Jack A. Nickerson

Why Firms Want to Organize Efficiently and What Keeps Them from Doing So: Inappropriate Governance, Performance,and Adaptation in a Deregulated Industry

This paper integrates content-based predictions of transaction cost economics with process-based predictions of organizational change to understand adaptation to deregulation in the for-hire trucking industry. We predict and find that firms whose governance of a core transaction is poor (according to transaction cost reasoning) will realize lower profits than their better-aligned counterparts and that these firms will attempt to adapt so as to better align their transactions. Results show that several organizational features affect the rate of adaptation: (1) firms with large investments in specialized assets adapt less readily than firms that rely on generic assets, (2) firms with unions adapt less readily than firms without unions, (3) firms that must replace employee drivers with owner-operators adapt less readily than firms that must replace owner-operators with employee drivers, and (4) entrants adapt more quickly than incumbent carriers. There is evidence of institutional isomorphism in that although carriers move systematically to reduce misalignment, they do so less assiduously when this will make their governance of drivers look less like that of nearby, similar carriers. Finally, our results indicate that firms that ultimately exited adapted more quickly than firms that survived.

Antecedents and Performance Implications of Contracting for Knowledge Workers: Evidence from Information Technology Services

This paper develops a theory that predicts why firms organize their knowledge workers as employees versus independent contractors and predicts the performance implications of this choice. It then empirically examines this organizational choice--which our theory predicts will be driven by contracting difficulties arising from expropriation concerns, measurement costs, and interdependence--and its implications for profitability for 190 information technology service projects. Using a two-stage switching regression model, our analysis shows that projects aligned according to our theory are on average more profitable than misaligned projects and that firm capability impacts organizational choice but not profitability.

Towards Reconciling Transaction Cost Economics and the Knowledge-based View of the Firm: The Context of Interfirm Collaborations

This paper presents a set of relationships that have the potential to reconcile the dispute between the knowledge-based view of the firm (KBV) and transaction cost economics (TCE). Several KBV scholars have argued that governance choice need rely only on bounded rationality and not on opportunism where TCE scholars maintain that both behavioural assumptions are needed to explain governance choice.We help to resolve part of the debate by developing an extension ofTCE to encompass certain knowledge-based attributes of transactions.We argue that high-levels of two knowledge transfer attributes - knowledge tacitness or problem solving complexity - lead to the adoption of the knowledge management practices - high-bandwidth channels or idiosyncratic communication codes - to economize on the cognitive limitations of man. It is these knowledge management practices that generate contracting hazards for whichTCE, and its attendant concern about opportunism, predicts equity-based collaborations are superior to non-equity-based collaborations.The linkages between knowledge transfer attributes, knowledge management practices, and governance choice add value via implications for managers which are not readily apparent from either theory alone.

The Antecedents and Performance Implications of Cooperative Exchange Norms

Our study investigates the antecedents and performance implications of cooperative exchange norms. We argue that, in early relationships, the level of expected cooperative norms in an exchange is the result of a calculative process facilitated by transaction attributes: joint transaction-specific investments and observability. The greater the level of these two exchange attributes, the greater the level of cooperative exchange norms, all else being equal. We further argue that the realized level of cooperative exchange norms can deviate from the expected level because the development of such norms is the result of social processes that management cannot directly and fully control. This gap between realized and expected norms affects exchange performance. Performance suffers when the realized level of cooperative exchange norms falls below the expected level, but overshooting expectations lays a critical groundwork for repeat transactions. The analysis of a survey of 182 collaborative R&D alliances provides initial support for our theory.

Strategic Management of R&D Pipelines with Cospecialized Investments and Technology Markets

The theoretical literature on managing R&D pipelines is largely based on real option theory making decisions about undertaking, continuing, or terminating projects. The theory typically assumes that each project or causally related set of projects is independent. However, casual observation suggests that firms expend much effort on managing and balancing their R&D pipelines, where managing appears to be related to the choice of R&D selection thresholds, project risk, and whether to buy or sell projects to fill the pipeline. Not only do these policies appear to differ across firms, they also appear to vary over time for the same firm. Changes in management policies suggest that the choice of R&D selection thresholds is a time-varying strategic decision and there may be some type of vertical interdependency among R&D projects in different stages. In this paper we develop a model using dynamic-programming techniques that explain why firms vary in their R&D project-management policies. The novelty and value of our model derives from the central insight that some firms invest in downstream cospecialized activities that would incur substantial adjustment costs if R&D efforts are unsuccessful whereas other firms have no such investment. If transaction costs in technology markets are positive, which implies that accessing the market for projects is costly, these investments lead to state-contingent project-selection rules that create a dynamic and vertical interdependency among R&D activities and product mix. We describe how choices of R&D selection thresholds, preferences over project risk, and use of technology markets for the buying and selling of projects differ by the state of the firms pipeline, the magnitude of transaction costs in the adjustment market, and the magnitude of technology costs. These results yield interesting managerial and public policy implications.

Are Supply and Plant Inspections Complements or Substitutes? A Strategic and Operational Assessment of Inspection Practices in Biotechnology

This paper theoretically and empirically examines the conventional wisdom in procurement management that often portrays supply inspections and supplier plant inspections as substitutes. We develop a theoretical model that focuses on potential internal spillover costs of the buyer receiving low-quality inputs and external spillover costs should low-quality inputs go undetected. Key to our analysis is the condition of whether a buyer can commit to the intensity of supply inspection. If a buyer cannot commit, supply inspections and plant inspections are substitutes, as widely believed. The two types of inspections, however, may become complements when a buyer is able to commit to the intensity of supply inspection. Complementarity is especially likely when (a) external spillovers are smaller than expected internal spillovers, which depends on the level of buffer inventory, (b) when knowledge sharing between buyer and supplier becomes more effective as the supplier allocates more resources to learning for quality improvement, or (c) when hiding aspects of the production processes is easier for suppliers. We empirically evaluate our model with a new data set drawn from a large biotechnology manufacturer. Empirical results provide broad support for theory, which, we argue, might help to explain variation in inspection practices across industries. Our theory and empirical analysis contribute to the literatures on strategic management, organizational economics, and procurement management by highlighting the organizational and strategic use of inspection practices.

Regulator Heterogeneity and Endogenous Efforts to Close the Information Asymmetry Gap

The now standard principal-agent model of regulator-firm interactions typically assumes the presence of a single regulator and an exogenously determined information asymmetry between the principal and the agent. In this paper we draw upon a unique data set of regulatory inspections conducted by the U.S. Food and Drug Administration (FDA) to explore the consistency of these assumptions with the actual practice of regulators. We find that the canonical assumptions of the agency paradigm are strained by, if not altogether inconsistent with, the key practical realities of regulation by the FDA. Our analysis uncovers several dimensions along which regulators actively and endogenously seek to close the information asymmetry gap. We also find considerable regulator heterogeneity, which in turn depends in part upon the specific training and experience of individual regulators.

Intellectual Capital Management Strategy: The Foundation of Successful New Business Generation

This paper describes a process that integrates business, technology and intellectual capital strategy to identify and exploit business opportunities. It then discusses how business, technology and intellectual capital strategy are linked. The authors introduce a competitive strategy process (or model) which they call Strategy Integration Analysis (SIA). Two examples of the application of SIA by two different technology‐based firms are provided which emphasize the intellectual capital and technology aspects.

Proprietary Information Networks and the Scope of the Firm

International air freight, once the exclusive domain of heavy regulation, is now a global market fraught with intense competition by for-profit firms. One feature of this competition is that the organizational form of carriers frequently differs. For an example, consider documents and parcels exported by the Japanese international air courier and small package (IC&SP) industry. Some carriers are vertically integrated, which is to say that a carrier owns domestic freight forwarding and trucking operations, international air, and foreign freight forwarding and trucking operations. Federal Express, which owns both domestic and foreign trucking as well as international air operations, typifies a fully integrated organizational form for IC&SP service. In contrast, other carriers employ a more disaggregated organizational form outsourcing one or more of these operations. Overseas Courier Service Co., Ltd., for instance, typifies a freight forwarder that owns a foreign freight forwarder but contracts for some of its domestic trucking services, for international air operations, and for foreign trucking services—an organizational form sometimes referred to as a network organization. Between these two extremes can be found a variety of ownership structures with firms owning some, but not all of these activities. Moreover, carriers may vertically integrate transportation segments for one destination, yet contract out for another. What accounts for this organizational heterogeneity? Why do some firms vertically integrate into some segments of IC&SP service while other firms rely on network organizations?