The Theory of the Firm and the Markets for Strategic Acquisitions

Five problems are addressed: (1) the role of competent actors in the venture capital and exit markets supporting the industrialization of winning technologies in small innovative firms, (2) the competence of the large firm to integrate large-scale operational efficiency with small-scale innovative capability through distributed development work and integrated production and (3) the importance of viable markets for strategic acquisitions, both in making this possible and in allowing a flexible choice for the small firm between growing aggressively on its own through own acquisitions, or being acquired strategically itself. We (4) find that the less developed markets in continental Europe may be a disadvantage compared to the US in ushering in a future New Economy. We finally (5) discuss what becomes of the Coasian theory of the firm when production is constantly outsourced in, or insourced from the market as the relative efficiency of coordination through management and over the market changes.competence bloc; experimentally organized economy; heterogeneity; Marshallian industrial district receiver competence; strategic acquisitions

The Pharmacia Story of Entrepreneurship and as a Creative Technical University - An Experiment in Innovation, Organizational Break Up and Industrial Renaissance

While innovative technology supply has been the focus of much neo Schumpeterian modeling, few have addressed the critical and more resource demanding commercializing of the same technologies. The result may have been a growth policy focused on the wrong problem. Using competence bloc theory and a firm based macro to macro approach we abandon the assumed linear relation between technology change and economic growth of such models, and demonstrate that lack of local commercialization competences is likely to block growth even though innovative technology supplies are abundant. The break up, reorganization and part withdrawal of Pharmacia from the local Uppsala (in Sweden) economy after a series of international mergers illustrate. Pharmacia has “released” a wealth of technologies in local markets. Local commercialization competence, notably industrially competent financing has, however, not been sufficient to fill in through indigenous entrepreneurship the vacuum left by Pharmacia. Only thanks to foreign investors, attracted by Pharmacia technologies, that have opted to stay for the long term the local Uppsala economy seems to be heading for a successful future. The Pharmacia case also demonstrates the role of advanced firms as “technical universities” and the nature of an experimentally organized economy (EOE) in which business mistakes are a natural learning cost for economic development.Competence Bloc Theory; Commercialization of Innovations; Experimentally Organized Economy; Innovation and Entrepreneurship; Pharmaceutical industry

Competence in Health Care - An Industrial Systems Analysis Using Competence Bloc Theory to Compare European and US Health Care

While European health care systems are mostly public and similar the contrast is large to the US health industry based to a large extent in the market. Using competence bloc theory the industrial potential of Swedish and European health care is assessed and compared with US health industry. To get the the analysis properly framed health industry is defined to include health insurance, health care and the supporting biotech, pharmaceutical and medical instrument industries. A gradually aging industrialized world makes wealthy customers demand the sophisticated life quality enhancing medical support new technology offers. The overwhelming influence of substitute customership in Europe, through politicians, social insurance, doctors etc., however, holds back development through suppressing the preferences of the true customer (the patient), discouraging innovative product competition and entrepreneurship. The larger part of cost escalation in US health care can be attributed to quality improvements, and luxury health care has stimulated innovative product development. While Swedish health care so far has been a technological winner, commercial competence to become internationally competitive is lacking. It appears politically difficult to recognize that private for profit health care may be both more efficient and profitable than publicly run services. However, once competition for profit has been introduced public providers have to improve performance and the differences will disappear.Health care; Biotechnology; Competence blocs; Experimentally Organized Economy; Entrepreneurship; Industrial Systems analysis; Science Based Industry; Substitute Customers; University Entrepreneurship

Managament in a New and Experimentally Organized Economy

The parallel development of management theory and practice over three phases of economic development is surveyed; (1) the pre-oil crisis experience 1969-1975, (2) the post oil crisis sobering up through most of the 1990s and (3) the emergence of new global production organizations , blurring the notion of the firm to be managed. The external market circumstances of each period dictate different structures of business operations ; (a) a steady state and predictable environment, (b) crisis, inflation and disorderly markets and (c) new technology supporting a globally distributed production organization. As a consequence structural learning between the periods has been of limited value and often outright misleading. The influence of management theory on management practice and its origin in the received economic equilibrium model are discussed, and an alternative management theory based on the theory of the Experimentally Organized Economy (EOE) presented. The increased rate of failure among large firms is related to the increasing complexity of business decisions in globally distributed production and the decreased reliability of learning . It is concluded that successful management practice develops through experimentation in markets and that the best management education has been a varied career in many lines of business and in several companies.Competence bloc theory; Experimentally Organized Economy (EOE); Management theory; WAD theory; Firm Dynamics; Learning

Making Regional Competence Blocs Attractive - On the Critical Role of Entrepreneurship and Firm Turnover in Regional Economic Growth

Radically new technology offers the prospect of a New and high productivity Economy for the industrially advanced economies. These opportunities are rapidly taken advantage of by innovative firms operating across national borders. Rapid globalization, therefore, makes the regional dimension of economic growth increasingly overshadow the national dimension. Economic transformation, furthermore, is also being pushed by a still ongoing (2003) severe recession , forcing previously successful firms to shed resources and making industrial assets available in the market at depressed prices. Technologies embodied in those assets are often globally mobile. Even large regions or nations, however, may lack a sufficiently broad commercialization competence to locally identify, capture and industrialize all free floating technologies. Hence, also previously prosperous regions may risk missing the boat to the New Economy, and history is full of such regional failures. Therefore, even large regional economies will depend on foreign investors, and policy authorities in many industrial regions have initiated policy races both to attract new resources and to shore up the outward flow that might otherwise occur through the intermediation of global companies. The outcome of all this may be the creation of other concentrations of excellence among the rich industrial economies than those created in the wake of the previous industrial revolution some 150 years ago. Being attractive for advanced investments is synonymous to being both internationally competitive and offering a rich supply of complementary industrial services to potential investors. The local capacity (receiver competence) to identify and locally commercialize technological spillovers is always more narrow than the supplies of technology. Competence bloc theory is used to explain and characterize the locally attractive attributes and to demonstrate how they can be enhanced through policy to attract global resources.The Lake Mälar/Baltic region in Sweden is used to clarify how policy action may stem the outward flow by making the region attractive for imports of industrial competence and inward investment emphasizing the need to import industrially competent venture capital to broaden the local receiver competence and to support local new firm establishement based on locally available technology. The Bavaria/Baden- Württemberg (B/W-W) region in Southern Germany is used to illustrate the opposite, namely a region that may possess the broad based capacity to locally reinvest in locally released technologies. For Sweden this amounts to a repeat of the 17th and 18th century industrial policy of Swedish kings to stimulate the foreign immigration of skilled labor, only that this time the purpose is to build new industry for economic growth, not to build an imperial war machine. The dramatic restructuring over markets in Sweden holds the promise, if succesful, to be more innovative than the B/B-W restructuring, but the Swedish case is more risky, not least because of a political unwillingness to introduce the necessary institutional reforms.Competence Bloc theory; Experimentally Organized Economy; Globalization; New Economy; Policy Competition; Regional Industrial Attractor; Social Capital; Venture Capital Competence

William J. Baumol: An Entrepreneurial Economist on the Economics of Entrepreneurship

William J. Baumol is the 2003 winner of the International Award for Entrepreneurship and Small Business Research. Throughout his career Baumol has urged the profession to pay attention to the instrumental role of entrepreneurship in economic renewal and growth. At the same time he has insisted that economists continue to use their usual tool box when the purview of analysis is extended to entrepreneurship. Hence, Baumol can be characterized as a revolutionary from within. In this article we present and discuss Baumol’s research contribution in the areas of entrepreneurship and small business economics, notably from a growth perspective. In addition to placing his work in these areas into the wider context of his full contribution, we emphasize Baumol’s findings that growth cannot be explained by the accumulation of various factors of production per se; human creativity and productive entrepreneurship are needed to combine the inputs in profitable ways. As a result, an institutional environment that encourages productive entrepreneurship and human experimentation becomes the ultimate determinant of economic growth.Economic development; Entrepreneurship; Small business economics

Electronics, Economic Growth and Employment Revolution or Evolution

The 'new electronics technology' in its various manifestations has been very much in the limelight during recent years. It has been associated with future mass unemployment or scary visions of a Brave New World, a grand discontinuity in economic and cultural development. Governments are worried about the effects of the same technology on the international competitiveness of their industries and public investigative committees abound among the western industrialized countries. Some economists regard microelectronics as the new technology that will generate the next Kontradieff cycle. The vast attention paid to this technological phenomenon in itself warrants a serious inquiry into its potential macroeconomic implications even though much of the speculation around it may seem farfetched to the majority of professional economists

The Firm as a Competent Team

Results from empirical studies of firm behavior are synthesized into, a theory of the firm as a competent team. I demonstrate the existence of a tacit organizational competence exercising a leverage on the productivities of all other factors through selecting and allocating competent people, thus earning a monopoly rent in the capital market. The competence identified can only be fairly compensated through sharing in firm value growth in the equity market, exhibiting undervaluation of prime assets. Policies aimed at firm efficiency should improve the market measurement function, including stimulating insiders to exhibit information through trades