Incumbent Responses to an Entrant with a New Business Model: Resource Co-Deployment and Resource Re-Deployment Strategies

The constructs of re-deployment and co-deployment have been central to discussions of scope economies in diversified firms. We argue however that these constructs are also significant in the context of single business firms. Increasingly, changes in technology and demand preferences have provided opportunities for entrants to attack incumbents with a different business model, one that may neutralize the incumbent’s advantage for at least some set of customers (e.g. Netflix versus Blockbuster). In such a context incumbents often respond by modifying their business model. We note that several of the business model-altering responses of the incumbent can be characterized in terms of co-deployment and re-deployment benefits and costs, where co-deployment benefits/cost apply to the scope economies/diseconomies in running multiple business-models within the same firm and re-deployment benefits/costs apply to the implications of moving assets from one business model to another. We then examine the set of strategic choices faced by the incumbent in competing with an entrant with a different business model. We identify five set of factors that are likely to influence the decision to choose between these alternatives – uncertainty spawned by the new business model, market segment targeted by the new model, the within-business-across-business-model co-deployment and re-deployment benefits and costs, the across-business co-deployment and re-deployment benefits and costs, and the incumbent’s prior performance history. Although some of these choices have seen some work, most remain relatively underexplored in the strategy literature. We highlight the potential for research in this area with a set of propositions that identify key conditions that should hold true for a particular strategic choice to be picked by an incumbent

A Framework for Understanding Firms’ Foreign Exit Behavior

Although research on foreign market entry and expansion behavior has attracted significant interest in the literature, there is a general lack of research (either conceptual or empirical) on the exit behavior of international companies. To address this issue, the authors develop a conceptual framework to understand firms’ foreign exit behavior. The objective is to lay the conceptual foundation for subsequent empirical research in this area. A series of research propositions have been advanced that can guide hypothesis generation for future research

Activity Overinvestment: The Case of R&D

The literature on corporate diversification has often argued for and established the case that companies often overdiversify in a product market sense – i.e. enter into unrelated product markets where they may not fully cover their cost of capital. Yet, even without engaging in unrelated diversification, managers need to make resource allocation decisions to a variety of activities that a company conducts to consummate its business. In this article we focus on Research and Development (R&D) activity and we discuss the effects that the uncertainty, boundary ambiguity, feedback latency, R&D lumpiness and legitimacy that characterize technological contexts can have in making overinvestment in R&D likely. Specifically, in this article we a) draw attention to the construct of activity overinvestment, and specifically R&D overinvestment, b) use the received literature to argue that there exists a prima facie case for examining this construct and its antecedents in order to evaluate the extent and implications of R&D overinvestment, and c) make the more general case that the resource allocation literature needs to study the issue of activity overinvestment systematically

Why organizational and community diversity matter:Representativeness and the Emergence of Incivility and Organizational Performance

Integrating sociological and psychological perspectives, this research considers the value of organizational ethnic diversity as a function of community diversity. Employee and patient surveys, census data, and performance indexes relevant to 142 hospitals in the United Kingdom suggest that intraorganizational ethnic diversity is associated with reduced civility toward patients. However, the degree to which organizational demography was representative of community demography was positively related to civility experienced by patients and ultimately enhanced organizational performance. These findings underscore the understudied effects of community context and imply that intergroup biases manifested in incivility toward out-group members hinder organizational performance

The Impact of Symbolic and Substantive Actions on Environmental Legitimacy

Drawing on institutional theory and insights from stakeholder theory and impression management, we empirically analyze the impact of both environmental symbolic polices (participation in voluntary environmental programs, green trademarks, environmental-dedicated board committees, environmental pay policies and community communication) and substantive actions (environmental patents and pollution prevention practices) on environmental legitimacy. We show that (1) symbolic actions have a weaker positive effect on legitimacy than substantive actions, (2) that the impact of symbolic actions is greater when they are combined with substantive actions, (3) that this impact is only short-term while substantive actions have both short- and long-term effects