Faced with excess capacity, innovative firms retain staff, train and even hire

The cost of hiring and training is low during recessions, argue Eirik Sjåholm Knudsen and Lasse B. Lie

What's the Matter with Relatedness?

A core proposition of the resource-based view of the firm is that related diversification is more efficient than unrelated diversification. Nevertheless, the empirical evidence is usually described as mixed or unstable. We empirically examine three possible explanations for the nature of these findings. One is that they reflect measurement problems. Another is that they reflect a failure to take the resource-based view far enough in terms of recognizing firm heterogeneity. The third is that the resource-based view is misspecified: relatedness is not a significant determinant of efficiency. We use a detailed line-of-business sample to examine these three explanations. Our findings clearly indicate that the main problem is measurement, and we describe an approach to overcoming these problems

Innovation, human capital and exogenous shocks

Strategic entrepreneurship is about the simultaneous exploitation of existing advantages and the creation and exploitation of new opportunities. These are often referred to as the strategy-and the entrepreneurship dimension, respectively. We examine how the relative emphasis on the two dimensions of strategic entrepreneurship affects how firms behave with respect to human capital in the context of one particular exogenous shock, namely recessions. We hypothesize and find that the higher the focus on the entrepreneurial dimension, the more firms invest in training, the more likely they are to hire, and the more likely they are to lay off employees. Finally, we also find that these firms are more likely to combine the accumulation of human capital through training with both hiring and firing. In sum, these findings show how challenges and opportunities created by environmental change differ depending on the relative emphasis on the two dimensions. They also show how firms focusing on the entrepreneurial dimension more actively pursue the opportunities created by increased labor market imperfections in recessions. These results contribute to the literature by highlighting how recessions affect firms’ flow of human capital investments, and subsequently stocks, depending on their weighting of the two dimensions of strategic entrepreneurship

Relatedness and Acquirer Performance

Includes bibliographical references.Uncorrected proofWhile the strategic management literature suggests that related diversification is superior to unrelated diversification, there is little evidence that acquirers benefit from pursuing related targets. We argue that the empirical literature is plagued by poor measures of relatedness. Moreover, many empirical studies do not control adequately for the characteristics of the market for corporate control. We argue that not only value creation, but also value appropriation, depend on the relatedness of acquirer and target. Using an improved measure of relatedness, we provide empirical evidence that acquirer returns are positively and significantly correlated with relatedness

Recessions give businesses time to improve — if governments let them

Rather than sit out the storm, this is the time to put excess capacity to good use, retaining and reallocating employees, write Peter Klein, Eirik Sjåholm Knudsen, Lasse Lien, and Bram Timmerman

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

The theory of the firm and its critics: a stocktaking and assessment

Includes bibliographical references."Prepared for Jean-Michel Glachant and Eric Brousseau, eds. New Institutional Economics: A Textbook, Cambridge, Cambridge University Press.""This version: August 22, 2005."Since its emergence in the 1970s the modern economic or Coasian theory of the firm has been discussed and challenged by sociologists, heterodox economists, management scholars, and other critics. This chapter reviews and assesses these critiques, focusing on behavioral issues (bounded rationality and motivation), process (including path dependence and the selection argument), entrepreneurship, and the challenge from knowledge-based theories of the firm

Recessions across industries : a survey

This paper surveys existing knowledge about how and why industries differ with respect to the impact of recessions and credit crunches. While this question is of obvious relevance in today’s business environment the relevant knowledge is scattered across several literatures, including macroeconomics, finance, industrial organization and strategic management. We summarize and integrate this knowledge. Our approach is first to examine what determines the cyclicality of demand in an industry, or more precisely, the sensitivity of industry demand to negative shocks in aggregate demand. We then move on to examine how the supply side responds to these shocks, in particular whether the response is primarily in the form of reduced output or reduced margins. Finally, we examine implications for industry productivity, both in the short and the longer run

Why there? Decomposing the choice of target industry

How do diversifying firms chose their target industries? We explore target-industry choice empirically by focusing on the relative importance of target-market characteristics and the focal firm’s resources and capabilities. We avoid some key restrictions in earlier work by using a measure of relatedness that is highly general and flexible, using population-level data, and including measures of resource strength in addition to resource relevance. We find that the match between the acquiring and target firm’s resources and capabilities is a much stronger predictor of diversifying entry than the attractiveness of the target market per se

Skjev eller bare hard? Økonomisk seleksjon i utider

Økonomisk seleksjon foregår ved at bedrifter konkurrerer seg i mellom i et marked. Konkurransen mellom dem – konkurransekreftene – danner en seleksjonsmekanisme som bestemmer hvilke selskaper som overleverer og vokser, og hvilke selskaper som krymper og dør. De selskapene som har høy (forventet) produktivitet har størst forutsetninger for å ha høy lønnsomhet og blir foretrukket av investorer (som får bedre avkastning på investeringene sine) og kunder (som får bedre/billigere produkter), mens bedrifter med lavere produktivitet sliter. Men hva skjer under en krise? Hva skjer med disse seleksjonsprosessene når negative økonomiske sjokk som finanskriser oppstår i en økonomi? Sørger markedskreftene fremdeles for at det er bedriftene med høyest forventet produktivitet som faktisk overlever? I denne artikkelen viser vi hvordan kriser kan ha to ulike effekter på seleksjon av bedrifter. Den første effekten er at konkurransen om å overleve tiltar og seleksjonskreftene blir sterkere, som igjen fører til at flere av de minst produktive selskapene dør. Den andre mulige effekten av en krise er såkalt skjevseleksjon hvor banker og andre kredittgivere tar over noe av rollen til markedet når det gjelder å velge ut hvilke selskaper som skal overleve. Vi finner at slik skjevseleksjon kan ha svært så negative konsekvenser for en økonomi på litt lengre sikt