Gordon Walker

A Transaction Cost Approach to Make-or-Buy Decisions

Gordon Walker and David Weber This study focuses on make-or-buy decisions as a paradigmatic problem for analyzing transaction costs. Hypotheses developed from Williamsons efficient boundaries framework were tested in a multiple-indicator structural equation model. The influence of transaction costs on decisions to make or buy components was assessed indirectly through the effects of supplier market competition and two types of uncertainty, volume and technological. In addition to transaction costs, the decisions were hypothesized to be predicted by both buyer production experience and the comparative production costs between buyer and supplier. The hypotheses were tested on a sample of make-or-buy decisions made in a division of a U.S. automobile company. The results show that comparative production costs are the strongest predictor of makeor-buy decisions and that both volume uncertainty and supplier market competition have small but significant effects. The findings are explained in terms of the complexity of the components and the potential pattern of communication and influence among managers responsible for making the decisions.*

The dynamics of interorganizational coordination.

A theory was developed on the creation, growth, and decline of relationships among organizations and was tested, using a longitudinal study of 95 dyadic relationships among child care and health organizations in Texas. Using LISREL V, the test of the theory showed that substantial revision of the model was required to explain the data adequately. When the model was revised, important new patterns were revealed in the development of interorganizational relationships over time: (1) Perceptions of dependence on others for resources spurs the development of interorganizational relationships. Resource dependence is a powerful direct determinant of communications, resource transactions, and consensus; (2) The growth of interorganizational relationships is fostered by frequent communications to formalize the relationship and build consensus about the terms of the relationship among the parties involved; (3) Monetary transactions and client referrals entail different patterns of coordination; and (4) Consensus among parties in an interorganizational relationship is both a positive outcome of initial resource dependence and communications and has a negative influence on subsequent perceptions of resource dependence.

Supplier Competition, Uncertainty, and Make-or-Buy Decisions

The article provides information on the make-or-buy decisions involved in a buyer-seller relationship. Information is presented about contracting cost and market competition. A discussion is presen...

Network Position and Cognition in a Computer Software Firm

Gordon Walker The present study examined the relationship between differences in cognition among the members of a software firm and the position a member occupied in the network of task relationships in the organization. Cognition was measured through judgments about means-ends associations relevant to software product success. The network was analyzed as a blockmodel, and positions in the network were defined as blocks of structurally equivalent individuals. Network position was found to be a stronger and more stable predictor of differences in cognition than the type of function an individual had and the type of product worked on. Both tenure in the industry and tenure in the firm also were found to have strong and stable effects. The generalizability of the findings is discussed in terms of the type of cognition studied and the firms size, technology, and level of market uncertainty.*

Agency and Institutions: National Divergences in Diversification Behavior

A fundamental theme in comparative crosscountry research is the convergence of organizational forms in diverse national settings. In this paper we examine a special instance of this theme: the pattern of diversification across industries. A common argument is that technical and market forces compel firms to adopt ?coherent? strategies of diversification. This thesis implies that there should be a convergence in the patterns of interindustry diversification in all market-based economies. An institutional approach offers an alternative view. From this perspective, when diversification across industries is seen as subject to nation-specific governance and resource constraints, countries should vary widely in their interindustry diversification patterns.To test these alternative views, we analyze the diversification patterns of large corporations from five countries: France, Germany, Japan, the United Kingdom, and the United States. Our results do not support the hypothesis of a common pattern of diversification across countries, and thus reject the technological thesis. By comparing two case studies in which entrepreneurs attempted to diversify by acquisition in France and the United States, we examine how institutions and agents interact to permit different diversification patterns to arise in diverse national environments.The statistical results and case studies imply that, given the fixity of certain institutions, even if countries are subject to globalization, convergence in diversification patterns is not necessary. The results cast doubt upon the merits of stylizing the debate as a choice between technical and institutional theories of organizational choice. Rather, the study points to the importance of two theoretical statements. The first is to inquire under what conditions there is likely to be consensus on a given ?means-end? rationality for a specific managerial decision (e.g., diversification). The second is to understand the structural opportunities available to entrepreneurs for diversifying through acquisitions. Iterating between these cognitive and structural considerations shifts the focus from the false debate between technological and institutional arguments to the study of entrepreneurship situated in historically given national environments.

Emergent Properties of a New Financial Market: American Venture Capital Syndication, 1960--2005

The recorded transactions of venture capital investments permit a direct examination of the Braudel hypothesis that regional markets evolve dynamically and interdependently in reference to a global system. This hypothesis contradicts the popular belief that regional financial development is anchored in dense clusters. Using methods of complex graphs, we analyze 159,561 transactions over nearly 45 years to demonstrate the rapid emergence of a national network of syndications. A giant component emerges early in the history of the industry, which subsumes the regional and sectoral subgraphs. The results confirm the Braudel hypothesis over the role of regional clusters, rejects preferential attachment in favor of repeated ties among trusted partners, and emphasizes the importance of dynamics and complex weighted graphs for the analysis of social and economic behavior.

Coordination Patterns Within an Interorganizational Network

This research examines and compares patterns of coordination among clusters of organizations which are all members of a larger network of human service agencies. The blockmodeling procedure developed by Breiger et al. was used to analyze the data collected, and three tightly connected clusters of agencies werefound to exist in the network. By evaluating the reasons why organizations reported being involved with others, it was found that the three interorganizational clusters existed for three predominantly different reasons: resource transactions, direct services, and planning and coordination. The three clusters were then compared on a number of dimensions of interorganizational coordination, and it was found there were significantly different patterns of relationships among these clusters of agencies while no significant differences among the clusters were found on perceived effectiveness and the degree of impact of the relationships. A theoretical explanation for the observed results is developed. The major conclusion is that it is important to determine the different reasons for interorganizational relationships if one is to understand the various patterns of coordination among clusters of organizations within interorganizational networks.

Identifying a distinctive competence: forecasting ability in the money fund industry

Testing the causal link between a firm‐specific competence and its antecedents or consequences has become a key objective for strategy research over the past decade. On one hand, case studies can identify a competence, but with their small sample size, their retrospective research design, and their tendency toward sampling on the dependent variable, they can not reliably test the causal connection between a competence and its antecedents or its consequences. On the other hand, variance decomposition studies demonstrate the existence of firm‐specific performance differentials but have not identified which particular competencies are responsible for them. The present paper avoids both of these problems by measuring a particular competence across a large sample of organizations over a long period of time, so that a test of statistical causality can be applied to the relationship of this competence to both its antecedents and its consequences. The particular competence studied is the ability of money market mutual funds to forecast changes in short‐term interest rates—a competence known from prior research to be both valuable and rare. In particular, we test the effect of forecasting ability on the economic surplus generated by the fund and its growth. Conversely, we also test the effect of growth on the subsequent development of forecasting ability. Copyright

Cooperation and entry induction as an extension of technological rivalry

Abstract This paper investigates how the structure of cooperation in an industry influences the dynamics of entry by start-up firms. Competition over technological dominance induces the entry of start-up firms into new subfields as incumbent firms seek to expand the consumer base using their technology. By cooperating, incumbent firms succeed to varying degrees in establishing their technologies as a dominant standard by building central positions in a cooperative network. Start-ups tend to enter, however, if there is reasonable certainty that a dominant technology has been established. We find strong support for the relationship between network centrality, as a measure of technological dominance of a standard, and the entry of start-up firms into the semiconductor industry.

Outsourcing of application software: a knowledge management perspective

Summarizes results from an exploratory field study of application software acquisition decisions and outcomes. We argue that outsourcing for application software is easiest when the objective is to obtain knowledge codified in artifacts such as packaged programs and their documentation. It is more complex when the objective is to get access to tacit knowledge about information technology or business processes held by professionals, and most problematic when the firm depends on learning or inventing new knowledge specific to the business process.