The Dynamics of Learning and Competition in Schumpeterian Environments
with A. Kaul and B. Wu
Organization Science (2019)
In this study, we examine the nature of Schumpeterian competition between entrants and incumbents. We argue that incumbents may respond to the threat of entry by either attacking the entrant or trying to learn from it, and that entrants, in turn, may react by either reciprocating the incumbent’s advances or retreating from it. Putting these competitive choices together, we develop a framework of four distinct potential scenarios of Schumpeterian competition. In particular, we emphasize a scenario we term creative divergence, wherein incumbents try to learn from entrants and build on their technologies, but their investments to do so cause entrants to retreat, resulting in diminishing returns to learning investments by incumbents. Exploratory analyses of the US cardiovascular medical device industry find patterns consistent with the creative divergence scenario, with incumbent knowledge investments helping them to learn from entrants, but these learning benefits being undermined as entrants move away from incumbents.
Is the Division of Labor Limited by the Extent of the Market? Opportunity Cost Theory with Evidence from the Real Estate Brokerage Industry
Strategic Management Journal (Forthcoming)
The division of labor allows individuals to focus their time on a narrower band of activities and increase productivity through specialization, but this comes at a cost. When individuals divide labor, they divide value and split the “pie” they help create. In this paper, I formally model this tradeoff and examine how it is affected by opportunity-cost considerations related to market characteristics. I test the empirical predictions of the model in the residential real estate brokerage industry in Southeast Michigan. Consistent with the predictions, I find that the division of labor is more likely for properties in the midrange of the price distribution and in larger markets, but less likely at the tails and in markets where property prices exhibit substantial heterogeneity.
A Resource-based Theory of Hyperspecialization and Hyperscaling
with B. Wu and D. Somaya
(R&R at Strategic Management Journal)
Compared to the large-scale enterprises of the past, digital firms tend to be narrower in their vertical scope (hyperspecialization) but larger in their scale (hyperscaling). We explain this phenomenon through a theory about the simultaneous impetus towards scale and specialization created by the opportunity costs of not intensively deploying highly scalable resources. Our theory is supported by a model that combines recent theoretical developments in the RBV with real-world insights about the resource attributes of digital firms. We develop a number of propositions consistent with observed examples and empirical regularities in digital business models, shedding light on the far-reaching ways that technology-enabled resources are reshaping firms in the fourth industrial revolution.