James M. Collins

Risk measures in strategic management research: auld lang syne?

Risk is an integral component of strategic management decisions and often appears as an element of empirical studies reported in the strategic management literature. Recent methodological research in the financial economics and management science literatures has, however, raised serious questions about the strategic management literature’s two most widely used measures of firm and business‐level risk: beta (or its derivatives) from the Capital Asset Pricing Model and simple variance (or its variants). This research reviews risk studies published in leading management journals in the past 15 years and summarizes the recent methodological findings in the adjacent literatures. We discuss the implications of these findings for our understanding of risk in strategic management and assess alternative measures of risk and conclude with a discussion of directions for future strategy research. Copyright

Sex-Role Portrayals and the Gender of Nations

Abstract This study compares television advertisements from Japan, Russia, Sweden, and the United States are compared. Consistent with Hofstedes framework which suggests that countries may be characterized along a continuum from masculine to feminine, the authors found that television advertisements from feminine countries featured more depictions of relationships for male and female characters than did masculine countries. Expectations of fewer gender differences in feminine countries than in masculine countries and of greater depictions of productivity being found in television advertisements from masculine countries were not realized, however. Implications of these findings for the international advertiser are considered, and future directions for research are suggested.

The Japanese Vacation Visitor to Alaska: A Preliminary Examination of Peak and Off Season Traveler Demographics, Information Source Utilization, Trip Planning, and Customer Satisfaction

Summary The current study examines data gathered on the Japanese visitor to Alaska during the summer of 1996 and winter of 1997. The survey focused on several topics: the demographic profile of the visitor, their motivations, the sources of information used, actual trip behaviors, and indices of customer satisfaction. Results indicate that the Japanese visitor to Alaska segment may be further subdivided based on season, winter and summer. Implications are discussed.

Strategic Risk: A State Defined Approach

List of figures. List of tables. 1. Introduction. Appendix A. 2. Review and Analysis of Traditional Conceptualizations and Related Measures of Risk. 3. A Concept of State-Defined Risk. 4. A Measure of State-Defined Risk. 5. A Generalized Measure of State-Defined Uncertainty. Appendix B: Weight Systems. 6. Concepts and Measures of State-Defined Prospect and Hold. 7. Recapitulation. 8. Two Illustrative Examples. 9. Ex Post Risk and Return Relationships. 10. Asymmetries in State-Defined Risk and Prospect. 11. Implications, Contributions, Limitations, and Directions for Future Research. Bibliography. Index.

R&D and product obsolescence

Claims of “planned obsolescence” have often been made by various consumer groups. Bulow (1986) examined a monopolists choice of product durability and found that firms who sell their products tend to choose lower durability levels than firms that rent. We argue that the speed of new product development may be a more appropriate proxy for obsolescence than is durability. Reformulating Bulows model in terms of R&D choice rather than durability choice, we find that sales firms engage in higher levels of R&D than do rental firms. Additionally, we provide an empirical example using data from the copier and computer industries which also suggests a strong positive relationship between the R&D intensity of a firm and the proportion of output sold versus rented.

Is Smoking As Deadly As You Think? A Research Methods Perspective

During the recent tobacco wars between the US cigarette industry and antismoking groups, estimates of the public health dangers attributable to domestic cigarette consumption played a pivotal role in persuading government officials and consumers to support regulatory restrictions. Antismoking persons generally argue that cigarettes are high in risk and low in benefits and may support this stereotype by pointing to the US surgeon generals (1989) estimate of attributable risk that over 400,000 American adults die annually from smoking-related diseases. However, most people are unaware of the statistical calculations behind these estimates. The Doll-Peto population-attributable-risk ( PAR) results dominatedBusiness Weeks (1982) coverage of the tobacco wars.

A Generalized Measure of State-Defined Uncertainty

To this point in the development, attention has been focused on the development of entropic measures of uncertainty for a system of entities as a whole. Such classical measures of informational uncertainty assume that all outcomes in a system of events are of equal importance to a managerial decision maker. There is no distinction between the treatment of a category shift from first to last category and the treatment of a category shift from second to third category. However, other things being equal, it is reasonable to suppose that these two events should contribute differently to an evaluation of a firm’s state-defined uncertainty. What is needed is a way to distinguish among different classes of category shifts in terms of their amount of loss or gain if their differences and evaluation are to be reflected in a measure of risk.

Concepts and Measures of State-Defined Prospect and Hold

The focus of concept development and measurement to this point in the exposition has been on the concept of risk and, by definition, the realm of loss. This focus differs significantly from the emphasis in almost all research literature on risk. As mentioned in Chapter 1, the bulk of the literature in strategic management has utilized a measure of risk—variance—that does not distinguish positive from negative changes in performance (March and Shapira, 1987). Similarly, s from the CAPM, only measures association with movements in the market line, not whether those changes were positive or negative in nature. Only the few studies (e.g., Hogan & Warren, 1972, 1974; Bawa & Lindenberg, 1977; Harlow & Rao, 1989) that employed a semivariance or mean lower partial moment approach explicitly treat risk as being a downside phenomenon.

A Concept of State-Defined Risk

The discussion contained in the preceding chapter demonstrated that during the past twenty years researchers in strategy and in a range of strategy-related disciplines have developed a paradigm of risk that has found wide-spread use, if not whole-hearted acceptance, among strategy theorists. As discussed in Chapter 2, this paradigm looks at risk in terms of fluctuations of outcomes and has usually been operationalized in terms of a variance-based measure of some sort. Unfortunately, not only have the predominate measures of risk in the literature been shown to be lacking, in the course of elaborating and using this paradigm of risk researchers have failed to determine if the paradigm parallels common managerial usages of the idea of risk. In spite of all of the research which has been directed toward developing a reasonable general model of risk, an underlying problem, of special interest to strategy theorists and practitioners, remains: What is risk in a strategic context, how can it be conceptualized, and how, given such a conceptualization, can strategic risk be measured? This chapter will address these issues in a state-defined context.

Two Illustrative Examples

The U. S. airline industry provides a particularly rich research environment in which to examine the efficacy of new conceptualizations of risk and prospect. The industry is well-defined along several meaningful regulatory, market, and managerial dimensions (Wycoff & Maister, 1977), and may be divided into strategically distinct groups of “major” and “national” airlines (as classified by the Federal Aviation Administration in 1984). Further, the Airline Deregulation Act of 1978 led to dramatic changes in the industry’s structure, presumably resulting in increased levels of strategic risk in an industry previously characterized by a tranquil environment determined by governmental fiat (Ruefli, 1986, 1989, 1990d). In many respects, the industry offers an expansive “natural experiment” in which firms and groups of firms may be examined as they strategically react to a great unsettling event. Because the state-defined risk approach filters out effects of events that affect all firms in the reference set in a proportional way, the differential effects of an event such as deregulation are what remain for examination.