Knowledge that Transforms

Abstract A firm is confronted with the separate decisions of product and international diversification. It is suggested that these postures are linked to external contingencies in firms who face core business regulation. A technique is developed to explain dual diversification patterns using evidence obtained from the new industry comprised of the Regional Bell Operating Companies (RBOCs).

Abstract Recent empirical work has supported the Penrose‐Teece view that firms diversify to exploit fully specific assets or capabilities. Where transactions costs permit, these economies of scope may be realized via input supply contracts among producers. However, asset specificities frequently create transactions costs which discourage market contracting and leave firms with a choice between collaborative ventures and wholly‐owned new entry. This research uses the natural experiment of financial services deregulation to explore the collaborative‐own entry choice for 292 new entries in 13 financial product markets. The results generally support our maintained hypotheses that specificity encourages full ownership while collaboration is used to ease a resource constraint.

Abstract The advent of the Medicare prospective payment system (PPS) in 1983 affected individual general hospitals in varying degrees based on their revenue and cost structures. These same factors served to constrain a hospital's ability to adapt to the post‐PPS environment. The three constraints are based on the proportion of the hospital's private‐pay (non‐Medicare/Medicaid) patients, economies of scale and economies of scope among medical services. We test the relationship between these constraints and organizational failure in the Chicago area. Hospitals selected out of the new environment (1986‐91) were at a significant relative disadvantage with respect to the proposed constraints.

Abstract Some scholars (Chandler, 1977; Penrose, 1959) believe that firms grow by transferring inimitable marketing, production, and research skills from one line of business to another. Extending this view and emphasizing the role of the central office of a multidivisional firm to transfer administrative skills, Williamson (1975) argues that competition among business units within the firm mimics a competitive capital market and leads to an effcient allocation of resources. Coase (1937), however, argues that firm size is limited by the costs of organizing diverse transactions and Chandler (1991) claims that growth is constrained by the technical and marketing expertise of the top managers. The purpose of this paper is to demonstrate that the scope of the multidivisional firm is limited by the transferability of firm‐specific skills and the efficiency of capital markets. Support comes from a case study of 19 oil companies over the 1930–90 period.

Abstract Although recent studies of strategic groups have provided much insight into the nature of intra‐industry rivalry, most studies have focused on the strategies of seller firms. In this paper we argue that the bilateral exchange between groups of buyers and sellers in adjacent markets should be made explicit. Within this bilateral context, the market for non‐tactical Navy infomation systems is empirically examined. Strategic groups are developed for both seller and buyer industries, and the interaction between these groups are explored over time. In particular, two market interventions, the imposition of industrial funding procedures in 1984 and a Life‐Cycle requirement order in 1988, were examined with respect to their impact on seller/customer exchanges and vertical integration strategies. Significant changes in strategies were noted, and explained within a transaction cost framework.

Abstract This study analyzes the goal configuration of 126 firms, based in Japan, U.K. and U.S., competing in global industries. The results indicate that firm nationality and internationalization do not affect the firm's goal configuration. The breadth of the firm's reward system was found to be related positively to a dispersed goal configuration and, within global and multifocal industry segments, a congruence between goal configuration and industry position was found to be associated positively with performance.

Abstract The longevity debate about buy‐outs has hitherto been restricted. By focusing on large highly leveraged transactions, existing research has taken only a partial view of how long buy‐outs last and the factors influencing longevity. This paper develops and tests hypotheses concerning the influences on buy‐out longevity across the whole spectrum of management buy‐out applications. Both quantitative and case study evidence from the U. K. is presented. A heterogeneity view of buy‐outs is supported. Tests using quantitative data show that earlier exit is associated with larger buy‐outs, and buy‐outs arising on privatization from the public sector and from non‐U. K. parents. Case study evidence principally supports hypotheses that earlier exit is associated with financing institutions being in a relatively stronger position than management and with more rapidly changing market conditions for the firm.