The Performance of Private Equity Funds: Does Diversification Matter?

This paper is the first systematic analysis of the impact of diversification on the performance of private equity funds. A unique data set allows the exact evaluation of diversification across the dimensions financing stages, industries, and countries. Very different levels of diversification can be observed across sample funds. While some funds are highly specialized others are highly diversified. The empirical results show that the rate of return of private equity funds declines with diversification across financing stages, but increases with diversification across industries. Accordingly, the fraction of portfolio companies which have a negative return or return nothing at all, increase with diversification across financing stages. Diversification across countries has no systematic effect on the performance of private equity funds

Pioneering strategies in the digital world. Insights from the Axel Springer's case

Digital technologies present some distinctive characteristics: they simultaneously enable pervasive connectivity, immediacy of interactions and wide access to data and computing power. Based on a detailed historical analysis of Axel Springer, we suggest that pioneering strategies in new markets created by the diffusion of digital technologies is negatively moderated by the fit between firms’ legacy core capabilities and those required to enter the new market. We then show that pioneering strategies in non-core legacy markets are instrumental in creating the capabilities necessary for the sustainability of first-mover advantages (FMA) in the legacy core markets. Finally, we show the role of managerial cognition as a key individual-level enabler in achieving pioneering advantages

2003 Manifesto on the California Electricity Crisis

The authors, an ad-hocgroup of professionals with experience in regulatory and energy economics, share a common concern with the continuing turmoil facing the electricity industry ("the industry") in California. Most ofthe authorsendorsed the first California Electricity Manifesto issued on January 25, 2001. Almost two years have passed since that first Manifesto. While wholesale electric prices have moderated and California no longer faces the risk of blackouts, in many ways the industry is in worse shape now than it was at the start of 2001. As a result, the group of signatories continues to have a deep concern with the conflicting policy directions being pursued for the industry at both the State and Federal levels of government and the impact the uncertainties associated with these conflicting policies will have, long term, on the economy of California. Theauthorshave once again convened under the auspices of the Institute of Management, Innovation and Organization at the University of California, Berkeley, to put forward ourtheir ideas on a basic set of necessary policies to move the industry forward for the benefit of all Californians and the nation. The authors point out that theydo not pretend to be "representative." They do bring, however, a very diverse range of backgrounds and expertise.Technology and Industry, Regulatory Reform

Universal Rights and Wrongs

This paper argues for the important role of customers as a source of competitive advantage and firm growth, an issue which has been largely neglected in the resource-based view of the firm. It conceptualizes Penrose’s (1959) notion of an ‘inside track’ and illustrates how in-depth knowledge about established customers combines with joint problem-solving activities and the rapid assimilation of new and previously unexploited skills and resources. It is suggested that the inside track represents a distinct and perhaps underestimated way of generating rents and securing long-term growth. This also implies that the sources of sustainable competitive advantage in important respects can be sought in idiosyncratic interfirm relationships rather than within the firm itself

Human Resources and the Resource Based View of the Firm

The resource-based view (RBV) of the firm has influenced the field of strategic human resource management (SHRM) in a number of ways. This paper explores the impact of the RBV on the theoretical and empirical development of SHRM. It explores how the fields of strategy and SHRM are beginning to converge around a number of issues, and proposes a number of implications of this convergence

Value Creation from Big Data: Looking Inside the Black Box

The advent of big data is fundamentally changing the business landscape. We open the ‘black box’ of the firm to explore how firms transform big data in order to create value and why firms differ in their abilities to create value from big data. Grounded in detailed evidence from China, the world’s largest digital market, where many firms actively engage in value creation activities from big data, we identify several novel features. We find that it is not the data itself, or individual data scientists, that generate value creation opportunities. Rather, value creation occurs through the process of data management, where managers are able to democratize, contextualize, experiment and execute data insights in a timely manner. We add richness to current theory by developing a conceptual framework of value creation from big data. We also identify avenues for future research and implications for practicing managers

From social ties to embedded competencies: The case of business groups

Our current views of economic competition are still rooted in the imagery of the isolated firm that transacts with its buyers, suppliers, and competitors via largely anonymous factor and product markets. Yet this view is fundamentally at odds with the growing importance of business groups in the global economy. We thus need a reconceptualized version of our idea of economic competition, which is capable of explaining competitive advantage at the group-versus-group rather than firm-versus-firm level of analysis. In the present paper we build on insights derived from organizational sociology and organizational economics to develop a business group-level theory of competition and competitive advantage based on embedded competencies

Using rival effects to identify synergies and improve merger typologies

"The strategic management literature has found it difficult to differentiate between collusive and efficiency-based synergies in horizontal merger activity. We propose a schematic to classify mergers that yields more information on merger types and merger effects, and that can, moreover, distinguish between mergers characterized largely by collusion-based synergies and mergers characterized largely by efficiency-based synergies. Crucial to the proposed measurement procedure is that it encompasses the impact of merger events not only on merging firms - as is custom - but also on non-merging competitor firms (the rivals). Employing the event-study methodology with stock-market data on samples of large horizontal mergers drawn from the US and UK (an Anglo-Saxon sub-sample) and from the European continent, we demonstrate how the proposed schematic can better clarify the nature of merger activity." (author's abstract)"Die Literatur über strategisches Management hatte bisher Schwierigkeiten, zwischen wettbewerbsschädlichen und Effizienz steigenden Synergien bei horizontalen Zusammenschlüssen zu differenzieren. Wir schlagen einen konzeptionellen Rahmen vor, um Fusionen zu klassifizieren, welcher mehr Informationen sowohl über die Fusionstypologie als auch über die Wirkung von Zusammenschlüssen entschlüsselt und welcher eine klare Abgrenzung zwischen wettbewerbsschädlichen und wettbewerbsfreundlichen Fusionen erlaubt. Fundamental für diesen konzeptionellen Rahmen ist, dass er nicht nur die Wirkung der Fusion auf die fusionierenden Unternehmen (was typisch in der Literatur ist) umfasst, sondern auch ihre Wirkung auf die Rentabilität der Wettbewerber. Wir wenden eine Ereignisstudienmethode mit Aktiendaten an, um unsere Kategorisierung empirisch umzusetzen. Im Vergleich einer Stichprobe von Fusionen in der angelsächsischen Welt (US und Großbritannien) mit Fusionen zwischen kontinentaleuropäischen Firmen zeigen wir, wie unsere Methodologie hilfreich sein kann, die Art der Fusionsaktivitäten zu identifizieren." (Autorenreferat

What lies between market and hierarchy? Insights from internalization theory and global value chain theory

In this paper, we suggest that internalization theory might be extended by incorporating complementary insights from GVC theory. More specifically, we argue that internalization theory can explain why lead firms might wish to externalize selected activities, but that it is largely silent on the mechanisms by which those lead firms might exercise control over the resultant externalized relationships with their GVC partners. We advance an explanation linking the choice of control mechanism to two factors: power asymmetries between the lead firms and their GVC partners, and the degree of codifiability of the information to be exchanged in the relationship