The complexity of a firm's strategy affects both the ease with which the firm can replicate the strategy in a new setting and the ease with which rivals can imitate it. Simple strategies are as readily imitated as replicated, and highly intricate strategies resist imitation and replication equally. At moderate levels of complexity, however, a wedge develops between the ease of replication and the difficulty of imitation, so long as the replicator has better information than the imitator about the original success. An agent-based simulation model clarifies the structural reasons that this is so. The model also shows how the wedge-maximizing level of complexity varies with the replicator's informational edge over the imitator. The results help to pinpoint situations in which strategies requiring replication are likely to defy imitation and generate sustained competitive advantage. More generally, the analysis sheds light on the value of superior but imperfect information about good solutions to hard problems. Finally, the results suggest that a pattern long observed by organization scholars--that “loosely coupled organizations” are especially effective competitors--may arise for a very different reason than is normally posited.

The dynamics of innovative search are investigated. A formal learning model is explicated to understand (1) how attention is allocated and (2) how attention and ideas are related during an active search. A particular chaotic regime of the model is shown to have dynamics similar to an actual search process. This motivates an agenda for research along three primary directions: refinements to the model, extensions that link the model to actions and decisions, and surroundings required to embed such a model in a larger context. The findings here suggest that chaos can occur in specific organizational processes over particular periods of time. Whether such chaos is beneficial to organizations is unclear.

Japan’s economic success since World War II has been striking. Modern Japan was the first major industrial economy to emerge from outside the Western tradition. Economically devastated in 1945, by 1990 Japan had the world’s second largest economy and a GDP per head 20 percent greater than that of the United States. In this paper it is argued that one reason for Japan’s success is that the costs of achieving cooperation and specialization are lower in Japan than in the West. Cooperation and specialization have been acknowledged to have a beneficial impact upon productivity ever since Adam Smith wrote about cooperative specialization in the context of the division of labor. Modern economic theory, however, suggest that in a world of self-interested individuals the costs of achieving cooperation and specialization are substantial. In this paper it is argued that the cultural value system that Japan has inherited from its preindustrial past, and particularly the Tokugawa period, helps facilitate cooperation between individuals and encourages them to undertake productivity-enhancing investments in specialization. This lowers the costs of achieving cooperative specialization. In turn, the lower costs of achieving cooperative specialization have helped Japanese enterprises adopt practices such as self-managing work teams and long-term supplier relations that are consistent with obtaining a productivity-based competitive advantage in the world economy.

Given the limits of the patent systems, an innovating firm faces a difficult strategic conundrum: should it license its new technology to competitors or not? If the innovating firm does not license its new technology, competitors may quickly develop their own, possibly better, version of the technology. On the other hand, if imitation of the new technology is difficult, by denying its technology to competitors the innovating firm may be able to establish a competitive advantage. If the innovating firm does license its new technology to competitors, it runs the risk of losing control over that technology (of giving away its competitive advantage to competitors). On the other hand, if competitors are able to rapidly imitate the new technology anyway, by licensing its technology the innovating firm may ensure that its version of the technology becomes the dominant design in an industry. Moreover, the innovating firm will receive royalty payments in this scenario. Given these different scenarios, what should an innovating firm do? In this paper a theoretical framework is constructed that identifies the factors that influence an innovating firm's choice between licensing and not licensing. This suggests that the speed of imitation, the extent of first mover advantages, and the transaction costs of licensing play a major role in determining the appropriate choice.

The primary purpose of this study was to compare and contrast an organization's official culture and its subcultures. The proposition that soft bureaucracies project a rigid exterior appearance, symbolizing what key stakeholders expect, while masking a loosely-coupled set of interior practices, guided this analysis of a police organization. The official culture (crime-fighting command bureaucracy) was examined as an arbitrary set of symbols and meaning structures arranged according to top management preferences. Using qualitative and quantitative data, the organization's subcultures were profiled. It was demonstrated that top management was unable to impose organization-wide conformance with the official culture. There was close conformance to the official culture in only one of five distinct clusters of officers (“crime-fighting commandoes,” 21 percent of the sample). Officers in the other clusters (“crime-fighting street professionals,” “peace-keeping moral entrepreneurs,” “ass-covering legalists,” and “anti-military social workers”) substantially modified or rejected top management's dictates. They represented resistance subcultures, similar in their opposition to official culture, but unique in form. It was concluded that other organizations, not known for their monolithic image and solidarity, also encompass subcultures.

We contend that two important, nonrelational, features of formal interorganizational networks—geographic propinquity and organizational form—fundamentally alter the flow of information through a network. Within regional economies, contractual linkages among physically proximate organizations represent relatively transparent channels for information transfer because they are embedded in an ecology rich in informal and labor market transmission mechanisms. Similarly, we argue that the spillovers that result from proprietary alliances are a function of the institutional commitments and practices of members of the network. When the dominant nodes in an innovation network are committed to open regimes of information disclosure, the entire structure is characterized by less tightly monitored ties. The relative accessibility of knowledge transferred through contractual linkages to organizations determines whether innovation benefits accrue broadly to membership in a coherent network component or narrowly to centrality. We draw on novel network visualization methods and conditional fixed effects negative binomial regressions to test these arguments for human therapeutic biotechnology firms located in the Boston metropolitan area.

Competitive advantage is a key concept in strategic management research for a number of reasons—not the least of which is that an avowed consequence of its attainment is held to be superior economic performance. However, few prior empirical studies have directly and systematically documented the incidence or prevalence of persistent superior economic performance. The research reported here is based on empirical studies of a large number of industry samples for which longitudinal data were stratified by levels of performance using a new methodology and then analyzed in terms of their dynamics. This new stratification technique was used in lieu of autoregressive methods employed in prior studies of performance persistence to allow for a true outlier analysis because persistent superior economic performance both has been argued theoretically, and found empirically, to be rare. Detailed results from a sample of 6,772 firms in 40 industries over 25 years are presented to illustrate the findings that: (1) while some firms do exhibit superior economic performance, (2) only a very small minority do so, and (3) the phenomenon very rarely persists for long time frames. These results, while not providing direct support for a particular extant strategic management or economic theory concerning firm performance, are most consonant with the resource-based view of the firm and have implications for significant aspects of other received strategic management and economic theories.

Organizational adaptation to competition often means inventing or adopting a process innovation and the daunting challenge of implementing it. Increasingly, process innovations rely on the capabilities embedded in an organization's IT infrastructure. Successfully implementing an IT-enabled process innovation depends largely on how a project's IT and work process designs fit and evolve with this IT infrastructure. However, little empirical research guides the formulation of IT and work process strategies. This study addresses the question: How does the degree of coupling between a redesign project's IT strategy and work process strategy affect project performance? Data collection utilized a multistage research design employing comprehensive phone interviews and matched surveys among three sets of respondents (project managers, IT managers, and process users) across 43 process redesign projects in the health care industry. Our findings indicate project performance improves with tightly coupled IT and work process strategies when implementing process inventions, and with loosely coupled strategies when implementing imitations.

How can a multinational formulate an effective global strategy? This paper attempts to address this question by assessing the effect of a procedural justice model of strategic decision making (Kim and Mauborgne [Kim, W. C., R. A. Mauborgne. 1991. Implementing global strategies: The role of procedural justice. Strategic Management J. 12125–143.], [Kim, W. C., R. A. Mauborgne. 1993a. Procedural justice theory and the multinational corporation. S. Ghoshal, D. E. Westney, eds. Organization Theory and the Multinational Corporation. Macmillan, London, UK.]) on the multinational’s ability to formulate effective global strategies. There are five designing principles that define a procedural justice model of strategic decision making. These are: bilateral communication between the head office and subsidiary units; the subsidiary units’ ability to challenge and refute the strategic views of the head office; head office familiarity with the local situation of subsidiary units; a full account for the head office’s final strategic decisions; and application of consistent decision making procedures across subsidiary units. To examine the above effect, here we introduce information processing as an intervening concept to assess the match between the information processing requirements of multinationals’ global strategic objectives and the information processing capabilities provided by the proposed procedural justice model of strategic decision making. Here multinationals’ global strategic objectives are defined as global learning, the balancing of global efficiency and local responsiveness, global strategic renewal, and rapid global strategic decision making. The underlying assumption in this analysis is that if the dimensions of procedural justice facilitate the kinds of strategic information necessary to achieve the multinational’s global strategic objectives, the exercise of procedural justice can be judged to have a salutary effect on the content of global strategies. The results of this study, which are based on the experiences of 63 global strategic decision units, provide support for the effectiveness of this model of strategic decision making.

This paper examines the relationship between organization science and managerial practice. Science and practice are viewed as interdependent, yet semiautonomous, domains which engage in their own specialized forms of discourse or “language games.” The paper examines both the internal dynamics of these language games and the relationship between them. The analysis suggests a reinterpretation of the role played by organizational scientists in relation to practitioners. Organizational scientists should be viewed not as engineers offering technical advice to managers but as providers of conceptual and symbolic language for use in organizational discourse. This view's implications for enhancing the relationship between organization science and managerial practice is discussed.