Resource Allocation and Firm Boundaries

Journal of Management, 2021

The resource-based view of the firm has become dominant within the field of strategic management, yet it has had surprisingly little influence within organization theory. In this article, we document the divide between strategy and organization theory and propose an interpretation. Choices of theories are largely driven by a researcher’s dependent variables, and the questions “Why do firms do what they do?” and “Why do some firms perform better than others?” can have distinct answers. Thus, strategic management scholars and organization theorists are like howler monkeys and spider monkeys, coexisting peacefully in the same ecosystem by dining on different dependent variables. We further speculate on the looming existential crisis for both fields as traditional firms are increasingly unsustainable due to the transformation wrought by the digital revolution in product markets and the markets for capital, labor, and supplies.

Managerial Finance, 2001

Explains the concept of the investment set (IOS: i.e. chances to invest for expansion, new products, cost reduction etc.) and its effects on firm value. Reviews previous research on the theoretical relationships between IOS and optimal contracting resulting from shareholder/debtholder conflict, agency costs and performance measurement problems; and empirical research on its links with company policy on financing, dividends and compensation. Goes on to discuss research on measuring IOS by using various proxies; and summarizes the main findings.

SSRN Electronic Journal, 2015

TOWARD A PECKING ORDER THEORY OF STRATEGIC RESOURCE DEPLOYMENT A premise of the capabilities perspective in strategy is that firm-specific capabilities allow some firms to be unusually adept at exploiting growth opportunities. Since few firms have the capacity to internally generate the quantity or variety of strategic resources needed to exploit growth opportunities, the ability to externally acquire complementary resources is critical to the acquisition of competitive advantage. However, the external sourcing of resources exposes the firm's strategic resources to risks of expropriation. We argue this threat gives capable firms incentive to use internally generated strategic resources to pursue growth opportunities before turning to external sources. A pecking order theory of strategic resource deployment is implied. Data from a 22-year sample of cross-border investment partnership decisions made by U.S.based venture capital firms lend support to our theory.

2011

Within the theoretical framework of organizational architecture, this paper attempts to explain the decentralization of investment decision. To do so, it highlights the role of the allocation of decision rights and control as a factor explaining the effectiveness of investment management. Thus, the object of this research is, first, to strengthen the relevance of the theoretical corpus of Jensen (1983a, 1983b) and , and, secondly, to replicate the studies by Bower (1996), Fahmi (1999) and and extend them to the Tunisian context. The Tunisian example is relevant because of the lack of research on the topic for this country, and also because this research could improve decision making for investment in the current context of Tunisia. We show that the role played by organizational complexity, information and communication technology, training programs, and evaluation and incentive systems in the creation of value requires the setting of a centralized organizational structure. An empirical test was conducted on a sample of 63 Tunisian firms by using canonical analysis. This test allowed the validation of four out of the five tested hypotheses.

Res. Organ. Behav, 2002

By the logic of many theories of organization, the dominance of large firms in an industry shouM hinder the emergence and operation of small specialist firms. Yet, in modem economies, a variety of industries display simultaneous trends of increased concentration and specialist proliferation. Within the perspective of organizational ecology, the theory fragment known as resource partitioning views these two trends as interdependent. The theory holds that under certain environmental and organizational conditions, the increased dominance of large firms in an industry will enhance the life chances of specialist organizations. Here, we examine this theory and the evidence that has been offered in its support. We discuss four different mechanisms that produce resource partitioning: location, customization, anti-mass-production cultural sentiment, and conspicuous status consumption. We also explore empirical issues involved in investigating these mechanisms. Finally, we describe some interesting and little investigated problems of the theory.

2003

 The notion of firm boundaries has received considerable attention in theories of the firm that address the problems of investment incentives and mitigation of hold-up problems. In this paper we attempt to develop a different approach to the problem of vertical firm boundaries, based on recent advances in the capabilities view of the firm. Our arguments rely on the pioneering insights of Penrose, Richardson and Loasby to elaborate a view of the boundaries determined by the interaction of the firm's direct and indirect capabilities with other actors. We develop the notion of indirect capabilities to highlight how firm boundaries respond to the distribution of capabilities in the economy as well as the modes of access to complementary and external capabilities. We conclude that the evolution of firm boundaries must be understood in the context of decisions on how the firm relates to other actors in its environment.

JBM

We tested the effect of prior firm performance on changes in strategic resource allocation decisions under the environmental conditions of an economic recession. Results from a study of commercial banks suggest that the effect of firm performance on changes in resource allocation in response to environmental change is curvilinear and nonmonotonic. Firms with middlelevel performance, however, tend to respond to changes in the environment with changes in strategic resource allocations, while both poor-performing firms and high performing firms demonstrate little such changes in response to environmental change. When, why, and how firms initiate and implement strategic changes needs to be understood more clearly in the field of strategic management . Although previous studies have contributed to our knowledge of the phenomenon of strategic change in different contexts (e.g.,

Organization Science, 2002

Theories on the motivation underlying firm boundaries have recently sparked renewed debate. What best explains whether a firm relies on market control or hierarchical control to secure required resources? How do the characteristics of the resources come into play? In this study, we consider a comprehensive path model of the governance mode decision for sourcing technological know-how. By integrating different perspectives on firm boundaries, including transaction cost economics, a resourcebased view, and an options perspective, we link characteristics of the technology (i.e., uniqueness, barriers to imitation, commercial uncertainty, technological dynamism) to the perceived threat of opportunism, the potential for sustainable advantage, and the pursuit of a licensing agreement vis-à-vis the outright acquisition of the firm that possesses the desired know-how. We use structural equation modeling to analyze 127 sourcing arrangements. Our results show that technological dynamism and barriers to imitation indirectly influence the governance mode decision by increasing the perceived threat of opportunism. Commercial uncertainty directly influences the governance mode and decreases the likelihood of an acquisition vis-à-vis a licensing agreement. Although uniqueness and barriers to imitation are also positively associated with the perceived potential for sustainable advantage, the potential for sustainable advantage had no direct effect on governance mode. Implications and suggestions for further research are offered.