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? Evidence from Residential Real Estate
(R&R at Strategic Management Journal)
The division of labor allows individuals to focus their time on a narrower band of activities and increase productivity through specialization, but it also 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 trade-off and examine how it is affected by market characteristics. I test the empirical predictions of the theory in the residential real estate brokerage industry in Southeast Michigan. Consistent with the model, I find that the division of labor is more likely for properties in the middle 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
(under review 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.
Vertical and Horizontal Expansion in Value-based Models
(Under Preparation for Submission)
Strategy research has often treated vertical integration and diversification strategies as independent topics. Using a biform model, this paper reconciles the existing chasm by examining the simultaneous interplay between vertical and horizontal corporate strategies. I find that firms in a classical Williamsonian scenario characterized by “small numbers”, ex ante vertical integration decisions, and ex post bargaining do not necessarily prefer vertical integration to market transactions. Conversely, if one firm in the economy can develop a valuable, rare, inimitable, and non-substitutable resource that favors synergies from horizontal expansion strategies, said firm does strictly prefer vertical integration. Overall, I show that vertical and horizontal corporate strategies may be complements even when governance and production costs increase disproportionately to firm size.