Jongwook Kim

A Strategic Theory of the Firm as a Nexus of Incomplete Contracts: A Property Rights Approach

This article maintains that insights gained by joining property rights theory with Austrian economics can contribute to the dynamic capabilities literature by giving context to key constructs in the dynamic capabilities approach, particularly the nature of organizational processes and resource positions. By defining resources and capabilities as bundles of property rights, scholars can theoretically consider how firms develop, deploy, and renew those resources and capabilities by a process of bundling and rebundling resource combinations. Furthermore, central to bundling resource combinations is the contracting process, which generates information that leads to more efficient solutions that are achieved through intense bargaining and ingenuity, that in turn lead to discovery of new economic opportunities. However, in a world of positive transaction costs, the notion of the firm as a nexus of (complete) contracts is less useful for the authors’ purposes; rather, the firm is defined as a nexus of incomplete contracts, which enables the possibility of entrepreneurial alertness and ingenuity. Thus, the authors maintain that the contracting process is a form of the entrepreneurial discovery process enabling firms to sense and seize new economic opportunities. Furthermore, the authors suggest that property rights theory informs a contractual process-oriented approach for analyzing how dynamic capabilities are developed, sustained, and rejuvenated and in so doing intertwines firm boundary issues with the capabilities dimension of a strategic theory of the firm.

Appropriating economic rents from resources: an integrative property rights and resource-based approach

Resource-based theory focuses on how economic value is created and sustained, providing the theoretical underpinnings for explaining and predicting sustainable competitive advantage. An implicit assumption of resource-based theory is that the firms property rights to such resources are secure. However, where property rights to potentially value-creating resources are not fully secure, as in business contexts where multiple parties are jointly participating in creating economic value, potentially value-creating combinations of resources may not be realised. Similar difficulties may arise within the firm, where multiple stakeholders that supply factor inputs are jointly producing economic value. To address these theoretical issues, we map out a property rights theory of the firm that is grounded in resource-based theory on economic rents. We emphasise how firms create economic rents (ex ante) as well as how firms appropriate or capture economic rents (ex post).

Physical distance vs. clustering as influences on contracting complexity for biopharmaceutical alliances

Abstract We examine whether the presence of alliance firms in the same regional cluster or in close physical proximity influences contracting behaviour of biopharmaceutical companies by enhancing coordination and mitigating the need for control. The literature addressing geographical proximity and alliance contracting fails to make a clear distinction between physical co-location and co-location within a cluster, although the two attributes are conceptually distinct. We find that geographic proximity is not related to contracting behaviour. The impact of co-location within a cluster is more nuanced. Specifically, we find that co-location in the San Francisco Bay Area cluster is associated with less complex contracting; however, co-location in other biotechnology clusters does not seem to be related to contracting behaviour. We believe that the informal business environment characterising the Bay Area cluster, as well as unique roles played by venture capital and law firms located in the Bay Area account for the distinct result.

Distinguishing between spinouts and non-spinouts: allocating control rights in biotechnology alliances

Spinouts are startups founded by employees of established firms in the same industry. Spinouts inherit technological and market-related knowledge from their parent companies. In contrast, non-spinout startups that do not have such close connections to an industry incumbent firm will have a different endowment of technological and market knowledge. Given this contrast between different startups in a risky science-based industry such as biotechnology, we explore whether spinout startups are different from non-spinouts in how control rights are allocated in strategic alliances. We develop a predictive model to distinguish whether an alliance is a spinout startup or a non-spinout startup.