Jackson A. Nickerson

Team Incentives and Worker Heterogeneity: An Empirical Analysis of the Impact of Teams on Productivity and Participation

This paper identifies and evaluates rationales for team participation and for the effects of team composition on productivity using novel data from a garment plant that shifted from individual piece rate to group piece rate production over three years. The adoption of teams at the plant improved worker productivity by 14 percent on average. Productivity improvement was greatest for the earliest teams and diminished as more workers engaged in team production, providing support for the view that teams utilize collaborative skills, which are less valuable in individual production. High‐productivity workers tended to join teams first, despite a loss in earnings in many cases, suggesting nonpecuniary benefits associated with teamwork. Finally, more heterogeneous teams were more productive, with average ability held constant, which is consistent with explanations emphasizing mutual team learning and intrateam bargaining.

Interorganizational Trust, Governance Choice, and Exchange Performance

This paper looks at when and how preexisting interorganizational trust influences the choice of governance and in turn the performance of exchange relationships. We theorize that preexisting interorganizational trust complements the choice of governance mode (make, ally, or buy) and also promotes substitution effects on governance mode choice while impacting exchange performance. We evaluate hypotheses using a novel three-stage switching regression model and a sample of 222 component-sourcing arrangements of two assemblers in the automobile industry. Analysis of our data broadly supports our hypotheses. High levels of preexisting interorganizational trust increased the probability that a less formal, and thus less costly, mode of governance was chosen over a more formal one. This finding suggests a substitution effect of interorganizational trust on governance mode choice that in turn shapes exchange performance. We also found a complementary effect of trust on performance: Regardless of the governance mode chosen for an exchange, trust enhanced exchange performance. Additional evidence of the complementary effect of trust on performance was that trust somewhat reduced interorganizational conflict.

Being Efficiently Fickle: A Dynamic Theory of Organizational Choice

A central proposition in organization theory is that discrete organizational forms are matched to environmental conditions, market strategies, or exchange conditions. This paper develops a contrary theoretical proposition. We argue that efficiency may dictate modulating between discrete governance modes (i.e., structural modulation) in response to a stable set of exchange conditions. If governance choices are discrete, as much of organization theory argues, then the consequent steady-state functionality delivered by these organizational forms is itself discrete. However, if the desired functionality lies in-between the steady-state functionality delivered by two discrete choices, then efficiency gains may be available by modulating between modes. We develop an analytical model of structural modulation and examine factors that influence when modulation is ef- ficiency enhancing, as well as the optimal rate of modulation. We conclude that under certain conditions structural modulation is efficiency enhancing. Further, contrary to theories that highlight the potentially destructive consequences of inertia on organizational survival, we identify important efficiencyyielding benefits of inertia.

Diversity and Productivity in Production Teams

The popular press often touts workforce demographic (e.g., ethnicity and age) diversity as profit enhancing. Diversity may reduce the firms communication costs with particular segments of customers or yield greater team problem solving abilities. On the other hand, diversity also may raise communication costs in teams thereby retarding problem-solving and diminishing productivity. Unfortunately, the effect of team diversity on productivity has not been studied formally and there is little empirical evidence concerning the impact of diversity on productivity. Diversity in ability enhances the team productivity if there is significant mutual learning and collaboration within the team, while demographic diversity is likely to harm productivity by making learning and peer pressure less effective and increasing team-member turnover. We evaluate these propositions using a novel panel data from a garment plant that shifted from individual piece rate to group piece rate production over three years. Because we observe individual productivity data, we are able to econometrically distinguish between the impacts of diversity in worker abilities and demographic diversity. Our results indicate that teams with more heterogeneous worker abilities are more productive. Holding the distribution of team ability constant, teams with greater diversity in age are less productive, and those composed only of one ethnicity (Hispanic workers in our case) are more productive, but the findings for team demographics are not robust to alternative model specifications. Finally, workers on all Hispanic teams are less likely to leave the team, even after accounting for team productivity, indicating some preference for segregation among these workers.

Why do firms make and buy? Efficiency, appropriability and competition in the trucking industry

Most literature examining firms’ make and buy decisions fails to explore when firms use both governance structures for similar transactions. We examine this phenomenon in the trucking industry, where it is common for a carrier to use both employee drivers and outsourcing at the same time. We argue that efficiency, appropriability and competition concerns lead carriers to organize on a haul-by-haul basis.We empirically examine our theory using a unique data from a small trucking firm in St Louis, MO, and find broad support for our hypotheses.We also discuss the possibility of alternative explanations of market power, capacity constraint, agency theory and property right theory for the use of make and buy. We conclude that these theories do not explain this phenomenon in the trucking industry. Thus, we conclude that it is the interaction of efficiency, appropriability and competition concerns that drive the decision to make and buy in the trucking industry.We further postulate that these concerns can manifest themselves in other industries, suggesting that our theory has applicability beyond trucking.

Data reduction techniques and hypothesis testing for analysis of benchmarking data

This paper proposes a data reduction and hypothesis testing methodology that can be used to perform hypothesis testing with data commonly collected in benchmarking studies. A reduced-form performance vector and reduced-form set of decision variables are constructed using the multivariate data reduction techniques of principal component analysis and exploratory factor analysis. Reductions in dependent and exogenous variables increase the available degrees of freedom, thereby facilitating the use of standard regression techniques. We demonstrate the methodology with data from a semiconductor production benchmarking study.

Does Ownership Affect the Variability of the Production Process? Evidence from International Courier Services

A firm often must ensure that products or services it produces match customer expectations. We define variability as any deviation in a production process yielding products or services whose attributes differ from the firms stated target specifications. Firms pursuing products marked by low variability are more subject to maladaptation costs if production processes are not adjusted to avoid nonconformities. Furthermore, such adjustments often require idiosyncratic investments (e.g., dedicated information technology systems), thereby creating contractual hazards and potential underinvestment. We hypothesize that ownership of sequential activities in the value chain helps mitigate problems associated with maladaptation as well as suboptimalities in transaction-specific investment, thereby resulting in lower variability. Using data on delivery times from the Japanese international courier and small package services industry, we assess the variability-reducing role of ownership in two complementary ways. The first approach is parametric, allowing us to assess the impact of ownership on the variance associated with delivery time; here we focus on shipments that frequently fail to arrive precisely within the time period initially expected by customers. The second approach is more consistent with the notion of reliability, or the likelihood that shipments will not arrive later than expected: we nonparametrically estimate the distribution of deviations between actual and expected delivery time, and verify how distinct organizational choices change the distribution. Ownership of multiple segments yields a particularly pronounced effect on both variance and reliability. Ownership bestows variability-reducing benefits of ownership, especially when ownership is observed in multiple stages of the value chain.

New Institutional Economics: New Institutional Economics, Organization, and Strategy

Introduction Although the roots of research into business strategy were seeded in the late 1960s with Igore Ansoff and Richard Brandenburg (1967), the field broke through to the surface and began to grow quickly in the 1970s and early 1980s. In particular, 1980 was a watershed year because of the launching of the fields first major journal, the Strategic Management Journal , and Michael Porters (1980) book, Competitive Strategy , which was heralded in the business community. Since then research into business strategy has been a “growth opportunity,” attracting scholars from many disciplines and subdisciplines and publishing an increasing number of papers each year in a widening number of journals of both general and special interest. Transaction cost economics (TCE) is one of the subdisciplines that planted seeds in the strategy field and nurtured them with notable success. The good news for those studying TCE is that the field of strategy remains fertile and, in our opinion, TCE remains a useful tool for planting many more seeds as well as for harvesting opportunities. Research into business strategy is motivated by three questions: (1) Why do some firms earn more rents than other firms, even in the same industry? (2) Why do performance differences persist? And (3) what can managers do to earn higher and enduring rents for their firms? (For a discussion, see Rumelt, Schendel, and Teece 1991.

New frontiers in strategic management of organizational change

Why and in what direction do organizations change?1 Early responses to these questions generally fell into two camps. Adaptationist scholars proposed theories based on the assumption that organizations have wide latitude to change their structure, strategy, and scope. In the adaptationist view, organizations are able to change in the direction dictated by their environment or by the choices of organizational decision makers, whether in the pursuit of rational action (e.g., Lawrence & Lorsch, 1967; Williamson, 1985) or blind action (Weick, 1979). In its extreme form, the adaptationist view implied that firms can and do adapt nearly frictionlessly, suggesting that if there is a performance penalty associated with inappropriate organization, misaligned firms will change so as to reduce or eliminate this misalignment. Alternatively, selection-based theories, notably structural inertia theory within organizational ecology, contended that inertial forces tend to stymie attempts at organizational change (Hannan & Freeman, 1984). In its extreme form, the selectionist view implied that firms can rarely change successfully; instead, if there is a performance penalty associated with misalignment, misaligned firms will be “selected out” of the population.

A Knowledge-Based Theory of the Firm - a Problem-Solving Perspective

Knowledge-based theorists have developed two primary arguments to explain the existence of firms: one based on avoiding knowledge transfer and the other based on facilitating knowledge transfer. These arguments are not only contradictory, but also fail to predict when hierarchies supplant markets and when markets prevail. This paper develops a knowledge-based theory of governance choice that addresses these shortcomings by explaining how knowledge formation needs, described by various solution landscapes, dictate governance selection. Governance modes of market, authority-based hierarchy, and consensus-based hierarchy are prominently featured in the theoretical analysis.