Politics, Governance, and Leadership: What Can We Learn From the Academy of Management’s Response to EO13769?

Organization design seeks to balance potentially conflicting objectives while achieving a broader mission. EO13769 created a challenge for the president of the Academy of Management in leading through these conflicts, as President Anita McGahan describes: how to be true to her own moral values while leading an organization with well-established design constraints, and members with diverse opinions. This article shares the perspectives of 12 scholars on the lessons we can learn from Professor McGahan’s leadership of a constraining organization through a challenging time

Ownership competence

Ownership is fundamental to firm strategy, organization, and governance. Standard ownership concepts—mainly derived from agency and incomplete contracting theories—focus on its incentive effects. However, these concepts and theories neglect ownership's role as an instrument to match judgment about resource use and governance with the firm's evolving environment under uncertainty. We develop the concept of ownership competence—the skill with which ownership is used as an instrument to create value—and decompose it into matching competence (what to own), governance competence (how to own), and timing competence (when to own). We describe how property rights of use, appropriation, and transfer relate to the three ownership competences and show how our theory offers a fresh perspective into the role of ownership for value generation

Valve Corporation: Composing Internal Markets

Discussions of the Valve Corporation are always enlightening. The skeptic wonders how much is rhetoric and recruiting ploy and how much is real. Is there clear evidence that this organizational design actually works – that it is efficient in this setting? While revenues per employee are quite remarkable, cause and effect are unclear. Is “boss-less-ness” the cause of high sales per employee or simply the result of high sales per employee, fueled from earlier success? The same question could be asked of Google’s unusual organizational approach. Is Google’s success the result of its extensive autonomy granted to employees, or is its past success the enabling cause of such autonomy? Such questions, of course, are empirically unanswerable here. I therefore set them aside and assume this organizational specimen is efficient – well-suited to its environment – and proceed with further commentary

Explaining Organizational Diseconomies of Scale in R&D: Agency Problems and the Allocation of Engineering Talent, Ideas, and Effort by Firm Size

The comparative efficiency and success of small firms in R&D remains largely unexplained. This paper empirically examines scale diseconomies in offering employment contracts as an explanation for diseconomies of scale in R&D. The paper argues that small firms more efficiently resolve the severe agency problems of hidden information and hidden behavior in R&D. Small firms more efficiently offer contracts that reward performance than large firms, and consequently, small firms attract and retain engineers with higher ability and skill. Further, small firms through these more performance-contingent contracts induce higher levels of effort than large firms. The study tests and generally confirms these hypotheses using data collected from 912 current and former engineering employees of two large high-technology companies.diseconomies of scale, compensation, job mobility, self-selection, agency theory, firm size and innovation

Corporate Strategy and Analyst Incentives: Do Capital Markets Encourage or Discourage Uniqueness?

Our paper focuses on how the relationship between corporate strategy and securities analyst activity may yield capital markets which discourage uniqueness in strategy. We argue that corporate strategy choices influence not only the expected cash flows of the firm, which form the fundamental basis for the firm’s valuation by capital markets, but also the amount of effort exerted by those who engage in such valuations. In particular, the effort of analysts and the willingness of investment banks to allocate analyst coverage are partly a function of the cost of that coverage, which in turn is a function of how difficult it is to analyze a corporation’s strategy. When analysis is particularly costly, investment banks may either choose to compromise on the quality of coverage or avoid coverage altogether, reducing the amount of information about the firm that is available to investors. Unique or complex corporate strategies are thus predicted to receive less coverage and correspondingly to be discounted by capital markets. We empirically test this proposition using a 10-year panel dataset linking approximatel

What Sets Breakthrough Strategies Apart

Strategy advice has taken a rather negative tone of late. Consultants and scholars alike seem obsessed with eradicating bias and error in human judgment and decision-making. A virtual cottage industry has emerged to advise how to accomplish this, often pushing managers to replace flawed human judgment with Big Data analytics and various computational tools. Given this abysmal view of human judgment, it’s no wonder that some authors have suggested that algorithms and artificial intelligence (AI) should play a greater role in strategic decisions. No doubt bias and error are important concerns in strategic decision-making. Yet it seems quite a stretch to suggest that the original strategies developed by people like Apple’s Steve Jobs, Starbucks’ Howard Schultz, or even Walmart’s Sam Walton had much to do with error-free calculations based on Big Data. Their strategies, like most breakthrough strategies, emerged in settings with remarkably little data to process and little basis for calculation — situations in which the paths to value creation were highly uncertain and evidence was sparse. We are highly skeptical that debiasing decision-making, eradicating errors, or ceding strategy to AI will improve strategizing, let alone lead to breakthrough strategies

Information Aggregation, Matching and Radical Market-Hierarchy Hybrids: Implications for a Theory of the Firm

More than 65 years ago Friedrich Hayek parenthetically remarked that while ‘man has learned to use [the market] ... he is still very far from having learned to make the best use of it’ (1945: 528). The ensuing years have seen significant innovation in the structure and use of markets, including the infusion of market mechanisms into organizations (Zenger and Hesterly, 1997). However, the focus in extant theory of the firm scholarship has largely been on the market’s high-powered incentives. But markets – as we argue in this essay – have additional features, such as information aggregation and matching. These novel features of markets have recently begun to receive managerial attention as organizations experiment with market-like practices such as crowdsourcing, information and prediction markets and open innovation. While we are descriptively learning much about these market-like practices and forms, nonetheless the theoretical foundations behind them, their implications for comparative governance (market vs hierarchy), their possible forms (market–hierarchy hybrids) and implications for strategy and competitive advantage have yet to be fully vetted in the organizational literature. The purpose of this essay, then, is to step back and theoretically discuss the common threads that unite innovative practices such as prediction markets and crowdsourcing, and more importantly, to discuss their comparative implications for markets and organizations, as well as market–hierarchy hybrids. We specifically focus on two, relatively neglected features of markets as a governance form – features that give markets an advantage over firms and hierarchy: information aggregation and matching. We provide a contrast of the informational and matching-related assumptions associated with coordinating economic activity via the market’s price mechanism versus hierarchy and organization, and highlight the potential gains from infusing the information aggregation and matching-related features of markets into organizations. While organizational scholars have certainly focused on the importance of information in organizations (Stinchcombe, 1990), and economists have highlighted the role that information So!apbox editorial essay Downloaded from soq.sagepub.com at Oxford University Libraries on October 16, 2015 164 Strategic Organization 9(2) plays in markets (e.g. signaling, information asymmetry; Spence, 1973; Stigler, 1961), nonetheless the market’s capacity for information aggregation and matching has not been well integrated into our theories of the firm – specifically, questions of comparative governance and radical market–hierarchy hybrid forms of organization. Based on our discussion, and in the spirit of the So!apbox forum, we also speculate on possible areas of future research for the field of strategic organization