Knowledge that Transforms

Game theory has not been applied much to business strategy. I review some criticism of the game-theoretic approach which inhibits its application, and mention some others. The common criticism that game-theoretic models assume too much rationality is often wrong because (i) some games require little rationality to compute equilibria; and (ii) players may reach an equilibrium by communicating, adapting, or evolving to it rather than by calculating it. However, other criticisms can be forceful: Game theory is hard to use and test, it threatens to explain anything, it generates customized models of local settings rather than general regularities, and it offers only part of the advice a manager needs. Nonetheless, game theory could be a fruitful source of ideas and testable implications for strategy, requiring more fine-grained, longitudinal studies sensitive to interactions between structural variables.

This article develops a resource-based strategic management model of MNE market entry. Strategic groups of firms in the U.S. foreign auto industry are derived empirically and tested for their ability to explain structural and performance results in one industry and one host country under the assumptions of the model.

Abstract The paper hypothesizes that diversification by firms based in the pharmaceutical industry during the 1977‐86 time period was primarily undertaken to reduce the risks associated with being dependent upon a technologically dynamic environment. Consistent with this non‐efficiency motive for diversification, declining economic performance is predicted. A longitudinal empirical analysis provides support for these propositions.

Abstract This research examines the relationship between ownership structure and financial performance in the context of the agency theory. It improves upon previous research by presenting an improved risk‐adjusted performance measure, by using a larger sample size than prior work and also by controlling for firm size differences. The results suggest that ownership is significantly related to firm financial performance even after controlling for size.

Abstract This study analyzes the strategy‐structure fit and its effect on the economic performance of 144 U.S. manufacturing and service multinational corporations (MNCs). The results indicate that MNCs, irrespective of being services or manufacturing, choose their organization structure consistent with the theoretical fit prescription for the kind of strategy they are pursuing. However, the strategy‐structure fit had no effect on service MNC economic performance. With manufacturing MNCs, mixed results regarding the fit‐performance linkage were found. Based on the findings, implications and directions for future research are suggested.

Abstract This research investigates the role that mergers and acquisitions may play in the disciplining of entrenched and inefficient managers. The relationship between a company's performance history and its subsequent top management turnover is assessed for a sample of target companies, their parents, and a control group of companies not involved in merger and acquisition activity. The results reveal that target company top management turnover is higher than ‘normal’ in the 2 years immediately following a merger or acquisition, but there is no relationship between previous target company performance and its subsequent top management turnover. Further analyses indicate that first‐year target company turnover rates are associated with a history of relatively poor parent company performance, while second‐year turnover rates are associated with a history of relatively good parent company performance.

Abstract Past research using managers' attributions for good and poor performance in annual reports has repeatedly demonstrated that management takes credit for good outcomes. However, there is disagreement about whether this pattern of attributions reflects attempts to manage impressions in stakeholders or biased perceptions on the part of management, and whether it is associated with increases or decreases in future performance. In this study, attributions in letters to shareholders in the annual reports of public utilities were analyzed. The results showed the same general pattern of attributions as was found in previous studies. However, the relationship between this pattern of attributions and performance (earnings per share growth) was generally negative. Implications of these results for future research are discussed.

While work in the field of global strategic management has largely focused on defining the content of effective global strategies and on prescribing winning strategic moves for multinationals, this research argues the importance of the process through which global strategies are generated, in particular the perceived procedural justice of that process. Drawing on the theoretical heritage of justice-based research, this study first explored the meaning of procedural justice by an investigation of the specific criteria used by subsidiary top managers to define what they perceive to be a fair process in global strategy-making. Second, the importance of procedural justice was assessed by an examination of its effects on the higher-order attitudes of commitment, trust, and social harmony as well as on the lower-order attitude of outcome satisfaction in subsidiary top management. One of the central conclusions of the research is that the procedural justice of the global strategy generation process indeed affects commitment, trust, and social harmony as well as outcome satisfaction in subsidiary top management, and hence provides a potentially powerful but, as yet, unexplored avenue for mobilizing the multinational's global network of subsidiaries.