership to cash flow ownership. However,
agency theory cannot explain Morck et al. (1988) finding of non linear relationship between voting
rights and market valuation, nor Gompers et al. (2004) finding that firm value (as measured by
Tobin’s Q) increases in cash flow ownership and decreases in voting ownership in a non linear
fashion. Furthermore, Scott and Zutter (2003) find no differences in post-IPO revenue growth
228
between dual and single-class firms, however stocks of dual class firms traded at lower valuations
relative to fundamentals than single class firms. Dalton et al. (2003) also find no support for the
agency theory prescribed relationship between equity ownership and firm performance. Neither
inside nor outside equity ownership was found to be related to firm financial performance in that
study.
As defense against takeover: Dual class recapitalization during 1984-1986 in the US, garnered
much interest from researchers. Most researchers utilizing agency theory principles argue that
firms use concentrated ownership afforded by dual class structure as a defense against takeovers
and to ward off corporate raiders (Alchian & Demsetz, 1972; DeAngelo & Rice, 1983; Easterbrook
& Fischel, 1983; Shultz, 1988). Smart and Zutter (2003) also find that single-class firms become
acquisition targets within five years of the IPO more frequently than dual-class firms do. However,
Shum (1995) finds that firms recapitalized to dual class structure even when they were not targets
of takeover attempts. Becht et al. (2003: 50-51) finds very few and decreasingly rarity of takeovers
in US (highest at 1.5% in 1986 and steeply decreasing thereafter), however Gompers et al. (2004)
find stability (rather a slight increase) in the number of firms with dual class structure in the US
from 1970 to 2001. Thus adoption of dual class structure is not merely a takeover defense
mechanism. Furthermore, there is lesser consensus if takeover defense mechanisms are beneficial
or detrimental for firms. As per the dictates of agency theory, hostile takeover bids result in
significant wealth gain for shareholders and dismissal of inefficient managers, thus anti takeover
defenses should result in wealth loss of ‘outside’ shareholders (Grossman & Hart, 1988; Jarrell and
Poulson, 1988). Partch (1987) studied the wealth effects of 44 recapitalizations from 1962 through
1984, and concluded that the creation of dual classes of common stock with unequal voting rights
does not harm shareholders. Lauterbach (1991) also finds shareholders are not harmed by adoption
of anti-takeover amendments. Jarrell and Poulson (1988) however find significant wealth loss of
‘outside’ shareholders for recapitalizing firms, especially during 1986-1988. Pound (1988) finds
takeover attempts as value reducing for firms and leading to further entrenchment of management.
However, Kabir et al., (1997) find mixed results in the case of Dutch firms. Harris & Raviv (1988),
Gromb (1993) and Zingales (1995) contest that some deviation from one-share-one-vote structure
will in fact lead to wealth gain in cases of takeovers. Alchain & Demsetz (1972) suggest non-voting
shares will actually benefit outside shareholders as it deters takeovers that do not enhance wealth
and reduces managerial allocation of resources towards anti-takeover efforts. Stulz (1988) finds
that management actually forces acquirers to pay higher premiums to gain control when
management's stake is higher, and this sometimes leads to an increase in the target firm's ex ante
value, thus resulting in gains for outside shareholders. Burkart et al. (1998) further propose that
dual-class capitalization helps majority holders achieve higher bid prices for the firm. Daines
(2001) finds that anti-takeover protection is used to protect management when takeovers are most
likely and management performance is most transparent, but do not find any evidence of
managerial desire to protect unduly high private benefits. Becht et al. (2003) assert that that the
main beneficiaries of hostile takeovers are target company shareholders and the main losers are
acquiring company shareholders and target management in case of dual class firms. Thus, there is
no consensus if dual class structure is a takeover defense mechanism, and is such a structure
harmful or beneficial for the firm if examined solely in terms of agency theory.
As Private Benefit of Control: As per traditional financial theory, there should be no price
differential between the voting and non voting class of shares if they have the same pecuniary
payoff (Levy, 1983). Jensen and Meckling (1976) explain this paradox as the controlling
‘management’ may increase its welfare by receiving non-pecuniary benefits that are not enjoyed by
outside shareholders and thus the voting shares will be worth more. However some European firms
have had negative differential between the voting and non-voting shares in the 90s. This
discounting of voting shares cannot be explained in terms of agency theory. Most researchers
229
however, address only acquisition premium paid for voting stock, and attribute it as the ‘private
benefit of control’ (DeAngelo et al., 1985; Rydqvist, 1992; Zingales, 1995; Shum et al., 1995;
Nicodano, 1998; Gompers et al., 2004), and this ‘benefit’ is generally viewed as a means of
expropriating rights or as a takeover defense mechanism by the proponents of agency theory. In a
related study, Dyck and Zingales (2004) find that higher private benefits of control are associated
with less developed capital markets and more concentrated ownership. Thus dual class firms, as per
agency theory should have uniformly high premia because of the high private benefits of control.
However, Faccio et al. (2002), Dimitrov et al. (2004) find no support for private benefit of control
for dual class firms. During 1990-1993, Norway and Denmark in fact had negative valuation for the
voting shares, while other Scandinavian countries have declining premia (Becht et al., 2003: 57).
Neumann (2003) addresses the discounts specifically and asserts that the price differential in stock
classes is more likely to reflect investors' liquidity risks than benefits of control in the case of
Danish firms. In any case, fact remains that there are significant variations in the premia (discount)
between countries1 that cannot be fully explained by agency theory. Nanova (2003) finds that legal
environment variables explain 75% of the cross-country variation in the value of control ‘benefits’;
however, Becht et al. (2003) assert that time series data shows significant variations within
countries2 that cannot be fully explained in terms of only legal environment. They also caution that
the measures are still incomplete and call for further research for understanding the valuation of
premia (discount). In fact Gompers et al. (2004) conclude by speculating that the most plausible
explanation for some firms adopting dual-class structures is when their original owners are
reluctant to cede control – and perhaps not to extract private benefit of control or any of the other
such agency theory prescribed costs.
As means to managerial entrenchment: Most researchers assert that the dual class structure results
in managerial entrenchment in firms (Morck, Shleifer and Vishny, 1988; Gompers et al., 2004).
However, Dimitrov et al. (2004) finds no evidence for entrenchment. DeAngelo & DeAngelo
(2000) state managerial replacement in the Times Mirror dual class case study. Moreover, many
researchers find managerial entrenchment even in widely dispersed ownership and even block
owned single class firms (Grossman and Hart, 1980; Black, 1990; Becht et al., 2003). Furthermore,
Scott and Zutter (2003) find factors other than management entrenchment influence ownership
structure, most notably risk and growth prospects. Also there is no consensus if entrenched
management benefits or harms a firm. While most researchers imply entrenchment is detrimental
for firms (Coles, 2001), DeAngelo and DeAngelo (1985) argue that dual class structures can
encourage managers to invest in firm-specific human capital adding value to the firm. Thus agency
theory cannot explain effect of entrenchment on dual class firms.
As a ‘principal-agent’ governance mechanism. As per the dictates of agency theory,
concentrated ownership should lead to better governance. Because of the majority of voting rights
are controlled by insiders, dual class firms should have minimal or nil ‘principal – agent’ agency
problems and monitoring costs. However, DeAngelo & DeAngelo (2000) study of the Times
Mirror (TM) Company is an illustrative example of agency theory’s inability to explain the
instance of poor governance in such a dual class firm. Four aspects of the study stand out in stark
contradiction to agency theory – (1) Interests of the family (controlling owner) and the outside
1
Canada, 8–13%; France, mean 1986–1996 51.4%; Germany, mean 88–97 26.3% in 2000 50%; Israel,
45.5% ; Italy 82% ; Korea, 10% ; Norway, −3.2–6.4% ; Sweden, 12% ; Switzerland, 18% ; UK, 13.3% ;
USA, 5.4% , mean 1984–90 10.5%, median 3% (Becht et al., 2003: 57)
2
While premia have been rising from 20% in mid-1998 to 54% in December 1999 in Germany, in Finland
they have dropped from 100% in the 1980s to less than 5% in 2003. Similarly in Sweden premia have
declined from 12% in the late 1980s to less than 1% today, 129 and in Denmark from 30% to 2%. In Norway
the differential was actually negative in 1990–1993, but has risen to 6.4% in 1997 (Becht et al., 2003: 58)
230
manager were never divergent or misaligned; (2) First reaction to the sale was positive, and then
negative when full information was available, (3) Management was replaced by controlling
shareholder even when management met their interests, and (4) Though eventually the Chandler
family’s pressure led to improved performance of TM, the path to this outcome was slow and
circuitous, thus the disciplinary forces were weaker than agency theory typically implies. Thus
agency theory prescribed ‘principal-agent’ governance mechanism does not work as stipulated.
However, Brown and Caylor (2004) find dual class firms score relatively high on their 54 variable
‘Gov-score’. Also, Gompers et al. (2004) find that dual class firms score significantly lower than
single class firms as per the 24 variable ‘Governance Rating’ developed by Gompers et al. (2003),
signifying low managerial powers and thus higher governance. Both these scales were developed
to assess the relationship between corporate governance and firm performance. Though neither of
these scales has been rigorously tested or is widely accepted as a reliable measure of corporate
governance as yet, these indicate dual class share structure seems to work as a corporate
governance mechanism, however not as prescribed by agency theory. This might well be true of
other concentrated ownership structures also. Morck et al. (2000) provide evidence of the
detrimental effects of this particular type of ownership (dubbed the ‘Canadian Disease’) on firm
performance. However, Chirinko et al (2004) find that the Canadian concentrated share ownership
is associated with fewer governance problems.
Thus we argue that agency theory, even defined in terms of PPA, is unable to satisfactorily
explain some of the fundamental issues involved in the adoption of dual class share structure by
firms, and perhaps even with the mechanisms of corporate governance in other firms with
concentrated or large ownership structures per se. Recently, some management researchers have
also similarly moved beyond the one dimensional agency theory lens for examining the issues of
corporate governance (Aguilera et al., 2003; Sundaramurthy et al., 2003; Lee and O’Neill, 2003;
Daily, Dalton and Canella, 2003; Daily, Dalton and Rajagopalan, 2003; Morrisson, 2004; Wang,
2004).
Recent Alternative Theoretical Lenses
Aguilera and Jackson (2003) argue that agency theory fails to sufficiently explore how
corporate governance is shaped by its institutional embeddedness. They propose a firm level
governance model consisting of the domains of capital, labor and management, and define
corporate governance as the relationship between these stakeholder groups in the process of
decision making and control over firm resources. National institutional structures are seen as
influencing the range of effects but not determining outcomes within organizations. Aguilera et al.
(2003) thus link agency and institutional theory to assert that multiple institutions exert
interdependent effects on firm-level governance outcomes. We argue that this view overlooks the
important aspects of individual and industry level effects on the governance mechanism. Also, in
the context of dual class capital structure specifically, this model considers the stakeholder group of
‘capital’ to be homogeneous within the domain, and does not differentiate between minority and
majority shareholders. Thus this model, though considered to be more robust and predictive of
corporate governance mechanisms than one based solely on agency theory, is still considered to be
unsatisfactory in explaining the relevant issues of governance, especially in case of firms with dual
class equity capital structure. Sundaramurthy et al. (2003) proposes an alternative paradox
framework, using agency and stewardship theories to explain governance mechanisms at the
individual level. They thus assert governance as a ‘control and collaborate’ issue. Lee et al. (2003)
similarly look at agency – stewardship theories to explain their findings of differences in
governance mechanisms between US and Japan. They hypothesize that agency theory explains the
relationship between ownership structure and long-term orientation in United States firms, while
stewardship theory best explains the Japanese context. They go on to assert that ownership and
231
strategic decisions are embedded in cultural and institutional processes and path dependencies.
Such a paradox framework integrated with institutional theory perspective might well become
central in future studies of corporate governance mechanism, but we argue that the industry level
institutional pressures on a firm are not catered for in such a viewpoint. As Coles et al. (2001)
assert, industry performance is a strong and significant driver in the governance and performance
relationship. Also, especially in respect of dual class share firms, the governance issue of control
between owners cannot be specifically addressed by the paradox framework alone. Thus even these
new models do not suffice for explaining the governance mechanism in case of dual class firms.
This paper proposes a contingent governance model to address this gap in literature and
explores the dual class capital structure, building on the above mentioned multi-theoretical lenses
at individual, industry and national levels, in an attempt to understand the underlying mechanism
that might better explain the contradictory findings and to seek a rationale for adoption of dual class
equity structure in firms worldwide.
The Contingent Governance Model
We start with summarizing the common findings in the studies on dual class share firms.
The firms that generally adopt dual class structure are found to be mostly:
•
•
•
Family or founder owned
Concentrated in media related and other industries that avail benefit of control
Have larger book value to size ratios and are highly leveraged (high debt to asset
ratios)
• Differ significantly across countries in the premia (discount) between the valuation of
the different classes of shares
We build our theoretical development around these findings and attempt to explain these
trends by asserting that dual class share structure is a contingent governance mechanism adopted by
firms to safeguard against ‘outside’ influences, and this mechanism is better understood by
utilizing multi-theoretical lenses instead of the mono-theoretic agency lens. Explanations for dual
class share structure (and their governance implications) are manifested at several levels, thus we
argue that the dual class structure adoption by a firm is best explained by:
(i)
Psychological ownership and paradox framework at the individual
level,
(ii) Resource dependency and institutional theory at the industry level,
and
(iii) Institutional and resource based view (RBV) at the national level.
The effects on a specific level do not preclude similar effects at the other levels, but are
merely indicative of the greater salience of that effect on that level, e.g. RBV is manifested at the
firm level as well as at the national level, however, its effect is most salient at the national level.
Likewise, control-collaborate at individual level is opined to be closely related to
individualism-collectivism at national level; however, within a given country, control-collaborate
behavior will better explain variation between individual firms. Our model is thus proposed as a
refinement of Lee et al (2003) assertion that agency theory reflects U.S. firms adequately, while
stewardship theory represents Japanese firms adequately – our model enables differentiating
between individual firm behavior within a specific national culture. Also, in keeping with
contingency theory (Galbraith, 1973), we further assert that the interaction between these levels
will determine the adoption, composition of the capital structure (percentage of voting to
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non-voting shares, premium/discount between these shares, extant of voting power) and utilization
of control by a dual class firm, and thus is unique to each firm. Such an undertaking is also in
keeping with Daily et al’s (2003a) call for a “multi-theoretic approach to corporate governance as
essential for recognizing the many mechanisms and structures that might reasonably enhance
organizational functioning”. The premises for this model are developed further in the following
exploratory propositions section.
Propositions
Individual level: We argue that the tenets of psychological ownership (Pierce et al., 2001) better
explain the governance mechanism of dual class firms, in view of the fact that most dual class firms
are predominantly family or founder owned and/or managed. This theory asserts that the degree of
control engenders feeling of ownership towards the firm. Such owners do not treat ‘their’ firm as an
economically rational ‘homoeconomicus’ would do as per the tenets of agency theory. This might
be the underlying cause for Becht et al. (2003) assertion that family-owned firms go public only if
they could retain control through mechanisms like dual-class share structures, as they might be
reluctant to go public if they risk losing control in the process. Hart (1988) argues that this would
benefit the firm and the exchange, and is also unlikely to hurt minority shareholders. This is
supported by the findings of Taylor & Whittred (1998) and Holmén & Högfeldt (2004) studying
the IPO valuation of firms with different classes of shares. Smart and Zutter (2003) also find that
dual class IPOs experience less underpricing as compared to single class firms. Psychological
ownership might also explain the reason why dual class firms are uniformly so anti-takeover
oriented (despite there being not many takeover attempts) that such firms are predominantly
represented in takeover defense literature (Rosenbaum, 1990 - 2002). Morck, Shleifer, and Vishny
(1988) also offer evidence that firms in which one of the top two officers is a member of the
founding family are less likely to be acquired in a hostile tender offer than firms in which the top
two officers are unrelated to the founder. This also explains Stulz (1988) finding that high equity
holding management's preference for control and consequent refusal to tender its shares, forces
acquirers to pay higher premiums to gain control when management's stake is higher, and
sometimes leads to an increase in the target firm's ex ante value. Thus we propose:
Proposition 1a: Dual class share structure will predominantly be adopted by founder or
family controlled/managed firms
Proposition 1b: Dual class firms will have higher representation of family members in the
management team and on their board of directors
Thus control is to maintain ownership, not with explicit intentions of either expropriating
minority shareholders rights, or reducing monitoring or agency costs, or even as a safeguard against
takeover attempts; but more as indicative of the owner’s identification and attachment with the
firm. Shum et al. (1995) found that 40% of the US firms (in their sample of 69 stock
recapitalizations to dual class) publicly stated that they created the dual class structure to retain
voting control even when none of these firms were targets of takeover attempts. Anecdotal evidence
also shows that most family firms are named after the founding family (e.g. Bombardier, Molson,
Coors, Reitmans) and thus the family reputations are closely associated with the firm’s image.
Donoher’s (2004) study also indirectly supports this assertion, as he found that contrary to agency
theoretical predictions, firms with high levels of inside equity ownership and secured indebtedness
file for bankruptcy in poorer financial condition than peer firms with low levels of these variables;
and in contrast, firms with high levels of outside equity ownership and short-term indebtedness file
when in relatively better financial condition. Aghion and Bolton (1992) consider a situation where
ownership is concentrated and argue that family-owned firms want to limit control by outside
233
investors because they value the option of being able to pursue actions in the future which may not
be profit maximizing. They may value family control so much that they may want to turn down
acquisition bids even if they are worth more than the net present value of the current business. Or,
they may prefer to keep the business small and under family control even if it is more profitable to
expand the business. It will be logical to suppose that in such cases, the owning family will play an
active part in managing and governing the firm and will attempt to minimize outside influence.
Nelson (2003) finds support for this argument in her empirical study of founder firms at IPO stage.
Thus we propose:
Proposition 1c: Dual class firms will have smaller boards consisting of more insiders
Proposition 1d: Management in dual class firms will exhibit higher commitment to the firm
and thus will display lower turnover of management
Such a ‘psychological ownership’ of the firm will also explain why dual class firms exhibit
non-linear relationship between voting rights and performance (Morck et al., 2000; Gompers et al.,
2004). Too little ‘psychological ownership’ might lead to “not my baby” sentiment and
safeguarding of income/employment by the insiders and thus high risk aversion strategies (Ansoff,
1965); while too high an ‘ownership’ will lead to choosing a certain option over a risky one in
keeping with prospect theory (Tversky and Kahneman, 1992). Higher ownership by insiders, the
desire to maintain control and the consequently increasing lack of diversification by the insiders
(unlike outside investors) will also lead to risk adverse strategies (Gompers et al., 2004). Such a
firm behavior also explains Smart et al. (2003) finding of lower valuation of dual class firms, while
there are no systematic differences in earnings vis-à-vis single class firms. Bhide (1993), Becht et
al. (2003) and Neumann (2003) also assert that the national stock market liquidity effect the firm’s
stock valuation. More liquid stocks are generally valued higher and are more frequently traded.
Thus, in agreement with Gompers et al. (2004), we restate their assertion to propose:
Proposition 1e: Dual class firms will be less likely to raise capital so as to avoid diluting
control, invest less, grow slower, trade lesser volumes of shares, and thus will be valued lower.
We further assert that due to the high degree of control in such firms, the values, norms and
attitude of the owner will better indicate the outcome of the governing mechanisms and its effect on
firm performance. Hence, the control-collaborate paradox framework might best explain the
outcome of the utilization of control - agency theory for malfeasance and stewardship theory for
benevolence, and we opine, somewhere between the two for most firms1. Concentrated control will
result in a tendency towards self-reinforcing cycles. Due to such self reinforcing cycles, any
change will have a more significant impact on the firm. We thus agree with Sundaramurthy et al.
(2003) assertions regarding the control-collaborate paradox framework and merge their original
proposals to state:
Proposition 2a: Dual class firms with a history of high performance and a predominant
emphasis on control or collaboration will experience reinforcing cycles that foster strategic
persistence.
1
An illustrative example of the ‘psychological ownership’ agency-stewardship paradox is Conrad Black’s
2002 email to Hollinger executive Peter Atkinson: "There has not been an occasion for many months when I
got on our plane without wondering whether it was really affordable. But I am not prepared to re-enact the
French Revolutionary renunciation of the rights of nobility. We have to find a balance between an unfair
taxation on the company and a reasonable treatment of the founder-builders-managers. We are proprietors,
after all, beleaguered though we may be." (The Montreal Gazette, Friday December 31, 2004, page B 02).
234
Proposition 2b: In a low-performance context, dual class firms with a predominant
emphasis on control or collaboration will experience reinforcing cycles that foster organizational
decline.
The degree of psychological ownership and its effect on the paradox framework might also
suggest some possible outcomes in the context of dual class firms. Such a perspective will suggest
that dual class firms will significantly alter in valuation and governance during or immediately after
succession. This is argued as because a founder identifies more closely with the firm as compared
to her descendents (unless the successor has previously been involved with the firm). This is
supported by the findings of Smith et al. (1999) and Villalonga et al. (2004) that find higher
valuation for founder led firms, and lower for descendent led ones. We can also expect that later
generations will be groomed to run the family business and thus the descendants will undergo
business education and be exposed to the mainstream corporate norms and values, and thus will act
more like other ‘professional’ managers. In case the descendents show no interest in managing the
firm, outsiders will be hired to manage the firm, who might lack the same degree of psychological
ownership that the founder, or even the descendants, might exhibit. This is supported by Morck et
al. (1988) finding that in older dual class firms, firm value is higher when the firm is run by a
member of the founding family than when it is ran by an officer unrelated to the founder. Also, in
cases of outsider management, change in management structure will be caused due to divergence
from controlling shareholder’s desires, and thus there will be a drastic shift in direction by the firm
at turnover, and the subsequent valuation based on the market’s reaction to the change. This
assertion is in congruence with the DeAngelo & De Angelo (2000) study of the Times Mirror
Company and the mechanism of governance in that case. Thus we propose:
Proposition 3a: Dual class firms will drastically change in valuation as well as strategic
direction with change in ownership/management as compared to single class firms.
Propositions 3b: Older dual class firms will be more alike single class firms
Industry level: As per the resource dependency perspective, firms do not merely respond to
external constraints and control through compliance to their environmental demands, rather they
undertake a variety of strategies to alter the situation confronting them to make compliance less
necessary (Pfeffer & Salancik, 1978). We assert that firms adopt dual class equity structure in
accordance to this perspective, as a means to minimize outside influence on its workings. We argue
that firms that started up in capital intensive industries with relatively low operating cash flow
/liquidity requirements (like most of the firms that have adopted dual class shares), were mostly
well entrenched and established family firms. Once entrenched, these firms have lower needs for
capital as most of the assets of these industries are lienable, these firms opted for the ‘cheaper’
capital of debt. This argument is supported by Anderson et al. (2003) finding that firms controlled
by founding families pay lower interest rates on bank loans. Also, Gompers et al. (2004) also find
dual class firms to be older and highly levered (though they interpret the leverage as a lack of equity
raising capability of dual class firms), and have very high book value to size ratio. Smart and Zutter
(2003) also find that dual class firms have high family involvement, high leverage and lower
reliance on external equity. Pajuste (2003) also finds dual class firms to have low equity
dependence. Thus we assert that equity dependence (or lack thereof) is the main reason for
adopting or recapitalizing to dual class structure by firms. Thus we propose:
Proposition4a: In industries with low equity dependence, i.e. high capital outlay (fixed
assets) and low liquidity requirements, firms will tend to adopt dual class equity structure
235
Also, Demsetz and Lehn (1985) speculate that “amenity potential” (the non-financial
benefits, such as fame and influence, obtained by controlling a newspaper or a television station)
influence ownership structures in industries such as media, sports, and entertainment. For example,
owners can enjoy ‘amenity potential’ from controlling the editorial privilege of a media company
or affiliating with sports and entertainment celebrities. This term was thereafter referred to as
non-pecuniary ‘private benefit of control’ (Grossman and Hart, 1988). DeAngelo and DeAngelo
(1985) argue that the non-pecuniary private benefits of consumption may be high in media-related
firms and hence may lead founders to establish a dual-class structure in order to preserve control.
Gompers et al. (2004) also find support for such non-pecuniary ‘benefit of control’ amongst media
and communication firms. Djankov et al. (2003) find that dispersed ownership firms are
uncommon in these industries as widely held firms will have no controllers who would enjoy the
amenity potential, and thus these will be ripe for takeover by others desiring this benefit. Smart and
Zutter (2003) also find dual class firms are more prevalent in industries in which ‘private benefits’
are significant, and particularly non-pecuniary private benefit of control in most dual class media
firms. Thus we state:
Proposition 4b: In industries (like media-related) that have ‘amenity potential’, firms will
tend to adopt dual class share structure to preserve control
Zhang (2003) also finds that within media industries, dual class firms do not have a lower
Tobin’s Q than single class firm while non- media industries dual class firms have a lower Tobin’s
Q than single class firms. He also finds that in the media industries, dual class firms pay lesser
dividends than single class firms, the dividend payouts increases as insider ownership of cash flow
rights rises and declines as insider ownership of voting rights rises – while there is no such relation
in the non-media industries. Thus we state:
Proposition 4c: In industries (like media-related) that significantly benefit from control,
dual class firms will not differ in valuation from single class firms
We also argue that once adopted at the IPO stage, path dependency (Bebchuk and Roe,
2003) will cause firms to continue with their dual class equity structure, unless their liquidity
requirements changes drastically. This is supported by Pajuste (2003) in a related study, where she
finds that dual class firms with higher equity dependence also have higher probability of unification
(restructuring into single class firm). Thus we propose:
Proposition 4d: Once adopted, firms will maintain dual class equity structure unless there
is a drastic change in their equity dependence
National level: Numerous studies have linked national and cultural effects on institutional
structures and governance mechanisms (Nenova, 2000; Coffee, 2001; Gedajlovic & Shapiro, 2002;
Aguilera et al., 2003; Lee et al., 2003; Chang, 2003; Miguel et al., 2004) proposing how national
culture, norms and values are reflected in the governance mechanism of the firms. The societal
(media), institutional (stock market) and regulatory (trading and taxation laws) pressures also
ensure that most firms within the context of a nation will adopt similar governance mechanisms,
thus leading to convergence in the mechanism of governance being adopted by firms within that
nation. Dual class firms also will perforce conform to these institutional pressures. However, in the
case of dual class firms, we assert that the concentrated control (within its close knit ownership
structure) acts like an organizational resource adding a unique value that is difficult for competitors
to imitate (Barney, 1991), and this will enable dual class firms more commitment (or flexibility,
depending in the concentrated owner’s strategic choice) in its strategy and thus might be a source of
potential competitive advantage. Concentrated control is an asymmetric resource available only to
236
dual class firms, and thus is a rare, inimitable and non-substitutable. Support for this assertion can
be Miller’s (2003) finding that many firms are able to turn asymmetries into sustainable
capabilities, leveraging them across appropriate market opportunities (Miller assets that
asymmetries are rare, inimitable and non-substitutable, although not connected to any engine of
value creation, and, in fact, might often act as liabilities too). Thus we propose:
Proposition 5a: Dual class firms will differ significantly from single class firms in their
strategic orientation and/or commitment
This strategic divergence and the information asymmetries might also better explain the
national level variation in the premia (discount) in the value of the different class of shares, which
essentially is the market’s expectation of the firm’s future performance. Support for such an
assertion can be found in Amit et al. (1993) study that use resource based view to develop the
notion of strategic assets of firms to obtain competitive advantage and organizational rent. They
assert that resource market imperfections and asymmetry in discretionary managerial decisions
about resource development and deployment can be a source of sustainable economic rent. This
argument is also supported by Nenova (2000) finding that legal environment (and thus degree of
market imperfections) explains most of the variation in premia. Dyck and Zingales (2004) finding
of media (influencing information asymmetries) and regulations (influencing market
imperfections) as the only significant governance mechanism also supports this argument. Further
support can be Doidge (2003) finding that non US dual class firms, when cross list on the US
exchange, experience a reduction in the voting premia. Building on these arguments, we state:
Proposition 5b: In countries with high market imperfection and information uncertainties,
dual class firms will exhibit greater variation in the premia (discount) between the types of shares
Proposition 5c: Within a given country, dual class firms with higher information
uncertainties will exhibit higher variation in the premia (discount) between the types of share
Whether dual class firms will be able to consistently reap the benefits of this strategic asset
of control is of course contingent on the fact if the chosen strategy was appropriate or not - the
outcomes are ex post - we argue for the ex ante strategic asset of commitment (or flexibility) and
the value of the perceived strategic advantage of control - and the corresponding market reaction
based on information asymmetry and market imperfection, or lack thereof.
Research and Managerial Implications
This paper focused on the underlying issues of firms adopting a dual class equity capital
structure; however our model and propositions are opined to be generalizable to other concentrated
ownership structure. If such concentrated ownership is the norm, as La Porta et al. (1999) and
Faccio et al. (2002) assert, this contingent governance model is considered to have implications
beyond dual class firms. We also did not analyze the firm level effect of variation in stakeholder
salience (Jawahar et al., 2001) and thus its effect on governance mechanisms. We speculate RBV
and stakeholder salience at the firm level might better explain governance and performance
relationship than agency theory. Thus, understanding the mechanism of governance in terms of
multi-theoretic lens and at multiple levels has important research implications. Such an approach
might be able to explain the inconsistencies found in previous studies that utilized the
mono-theoretic agency lens only. This paper is considered to have important managerial
implications too. Firstly, free of the constraining view of agency theory, managers might not be
seen only as ‘agents’ who need to be ‘monitored’, ‘disciplined’ or ‘bribed’ with equity or other
such incentives(which McGuire and Matta [2003] show anyways doesn’t translate into greater firm
237
performance). And secondly, understanding the importance of psychological ownership at the
individual level will enable owners to devise better governance instruments and mechanisms
designed to engender sense of ownership in the managers.
Limitations
This paper has viewed prior corporate governance studies purely from the agency
perspective, which is in keeping with the commonly accepted view (Eisenhart, 1989). However,
some researchers have approached agency costs in terms of transaction cost economics (TCE) also.
We have not addressed the issues from the TCE perspective. This is accepted as a limitation of this
paper, however examining corporate governance issues of dual class firms or other kinds of
concentrated ownership, in terms of TCE might be a worthwhile focus of future studies. Another
limitation is that we have not included the stultifying effect of embeddedness on the choice of
strategy by dual class firms. What we term as ‘commitment to strategy’, might well be effect of
embeddedness, i.e. the firm continues to ‘do what it has always done’ without suffering the
disciplinary role of outside market or shareholder pressure to alter its strategy. We assert that the
controlling owner-manager of dual class firms intends to work in the best interests of the firm
because of the psychological ownership effects, and argue for Hendry (2002) assertion that
managerial action that might eventually lead to lowering of firm value will be a case of ‘honest
incompetence’- but definitely not a case of ‘agency’ problem against itself.
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242
ASAC 2005
Toronto, Ontario
Carol-Ann Tetrault Sirsly (student)
CORPORATE SOCIAL RESPONSIBILITY INITIATIVES: A FIRST-MOVER THEORY
In assessing a strategic corporate social responsibility (CSR) initiative, I ask
the question, does it provide the firm with a first-mover advantage (FMA)?
Using the resource-based view, I construct a framework for predicting a FMA
based on the CSR initiative possessing three strategic attributes: centrality,
specificity and visibility.
While marketers have long debated the first-mover advantage (FMA) in garnering market
share, the translation into competitive advantage and superior profit performance has fuelled the
debate in strategic management. As Lieberman and Montgomery argue the independent
evolution of FMA and resource-based view when "taken separately, each suffers from serious
deficiencies. We see a strong potential for synergy" (1998: 1112).
While some might accept short-term costs as inevitable in meeting the firm's responsibility to
society, corporate social responsibility (CSR) advocates assert it is possible for firm strategies to
be aligned with societal objectives to generate benefits for the firm (Burke & Logsdon, 1996;
Epstein & Roy, 2003; Griffin & Mahon, 1997; Waddock & Graves, 1997). This then brings us to
the research questions this paper answers. Is there a strategic advantage to be a first-mover in
adopting a CSR initiative? On the other hand, do early adopter or follower roles provide better
strategic positions? This paper will explore these questions and propose a theory to identify
which CSR initiatives are likely to provide a FMA. The three attributes used to determine the
salience of a CSR initiative to a FMA are: (1) the centrality of the CSR initiative to the firm's
mission, (2) the specificity of the benefits of the CSR initiative to the firm as opposed to the
general good, and (3) the visibility of the CSR initiative to the firm's stakeholders. This theory's
logic is inspired by Burke & Logsdon's (1996) examination of the pay off of CSR and contributes
to CSR research by providing a framework for predicting a FMA for a strategic CSR initiative.
The theoretical underpinnings of the argument lie with a resource-based view of FMA
interpreted within stakeholder theory. I will briefly define and position each of the main elements
of the argument, providing a review of the literature. I will then elaborate a theory of FMA of a
CSR initiative, building a model based on the three key attributes of centrality, specificity and
visibility. I will illustrate applications for management and strategy development. The
implications for empirical and further research will also be discussed.
Literature Review and Theory Development
Resource-Based View
The resource-based view's answer to why performance varies between firms contends that it
is a firm's unique bundle of valuable, rare and costly to imitate resources and capabilities that
provides competitive advantage (Barney, 1991, 2001a, 2001b; Hoopes, Madsen & Walker, 2003;
Peteraf, 1993; Peteraf & Barney, 2003; Peteraf & Bergen, 2003; Wernerfelt, 1995).
"A
capability is firm-specific since it is embedded in the organization and its processes, while an
ordinary resource is not" (Makadok, 2001: 388), with a further distinction lying in the ability to
value and trade a resource, but not a capability (Hoopes et al., 2003; Teece, Pisano & Shuen,
1997).
This unique bundle of resources and capabilities can also be constituted of the business
processes, routines or activities of the firm (Porter, 1991), while "the ability of firms to pursue
certain activities, routines or business processes may be limited by the resources and capabilities
they control" (Ray, Barney & Muhanna, 2004: 35). The threat of imitation can be reduced by
patent right protection and by either very expensive replication costs or when there is sufficient
ambiguity as to what to imitate (Hoopes et al., 2003; Peteraf & Barney, 2003). The criteria of
costly to replicate must also not ignore substitution as a tangible competitive threat (Peteraf &
Bergen, 2003).
Peteraf and Barney (2003) argue the resource-based theory addresses sustainable competitive
advantage by creating greater net benefits and is a complement, not a substitute, to Porter's
5-forces (Porter, 1991) and game theory. They go on to suggest that resource-based theory can
also be "useful for non-profit organizations and those with a stakeholder orientation" (Peteraf &
Barney, 2003: 321), since value creation is segregated from its distribution. Russo and Fouts
(1997: 536) welcome the resource-based view for CSR research, highlighting it "addresses the fit
between what a firm has the ability to do and what it has the opportunity to do".
Hoopes and colleagues (2003) relate the resource-based view to the growth, shakeout and
maturity cycle of industry growth, where early entrants rely on innovation with a high degree of
variability in the cost of resources. As the industry develops, early entrants face challenges from
new entrants. Through further innovation and imitation survival is determined (Porter & van der
Linde, 1995): "The combination of competitive advantage in the short term and dynamic
capability in the long term determines whether a first-mover can sustain its superior position as an
industry evolves" (Hoopes et al., 2003: 894).
First-Mover Advantage
Lieberman and Montgomery (1988: 41) define "first-mover advantages in terms of the
ability of pioneering firms to earn positive economic profits (i.e. profits in excess of the cost of
capital)" going on to attribute this pioneering opportunity to "some unique resources or foresight,
or simply because of luck". In their reflection ten years later, they explicitly linked the FMA to
the resource-based view of the firm (Lieberman & Montgomery, 1998), where a firm specific
resource or capability which thrusts a firm into being a first-mover can thus afford it a competitive
advantage (Hoopes et al., 2003; Lieberman & Montgomery, 1998; Teece et al., 1997). A
first-mover is also most likely to have the capability to reduce costs as experience is acquired
(Mueller, 1997), reinforcing this competitive advantage. Using game theory, a sequential-game
structure where the slope of reaction functions slopes downwards, affords a FMA to a pre-emptive
move by a leader (Gal-Or, 1985).
However, not all first-movers achieve an advantage, as a cheaper cost to imitate, suggested to
represent 65% of the cost to innovate, may favour free riding of followers over the pioneers (Kerin,
Varadarajan & Peterson, 1992; Lieberman & Montgomery, 1988), particularly when the followers
have alignable differences with the pioneers (Zang & Markman, 1998). Furthermore, later
entrants may learn from and improve upon the first-mover positioning to gain a competitive
advantage, thereby providing an alternative argument against first-movers (Kerin et al., 1992).
One inherent premise in this argument is the assumption that all information is public, permitting
rivals, as spectators, to assess first-mover outcomes and, "Each firm has an incentive to wait and
see because adoption by a rival provides the same information as its own adoption" (Jensen, 2003:
244
98).
Kerin and colleagues (1992: 48) argue, "Unless a firm has the expertise, resources and
creativity necessary to exploit these opportunities, and forestalls or neutralizes the efforts of later
entrants, being first to market will produce neither sustainable competitive advantages nor desired
performance outcomes", echoing the resource-based view of capabilities. A strategy proposed for
late entrants to redefine the market to benefit themselves at the expense of the pioneer (Shankar,
Carpenter & Krishnamurthi, 1998) is also routed in a resource-based view of the innovative
capabilities of the late-mover.
Fundamental to FMA is the yardstick against which performance is compared. Utilizing a
ten-year survival rate of industrial goods businesses, Robinson and Min (2002) compared 167
first-entrant market pioneers with 267 early followers to suggest the endurance of first-mover
advantages, including the role in setting industry standards. While most first-mover studies have
concentrated on products and markets, Nehrt (1996) used the timing and intensity of
environmental investments in 50 chemical bleached paper pulp manufacturers to show a FMA on
profitability.
Stakeholder Theory
Freeman's (1984) seminal "Strategic Management: A Stakeholder Approach" defined
stakeholders to include "any group or individual who can affect or is affected by the achievement
of the organization's objectives" (Freeman, 1984: 46). A narrower lens has been taken in
suggesting legitimacy be required to be considered a stakeholder (Rowley, 1997), in segregating
primary from secondary stakeholders based on their necessity to firm survival (Clarkson, 1995),
and in a typology of stakeholder salience utilizing attributes of urgency, power and legitimacy
(Mitchell, Agle & Wood, 1997). Stakeholders have also been identified as the involved
stakeholder, who is known to the firm and who may influence organizational behaviour and the
affected stakeholder, who does not have such an opportunity, other than by representation made by
a witness, and whose claims can rarely be bounded (Vos, 2003).
Stakeholder influence
strategies have been categorized in terms of direct and indirect use or withholding of resources,
building on resource dependence theory (Frooman, 1999), while firm responses to stakeholder
pressures have been categorized as "commander, compromiser, subordinate, and solitarian"
(Rowley, 1997: 888), using social network analysis.
A stakeholder view of the firm integrates Porter's structure-conduct-performance (Porter,
1991) and the resource-based view (Barney, 1991 & 2001a) to provide a dynamic framework (Post,
Preston & Sachs, 2002), where interaction between the various stakeholders constitutes the firm's
access to resources. Both external and internal stakeholders' perceptions of these past
interactions and expectations of future prospects are reflected in corporate reputation, which
represents a strategic resource to the firm's competitive advantage (Mahon, 2002; Logsdon &
Wood, 2002), consistent with the resource-based view. While it would be altruistic for firms to be
intrinsically committed to stakeholder interests because it is the right thing to do, a more
instrumental approach views stakeholder management as a strategic tool to improve financial
performance and provide a sustainable competitive advantage over the long term (Donaldson &
Preston, 1995; Harrison & Freeman, 1999; Wood, 1991).
The institutional view of the corporation's legitimacy is developed in relationship to how a
corporation manages its stakeholders (Wood, 1991), with any loss of legitimacy seen as a
withdrawal of stakeholder support. While "legitimacy is a perception or assumption in that it
represents a reaction of observers to the organization as they see it; thus legitimacy is possessed
objectively, yet created subjectively" (Suchman, 1995: 574), making it both the cornerstone and
245
Achilles' heel of the stakeholder relationship.
Corporate Social Responsibility
Lacking a single, universal definition, CSR is often linked to sustainability, stakeholders and
ethics. The World Business Council for Sustainable Development definition exemplifies the
underlying partnership of CSR as "the commitment of business to contribute to sustainable
economic development, working with employees, their families, the local community and society
at large to improve their quality of life" (WBCSD, 2002). The breadth and diversity of the
elements included in CSR range from the environmental aspects of air, water and habitat pollution
and degradation to employee and human rights abuses in unfair labour practices and dangerous
products sold to unsuspecting consumers (Harrison & Freeman, 1999). The relationship between
CSR and financial performance has not yet established a consistent pattern (Griffin & Mahon,
1997; Waddock & Graves, 1997), however major corporations do recognize the advantage of
social and environmental initiatives on long-term profitability (Epstein & Roy, 2003).
The need to make the business case to ensure the endurance of otherwise vulnerable CSR
initiatives (Epstein & Roy, 2003) is no different from any other strategic choice. Porter and van
der Linde (1995: 98) argue, "Properly designed environmental standards can trigger innovation
that may partially or more than fully offset the costs of complying with them". For example,
studies into corporate environmental performance have concluded that "it pays to be green and that
this relationship strengthens with industry growth" (Russo & Fouts, 1997: 534), leading to firm
specific benefits.
Defining the Strategic Attributes of CSR initiatives
Three key dimensions identifying whether a CSR initiative is strategic are centrality,
specificity and visibility (Burke & Logsdon, 1996). These may be compared to the three key
attributes of power, legitimacy and urgency used to determine stakeholder salience (Mitchell et al.,
1997), in that they distinguish a combination of characteristics necessary to attain a FMA..
Centrality. An intuitive yardstick of whether any firm initiative is truly strategic is the
proximity of that initiative to the core mission or strategic objectives of the firm (Burke &
Logsdon, 1996). Using the resource-based view, the resource needs of strategic objectives will
have first claim to firm-specific resources, justified by expectations that fulfilling these objectives
will maximize the benefits reaped on the resources invested (Burke & Logsdon, 1996; Peteraf &
Barney, 2003). For example, funds spent by a professional sports team to sign star athletes are
directly aligned with strategic objectives and would thus denote high centrality. However,
funding of the junior league feeder team, while developing future talent, would be viewed as being
more distant, or of lower centrality.
In the context of a clear CSR initiative, the generic corporate giving programs would
constitute low centrality, since firms do not define charitable donations as their mission.
However, a CSR initiative congruent with corporate objectives, such as a publishing house's
community program to increase literacy and encourage book ownership would have greater
centrality. Similarly, government lobbying to exempt books from retail sales taxes, making them
more affordable to the consumer, would have high centrality to the publishing house. However,
these same initiatives might be undertaken for ideological reasons by another firm, such as the
sports team, to have but very low centrality.
Specificity. "The firm's ability to capture or internalize the benefits of a CSR programme,
246
rather than simply creating collective goods which can be shared by others in the industry,
community or society at large" is defined as specificity by Burke and Logsdon (1996: 497). The
strategic value of a CSR initiative has greatest significance when some of the benefits are
exclusive to the firm, as opposed to just the general populace. The capturing of benefits from a
CSR initiative does not detract from the ethical anchor (Woods, 1991), but moreover reinforces the
firm's commitment and capacity to make a compelling business case (Epstein & Roy, 2003).
The numerous ecological initiatives that provide societal benefits such as clean air and water,
reduced reliance on non-renewable energy sources, reduced waste and more recycling do not have
to trade off against firm-specific benefits (Porter & van der Linde, 97). Lovins, Lovins and
Hawken (1999) cite examples of Johnson & Johnson's redesign of packaging saving 330 acres of
forest and $2.8 million annually and Dupont's recuperation and recycling of its polyester industrial
film, costing less and attracting a higher price from customers pleased with its greater strength for
a significant net benefit to Dupont. Porter and van der Linde (1995) show how Dow Chemical's
production process redesign, costing $250,000 to implement, generated an annual savings of $2.4
million, reducing caustic waste by 6,000 tons and hydrochloric acid waste by 80 tons. Russo &
Fouts (1997: 537) argue the profitability of firms "going beyond compliance to focus on
prevention".
While many CSR initiatives may advantage the general community, they may not procure any
monetary or tangible advantage for the firm. It is however, important to carefully evaluate the
broader implications of a CSR initiative to recognize indirect benefits, such as enhanced reputation,
in order to determine the specificity of benefits (Epstein & Roy, 2003).
Visibility. A strategic CSR initiative is one that is visible and recognized by internal and
external stakeholders (Burke & Logsdon, 1996) and by extension also a contributor to the creation
of a firm's reputation (Logsdon & Wood, 2002). While positive visibility is largely controlled or
even promoted by the firm, negative visibility of corporate social irresponsibility is generally
beyond the control of the firm. With the telecommunications revolution and the scope of global
media reporting, information rapidly reaches the public domain, facilitating stakeholder
mobilization (Dawkins & Lewis, 2003).
A firm whose stakeholders attribute a very high reputation for CSR risks a major backlash
should there be any breach of CSR (Dawkins & Lewis, 2003; Lewellyn, 2002). Ironically a firm
with a less strong CSR reputation would suffer less damage for the same behaviour (Lewellyn,
2002). Mahan's (2002: 415) quote of Shakespeare's Othello, "Reputation is an idle and most
false imposition; oft got without merit, and lost without deserving", reinforces the notion that
while costing nothing, reputation is priceless. Viewed as a firm resource (Barney, 1991, 2001a,
2001b; Oliver, 1997; Russo & Fouts, 1997; Teece et al., 1997), corporate reputation is built over
time and is a perception of how well the firm meets stakeholders' expectations (Rowley, 1997),
which also change over time (Lewellyn, 2002; Mahon, 2002).
The fact that different
stakeholders have different perceptions and biases (Lewellyn, 2002; Mahon, 2002) places added
onus on what visibility a CSR initiative will receive and how it will be interpreted.
First-Mover Advantage of a Corporate Social Responsibility Initiative
The combination of strategic characteristics of a CSR initiative of (1) centrality, (2)
specificity and (3) visibility are central to whether a pioneer can claim a FMA. The seven
possibilities include one combination of all three characteristics, three possibilities for two
characteristics and three single attributes, as depicted in the following model:
247
Figure 1: Strategic attributes of a CSR initiative
1-Centrality
4
2-Specificity
FMA
5
7
6
4=Add visibility for FMA
5=Late-mover advantage
6=Early-mover advantage
7=First-mover advantage
3-Visibility
When a firm institutes a visible new CSR initiative congruent with corporate objectives,
yielding direct benefits to the firm, a FMA is highly likely to accrue to the firm by virtue of this
CSR initiative constituting a valuable, rare and inimitable resource. A competitor would unlikely
be able to replicate or surpass the firm-specific benefits of the CSR initiative, and any challenge
would be able to be defended by the firm to maintain its FMA. Some of the possible outcomes of
achieving FMA include being able to establish the firm as the "prototype against which all later
entrants are judged" (Kerin et al., 1992: 35), setting the industry standards (Robinson & Min,
2002) and influencing the direction of environmental regulations (Porter & van der Linde, 1995).
For example, The Body Shop International's (BSI, 2004) campaign to stop violence against
women in Canada is a CSR initiative central to corporate objectives as documented in their
mission statement entitled "Our Reason for Being". The nine-year history of this highly visible
"STOP Violence Against Women" awareness and education program has given The Body Shop
International (BSI) a very positive public image to reflect favourably on the corporate reputation.
The sensitization and fund-raising initiatives within the retail outlets generate additional store
traffic and attract consumers that might be more interested by the cause and BSI's implication, than
in a specific BSI product. Much of the implication in supporting violence recovery and prevention
programs also comes from staff volunteering their time (Hartman & Beck-Dudley, 1999), thereby
providing this high visibility at a minimal cost while generating additional sales volumes to the
benefit of BSI. The impact of this high visibility on employee advocacy (Dawkins & Lewis,
2003) and on employee morale are also seen as contributors to attracting and retaining high calibre
employees (Burke & Logsdon, 1996). Therefore:
Proposition 1. Where all three strategic attributes of centrality, specificity and visibility are
high, a CSR initiative is likely to provide a FMA.
Where there are only two of the strategic attributes, the pairings will determine the possibility
of a FMA. As visibility is generally within the firm's control, a strategic CSR initiative meeting the
other two criteria could easily be the subject of low-cost press releases or other media interviews.
248
With the three attributes this CSR initiative would then likely lead to a FMA. Hence:
Proposition 2. Where the strategic attributes of centrality and specificity are high, a CSR
initiative can easily obtain high visibility to likely provide a FMA.
The visibility of the CSR initiative would provide information to competitors who could also
have similar objectives encouraging them to replicate the initiative at a lower cost than innovation.
The lack of any firm-specific benefit would not carry an opportunity cost to any delay in adoption.
The possibility to free ride another firm's initiative and possibly create a firm-specific benefit
would suggest a late-mover advantage situation.
Returning to the earlier example of the
publishing house and their lobbying efforts to eliminate retail sales taxes on books; letting another
publisher spend money on such an initiative and only jumping in when the tax reversal is imminent
would provide a late-mover advantage. Accordingly:
Proposition 3. Where the strategic attributes of centrality and visibility are high, a CSR
initiative provides no first-mover advantage but would support a late-mover advantage.
While not centered on the firm's strategic objectives, a visible CSR initiative that provides
tangible benefits will benefit from early adoption, since any delay would incur the opportunity cost
of foregoing the benefits. A FMA would be less likely since further corporate investment to
maintain the distinctiveness of a non-central CSR initiative would probably not be forthcoming.
In describing Germany's leading recycling standards Porter and van der Linde (1995: 105) note
these "gave German firms an early-mover advantage in developing less packaging-intensive
products, which have been warmly received in the marketplace", attracting premium prices.
Given that packaging is rarely a central corporate objective, these firms would readily be
characterized as having specificity and visibility, pointing to the likelihood of having early-mover
advantage. While competitors might replicate these CSR initiatives to eradicate any FMA,
further investment would be unlikely and therefore a FMA could not be defended. Therefore:
Proposition 4. Where the strategic attributes of specificity and visibility are high, a CSR
initiative would not provide a FMA but could provide an early-mover advantage.
The underlying rational applied to each single attribute follows. Centrality provides
legitimacy for the CSR initiative, beyond just doing the right thing, however its vulnerability to
changing priorities without any supporting firm-specific benefits or visibility (Epstein & Roy,
2003) would not provide a sustainable FMA.
Specificity provides a financial justification for the CSR initiative, however this does not
preclude imitation or being surpassed by competitors. It is likely that this type of CSR initiative
will survive only as long as the firm-specific benefit is convincingly positive (Epstein & Roy,
2003), although it is highly unlikely to ever constitute a FMA. For example, extrapolating from
the earlier example of Dupont's recycling initiative, should the manufacture of polyester industrial
film not fall within core objectives and there be no particular visibility, the recycling operation
would be vulnerable and unable to provide a FMA. It would be unable to attract corporate
investment to maintain its technological advance if it is not part of core objectives, leaving the way
open for a competitor to gain an advantage by free-loading and building a more cost-efficient
process.
Visibility alone cannot provide a FMA since the CSR initiative can easily be copied or
bettered, while the firm would have no incentive to make further investments on an initiative that
generates no firm-specific benefits, to procure a FMA. Although a CSR initiative having only the
249
attribute of being visible to stakeholders could be linked to the valuable resource of the firm's
reputation, this would not be sufficient to ensure a FMA. Accordingly,
Proposition 5. Where only one of the strategic attributes of centrality, specificity and
visibility is high, a CSR initiative will not generate a FMA
Discussion
I have proposed that for a CSR initiative to provide a FMA, it must have high centrality,
specificity and visibility. This strategic CSR initiative in the resource-based view of the firm
constitutes a rare, valuable and inimitable resource whose distinctiveness provides the firm with a
FMA. This FMA theory of CSR is presented as descriptive propositions. No prescription is
offered; the model proposes the three strategic criteria of centrality, specificity and visibility as
considerations for assessing the strategic advantage of a CSR initiative to provide a FMA. This
new perspective has implications for both research and management.
Empirical testing of whether the theory's explanation of the strategic criteria of centrality,
specificity and visibility for CSR initiatives describes the conditions necessary for a FMA would
be a starting point. The applicability to the various social and environmental CSR initiatives
should also be tested. Case studies could also be informative and provide an insight to causality.
While the CSR initiative's degree of centrality to corporate objectives is proposed, is it the CSR
initiative that moves corporate objectives closer to the CSR initiative to then create a FMA?
Further avenues of research could also include integrating the role of the stakeholders with the
strategic CSR initiative to refine the model.
Managers can also use this model when evaluating CSR initiatives to determine the degree of
commitment and how to solidify the CSR initiative to create a FMA. The consideration of the
three strategic criteria of centrality, specificity and visibility can help management frame a CSR
initiative within their overall business strategy and build a business case justification.
Conclusion
More than just doing the right thing, strategic CSR initiatives can also be viewed as rare,
valuable and costly to copy resources that under certain conditions can provide the firm with a
FMA. These can translate to sustainable competitive advantages where visible CSR initiatives
are central to corporate objectives and yield firm-specific benefits. This CSR theory opens a new
avenue of theory which complements stakeholder theory and recognizes the strategic opportunities
afforded by CSR initiatives. In aligning CSR with the sustainability of competitive advantage,
future research may open a window to how CSR pays off for the firm.
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ASAC 2005
Toronto, Ontario
Melissa Toffanin (student)
Martin L. Martens
EXAMINING PRE-IPO ACTIVITY: FIRM GROWTH BY ACQUISITION
In this article, we examine the effects of engaging in acquisition activity before issuing an
initial public offering. We find that pre-IPO acquisitions allow these firms to match the
valuations of similar firms that do not engage such acquisitions. Additionally, firms that
engage in pre-IPO acquisitions are more likely to fail three years after the IPO.
Introduction
Obtaining capital to finance firm growth through acquisitions is one of the primary reasons
for going public (Pagano, Panetta, and Zingales, 1998; Shultz and Zaman, 2001; Wiggenhorn and
Madura, 2004). Considering that financing acquisitions is a common reason listed in the use of
proceeds, one might think that acquisitions in the period prior to issuing the IPO would be a rare or
uncommon activity. Yet an examination of several IPO prospectuses quickly identifies firms
issuing pro forma financial statements and discussions about acquisitions in period in the year to
two before the IPO. While numerous researchers have investigated the acquisition activity of
public firms and, more recently, the acquisition of newly public firms (Wiggenhorn and Madura,
2004), the motives for and implications of acquisitions conducted prior to firms going public have
been ignored in both the IPO literature and the merger and acquisition literature. In this paper we
begin to fill this gap by examining conceptual reasons for pre-IPO acquisitions by firms who go
public soon after. We offer a series of hypotheses regarding potentially significant impacts of
pre-IPO acquisition activity on post-IPO performance, both short and long term, on underpricing,
and whether any noteworthy patterns might be inferred from our sample of firms.
If differences between the performance of non-acquiring IPO and acquiring IPO firms
exist, for example, then inferences may be made regarding the reasoning behind pre-IPO
acquisitions. More specifically, if we find that IPO firms that engage in acquisition activity
significantly outperform firms that do not engage in pre-IPO acquisitions, then we may reasonably
infer that the acquisitions are value-increasing and were conducted to improve the overall
performance of the firms prior to their offerings. Conversely, if non-acquiring IPO firms
outperform acquiring IPO firms, then we may reasonably infer that the acquisitions may not have
had a value-increasing motive, but were conducted for other reasons, such as managerial
incentives, managerial hubris, and sending signals to the institutional investors to improve the
legitimacy of the firm prior to its IPO. In this research, we hope to gain insight into the initial
public offering process, merger and acquisition activities by young firms, and corporate strategies
of firms preparing to issue initial public offerings.
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Literature Overview
In this section, we examine existing literature regarding motives for acquisitions, their
performance, the effect of method of payment, and roll-up IPO transactions. In general, we
examine three main theories regarding the motives for acquisitions: the synergy hypothesis, the
hubris hypothesis, and the managerialism hypothesis.
The Synergy Hypothesis
The synergy hypothesis suggests that acquisitions may occur when the combined value of
two firms is greater than the sum of the individual firm values (i.e.: Bradley, Desai, and Kim,
1988). Synergy potential is the only value-creating acquisition motive (Seth, Song and Pettit,
2000). In this conceptual framework, the management team is believed to maximize shareholder
value by taking on only positive NPV projects that result in statistically significant wealth
increases. Synergies can arise in three major forms: financial, operational, and managerial
(Trautwein, 1990). He argues that financial synergies can lower a firm’s cost of capital through
increased access to cheaper capital, the establishment of an internal capital market, and/or reduced
systematic risk. Secondly, operational synergies can occur when economies of scale and scope are
achieved by combining previously-separate operating units such as production, marketing, R&D,
and administration. Thirdly, managerial synergies can be realized when the acquiring firm’s
management has superior skills, abilities, and knowledge than incumbent s.
Larsson and Finkelstein (1999) note that “the various sources of synergy define a
combination’s potential, which in turn is expected to affect the extent to which synergies will be
realized in an acquisition” (p. 5). Thus, mergers with high combination potential are likely to
realize significant efficiencies, while those with low combination potential are unlikely to extract
any sizeable synergies. Larsson and Finkelstein (1999) further note that the traditional view of
enhanced synergy creation through combinations of firms with similar or related operations is
incomplete as it ignores the potential for considerable synergy creation through “complementary
synergy sources that may be present throughout the value chain” (p.6)
According to Seth, Song and Pettit (2000), the synergy hypothesis assumes that the
synergies created by combining two firms cannot costlessly be replicated by other firms, as many
of the benefits realized can be intangible, and that market frictions exist to prevent the facilitation
of replication.
The Hubris Hypothesis
The hubris hypothesis was first advanced by Roll (1986). Observing that acquisition
premiums are sometimes greater than the total gain that the market assigns to the transaction, he
concluded that at least part of the price paid is just a value transfer from the bidder to the target.
Because it may be unreasonable to assume that the managers make frequent valuation mistakes and
do not learn from them, Roll argues that takeovers produce no gains – the managers of the acquiring
firms make errors in estimating the potential gains, but proceed with the merger assuming their
valuations to be correct.
Although errors made by managers can either overestimate or underestimate the value,
Roll argues that the error we observe is usually in the same direction, and that the left tail of the
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valuation distribution is truncated at the current market price, as no offers would be accepted for
anything less than what can be achieved by selling the shares in the market. Roll notes that his
hubris hypothesis is consistent with market efficiency of the strong-form, where all information
about a firm is reflected in the current market price. Thus, in this case, managers are irrational if
they make a bid at a price that is anything greater than the current market price, given that there are
no expected synergistic gains. If the hubris hypothesis is taken to the extreme, takeovers result in
no gains overall and are mere transfers of wealth from acquirer shareholders to target shareholders.
Empirical evidence from Roll’s study indicates consistency with the extreme form of the hubris
hypothesis, while Berkovitch and Narayanan (1993) and Firth (1991) find evidence that supports
the hubris hypothesis, but not the extreme form.
Hayward and Hambrick (1997) argue that it is important to examine managerial incentives
in order to understand the motives for acquisition because the individual or group that makes the
acquisition decision (the CEO or top management team) can be clearly identified. Malmendier and
Tate (2004), concentrating on overconfident CEOs, found that they are more likely to conduct a
merger in the first place, because they identify undervalued companies more often when compared
to other managers. Malmendier and Tate (2004) also argue that the market reacts less intensely to
the acquisitions announced by overconfident CEOs.
In the case of firms issuing IPOs, however, many decisions regarding the reshaping and
restructuring of the firm are not made or driven by the top management team but by the lead
underwriters (Martens 2004). If the pre-IPO acquisition activity is driven by demands made by the
underwriters or venture capitalists, and the CEO or top management team acquiesces to these
demands, then the source of the hubris may be the underwriters or venture capitalists rather than the
management team. If the acquisitions are made in an effort to signal the firm’s fitness to
successfully operate as a public firm, or simply its fitness to issue an IPO, then the decisions may be
an effort to legitimize the firm in the eyes of potential institutional investors. These acquisitions
are, in effect, polishing the firm to get it ready for the IPO.
The managerialism hypothesis, also known as the agency motive, was first advanced by
Marris (1964), and suggests that it is not the best interests of the shareholders that guide
management actions but managements’ own self-interests (Jensen and Meckling, 1976; Jensen,
1986). Managers act to maximize their own utility at the expense of the firm shareholders and
knowingly overpay for the target firm. Marris argues that managerial compensation structures
give managers the incentive to increase the value of assets under their control, rather than firm
profits. In their study over the period 1963 to 1988, Berkovitch and Narayanan (1993) examine
negative returns to acquiring firms and find significant evidence that managerialism influences
acquisition decisions. Slusky and Caves (1991) focus their research on the premiums paid in
acquisitions in order to find evidence of synergies, agency, and/or managerial hubris. While they
do find evidence of financial (as opposed to real) synergies in their study, the overwhelming motive
in their sample is agency-based.
In terms of acquisition performance, the empirical results have been mixed – some
researchers provide evidence that merger activity adds value, others find it destroys value, and
several find a combination of the two. For example, Bradley, Desai, and Kim (1988) find positive
total gains in their sample and thus purport that mergers are value-enhancing activities.
Conversely, though target returns were found to be positive, returns to the acquirer were found to
be negative at least half of the time. Mulherin and Boone (2000) also find large and significantly
positive returns to target firm shareholders, but negative and insignificant returns to acquirers.
Other research consistent with these results include Asquith (1983), Bradley, Desai, and Kim
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(1983), Jensen and Ruback (1983), Malatesta (1983), Servaes (1991), Andrade, Mitchell, and
Stafford (2001), and Fuller, Netter, and Stegemoller (2002).
In a recent study, Wiggenhorn and Madura (2004) examine the acquisition activity and
performance of newly-public firms, arguing that the transactions are more likely to be
value-increasing as potential differences in life cycles, transparency in disclosure, and increased
corporate governance for the newly-public firms can allow for greater firm value enhancement than
found in acquisitions by established public firms. Wiggenhorn and Madura (2004) further note
that the managerialism motive behind acquisitions of newly-public firms is reduced, given that
much of the IPO proceeds have already been allotted and are unavailable to the management team
for self-serving interests. They find that, contrary to the general findings for acquisitions by
established public firms, there is a positive and significant acquisition announcement effect for
newly-public firms. Thus, their argument of greater value enhancement in acquisitions by
newly-public firms is supported by their findings.
The effect of the method of payment in acquisitions has also been well-studied in the
literature, where it has been found that there are significant differences in the return and operating
performance of acquisitions financed by cash and those financed by stock. In general, it is found
that cash payments are associated with positive but insignificant returns to acquirers, while
acquisitions financed with stock result in significantly negative acquirer returns (e.g. Wansley,
Lane, and Yang, 1987; Asquith, Brunner, and Mullins, 1987; Travlos, 1987).
A related consideration in this literature is that of acquisitions and free cash flow. Free
cash flow is generally defined as being the cash available after all positive NPV projects have been
undertaken (Jensen, 1986). Ideally, since only negative NPV projects remain, any excess cash
flow should be distributed to the firm’s shareholders. However, in many cases, this distribution is
not made and the cash flow is used to finance other endeavors, including acquisitions. Jensen
(1986) argues that managers act not in the interests of the shareholders but act to maximize their
own utility, and thus they have the incentive to use the free cash flows of the firm for
value-destroying investments that suit their own needs. Since issuing equity increases agency
costs and the potential for misuse of the cash, the market reaction upon equity offerings is usually
negative.
Roll-up IPOs are a specific type of acquisition that is related to our research. Brown,
Dittmar, and Servaes (2000) note that roll-up transactions occur where “a shell company goes
public while simultaneously merging with a number of other firms that operate in the same
industry” (p.1). The main motive of this approach is to consolidate firms in highly-fragmented
industries in order to achieve revenue and cost synergies. The merger occurs just prior to or in
conjunction with the IPO. In their study of 47 roll-up transactions over the period 1994 to 1998,
Brown et al. (2000) find that while the initial performance of this type of IPO is similar to that of
traditional IPOs, Roll-up IPOs significantly underperform several benchmarks and traditional IPOs
over the long term. In a related paper, Brown, Dittmar, and Servaes (2004) found that Roll-up
IPOs are more successful in the long run if the founder remains involved. Brown et al. (2003) argue
that industry consolidation success is significantly determined by initial structure.
In this article, we offer several hypotheses regarding the motives for pre-IPO acquisitions.
The first come from the synergy hypothesis literature. In many IPOs, firms have little or no revenue
inflows, especially those in the high-tech and pharmaceutical industries; in order to be able to
report a steady income stream in the prospectus and thereby encourage risk-averse investors to
participate in the offering, the IPO firm purchases firms with relatively stable incomes. In doing
so, synergies (both tangible and intangible) can be achieved. At the very least, financial synergies
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can be achieved as the acquisition can establish an internal capital market and can increase the
firm’s access to outside financing. Yi (2001) examined the pre-IPO earnings of firms going public
over the period from 1987 to 1991. For firms with positive earnings at the time of the IPO, he did
not find any significant benchmark-adjusted abnormal returns, while firms with negative earnings
had significant negative benchmark-adjusted abnormal returns. As well, Yi (2001) argued that
IPO firms with positive earnings outperform those reporting negative earnings. Thus, as there is
evidence that earnings can significantly impact long-term IPO performance, we argue that firms
attempt to improve their reported earnings through acquisitions prior to their offerings and offer the
following hypotheses:
H1a: Compared to similar IPO firms that do not engage in acquisition activity prior to
their IPOs, firms that engage in pre-IPO acquisition activity will have lower levels of ex-ante risk
level for the IPO.
H1b: Compared to similar IPO firms that do not engage in acquisition activity prior to
their IPOs, firms that engage in pre-IPO acquisition activity will have better long-term survival
performance.
The next hypothesis comes from the hubris hypothesis literature, in which authors argue
that firms will engage in pre-IPO acquisitions as a method for increasing firm size, but that
managers may make errors in valuing the target firm and overestimate expected synergies. Thus,
the acquiring firm may overpay for the target and the transaction will be value-decreasing overall.
Klein (1996) studies the relationship between the price per share and several variables for 193
IPOs, finding a positive relationship between the IPO share price and both pre-IPO earnings per
share (EPS) and pre-IPO book value of equity per share. Therefore, firms wishing to go public
may acquire to increase their book values of equity in an attempt to increase their IPO valuations.
Thus, we offer the following hypothesis:
H2: Compared to firms that do not engage in acquisition activity prior to their IPOs, firms
that engage in pre-IPO acquisition activity will have higher levels of IPO proceeds.
The third set of hypotheses comes from the managerialism (or agency) hypothesis
literature. Under this perspective, managers of the pre-IPO firm will make acquisitions that are in
their own self-interests, and not in the interests of value-maximization. Mann and Sicherman
(1991) note that:
“…since managers may have incentives to expand firm size and purchase
unrelated assets, any unencumbered (or nonbonded) cash requests by management
are likely to be perceived negatively by shareholders. If managers hoard free cash
flow rather than distributing it to shareholders, they can finance these projects
internally and avoid seeking financing in the capital markets. When firms are
seeking funds in well-functioning capital markets, it is easier to monitor
management behavior.” (p. 215)
Since a pre-IPO firm is, by definition, not yet public, investors cannot bid down the price of
the firm’s shares when they believe that the firm is engaging in acquisitions that are only in the
interests of management. Thus, the manager who may have built up cash reserves can time his/her
non-value-maximizing acquisitions to occur while the firm is still private in order escape market
discipline. While in efficient markets investors would take this “bad” transaction into account at
the time of the IPO and price the firm’s shares accordingly, if the acquisitions are made close
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enough to the IPO, it may be difficult to observe any negative impact on the firm’s value, and the
manager’s non-value maximizing behavior goes relatively unpunished.
The finance literature contains a plethora of documentation of the fact that, in general,
IPOs are underpriced (e.g. Ritter, 1991; Ritter and Welch, 2002; and Loughran and Ritter, 2004).
Many theories and hypotheses are devoted to attempting to explain this phenomenon (Tinic, 1988).
One of the main theories relevant to our research is that of the relationship between ex-ante
uncertainty (in terms of variables such as sales, amount and use of proceeds, industry, and
underwriter factors) and underpricing. Beatty and Ritter (1986) and Clarkson and Merkley (1994)
look at the relationship between ex-ante uncertainty and underpricing, arguing that the greater is
this uncertainty, the greater will be the underpricing. They base their argument on the winner’s
curse problem - to induce the uninformed investors to remain in the IPO market, issues need to be
underpriced. Beatty and Ritter (1986) note that smaller issues, in general, are more risky in nature.
Overall, the authors conclude that IPOs having greater ex-ante uncertainty do exhibit greater
underpricing.
Melnik and Thomas (2003) found that firms with larger revenues are less underpriced.
Thus, in cases where the acquisitions are made for securing revenue streams, we might expect
lower underpricing. Conversely, in cases where the acquisitions are conducted in managements’
interests and are not value-increasing transactions, we would expect greater underpricing.
However, we can also make the prediction that the pre-IPO acquisitions will have no discernible
effect on underpricing as the results of the transactions will have already been incorporated into the
value of the firm. Considering this literature, we offer the following hypotheses:
H3: Compared to firms that do not engage in acquisition activity prior to their IPOs, firms
that engage in pre-IPO acquisition activity will have lower levels of underpricing.
As we previously discussed, the method of payment used to finance an acquisition has been
shown to impact the performance of the combined firm. Acquisitions financed with cash perform
better than acquisitions financed with stock, with returns to acquirers being positive (or zero) and
negative, respectively (i.e. Ritter, 1991; Ritter and Welch, 2002; Loughran and Ritter, 2004). In
terms of the choice of financing method, Fishman (1989) purports that acquirers will finance deals
with cash in order to deter competing bids when they have favorable private information that
indicates a high value for the target, possibly stemming from expected synergies. Chang and Mais
(2000) assert that “in mergers, bidding firms are predicted to finance with stock when they have
high growth opportunities” (p. 143). Conversely, Travlos (1987) and Wansley, Lane, and Yang
(1987) find that the use of stock financing for acquisitions is a signal that the acquiring firm is
overvalued, and cash is used in cases where the firm is undervalued. In light of these findings, we
offer the following hypotheses:
H4: Compared to firms that finance their acquisitions with stock, firms financing the
transactions with cash will have higher levels of long-term survival performance.
H5a: Synergy will be the primary motive for those acquisitions financed with cash.
H5b: Agency or managerial hubris will be the primary motive for acquisitions financed
with stock.
Data and Methods
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Our dataset is composed of 435 firms in the computer software industry that issued an IPO
on a US stock exchange between 1996 and 2000. We chose the computer software industry as it
contained the largest number of IPOs for any single industry in this period and the single industry
sample eliminates the potential for cross-industry accounting problems. All firms listed themselves
in the SIC 2-digit classification 73 (Business Services). We collected the data using the
prospectuses filed with the Securities Exchange Commission and available in the SEC’s EDGAR
database.
Of the 435 computer software firms that issued IPOs between 1996 and 2000 on US stock
exchanges, we were able to identify 87 companies that made one or more acquisitions in the two
years prior to their IPO. For these 87 firms, we found an average of 2.7 acquisitions in the pre-IPO
period, with an average total consideration cost (cash, stock, and options) of US$24 million. The
average age of these 87 firms is 7.21 years; the average size was 470 employees, with an average
IPO valuation of US$81.6 million. Fifty-one of these firms made only a single acquisition before
their IPO; however, one 3-year old firm (Verio, Inc.) made 20 acquisitions in the two years before
its IPO while a 2-year old firm (Via Net Networks Inc.) made 19 acquisitions in the two years
before its IPO. The pre-IPO acquisition consideration cost averaged 33.9% of the firm’s IPO
valuation. One firm made two pre-IPO acquisitions that cost 3.35 times the eventual proceeds of its
IPO. The firms that made pre-IPO acquisitions were somewhat larger, on average, compared to our
entire dataset but the same age. The averages for all 435 IPO firms in our dataset are 7.19 years,
348 employees, and a valuation of US$69.1 million.
Dependent variables. We examine four dependent variables in this study. The first is a
measure of ex-ante risk, using the BROAD measure of ex-ante risk (MacCrimmon and Martens,
2001). This measure is created by examining the risk factor section of the prospectus for ten
specific risk factors. This result is a value from zero to ten where zero indicates that none of the risk
factors were listed and ten indicates that all ten were listed. This measure is more specific than a
simple count of all risk factors listed (Beatty and Ritter, 1986; Clarkson and Merkley, 1994) and is
similar to ex-ante risk factor measures (Welbourne and Andrews, 1996). The second dependent
variable (value) is the amount of capital raised in the offering (# of shares * offering price), the
valuation of the issue. As the data was left-skewed, we transformed it using a natural log. The third
dependent variable (uprice) is first day underpricing (stock price close of first day minus the
offering price). The fourth dependent variable (delist) is a dichotomous variable where 1 means
that the firm was delisted, for a negative reason, within the first three years on the market. We
include the condition ‘for a negative reason’ because some firms are delisted after being acquired
by other firms at a price higher than their IPO issue price. We define a delisting failure as one
where, within the first three years, the firm is delisted for failing to meet SEC or exchange
requirements or if they were acquired by another firm at a stock market-adjusted value that was
twenty-five percent below its IPO valuation or lower. We test our hypotheses on IPO valuation and
years to delisting using OLS regression analysis. We use logistic regression for the 3-year delisting
analysis.
Key independent variables. In our study, we employ four acquisition-related variables.
The acquisition indicator variable (ACQ) is a dummy where 1 equals a firm engaging in a pre-IPO
acquisition and 0 if no acquisitions were made. Acquisition consideration (CONSID) is the total
dollar value of the acquisition, in millions. The method of payment variables, CASH and STOCK,
are the percentages of total consideration of each respectively. Thus, the cash variable is the total
amount of cash paid as a percent of total consideration, while the stock variable is the total value of
stock paid as a percent of total consideration.
259
Control variables. We include a number of control variables. Since firms on the NYSE
tend to be substantially larger, we include AMEX and NASDAQ as market-level controls. IPO
performance may also be influenced by momentum effects and be subject to non-rational
enthusiasm over the possible future return of IPOs (Jenkinson and Ljungqvist 2001). IPO Date is
the Excel-coded date of the IPO issue (for example 35227 is the equivalent to June 11, 1996). We
also include a “Hot IPO” period variable that measures the number of IPOs during the week the
firm went public. The measure “BUBBLE” is a dichotomous variable indicating if the firm was
part of the 1998-2000 IPO bubble. The NASDAQ prior 30 days return variable controls for the
NASDAQ market performance in the 30 days prior to the IPO. The variable is measured as the
percentage return on the NASDAQ index during the 30 calendar days prior to the IPO date. The
NASDAQ is chosen for this control because the large majority of the issues in our sample trade on
this exchange.
We include a number of firm-level controls; age at the time of the IPO; Firm size
(LOGEES) is measured by taking the natural log of the number of employees at the time of the IPO.
We also measure firm financial size by including the total revenue in the year prior to the IPO
(TOTREV). Auditor reputation is measured as a dichotomous variable differentiating the involved
auditing firms in terms of size (Big 6 vs. non-big 6). Loughran and Ritter’s (2004) underwriter
prestige measures are used to control for underwriter reputation (UWRANK). We include a
dichotomous measure for profitability (NETINC) where 1 represents a company that reports a net
profit in the year prior to the IPO. Fraud is a variable used to take into account firms that are
involved in a class-action laddering lawsuit, identified on the website IPOfraud.com. This class
action lawsuit was filed in 2003 against 309 IPO firms and the underwriters involved in those firms.
129 of the 309 firms (42%) named in the lawsuit are present in our sample. We include a control for
firms where the Founder is still the CEO after the IPO (FCEO) and we control for firm ownership
by the CEO (CEORE) that measures the percentage of the outstanding shares owned by the CEO.
Results
For the first set of models, we examine the effect of acquisitions on our four dependent
variables. The results are presented in Table I. In testing the hypothesis that firms make
acquisitions pre-IPO to reduce ex-ante uncertainty, we find the acquisition dummy variable to be
significant and negative. This supports Hypotheses 1a. Pre-IPO acquisition activity appears to
be associated with lower levels of ex-ante risk.
When IPO valuation is the dependent variable, we find the acquisition dummy variable is
insignificant and thus Hypothesis 2 is not supported. Pre-IPO acquisition activity does not appear to
have an effect on the IPO valuation, compared to firms that do not engage in acquisitions. This
result suggests that firm growth through internal measures and growth via acquisition are valued
essentially the same for IPO firms. Almost all of the other variables are significant in this model,
save CEO retained earnings, total revenue, net income, and the hot IPO period dummy.
In terms of pre-IPO acquisitions and underpricing, we find an insignificant relationship.
Thus, although the coefficient on the acquisition dummy variable has the expected sign, Hypothesis
#4b is not supported in this model. Pre-IPO acquisitions do not seem to have an effect on
subsequent IPO underpricing. Other significant explanatory variables include the two stock
exchange dummies, underwriter rank, IPO fraud, net income, NASDAQ 30-day return, and the hot
IPO dummy variable.
260
Interestingly, when the 3-year delisting dummy is the dependent variable, the acquisition
dummy variable is positive and significant. Firms conducting pre-IPO acquisitions are more
likely to be delisted in the third year than non-acquiring IPO firms. Thus, Proposition #1b is not
supported by our data as long-term performance appears to be negatively impacted by pre-IPO
acquisition activity.
The Effect of Acquisition Consideration and Payment Type
For the next set of models, we reduce the sample size to the 87 acquiring firms and consider
the effect of acquisition consideration and payment type on our four dependent variables. The
results are presented in Table II. In our analyses, we find no support for Hypotheses 4, 5a, or 5b. In
terms of ex-ante risk level, we find no significant relation for the acquisition consideration, cash, or
stock variables. Thus neither acquisition size nor payment method appear to impact ex-ante risk
levels. Auditor reputation, IPO fraud, CEO retained earnings, IPO date, and log of employees,
conversely, are found to be significantly related to the BROAD measure. When considering IPO
valuation, we find that acquisition consideration and method of payment are not significantly
related to IPO proceeds. Larger acquisitions do not necessarily result in higher proceeds, and the
effect of payment method is weak at best. Variables found to be significantly related to IPO
valuation include the NASDAQ dummy, underwriter rank, total revenue, and the BROAD ex-ante
risk measure. In terms of underpricing, we find a negative but insignificant relation for each of
acquisition consideration, cash, and stock. Underwriter rank, IPO fraud, and IPO date are
significantly positively related to IPO underpricing for our sample of acquiring firms. The model
including the 3-year delisting dummy as the dependent variable reveals that acquisition size and
cash payment are not statistically significantly related to later delisting. Significant relationships
are found between the delisting dummy and each of net income, NASDAQ 30-day return, log of
employees, and the hot IPO dummy variable.
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Table I - The Effect of Acquisitions on the Dependent Variable List
Dependent Variables
N=435
2
BROAD (Adj. R = 0.3283)
2
VALUE (Adj. R = 0.4712)
UPRICE (Adj. R2 = 0.4049)
DELIST (Adj. R2 = 0.1250)
b
s.e.
p-value
b
s.e.
p-value
B
s.e.
p-value
b
s.e.
p-value
INTERCEPT
ACQ
AMEX
NASDAQ
AUDREP
UWRANK
FRAUD
CEORE
FIRMAGE
FCEO
TOTREV
NETINC
N30DRET
IPODATE
LOGEES
HOTIPO
BUBBLE
BROAD
VALUE
6.4109
-0.3567
-0.1165
1.1158
0.005
0.069
0.771
-0.018
-0.080
-0.088
-0.001
0.000
-0.011
0.000
-1.209
-----------------------------------------
1.027
0.194
1.129
0.424
0.646
0.075
0.179
0.008
0.015
0.156
0.001
0.000
0.009
0.000
0.248
-----------------------------------------
<0.0001
0.067
0.918
0.009
0.994
0.360
<0.0001
0.022
<0.0001
0.574
0.190
0.398
0.227
0.013
<0.0001
-----------------------------------------
1.094
-0.008
-0.659
-0.343
-0.141
0.064
0.053
0.001
-0.004
-0.070
0.000
0.000
0.004
0.000
0.201
0.001
0.098
0.021
-----------
0.141
0.025
0.142
0.054
0.082
0.009
0.024
0.001
0.002
0.020
0.000
0.000
0.001
0.000
0.032
0.001
0.026
0.006
-----------
<0.0001
0.752
<0.0001
<0.0001
0.085
<0.0001
0.027
0.417
0.036
0.001
0.607
0.963
0.000
0.002
<0.0001
0.102
0.000
0.001
-----------
-0.561
-0.036
0.309
0.166
-0.078
0.037
0.297
0.000
-0.003
-0.027
0.000
0.000
0.003
0.000
-0.045
-0.003
0.037
-0.009
0.167
0.168
0.028
0.163
0.063
0.092
0.011
0.027
0.001
0.002
0.022
0.000
0.000
0.001
0.000
0.038
0.001
0.029
0.007
0.055
0.001
0.190
0.060
0.009
0.396
0.001
<0.0001
0.929
0.134
0.227
0.976
0.084
0.019
0.540
0.238
0.001
0.213
0.191
0.003
1.519
0.525
-1.599
-0.228
-1.064
-0.186
-0.015
0.021
-0.032
-0.454
-0.001
-0.027
0.033
0.000
-0.379
0.016
-0.279
0.055
0.267
1.949
0.281
1.709
0.816
0.963
0.116
0.317
0.011
0.025
0.234
0.002
0.009
0.014
0.000
0.420
0.009
0.322
0.076
0.597
0.436
0.061
0.350
0.780
0.269
0.106
0.962
0.058
0.196
0.052
0.647
0.002
0.019
0.971
0.367
0.094
0.388
0.470
0.655
UPRICE
-----------
-----------
-----------
-----------
-----------
-----------
-----------
-----------
-----------
-0.790
0.506
0.118
Table II - The Effect of Consideration and Payment Method on Dependent Variable List
Dependent Variables
N=87
BROAD (Adj. R2 = 0.4100)
VALUE (Adj. R2 = 0.4041)
UPRICE (Adj. R2 = 0.3465)
DELIST (Adj. R2 = 0.2927)
b
s.e.
p-value
b
s.e.
p-value
B
s.e.
p-value
b
s.e.
p-value
INTERCEPT
CONSID
CASH
STOCK
NASDAQ
AUDREP
UWRANK
FRAUD
CEORE
FIRMAGE
FCEO
TOTREV
NETINC
N30DRET
IPODATE
LOGEES
HOTIPO
BUBBLE
BROAD
VALUE
9.370
0.001
0.337
0.997
0.428
-3.539
0.161
0.815
-0.037
-0.061
-0.284
-0.004
-0.006
-0.028
0.000
-1.312
-----------------------------------------
3.109
0.005
0.681
0.679
1.002
1.701
0.170
0.396
0.017
0.037
0.352
0.005
0.007
0.018
0.000
0.520
-----------------------------------------
0.004
0.895
0.622
0.146
0.671
0.041
0.346
0.043
0.027
0.107
0.422
0.493
0.427
0.117
0.089
0.014
-----------------------------------------
1.268
0.001
0.031
-0.038
-0.289
-0.063
0.065
0.024
0.001
-0.005
0.012
0.002
-0.002
0.005
0.000
0.023
0.001
0.071
0.034
-----------
0.546
0.001
0.111
0.111
0.162
0.290
0.028
0.068
0.003
0.006
0.058
0.001
0.001
0.003
0.000
0.089
0.002
0.076
0.020
-----------
0.023
0.420
0.782
0.736
0.080
0.831
0.022
0.721
0.710
0.425
0.835
0.082
0.179
0.108
0.112
0.798
0.664
0.353
0.092
-----------
-1.621
-0.001
-0.117
-0.068
0.269
0.180
0.076
0.231
-0.001
-0.005
-0.010
0.000
0.001
0.004
0.000
0.037
0.000
0.087
0.017
0.134
0.638
0.001
0.125
0.125
0.187
0.326
0.032
0.076
0.003
0.007
0.065
0.001
0.001
0.004
0.000
0.101
0.002
0.086
0.023
0.136
0.013
0.360
0.353
0.590
0.155
0.584
0.021
0.004
0.734
0.462
0.883
0.664
0.507
0.248
0.061
0.717
0.896
0.315
0.461
0.330
-2.465
0.005
1.023
2.092
-1.469
8.726
-0.124
0.352
-0.021
-0.013
-0.598
0.001
-0.045
0.066
0.000
-1.892
0.046
-0.724
-0.024
-1.576
762.3
0.009
1.320
1.360
1.922
762.2
0.314
0.775
0.034
0.074
0.625
0.010
0.021
0.037
0.000
1.084
0.024
0.841
0.216
1.371
0.996
0.578
0.438
0.124
0.445
0.991
0.694
0.650
0.528
0.864
0.352
0.892
0.033
0.071
0.686
0.081
0.054
0.390
0.913
0.250
UPRICE
-----------
-----------
-----------
-----------
-----------
-----------
-----------
-----------
-----------
-1.790
1.210
0.139
263
Conclusion
Individually, acquisitions and initial public offerings are momentous transactions for a
firm. Each may significantly improve or impair the prospects of a firm, and a plethora of research
is devoted to documenting their effects. However, the combination of the two, as far as we can
find, has been ignored in the literature. This paper begins to fill that gap by examining the
acquisition activity by pre-IPO firms in order to examine the motives behind and the impact of such
transactions, both pre- and post-IPO.
Following previous literature in the M&A framework, we examine a few perspectives in
our study: the synergy hypothesis, the managerial hubris hypothesis, and the agency hypothesis.
The first argues that acquisitions are conducted pre-IPO in order to increase the value of the firm;
while the latter two purport that the transactions are value-decreasing, either through managerial
error or self-serving behavior, respectively. We further proposed that the method of payment is
indicative of acquisition motives and that it will have an impact on post-acquisition performance.
Competing theories makes forming a single proposition regarding the effect of the acquisitions on
later IPO underpricing difficult, and thus it is left to empirical analysis.
The results of our study suggest that engaging in pre-IPO acquisitions may be explained by
both the synergy and managerial hubris hypotheses. We found that engaging in pre-IPO
acquisitions allows firms to match the IPO valuations that other firms obtain through internal
growth. This appears to support the synergy hypothesis. However, our analysis suggests that
firms that engaged in pre-IPO acquisitions were then more likely to be delisted, for negative
reasons, three years after the IPO. This appears to support the managerial hubris hypothesis. In
combination, engaging in pre-IPO acquisition activity helps firms obtain more money in the IPO
but then it appears that they are more likely to fail in three years.
We also offer a new possibility for pre-IPO acquisition decisions. If the decisions are
driven by the underwriters or VCs, then perhaps we should consider that it is the underwriters or
VCs who are overconfident and thus it is underwriter or VC hubris. If the acquisitions are
primarily done as a way to signal the firm’s fitness or legitimize the firm in the eyes of potential
investors, which then leads to higher IPO valuations but not better long-term performance, then we
should question the wisdom of this type of IPO polishing.
In addition to testing the hypotheses we proposed in this article, investigating the effects of
pre-IPO acquisition activity offers many other avenues worth researching. For example, in the
pre-IPO period, why do firms make acquisitions? Our research suggests that some acquisitions
are made to show rapid revenue growth while others appear to be efforts at product diversification.
The two firms mentioned above appear to use acquisitions as a method of assembling a firm for an
IPO, as they both appear to be a rapidly assembled collection of firms with similar or related
products. Some pre-IPO acquisition activity significantly shifts the firm’s strategic direction.
How do these different motivations affect the firm’s performance at the time of the IPO and its
long-term performance? Additionally, how does pre-IPO acquisition activity affect post-IPO
acquisition activity and subsequent firm performance? Firms do use the IPO proceeds for
acquisitions. Are firms that make pre-IPO acquisitions better able to successfully conduct post-IPO
acquisitions? If the Top Management Team is able to learn from their pre-IPO acquisitions, they
may be more capable at the post-IPO acquisition activity, as suggested by Wiggenhorn and Madura
(2004). We expect that our research will lead to such new and important avenues of investigation.
264
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ASAC 2005
Toronto, Ontario
Taiyuan Wang (student)
The University of Western Ontario
GENERIC STRATEGY AND CAPITAL STRUCTURE: THE IMPACTS OF PRODUCT
DIFFERENTIATION ON FINANCIAL LEVERAGE
This study examines the relationship between product differentiation and financial leverage.
It argues that product differentiation is associated with investments in firm-specific assets
that have lower liquidation value than general assets. Debt investors need to charge a higher
interest rate to cover the risk of default, making the firm resort to equity financing and
resulting in low financial leverage.
Modiglian and Miller (1958) argued that firm value was independent of capital structure. This
means that ways of financing (debt or equity) have no relationship to firm performance. On the
contrary, Myers and Majluf (1984) pointed out that different means of financing reflected
managers’ different decisions, which are influential in any firm’s performance. Other theory is
needed to explain the inconsistence.
Williamson (1988) pointed out that debt and equity could be considered as different means of
governance. Equity investors can access the management of a firm by means of the board of
directors. Debt investors have no right of access to the management, but they have priorities to
claim against the firm’s assets when it goes bankrupt. Since special assets are more difficult to be
redeployed, they have lower liquidation value than do general assets. As a result, debt investors are
less likely to provide funds for firms that have more special assets.
Prior studies found that some specific strategies would require investments in firm-specific
assets and consequently made the firm difficult in borrowing (Balakrishnan and Fox, 1993; Jordan,
Lowe et al., 1998; Kochhar and Hitt, 1998; Riahi-Belkaoui and Bannister, 1994; Vicente-Lorente,
2001. etc.). However, the impacts of generic strategies on capital structure have been ignored.
According to the Resource-Based View, competitive advantages are built on firm-specific,
rare, and inimitable resources (Barney, 1991). A successful differentiation strategy must involve
firm-specific assets to enable the firm to achieve sustainable competitive advantage. At the same
time, the specialty of firm-specific assets has a negative influence on debt borrowing capacity
(Williamson, 1988). Therefore, the strategy of differentiation should influence capital structure,
but there is no study concentrating on this research question. This paper fulfills this gap. It
theoretically examines the relationship between the strategy of product differentiation and capital
structure, and argues that product differentiation has negative impacts on financial leverage.
The contribution of this study is twofold. Firstly, the proposition that product differentiation
has negative impacts on financial leverage would be important to researchers, financial managers,
and bankers. For researchers, it broadens the domain of research by linking capital structure with
the strategy of differentiation; for financial managers, taking the account of strategy as a factor to
determine capital structure is practically meaningful; and for bankers, examining a firm’s strategy
may mean making better investment decisions.
Secondly, it argues for an improvement in the measurement of strategic position by
examining accumulated investments in particular assets. Prior studies used yearly investments in
268
specific assets to measure strategy (Balakrishnan and Fox, 1993; Jordan, Lowe et al., 1998;
Kochhar and Hitt, 1998; Riahi-Belkaoui and Bannister, 1994), but yearly investments cannot
reflect the stock of particular assets (O'Brien, 2003). At the same time, strategic position is less
likely to change frequently. The accumulated investments, which can reflect the stock of particular
assets, are more appropriate to represent strategic position.
Theoretical Background
Agency Theory and Debt Financing
The interests of shareholders and creditors may be incongruent. Shareholders have the right to
harvest the firm’s residual value, while creditors’ profit lies in the pre-determined interest rate.
After obtaining funds from creditors, shareholders are inclined to invest in more profitable projects,
which are riskier. If the riskier projects succeed, shareholders will harvest more, but creditors’
earnings will not change (Balakrishnan and Fox, 1993). Put differently, creditors bear risks with
shareholders for a riskier project but, even taking more risks, they cannot share the potential profit
with shareholders.
The interests of shareholders and managers are not always consistent. The return to
shareholders is determined by profitability, while the reward to managers is positively associated
with firm size. Therefore, managers may try to invest as much as possible, probably resulting in
some inferior investments (Jensen, 1986).
Agency Theory (AT) can theoretically explain the conflict between shareholders and creditors
as well as the inconsistency between shareholders and managers. Williamson (1988) argued that
people were subject to bounded rationality and opportunistic, which can interpret why
shareholders have the propensity to take riskier projects. Creditors recognize that shareholders
could steal their wealth. They will increase the interest rate to cover the risk of default
(Balakrishnan and Fox, 1993). Similarly, managers may concern their own benefits more than
those of shareholders: they over-invest the surplus capital and make the firm as large as possible,
seeking for the increase in salary, power, and social status (Jensen, 1986).
Agency costs between shareholders and managers can be reduced by debt financing (Jensen,
1986). Debt generates interest expense and therefore decreases the slack of cash flow, making it
difficult for managers to waste shareholders’ wealth. Further, a high debt ratio means high
financial distress - which can increase the risk of default, but can force managers to work hard. The
costs of bankruptcy to managers are dual: they will not only lose their current positions, but also
lose the opportunity to find new jobs because their reputation will be impaired by the experience of
bankruptcy (Balakrishnan and Fox, 1993).
The mixture of strengths and weaknesses of debt financing implies that there should be an
optimal debt ratio, but empirical investigations showed that this optimal debt ratio was not easy to
determine (Shyam-Sunder and Myers, 1999). Some researchers argued that there was a ‘pecking
order’ when firms make financing decisions: they are likely to use funds generated from operation;
if the retained earnings from operation are insufficient, they will choose debt financing; and if the
debt loan is still not enough, they will resort to equity financing (Myers and Majluf, 1984;
Shyam-Sunder and Myers, 1999).
269
TCE, Asset Specificity, and Capital Structure
Williamson (1988) theoretically linked capital structure and strategy. He argued that debt and
equity could be considered alternative means of governance. Equity investors can access
management by means of the board of directors; monitor managers’ behavior; and, if necessary,
control managers’ strategic choices. From this perspective, equity is a kind of hierarchical control
(Williamson, 1988). Debt investors cannot access management, but they have the preemptive right
to claim against a firm’s assets if the firm goes bankrupt. Before providing a firm with capital, debt
investors will evaluate the condition of the firm’s assets so that they can make appropriate
investment decisions. Compared with equity, debt is a kind of marketing control (Williamson,
1988).
A firm with more valuable firm-specific assets that are rare and inimitable may outperform its
competitors (Barney, 1991), but firm-specific assets have lower liquidation value than do general
assets that can be redeployed and reused. Because debt investors cannot access the management,
they are unable to discern that the firm can perform better than its competitors. Consequently, debt
investors are likely to increase interest rate to cover the risk of default. As a result, firms with more
specific assets have to resort to equity financing, resulting in lower financial leverage.
Theoretically, the specialty of firms’ assets and the difference of debt governance (market
control) and equity governance (hierarchy control) establish a bridge between capital structure and
strategy (Balakrishnan and Fox, 1993; Williamson, 1988).
Prior Research on Capital Structure and Strategy
Barton and Gordon (1987) ignited the studies of capital structure from a strategy perspective.
They argued that capital structure was influenced by top managers’ priorities and behavioral
characteristics. In their subsequent study (1988), they empirically concluded that both strategy and
top managers’ behavioral characteristics could explain capital structure. In the past decade, more
researchers joined in the studies of capital structure with a strategy paradigm (Balakrishnan and
Fox, 1993; Jordan, Lowe et al., 1998; Kochhar and Hitt, 1998; O'Brien, 2003; Riahi-Belkaoui and
Bannister, 1994; Vicente-Lorente, 2001. etc.). Most studies are based on the theory that strategic
investments in firm-specific assets impair firms’ debt borrowing capacity.
Investments in R&D are expected to influence firms’ borrowing capacity (Balakrishnan and
Fox, 1993; Vicente-Lorente, 2001). Empirical investigations found a “negative and significant”
relationship between R&D intensity and financial leverage (Balakrishnan and Fox, 1993, p. 12).
Vicente-Lorente distinguished between firm-specific R&D and external R&D (out-sourcing) and
found that firm-specific R&D intensity had negative influence on financial leverage, while
external R&D had “no significant effect” (Vicente-Lorente, 2001, p. 170).
Diversification and integration are considered to be associated with the change of capital
structure because such investments need substantive external funds (Kochhar and Hitt, 1998). A
firm that pursues related diversification or vertical integration is likely to look forward to the
synergies between the current business and the potential business. This means that investments in
related diversification or vertical integration bring more firm-specific assets than do unrelated
diversification investments. Therefore, a firm pursuing related diversification or vertical
integration will have lower financial leverage than if it had pursued unrelated diversification
(Kochhar and Hitt, 1998; Riahi-Belkaoui and Bannister, 1994).
270
Differentiation as a Generic Strategy
Generic strategy has been widely studied since the introduction of Porter (1980)’s typology:
cost leadership, differentiation, and focus. A firm pursuing cost leadership makes every effort to
reduce costs, so as to achieve a cost advantage over competitors. On the contrary, a firm taking a
strategy of differentiation tries to create something special on product and/or service, making it
unique in the industry so that the firm can charge a higher price than its competitors. Focus refers
to the concentration on a niche market segment, regardless of pursuing cost leadership or
differentiation. Commitment to one of the three as the primary target will result in better
performance than if the firm had become stuck in the middle (Porter, 1980). Cost leadership
cannot neglect the quality of products and services, and differentiation cannot ignore low cost
operation (Porter, 1985).
Differentiation brings more transaction costs than does cost leadership (Jones and Butler,
1988). Whichever strategy they take, firms need to make potential customers familiar with the
characteristics of their products and services. Through differentiation, a firm makes its products
and/or services more special and complex than if the firm had merely pursued cost leadership.
Therefore, the firm needs to invest more to inform and train its customers about its differentiated
products and/or services. To cover the transaction cost generated from differentiation, the firm can
charge a higher price to achieve a higher margin, or increase the production volume to reduce
production costs (Jones and Butler, 1988).
Product Differentiation
Differentiation can be achieved by employing some strategies that can be perceived by
customers as benefits; cannot be imitated by competitors; and are valuable for business partners
such as suppliers (Calorir and Ardisson, 1988). New product development, brand identification,
and innovation in marketing and technology are main differentiation strategies (Dess and Davis,
1984). Priem (1992) noted that differentiation could be achieved by improving product features,
product design, technology, customer service, and distribution network. To summarize,
differentiation can be realized through product differentiation and marketing management (Miller,
1986).
Product differentiation can be realized through product innovation, quality and reliability
improvement, and customer service enhancement (Murray, 1988). Product innovation is viewed as
a main differentiation strategy (Dess and Davis, 1984; Kotha and Vadlamani, 1995; Miller, 1988;
White, 1986. etc.). In mature industries, customers are already familiar with product features. They
are likely to choose standard products at a low price. Competitors have similar technology and
production capability: they can easily imitate the innovated products (Murray, 1988). Under such a
condition, the improvement on product quality, liability, and customer services becomes the
source of sustainable advantage (Murray, 1988; Porter, 1985).
Product differentiation and product innovation are different. Product innovation is widely
considered as a way to improve product features (Miller, 1986), while product differentiation
should include brand building, improvement in quality and reliability, and the strengthening of
customer service (Murray, 1988). Put differently, a strategy of product differentiation is associated
with product improvement, product advertisement, and customer service enhancement. Product
improvement refers to the improvement in product features, quality, and reliability; product
advertisement refers to those advertisements particularly designed for the brand building of
products and/or services; and customer service enhancement refers to the improvement on
customer service facilities, such as call-center, after sales service network, etc.
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Murray (1988) argued that the total costs to a customer included price, the expense of
configuration and repair, the inconvenience of poor performance, and the unhappiness due to
product or service problems. High quality and reliable products reduce repair expenses. Good
customer service can reduce customers’ unhappiness when they have problems. By means of
improving product quality and customer service, a firm can lower the total costs to its customers,
resulting in the achievement of customer loyalty, which is a competitive advantage. Further, the
process of improvement on product quality and customer service is sufficiently complex to make
imitation difficult (Murray, 1988). Therefore, such differentiation strategy can help the firm
achieve sustainable advantages.
Product Differentiation and Financial Leverage
Measurements of Financial Leverage
Capital structure is generally measured by financial leverage, which is defined as the ratio of
debt over the sum of debt and equity (Jordan, Lowe et al., 1998). Although some studies used
gearing (the ratio of debt over equity) (Kochhar and Hitt, 1998) to reflect capital structure,
leverage were more widely accepted in prior studies (Balakrishnan and Fox, 1993; Jordan, Lowe et
al., 1998; Vicente-Lorente, 2001. etc.). Albeit different in forms, leverage and gearing reflect
similar information.
The issue related to the measurement of financial leverage lies in the selection of debt
(long-term or short-term) and equity (book value or market value). Because long-term debt can
avoid the fluctuations of short-term financing (Barton and Gordon, 1988), and because strategic
positions are not likely to change frequently, compared with short-term debt, long-term debt is
more appropriate for reflecting strategic investments. Both book and market value equity are
important factors in evaluating financial leverage. Book value can reflect the information of
historical investments, while market value can reflect the economic rent generated from the
firm-specific assets that have been invested before.
Several measurements of financial leverage have been used in prior studies. Titman and
Wessels (1988) used the ratio of long-term, short-term, and convertible debt over book and market
value equity. Barton and Gordon (1988) used the ratio of owners’ equity over the difference of
total assets and current liabilities. Balakrishnan et al (1993) defined financial leverage as the ratio
of total debt over the sum of total debt and market value equity. Vicente-Lorente (2001) used two
financial leverage variables, one employing book value equity and the other using market value
equity.
In this study, I define financial leverage as the ratio of long-term debt over the sum of
long-term debt and equity, considering both book value and market value equity.
Product Differentiation and Investments in Firm-Specific Assets
Product differentiation requires investments in firm-specific assets. To improve product
features, firms need to invest in R&D; to improve product quality and reliability, firms need to
invest in quality management system such as Total Quality Management; to improve brand
identification, firms need to invest in product advertisement; and to increase customer loyalty,
firms need to invest in customer service facilities. These investments can be divided into three
categories: the investments in product improvement on features and quality & reliability; the
investments in product advertisement; and the investments in customer service.
272
To achieve product differentiation, a firm needs to continuously invest in the related assets.
Temporary or occasional investments cannot help the firm achieve sustainable advantage (O'Brien,
2003). Historical or accumulated investments in the related assets are more appropriate for the
reflection of a firm’s strategic position than temporary investments.
The related assets generated from these investments are firm-specific. If a firm goes bankrupt,
the liquidation value of these assets will have very low liquidation value. Consequently, the
specificity of such assets will influence the firm’s financial leverage. The relationships between
product differentiation and accumulated investments in product improvement, product
advertisement, and customer service, and the relationships between such investments and financial
leverage are shown in Figure 1.
Figure 1
Product Differentiation and Financial Leverage
Accumulated
investments in
product
Improvement
+
+
Product
Differentiation
Accumulated
investments in
product
Advertisement
_
_
Financial
Leverage
_
+
Accumulated
investments in
Customer Service
Proposition 1a: Product differentiation is positively associated with accumulated investments
in product improvement.
Proposition 1b: Product differentiation is positively associated with accumulated investments
in product advertisement.
Proposition 1c: Product differentiation is positively associated with accumulated investments
in customer service.
Product improvement requires the investments in firm-specific assets such as R&D (Jordan,
Lowe et al., 1998). A firm pursuing product differentiation by means of continuous investments in
product improvement will have a high ratio of firm-specific assets. The firm-specific assets will
impair the firm’s debt borrowing capacity (Williamson, 1988). Consequently, the firm will seek
for equity financing, resulting in lower financial leverage.
Proposition 2a: Financial leverage is negatively associated with accumulated investments in
product improvement.
273
On the one hand, the investments in product advertisement can be considered firm-specific. If
a firm that has invested much capital in product advertisement goes bankrupt, debt investors will
collect nothing from the invested advertisement: it is completely firm-specific. Therefore, debt
investors will increase their interest rate to cover the risk of default (Williamson, 1988).
On the other hand, continuous advertisements can help a firm build customer loyalty, which,
in turn, improves debt investors’ safety factor of investment (Balakrishnan and Fox, 1993). Further,
advertisement can be viewed as a signal showing that the firm will continue to operate in the
market, resulting in the improvement of debt investors’ confidence in investing (Balakrishnan and
Fox, 1993; Vicente-Lorente, 2001).
The competing effects of the investments in product advertisement on debt loan capacity
make it difficult to make a clear discernment. According to TCE (Williamson, 1988), it is the
liquidation value that makes debt investors prefer general assets. From this perspective, liquidation
value is negatively related to the difficulty of debt loan. The liquidation value of the investments in
advertisement is likely to be extremely low, if not zero, if the firm goes bankrupt. Therefore, we
can tentatively expect that the effects of the investments in product advertisement on financial
leverage are more negative than positive.
Proposition 2b: Financial leverage is negatively associated with accumulated investments in
product advertisement.
Customer service facilities such as call-centers, door-to-door service, international warranties,
and customer clubs have been widely established in recent years. The investments in such
customer service facilities are firm-specific. If a firm that has invested much capital in customer
service facilities goes bankrupt, its debt investors will recover less than if the firm had had more
general assets. Therefore, debt investors will request a high interest rate, making it difficult for the
firm to borrow and resulting in low financial leverage.
Proposition 2c: Financial leverage is negatively associated with accumulated investments in
customer service.
Conclusions and Implications
Prior research that links strategy and capital structure mainly focused on specific strategies
(Balakrishnan and Fox, 1993; Jordan, Lowe et al., 1998; Kochhar and Hitt, 1998; Riahi-Belkaoui
and Bannister, 1994; Vicente-Lorente, 2001. etc.). Generic strategy has been widely studied in the
field of strategy, but no study concentrates on the relationship between generic strategy and capital
structure. This study fulfills the gap. It examines the impacts of product differentiation on capital
structure and argues that product differentiation is related to product improvement, product
advertisement, and customer service. Each aspect is necessary but not sufficient. Product
improvement on product features and quality & reliability is the essence of differentiation. Product
advertisement improves brand identification, which is a key element of product differentiation
(Dess and Davis, 1984; Murray, 1988). It can also reduce transaction costs by means of
providing customers with more information (Jones and Butler, 1988). Good customer service
reduces total costs to customers (Murray, 1988), resulting in the improvement in customer
loyalty. At the same time, the investments in product improvement, product advertisement, and
customer service are firm-specific. Such investments will impair firms’ debt borrowing capacity,
resulting in low financial leverage (Williamson, 1988). Therefore, a firm that pursues product
274
differentiation is likely to have lower financial leverage than does a similar firm pursuing cost
leadership.
The propositions of this study are useful for researchers, financial managers, and bankers. For
researchers, earlier theorists (Modiglian and Miller, 1958) argued that firm value had no
relationship with capital structure. This study articulates that product differentiation does have
impacts on capital structure. It broadens the domain of the research for both strategy and finance
fields. For financial managers, it suggests that strategy should be considered when they adjust
capital structure. For bankers, understanding the influence of strategy on capital structure can help
them make better investment decisions. The discrimination against firm-specific assets might
make bankers lose good investment opportunities.
An advantage of this study is the recommendation of using accumulated investments in
product improvement, product advertisement, and customer service to reflect product
differentiation. Prior studies measured specific strategies by examining yearly investments in
particular assets (Balakrishnan and Fox, 1993; Jordan, Lowe et al., 1998; Kochhar and Hitt, 1998;
Riahi-Belkaoui and Bannister, 1994), but yearly investments cannot reflect the stock of a firm’s
particular assets (O'Brien, 2003). Therefore, accumulated investments in particular assets are more
closely to reflect specific strategic position.
A limitation of this study might be the measurements of product differentiation. Product
advertisement is defined as an item of product differentiation, but it was viewed as marketing
differentiation in prior research (Miller, 1986). Empirical investigation is needed to test the
representation of product advertisement. Another potential limitation is the weak argument that
product advertisement negatively influences financial leverage. Prior research, by arguing that the
reputation effect is more significant, found the opposite relationship (Balakrishnan and Fox, 1993;
Vicente-Lorente, 2001). Further theoretical explanation and empirical investigations are needed to
dig out the real impacts of product advertisement on capital structure.
It is not easy to “substantiate” the relationship between differentiation and financial leverage
(Jordan, Lowe et al., 1998, p. 7). As a generic strategy, differentiation has been widely studied in
the field of strategy. Capital structure is also a main topic in the field of finance. Any further study
able to pinpoint a more profound relationship between the two fields would constitute a significant
contribution.
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276
ASAC 2005
Toronto, Ontario
Jaana Woiceshyn
Haskayne School of Business
HOW ‘GOOD MINDS’ THINK: A STUDY OF CEO DECISION MAKING
This study of 16 oil company CEOs, recognized as effective thinkers, found that they combined
reason and intuition, primarily by relying on both explicit and ‘automatized’ principles. The CEOs
also shared three thinking-related traits: self-awareness, certain motivation, and an active mind.
Suggestions for effective thinking are derived from the findings.
“I have a strongly held belief that intuitive or gut feelings are just pattern recognition, almost
instantaneous pattern recognition, whereas logic is the more painstaking process of making a
pattern emerge. I think that one is just as important as the other.”
--A CEO participating in the study
To probe how ‘good minds’ think, I asked 16 CEOs who ran (or had been running until
recently) successful oil and gas companies to read a realistic decision scenario which presented
three strategic alternatives: to invest in a new technology, to explore in the Arctic in a joint venture,
or to acquire another oil company. The chief executives were then asked to think out loud how they
would decide in the scenario. See Table I for the research methodology.
This paper 1) explains how effective thinkers combined reason and intuition, 2) shows what
principles they relied on, 3) describes the three common characteristics of effective thinkers, and 4)
discusses implications of the study’s findings for those wanting to improve their thinking.
Effective thinking
Thinking is a process of asking and answering questions. Its effectiveness is tested when one is
trying to solve a problem or make a decision. For example, how to design a new product? Who to
hire to manage a new project? Where to drill for oil? All these decisions require thinking—and
preferably thinking that is quick rather than slow, and leads to ‘right’ rather than ‘wrong’ answers.
If thinking takes too long, the product might be obsolete when it is ready for a launch, or a
competitor might have hired the best project manager, or bought the property with significant oil
reserves. If the product design is ‘wrong’, there may be no buyers. If the ‘wrong’ manager is hired,
the project may not succeed. If one drills a well in a ‘wrong’ area, no oil will be found.
This suggests there are at least two dimensions of effective thinking: speed and finding a ‘right’
answer (cf. McGregor, 2002). A right answer is one that is consistent with facts (e.g., product
qualities match demand, the project manager’s skills match the requirements of the job, oil is
drilled where seismic analysis indicates oil). An answer consistent with facts is objective.
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Table 1.
How the study was done
I asked nine experts knowledgeable of the oil industry (oil company CEOs, investment
bankers, a financial analyst and a business reporter) to name effective thinkers among successful oil
company Chief Executive Officers in Calgary, home of the second largest concentration of oil
company headquarters in North-America. This led to a list of 72 names, 32 of which had been
nominated twice or more. I requested participation of the 32 CEOs; 16 of them agreed.
The companies these CEOs ran (or had run) ranged in size from about 1,000 to 300,000 boe/d
(barrels of oil equivalent per day), with the median of 7,000 boe/d. Three of them were private. The
Chief Executives had mainly technical degrees (engineering or geology); six also held MBAs. Two
were women. The median oil industry experience was 24 years.
To tap into the CEOs’ decision processes, I wrote a short, hypothetical decision-making
scenario (available upon request). It was revised based on the comments of three knowledgeable
industry observers, and ‘piloted’ with three oil company presidents (who were not part of the group
of 16) to make it as realistic as possible (cf. Thomas, Clark & Gioia, 1993). The scenario involved
an oil company CEO about to choose between strategic options for his firm and was used in a
‘think-out-aloud’ procedure in the interviews that averaged 90 minutes and were all taped.
I analyzed the interview transcripts in a number of rounds, first grouping comments together
by the question, then by similarity in their content. From these groups of comments, patterns about
using intuition and reason and active minds started to emerge. For example, the use of various
mid-range principles was directly observable in the interviews. I further integrated them into a
handful of ‘grand principles’ discussed below (Eisenhardt, 1989; Miles & Huberman, 1984).
However, thinking fast and objectively is not sufficient for effectiveness—one might be
focusing on a wrong problem altogether. Effective thinking also requires asking and answering the
right questions. Maybe a new product design is not what is needed for the business to succeed, but
improvement of the efficiency of the production process instead. Maybe a new project and a
manager are not needed. Maybe it would be better to acquire another oil company than to explore
for more oil. Effective thinkers need to ask the right questions, and answer them fast and
objectively. How do they do it?
How the CEOs made decisions: reason and intuition
Cognitive research has shown that experienced decision-makers in various fields--e.g., fire
fighters, chess masters, pilots, business executives--do not rely solely on rational analysis but also
utilize intuition in solving problems (Burke & Miller, 1999; Isenberg, 1984; Klein, 2001; Simon,
1987). How they combine the two is less well understood. The next sections describe how the
CEOs used reason and intuition and combined them in the decision-making process (Figure 1).
Reason. Reason is the faculty for thinking: it observes reality and integrates those
observations into abstract conceptual knowledge, which it then applies to various concrete
problems. Use of reason involves conscious cognitive processes. Three such processes manifested
themselves in this study: essentialization and logic, judgment, and explicit use of principles. When
dealing with the decision-making scenario, these executives focused on essentials: those factors
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that fundamentally affected the long-term performance and survival of the company in the
scenario. For example, the CEOs determined that the company needed to take significant action to
sustain value creation for its shareholders. This enabled them to put aside less fundamental issues
such as internal champions of and resistance to a new technology and post-acquisition
integration—issues they knew they could control after the essential concerns had been addressed.
Judgment is often considered an inexplicable process associated with intuition. However, here
it refers to the conscious decision as to what problem to focus on, and as to when there is sufficient
information and analysis to make a decision. Many of the CEOs related how they are able to make
such judgments quickly, often faster than their peers. Many of them indeed attributed this to
intuition or experience. However, I suggest that quick judgment follows from the decision-maker’s
ability to see fundamental causes (essentialization) and to project consequences of decisions. When
one has grasped the fundamental cause(s) of problems and projected consequences, the decision to
act can be made quickly and confidently.
The third conscious process was the explicit use of principles. For example, the rationality
principle guided the CEOs to base their decisions on facts as opposed to emotions, the objectivity
principle guided them to seek outside advice and prevented them from rushing to conclusions, and
the productivity principle told them to focus their company’s activities on its strengths in order to
create value. These and other principles were held explicitly—some CEOs told how they even kept
check lists of principles—and consulted them in making decisions.
Intuition. Intuition refers to subconscious cognitive processes which can be hard to observe.
I was able to observe some of them, thanks mostly to the CEOs’ introspection. The CEOs relied on
intuitive processes of pattern recognition, visualization, and what I call ‘automatized’ use of
principles. These processes contributed primarily to the speed of decision-making.
Pattern recognition refers to the instantaneous process of identifying events or situations as
familiar. But for the subconscious mind being able to quickly locate such experiences in one’s
‘memory files’, they have to be filed by essentials. For example, ‘technology adoptions over which
management team was divided’ is an essential categorization, whereas ‘technology adoptions
during sunny weather’, is not. (Understanding why the former happened will help with further
technology adoptions, whereas the latter does not provide any useful knowledge.) If the ‘filing’ has
been done properly, the recognition of a new situation as familiar is instantaneous, and
problem-solving can proceed faster. All the CEOs in this study commented how the decision
scenario was familiar, and were able to identify feasible alternatives quickly.
Visualization is another intuitive process. Its use varied among the CEOs, with some being
strong visualizers and others less so. Those who used visualization did it to project different
decision alternatives and solutions. This was a quick way for them to concretize alternatives and
assess their feasibility, again enhancing the speed in which they could handle the decision.
I label automatized use of principles as a subconscious, intuitive process, although one could
argue that it really lies in between conscious and subconscious activity. ‘Automatized’ here refers
to principles that have been internalized to such an extent that a conscious checklist is not needed
and their use is almost routine, not unlike driving a car. Many of the principles guiding the thinking
or decision-making process itself (as opposed to the substance of the decision) were like this. For
example, the principles of questioning the quality of information, of not using emotions as decision
tools, and of not latching onto the first solution that looks feasible, were held almost as automatized
(but recognized by the CEOs who were introspective of their thinking processes).
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Figure 1. Framework for effective thinking
Effectiveness:
• speed
• objectivity in asking and
answering the right questions
INTUITION
• pattern recognition
• visualization
• ‘automatized’ use of principles*
REASON
• essentialization and logic
• judgment
• explicit use of principles*
ACTIVE MIND
• reality focus: facts vs. emotions
• question asking
• varied interests
MOTIVATION
SELF-AWARENESS
*rationality, productivity, first-handedness, justice, self-interest, honesty
Combining reason and intuition. How did the chief executives rely on both reason and
intuition? The participants of the study exhibited a certain common pattern in approaching the
decision scenario:
• Instead of methodical analysis of the three proposed alternatives, they zoomed in quickly
on what they considered the most feasible ones. They were able to do this as they
recognized the pattern of the problem as familiar and then defined the problem by
essentialization (identification of fundamental causes). For example, most of the CEOs
rejected the option of exploring in the Arctic as something they had contemplated before
and as too risky with too distant a payoff, given the company in the scenario was publicly
traded with a short reserve life index and limited resources.
• The CEOs then focused on the feasible alternative(s) and rejected the non-feasible ones by
using principles such as value creation explicitly to project an alternative’s consequences,
but also by visualizing. For example, the value creation principle was used as a criterion
for the new technology option (if the technology could not increase production beyond
initial projection, i.e., create meaningful value, it was rejected). Also, the alternatives
visualized as feasible were adopted.
• The decision-makers analyzed the selected alternatives with the help of automatized and
explicit principles, judgment, and visualization. For example, if the quality of information
about an alternative was not sufficient, the alternative was put on hold.
• Finally, they developed additional alternatives, or combinations of alternatives using
essentialization as well as visualization. For example, once the CEOs had identified
fundamental causes for the company’s problems, they were able to develop a hierarchy of
alternatives, addressing both short-term and long-term performance of the firm.
Visualization of the alternatives also helped to put them in a hierarchy or a sequence.
Using principles in decision-making. Principles are important decision tools used by
strategic thinkers to cope with complexity (Keelin & Arnold, 2002), yet they have not been
280
addressed much by those who study thinking. As discussed above, principles were used by the
chief executives in this study, both explicitly and ‘automatically’, to guide decision-making. Here I
will discuss the role of principles in cognition in general, as well as the specific principles used by
the executives in this study.
Role of principles in cognition. Principles are generalizations reached by induction and used
as guidelines in decision-making (Peikoff, 1989). The need for them arises as people do not have
automatic knowledge as to what goals to choose nor how to achieve them, yet many human choices
are complex and can have far-reaching consequences that are not immediately visible. Principles
guide decision-makers through complex choices so that long-term goals can be reached, by helping
to project the future and to choose between concrete alternatives in any given situation. For
example, the principles of nutrition help project the long-term consequences of various nutritional
choices as well as choose what to buy at the grocery store for supper. The principles of competitive
strategy help project the consequences of various strategic options, and to choose which particular
strategies to implement in the face of competition.
Some principles can be almost ‘automatic’: they are so internalized that one does not need to
consciously apply them. For example, the ethical principle of honesty is so ingrained in many
people that they don’t even have to think whether to hand back the excess change that a cashier
mistakenly gives them or whether to return, unread, the confidential competitive information that
accidentally ends in their mailbox; they do it ‘automatically’. Examples of such automatized
principles in this study were the mental ‘standing orders’ about the decision-making process that
the CEOs followed, e.g. “Question the quality of the information” and “Do not to latch onto the first
feasible sounding alternative.” Other principles are more explicit and abstract, and thus warrant to
be placed on one’s checklist. An example in this study is the value creation principle which screens
out alternatives that dilute or do not create value for the shareholders.
Principles used by the CEOs. Many principles the CEOs in this study used were
immediately observable or were described by them. Such principles tend to be quite concrete or
narrow in their application. I call them ‘mid-range’. For the purposes of integration, I grouped them
into more abstract categories which I call ‘grand’ principles: rationality, productivity,
first-handedness, justice, self-interest and honesty. They are described here, showing how they
were integrated from the various mid-range principles (see Table 2). This is a descending order,
starting with the principles most frequently mentioned (all were mentioned in most interviews).
Rationality guides one to use reason (i.e., to adhere to facts by the means of observation and
logic), as opposed to emotions, mystic insights, or majority opinion. The decision-makers in the
study strongly subscribed to this principle. They emphasized the focus on facts and keeping
emotions in check when making decisions. In the words of one of the CEOs: “This business has the
highest highs and the lowest lows and if you are not excited about what you do and a little bit
emotional, it is a tougher business. But at the same time you have just got to pull back and say:
‘What are the facts, Jack?’” They also said their religious beliefs, if they had them, did not
influence their decisions. The CEOs kept asking questions to get to facts and to establish
connections between them. Finally, they emphasized ‘having done your homework’ before
leaping, i.e., having a good grasp of the relevant facts before making a decision:
The principle of rationality also manifested itself in the CEOs’ strong desire for objectivity.
They sought outside opinion (from the board members, consultants, investment bankers) to ensure
they did not get blind-sided by their own or their management team’s possible bias. For the same
reason, they wanted to have teams with diverse backgrounds and opinions, and ‘embraced the
skeptics’ within their organization. These executives also emphasized disciplined thinking and
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continuously assessed the quality of information they used. Although they made decisions quickly,
they insisted considering multiple options and not latching onto the first one too soon, without
substantiation by evidence. One CEO commented: “I would take that step back to make sure that
these are the only options that I should be considering. In that process you will probably come up
with another option.”
Table 2.
‘Grand’
Rationality
Principles
Mid-range - Focus on facts
principles - Homework/analysis
before deciding
- Objectivity:
● Seek outside opinion
● Use diverse teams
● Embrace skeptics
● Disciplined thinking
● Check quality of
information
● No rushing
‘Grand’
Justice
Principles
Mid-range - Hire best people and
reward them
principles
- Honest criticism
- Terminate nonperformers
- The Golden Rule
- Fairness
- Respect
- Justice to oneself:
Accountability
Principles used by the CEOs
Productivity
First-Handedness
- Value creation
- Building/creating
something meaningful
- Focus on the company’s
goals and strengths
- Commitment
- Manage/reduce risk (risk
threatens value creation)
- Work hard
- Consult others – but
decide on your own
- Control your destiny
(majority stakes in
projects)
- Hire and seek advice from
independent thinkers
- Confidence in your own
vision and ability to
solve
problems
Honesty
Self-Interest
- No sacrifice
- Passion/having fun
- Making money
- Long-term perspective
- Balance in life (work vs.
other values)
- Not faking reality to gain
values
- Not only towards other
people but towards
oneself
The principle of productivity guides one to create material values; this stood out as important in
every CEO’s interview. They assessed each alternative with the question: Does this create value for
the shareholders? And if the answer was negative, they rejected the option. The principles of
productivity also manifested itself in the CEOs’ goal of building or creating a successful business.
While they were motivated by the financial returns, virtually all of them said that was not enough to
keep them working. They derived a sense of purpose from building their businesses. “I just want to
build something that you are proud to run and build and create some value and good for your
shareholders and for your own family,” said one CEO. This goal of ‘creating something
meaningful’ was supported by the principle of focus, or the idea that the company needs to select its
goals carefully, and match those with its resources and strengths. The CEOs also emphasized
commitment to these long-term goals through hard work, and protecting the value created by
managing risk.
282
The principle of first-handedness guides one to do one’s own thinking, as opposed to following
others. The 16 CEOs demonstrated this in many ways. They wanted to consult others but process
what they had learned themselves, and decide on their own. To quote one of the CEOs: “You have
a discussion, it is open and frank, and let everybody say what they have in their mind. But
ultimately it is not a democracy; I will make the decision at that point in time.” They also sought
to ‘control their destiny’ by retaining majority stakes in projects or by being the sole owners and
operators. They resisted market pressures for maximizing quarterly profits, even at public
companies, being confident in the long-term vision and focus they had set for their firms.
These CEOs did not feel threatened by others’ independent thinking, either. Quite the contrary,
they wanted independent thinkers as employees and advisors, and felt confident that they were
capable of assessing others’ conclusions.
The principle of justice guides one to evaluate other people objectively—critically important,
given that so much of business success is based on social interaction. As the first-handedness
principle indicated, the CEOs in this study did not seek recognition from others. Instead, they
sought ability, talent and hard work. They recognized that productivity requires the combined
efforts of many people, and strove to hire and retain the best people they could.
The justice principle manifested itself primarily in two ways: how the CEOs evaluated others,
and how they treated them accordingly. They sought the best people (i.e., those who were talented,
hard-working, independent, accountable) and then rewarded them with autonomy and generous
compensation. The tougher aspect of justice was treatment of those who did not live up to
expectations. Some offered honest criticism first, and when it did not lead to an improvement,
terminated those employees who did not contribute to the company in a positive way. Most of the
CEOs found these dismissal decisions the toughest ones they had to make but yet necessary, and
just to both the employee and the company.
There was no ‘egalitarianism’ in these CEOs’ applying justice: everybody was not treated
equally regardless of conduct. Those who helped create value were rewarded, and those who did
not, were reprimanded or dismissed. Neither was there room for playing favorites: people were
assessed on merit, not on connections or relationships. Many CEOs also subscribed to the Golden
Rule (treating others as you would like to be treated), and the principles of fairness and respect.
Justice extended into the CEOs’ assessment and treatment of themselves. They held themselves
accountable for their decisions, admitted errors, and took and granted credit appropriately.
All the CEOs were driven by the principle of self-interest. They did not come to work and run
their companies from a sense of duty or sacrifice. Rather, they emphasized the enjoyment of or
even passion for their work. One said, reflecting the sentiment of many: “I love the business. You
want to make a bunch of money through the process, so obviously that is a motivating factor but
more so for myself, I love the business, I love coming to work every day. So I’ll call that fun.”
Many cited the intellectual challenge, and the satisfaction from solving the puzzles and problems
they encountered. Making money was considered an important motivator but not sufficient by
itself; work also needed to offer challenge, enjoyment and purpose.
The pursuit of self-interest did not consist of single-minded focus on work although it was a
central value. Even if the CEOs “lived to work”, they had lives outside of it. They all had families
and spent time with them. Those with no young children had other interests ranging from carpentry
to community work, but even in these activities they selected those that they enjoyed or believed in.
Some explicitly advocated balance in life, even if that balance came in shifts: periods of more
283
intense focus on work when that was required, alternating with periods where there was more
emphasis on outside things.
The principle of honesty guides one not to fake reality in order to gain a value. The 16 CEOs
considered it a given; when asked about ethical principles, it was usually raised first. By honesty,
they meant remaining true to reality, not just in communicating with others but in your own
thinking. This view of honesty contrast with those who suggest that a little dishonesty is necessary
to get ahead in business and is to be expected (Carr, 1968).
Common characteristics of effective thinkers
The CEOs participating shared three inter-related characteristics that seem to facilitate
effective thinking: a certain motivation, self-awareness and an active mind—all of which can be
cultivated with some effort and introspection.
All the CEOs showed a certain motivation. They all loved their business; they were not CEOs
of companies because their parents had wanted them to go into the oil business but because they
found the industry fascinating. They started and ran oil companies because they wanted to, and they
wanted their companies to succeed. This motivated their thinking: they wanted to solve problems
and find ever better solutions. They were motivated to find out what were the right questions to ask;
they were motivated to find out what the right (objective) answers were; and they were motivated to
think fast, to find solutions before their competitors did.
Being motivated to succeed made the CEOs introspect: how do I do it? Many of the CEOs were
also very aware of their own decision-making approach. Nobody had any trouble thinking out loud
how they would handle the decision-making scenario. Many recited the steps of their generic
decision-making approach and referred to principles they used. The CEOs were able to analyze
why they were effective, although this ability varied somewhat. For example, some referred to
either experience or intuition as their source of effective thinking, whereas others elaborated how
they bolstered their thinking by defining problems correctly, visualizing alternatives, or
recognizing familiar patterns to aid decision-making.
The motivation to succeed and self-awareness of the CEOs helped cultivate the third
characteristic facilitating effective thinking: an active mind. An active mind is curious; it’s engaged
with facts, and constantly processes them in search for the ‘right answers.’ The CEOs immediately
engaged with the scenario (i.e., ‘facts’ for the purposes of the exercise), and they also emphasized
the importance of focusing on reality and not deciding on emotion. As they were thinking out
aloud, they were asking a lot of questions, for more information but also as a habitual thinking
process, to check their assumptions and the quality of the information available.
Besides the reality focus and continuous question asking, the CEOs’ active minds were
evidenced by their varied interests. For example, most were avid readers, of fiction, history,
biographies, of technical and business-related material. One executive read a number of
newspapers daily. Those who did not read a lot (i.e., beyond the required technical and business
material) cited lack of time and importance of other priorities, such a family. Many were keen
travelers, and participated in outdoor activities and sports.
284
Lessons for effective thinking
This study’s findings suggest a number of ways in which executives, managers or other
business people can cultivate ‘good minds’, or at least improve the effectiveness of their thinking:
•
•
•
•
•
Cultivate an active mind. Ask a lot of questions, being focused on reality and seeking the
facts behind problems and issues. Having interests outside of work can also help.
Introspect. Being aware of you own thinking process facilitates its effectiveness. You can
catch yourself when emotions try to take over, or when you are tempted to evade a
problem. By introspecting, you can also guide yourself away from dead ends.
Find and follow your passion. Thinking is difficult when you are not motivated, and the
opposite is true when you are doing it in relation to something you enjoy. Being motivated
to solve problems is the first step in effective thinking.
Use intuition to speed up decision-making. In order to do this, you need to file things
properly, i.e., by essentials, in your subconscious. Your subconscious will not be able to
offer you patterns, if you have filed “technology adoptions during sunny weather” as
opposed to “successful technology adoptions”. Some people are able to use intuition to
visualize decisions and their consequences; and most people are able to internalize certain
decision principles so that their use becomes a second nature, or almost automatic.
Identify and apply principles. When you encounter a problem, ask yourself what principles
are involved. Value creation? Objectivity? Honesty? Justice? Or something else? (You can
induce principles from observation by generalizing). And how does the principle apply to
the problem? The more one identifies and applies principles, the easier it becomes—and
the more effective one’s decision making.
References
Burke, L.A. & Miller, M.K. “Taking the mystery out of intuitive decision making,” Academy of
Management Executive, 13:4, (November 1999), 91-99.
Carr, A. “Is business bluffing ethical?” Harvard Business Review, (January/February1968).
Eisenhardt, K.M. Building theories from case study research. Academy of Management
Review, 14:4, (1989) 532-550.
Isenberg, D.J. “How senior managers think,” Harvard Business Review, (November-December
1984), 81-90.
Keelin, T. & Arnold, R. “Five habits of highly strategic thinkers,” Journal of Business Strategy,
23:5, (2002), 38-42.
Klein, G., Sources of power: How people make decisions, Cambridge, MA: MIT Press, 2001.
McGregor, L. “Improving the quality and speed of decision making,” Journal of Change
Management, 2:4, (2002), 344-356.
Miles, M.B. & Huberman, M.A. 1984. Qualitative data analysis: A sourcebook of new methods.
Newbury Park, CA: Sage.
Peikoff, L. “Why should one act on principle?” Intellectual Activist, 4:20, (February 1989), 2-6.
Simon, H. A. “Making management decisions: The role of intuition and emotion,” The Academy
of Management Executive, 1:1, (February 1987), 57-64.
Thomas, J.B., Clark, S.M.& Gioia, D.A. “Strategic sensemaking and organizational performance:
Linkages among scanning, interpretation, action, and outcomes,” Academy of Management
Journal, 36:2, (1993), 239-270.
285
ASAC 2005
Toronto, Ontario
Samia Belaounia
Professeur
Rouen Graduate Business School
D’UNE APPROCHE DETERMINISTE A UNE APPROCHE CONTINGENTE DU LIEN
« DIVERSIFICATION –PERFORMANCE » : QUEL IMPACT SUR LA VALIDITE DE
CONTENU DES INDICATEURS « CLASSIQUES » DE LA DIVERSIFICATION ?
SUMMARY
Une large part du management stratégique concerne l’impact de la diversification
sur la performance. La plupart des travaux empiriques (notamment ceux des années 80)
visent à montrer, dans la perspective de Rumelt (1974), que la stratégie de diversification
liée, basée sur la recherche de synergies opérationnelles, génère une performance
économique supérieure à celle du conglomérat. Ces études comparent les stratégies de
diversification sur la base des principaux ratios de performance, en contrôlant l’effet de la
différenciation et de la structure des industries concernées sur les écarts de prix et de
rentabilité. Postulant l’avantage concurrentiel de la diversification liée, l’approche de
Rumelt est donc déterministe. Toutefois, les résultats empiriques contradictoires obtenus
amènent à s’interroger sur sa pertinence, en particulier face à une perspective contingente.
Celle-ci prend en effet en compte les coûts administratifs liés à la recherche des synergies.
La diversification liée suscitant les synergies mais aussi les coûts les plus élevés, elle a un
impact indéterminé a priori sur la rentabilité. En s’appuyant sur une approche systémique
de l’entreprise diversifiée, la perspective contingente éclaire de plus sur les modalités
permettant à la diversification liée de créer de la valeur. Toutefois, les résultats
contradictoires des études empiriques peuvent renvoyer également aux faiblesses des
indicateurs de la stratégie de diversification ou à leur divergence qui empêche de comparer
les résultats obtenus par des travaux n’exploitant pas les mêmes mesures.
Dans un premier temps, sont présentés les coûts administratifs de la diversification liée,
dans une perspective contingente du lien « diversification – performance ». Nous partons
pour cela de la conception systémique de l’entreprise multi-produit propre à Thompson
(1967) Puis, après un passage en revue des indicateurs de la diversification, nous montrons
l’incompatibilité de ces derniers avec une approche contingente combinée à une
perspective du portefeuille d’activités en termes de ressources, dans la lignée de Penrose
(1957). Cela amène à définir la stratégie de diversification à partir des liens réellement mis
en place entre les activités au sein de l’organisation. Nous dégageons enfin l’intérêt d’un
recours à la structure formelle, à partir des huit études de cas réalisées. Contrairement à
Wiersema [2003], le construit des indicateurs n’est pas au centre de la discussion sur la
validité de contenu. Ce travail vise à montrer le décalage existant entre données externes et
internes pour caractériser la stratégie de diversification, sur le mode de Nayyar [1992] mais
en prenant en compte les paramètres structurels. Celui-ci procède par le biais de
questionnaires. Or, le recours à la structure organisationnelle gagne en objectivité et en
finesse dans la caractérisation des liens inter-métiers. De plus, les entretiens semi-directifs
font accéder à des dimensions qui auraient pu être ignorées par le regard de l’observateur
extérieur.
286
ASAC 2005
Denise Ghanam
Toronto, Ontario
Bristol Business School, UK (student)
Odette School of Business, University of Windsor
DYNAMIC CAPABILITIES: THE STRATEGY-HRM INTEREST
SUMMARY
Much is written on current trends in strategic HRM, focusing on the new role of HR, and its
relationship to strategy. Issues like globalization, increased competition, and technology have
spawned a growing emphasis on the role of the individual employee and teams. Effective use of
human capital has become a valued source for competitive advantage, as well as a unique and
proprietary organizational asset. As firms realize they need innovation and information are for
success, and these attributes come most often from their people, focus moves to the connection
between the firm’s strategy and its HR practices and policies. Regardless of how one views
strategy, or what school of thought guides planning and formulation, it is people that are critical to
those processes. People develop strategy and vision, people create opportunities for success, and
people implement the strategic plans.
While the meaning of HRM is debated, typically a more strategic approach to managing
people encompasses what follows. Employees are an asset for achieving competitive advantage;
effective planning is utilized; and employment policies and practices are aligned in a coherent
fashion (internal integration) with business strategy (external integration) to be proactive. This
strategic HRM view ties together several schools of strategy, in that learning processes, planning
processes, design processes and cultural processes are connected to a configurational view of
strategy and its fit inside and outside the firm. As well, there are overtones of the positioning and
environmental schools as well. Michael Porter, even as he embodies positioning, reinforces the
importance of unique processes and intangible relationships for transfer of knowledge between
business units to provide competitive advantage through value chains. It is this multi-dimensional
cogency which must guide future work in the strategy area, in order for it to be truly useful.
Although this paper functions within a theoretical stance of strategic management, its focal point
remains the human factor. The more integrated HRM is with overall business strategy, the more it
reflects a unique way of managing employees that embodies the essence of the dynamic
capabilities approach. The overlap of the literature of HRM with that of strategy most often
incorporates a resource-based view (RBV) of human capital as value added, unique, difficult for
competitors to imitate, and non-substitutable. This dynamic capabilities view is the vital point at
which strategy and human resources intersect to ensure innovation and change.
Human capital theory emphasises the importance of individuals, considering them as
investors in their own education and training to achieve future benefits. Thus, intellectual capital is
an asset, similar to physical or financial assets. Management of intangibles should stress that the
total intellectual capital of the firm (its dynamic capabilities) can be increased either by leveraging
the level of human, structural, and relational capital or by promoting the interactions between these
interlinked groups. To be viable, existing managerial processes must align with an intellectual
capital system through effective HRM to become the firm’s dynamic capabilities. This is a useful
paradigm through which to view the strategy-HRM connection and has implications on a wide
range of strategic firm decisions.
287
ASAC 2005
Toronto, Ontario
Jean D. Kabongo
Virginia State University
THE DYNAMICS OF RESIDUAL REVALORIZATION: A CASE STUDY IN THE
CANADIAN ENTERPRISES
SUMMARY
Dynamics of residual revalorization are a critical issue in the development of industrial ecology as
a field of research. Studies relating to these considerations have been so far directed more toward
the description of the overall conditions and the implementation of technology innovations. Few
empirical researches have attempted to identify and to analyze the underlying causes of change and
growth of the recovery and the transformation of discarded waste industry. To address this issue,
fifty-six in-depth interviews with Canadian managers in charge of revalorization in twelve
industrial firms were carried out. Findings of the study show that faster growth and opportunities
for the firms in the particular revalorization industry rely basically on six types of dynamics
perceived as supply irregularity, waste materials asymmetry, process enrichment and enlargement,
green partnership, indefiniteness, and ecological managerial values. These identified dynamics that
likely impact industrial businesses go beyond the institutionalized technology implementation and
modeling. The results of the study are presented and discussed; perspectives for further researches
are open.
288
ASAC 2005
Toronto, Ontario
John R. Phillips (Student)
CEO MORAL CAPITAL AND STRATEGIC LEADERSHIP IN TURBULENT TIMES
SUMMARY
I build on the existing view that strategic leadership involves the effective management of
human and social capital (Hitt & Ireland, 2002) by incorporating the concept of moral capital:
CEO moral capital is the expectation that the CEO will justly* balance the disparate
interests of individual and group stakeholders; applied as material and symbolic
investments to achieve positive returns that benefit the firm, its stakeholders and the CEO.
CEO moral capital is a particularly valuable resource in a developing socio-culturally
turbulent environment. It generates cooperation in social networks and contributes to competitive
advantage and superior firm performance. I build on the sociology of Pierre Bourdieu to introduce
the concept of moral spheres of influence and I present five propositions:
Proposition 1: CEO moral capital is positively related to firm performance.
Proposition 2: To the extent that CEO moral capital is aligned with the communal
morality of the firm moral sphere it has a positive effect on firm performance.
morality of the moral sphere of economic production it has a positive effect on firm
performance.
morality of the moral sphere of wider society it has a positive effect on firm performance.
Proposition 5: The effect of CEO moral capital on firm performance is negatively related
to the social distance between the CEO moral sphere and the aligned moral sphere.
I emphasize that CEOs have a large job ahead of them to achieve competitive advantage and
superior firm performance in the developing socio-culturally turbulent environment. To create firm
value, it appears they need to become more proficient at distributing the value created by the firm.
Materially and symbolically, CEO’s need to demonstrate that they justly balance the interests of all
individual and group stakeholders. This requires that they develop moral capital.
*
Justly = lawfully and equitably distributes, corrects and reciprocates
289
ASAC 2005
Toronto, Ontario
Huanglin Wang (student)
Ivey School of Business
AN ANALYSIS OF THE RELATIONSHIP BETWEEN
ALLIANCE NETWORKS AND FIRM PERFORMANCE
SUMMARY
From a dyad level of analysis, the relational view provides a new perspective in strategy;
that is, the links that a firm has with other firms and its embeddedness in the networks that it has
with these firms, affects firm performance and competitive advantage. This approach suggests that
the source of competitive advantage may lie beyond a firm’s boundaries and in interfirm
collaboration. This is contrary to what is suggested by the resource based view which is focused
on intrafirm factors. Therefore, firms making relational specific investments may gain
competitive advantage.
Research has supported the conclusion that firms benefit from alliance networks on
survival, profitability, and so on. But there has not been systematic study to explore the mediating
factors in this relationship. This paper fills this gap and identifies interorganizational learning and
interoganizational trust between the partners as two of the mediators in this relationship. Both the
number and the properties of network ties can facilitate interorganizational learning. A central
location in a network brings more linkages and external learning resources for a firm, direct ties
that a firms has in alliance networks are efficient and effective in facilitating learning; therefore,
alliance networks promote interorganizational learning. On the other hand, risk sharing,
interdependence, asset specificity and reputation that are developed among the firms in alliance
networks may all produce interorganizational trust. Both interorganizational learning and
interoganizational trust are positively related to firm performance.
Firms must not overemphasize the benefits of alliance networks and neglect to develop
intrafirm competencies. Interfirm relationships, on the one hand, are sources of competitive
advantage because competitors cannot replicate these relationships, but on the other hand, they
constrain firms from adapting to a new environment. Firms should keep both independent
capabilities and develop interfirm relationships to create effective dual sourcing orientations at the
same time to consistently perform well.
Future research areas include the other mediators between alliance networks and firm
performance, the moderators that affect this relationship, the effect of structures of alliance
networks and the firms’ positions in alliance networks on firm performance, and the management
of the alliance networks that a firm is involved. These questions are important for current strategy
research. The key reason why they are important is there appears to be a trend toward alliance
networks as the basis for achieving sustainable competitive performance. Research regarding these
alliance networks is needed to gain an understanding of this new form of competition.
290

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