Jesper Blomberg

Gaining external knowledge - boundaries in managers' knowledge relations

Purpose – The purpose of this paper is to investigate interorganizational knowledge exchange from the perspective of the individual manager/professional. The paper aims to study the kinds of relationships managers/professionals in SMEs are involved in and the way in which they construct boundaries within and around these interorganizational relationships enabling and hindering knowledge acquisition. Design/methodology/approach – The paper is based on 31 interviews with managers and professionals in seven SMEs. Interviews focused on the interorganizational relationships they viewed as important sources of knowledge for themselves and their organizations. Findings – The study shows that managers/professionals gain vital knowledge from far more interorganizational relationships than those formally designed for knowledge acquisition. The most important sources of knowledge were relationships with suppliers and customers. The study also identifies five boundary dimensions – interests, interpretive frameworks, trust, private/organizational and priority – which respondents use in constructing boundaries within and around the relationships. These boundary dimensions represent important conditions for knowledge acquisition through the relationship. Research limitations/implications – The five boundary dimensions are generated based on a sample of SMEs in Sweden. They must thus be regarded as provisional and need to be validated in further research including larger organizations in different cultural contexts. Future studies should also focus on the dynamics of the boundaries and their interrelations as relationships evolve. Originality/value – This paper adds to research on interorganizational knowledge acquisition by taking an individual level perspective and identifying boundary dimensions through which the relationships and their knowledge flows are shaped.

The multiple worlds of equity analysts: valuation, volume, and volatility

ABSTRACT This paper contributes to the increasing research on how experts within financial institutions co-produce and organize financial markets, and in particular how equity analysts enact stock markets characterized by high volume and volatility. The 20 equity analysts studied give qualitatively different accounts of what, from an outsiders perspective, appear to be very similar work. The analysts understand investment objects, equity markets, and what constitutes good analytical work in qualitatively different ways. This heterogeneity, or multiplicity, could be one source of the, unexplained by orthodox financial theory, ‘excess’ volatility and ‘excess’ trading volume on financial markets. Therefore, the paper complements accounts within heterodox finance theory and sociology-based studies of financial market activities.

Bankers — Matchmaking and Midwifery

Where do they come from, the shares that populate the stock exchanges, the Reuter-screens, and the pages of the financial press? It is time to go back stage and visit the ‘construction department’ of investment banking: corporate banking. Such a visit is problematic, however, since corporate banking practices are much less public than the practices of the expert groups discussed previously. Indeed, corporate banking practices are highly insulated even from these other parts of investment banking. Nonetheless, we will not only provide an overview of how these experts work (in this chapter) but also follow corporate banking expertise at work in a specific project involving the introduction of a new share on the stock exchange (in Chapter 7). This will allow us to examine the role of corporate banking in structuring contemporary business life and in organizing stock markets by constructing and reshaping shares.

Brokers Selling Investment Advice

Twenty-five years ago, the stockbroker was literally in the centre of the stock market. Standing on the actual market floor, following the stock prices on large notice boards, moving physically between telephones used to contact investors and the trading zones in which they shouted out their ‘desires and intentions to buy or sell’ (Baker, 1984:789). This was the familiar open-outcry auction system. Although these markets may have come across as chaotic — at times they probably were — Baker’s classic study suggested that they nonetheless contained relatively stable patterns of social interaction among the brokers. Behind the scenes, away from the bustling trading floors, you could also find a few analysts providing support to the brokers in the form of in-depth analyses of firms and industries. The brokers would assign specific tasks to analysts working for their brokerage firm when and if they felt that this was called for. Typically, however, the broker’s own knowledge of the firms and industries behind the stocks they traded was sufficient to get the work done.

Understanding Investment Banking Practices

This book is about stock markets and the professionals that engage with them. Not long ago, financial markets were epitomized by the stock exchange, a physical floor where traders communicated about, and engaged in market transactions on behalf of, buyers and sellers. Developments during the past 25 years or so, however, have fundamentally reshaped the financial markets; these include the liberalization of national regulatory frameworks and the transformations caused by digitization (Sassen, 2005). The result has been a tremendous growth in the number of transactions, the number of products, the number of markets and, not least, in the value of financial assets worldwide.

A Brief History of Investment Banking

The origins of investment banking are many and they reach far back in time. As noted by Fleuriet (2008) few of those working in contemporary investment banking know its origins. In this chapter we approach investment banking by offering a brief account of a long history of organizational developments and innovations that, among other things, produced investment banking as we know it today. This history will show that the analytical stance applied in this book is supported by historical evidence. The history of investment banking is one of interaction between bankers, businessmen, investors, ideas and technical solutions. Through their actions, these actors co-constitute investment banking while enacting exchanges of securities.

Traders Activating the Stock Markets

Many of the financial experts interviewed for this study have brought up the complex personality needed to be a successful trader. In the literature, traders have been compared to test pilots in the US Air Force, which implies that both categories either ‘have it’ or not; that they need to be made out of ‘the right stuff’ (Bruegger, 1999). For traders, the central abilities seem to be to comprehend the rapid shifts occurring in the various markets with which they engage and to have the nerves to function under pressure. Due to their close and frequent involvement in transactions on specific financial markets, traders are seen as operating at the centre of the market mechanism (Abolafia, 1996). Their role has been further accentuated by the rapid growth in both the number of financial transactions executed and the value of the securities transacted. Even though there is a wide range of securities on sale in contemporary financial markets, the stock markets remain central to the financial industry. Figure 3.1 illustrates the value of shares traded annually on the global stock markets since 1995. The periods of rapid growth leading up to the dot-com crash in 2000 and to the global financial crises in 2008 can be clearly seen.

Behind the Scenes — Management, Risk and Compliance

In previous chapters, representatives of the four expert groups have often described themselves as entrepreneurs, suggesting that their work is like having ‘a business of their own, within the business’. The image they convey is one of competent professionals being given considerable leeway concerning how to plan and conduct their work. The focus is said to be on delivering (financial) results rather than on following specific procedures. They also suggest that this state of affairs is conducive to high performance in situations where you need to respond quickly and flexibly to external changes and adjust to the specific needs of your clients. As part of this characterization, managerial activity is regularly downplayed, for example: ‘as long as we deliver, they do not interfere’. This description of investment banking practices is hardly unique for our study and has led some observers to characterize investment banks as ‘self-designing organizations’, emphasizing the entrepreneurial facet of the experts’ work (e.g. Eccles and Crane, 1988).

Organizing Investment Banking

How is investment banking organized? In this chapter, we directly address the first of our two major research questions. As shown in previous chapters, specialized expert groups contribute to jointly perform investment banking. As suggested in Chapter 1, the outcome of this joint performance — investment banking — needs to be both innovative and coordinated. Our account of investment banking, as well as previous studies, thus leads us to address a series of traditional issues in organizational analysis. Is it possible for investment banking to be spontaneous, innovative, coordinated, as well as controlled? If so, how? What constitutes the ‘self-designing’ process that Eccles and Crane (1988) claim to be characteristic of investment banking? What constitutes the activities of bricolage that Engelen et al. (2010) argue is necessary for ‘improvised financial innovation’? How is investment banking organized to enable the ‘creative adoptions’ described by Beunza and Stark (2005)? And how is this type of organizing coupled with the explicit attempts by management to coordinate and control?

Enacting Stock Markets

How do investment banking practices contribute to shaping stock markets and, by extension, the financial markets at large? To answer this question, we go beyond the inter- and intra-professional interactions discussed in Chapter 9 to discuss how the expert practices of investment banking and the construction of share identities affect other actors. Eccles and Crane (1988:53) stress that investment banks are ‘managed from the outside in’; that they are organized to handle the external network of investors, corporations and competitors that forms as a consequence of the intermediating functions performed by the expert groups. While we acknowledge the porous boundaries of investment banking organizations and their close links to these groups of actors, we emphasize how investment banking practices drive, rather than are driven by, such external constituents (Folkman et al., 2007).