Hypercompetition theory

The hypercompetition theory analyzes the rapid and dynamic competition characterized by unsustainable advantage. It is the condition of rapid escalation of competition based on price-quality positioning, competition to protect or invade established product or geographic markets and competition based on deep pockets (financial capital) and the creation of even deeper pocketed alliances. Often a

Organizational learning theory

Organizational learning theory states that, in order to be competitive in a changing environment, organizations must change their goals and actions to reach those goals. In order for learning to occur, however, the firm must make a conscious decision to change actions in response to a change in circumstances, must consciously link action to

Resource-based theory

According to resource-based theory, organizations that own “strategic resources” have important competitive advantages over organizations that do not. Some resources, such as cash and trucks, are not considered to be strategic resources because an organization’s competitors can readily acquire them. Instead, a resource is strategic to the extent that it is valuable, rare, difficult

Systems Theory

Systems theory is the interdisciplinary study of systems. A system is a cohesive group of interrelated and interdependent parts which can be natural or human-made. Every system is bounded by space and time, influenced by its environment, defined by its structure and purpose, and expressed through its functioning. A system may be more than the sum of its parts if it

Transaction Cost Economics

In transaction cost economics and related disciplines, a transaction cost is a cost incurred in making an economic exchange. A number of different kinds of transaction costs exist. Search and information costs are costs such as those incurred in determining that the required good is available on the market, who has the lowest price,

Review: “Knowledge of the Firm, Combinative Capabilities, and the Replication of Technology” – by Kogut and Zander (1992))

This review focuses on summarizing the main contents of the article published by Kogut and Zander in 1992 on the Organization Science. In the literature, this article is considered as fundamental one for the knowledge-based view – a branch of Resource-Based Theory of the Firm approach, that explains why firms exist and differ in

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Evolutionary Processes of Industry

Although initial structure, structural potential, and particular firms’ investment decisions will be industry-specific, we can general-ize about what are the important evolutionary processes. There are some predictable (and interacting) dynamic processes that occur in every industry in one form or another, though their speed and direc-tion will differ from industry to industry: long-run changes

Toward a new institutional economics: Some Antecedents

The materials in this section are in no sense a survey. They merely indi­cate an early concern among some members of the profession of the types of institutional issues that I deal with in this treatise. With the exception of the market failure literature, which is examined briefly in Section 1.4, there is little

A Preliminary Statement of the Organizational Failures Framework

Although I shall defer a more complete statement of the organizational failures framework until Chapter 2 (indeed, some of the elements that appear in it are not even identified here), a sketch of the basic approach, set out early, will not only provide an overview of what will follow but also permit some immediate

Toward a new institutional economics: Three Illustrations

Whether the proposed approach leads to a better understanding of or to implications different from those found in received microtheory can best be established by addressing it to particular economic phenomena. Three are examined here: price discrimination, the insurance problem, and Stigler’s life cycle treatment of vertical integration. Although the first of these does

The organizational failures framework: Bounded Rationality and Uncertainty/Complexity

1. General Bounded rationality refers to human behavior that is “intendedly rational, but only limitedly so” (Simon, 1961, p. xxiv). Although it is widely appreciated that human decision makers are not lightning calculators, and occasionally this fact is explictly taken into account in abstract models of market processes ( Radner. 1968), the implications for

The organizational failures framework: Opportunism and Small Numbers

1. General Opportunism extends the conventional assumption that economic agents are guided by considerations of self-interest to make allowance for st™ eg,c behavior. This involves self-interest seeking with guile and has profound implications for choosing between alternative contractual relationships. Such strategic interaction has been discussed in other contexts by other writers; Schelling’s (1960) and

The organizational failures framework: Information Impactedness

Information impactedness is a derivative condition that arises mainly because of uncertainty and opportunism, though bounded rationality is involved as well. It exists when true underlying circumstances relevant to the transaction, or related set of transactions, are known to one or more parties but cannot be costlessly discerned by or displayed for others. It

The organizational failures framework: Atmosphere

1. General The power of economics, in relation to the other social sciences, is to be traced in no small part to its unremitting emphasis on net benefit analysis. Care must be exercised, however, lest problems be construed too narrowly. This will occur if net benefits are calculated in transaction-specific terms, when in fact

The organizational failures framework: Summary Remarks

At the risk of oversimplification, the argument of the preceding sections of this chapter can be summarized by the schematic in Figure 3. The main pairings are shown by the heavy double-headed arrows which associate bounded rationality with uncertainty/complexity on the one hand and op- portunism with a small-numbers exchange relations on the other.

Peer Group Associations

In order to avoid imputing benefits to hierarchy that can be had, in some degree, by simple nonhierarchical associations of workers, it will be useful to begin with an examination of worker peer groups. These groups involve collective and usually cooperative activity, provide for some type of other-than-marginal productivity and income-sharing arrangement, but do

Peer Group Limitations

That peer groups may have attractive properties in relation to the market for at least some individuals should be apparent from the above. But they also experience very real limitations. In comparison with both market and hierarchical organization, peer groups, being loose metering structures, are vulnerable to free rider abuses. In addition, collective decision-making

Simple Hierarchy of organization

That peer groups sometimes offer advantages in relation to autonomous contracting is apparent from the discussion in Section 1. But as Section 2 makes clear, peer groups also face limitations in both opportunism and bounded rationality respects. The restricted range of control techniques to which peer groups have access, in seeking to mitigate these

Involvement in organization

It would appear, from the above arguments, that simple hierarchy can do everything the peer group can do and more. It can contend better with indivisibilities of both physical and informational types, since it has superior bounded rationality properties. (Not that bounded rationality vanishes; rather, simple hierarchy economizes on the use of scarce bounded

Peer groups and simple hierarchies: Concluding Remarks

The simple (or single stage) hierarchies that have been discussed in this chapter will serve as the principal building blocks for the assembly of a complex (multistage) hierarchy in subsequent chapters. As might be anti- cipated, there are striking parallels between the reasons for workers to be joined in simple hierarchies and the decision