Peter W. Roberts

Austrian Insights on Strategic Organization: From Market Insights to Implications for Firms

A review of the strategy and organizations literature suggests that insights from Austrian economics are beginning to influence our thinking about market-level dynamics (Dickson, 1992; Jacobson, 1992; Hill and Deeds, 1996; Young et al., 1996; Roberts, 2000). Surprisingly, however, there are few, if any parallel efforts devoted to developing implications of the Austrian view at the level of the firm. Yet without such efforts there is a significant risk of overdeveloping our accounts of how the actions of entrepreneurial managers combine with other forces to create market turbulence, while under-attending to the specific strategies and organizational forms that firms’ managers adopt to compete effectively in these kinds of markets. In this essay, we argue that the principal tenets of Austrian economics suggest the possibility of fresh strategic and organizational thinking at the firm level. In particular, they provide the seeds of a novel theory of strategy that relies on a logic of sensing and seizing opportunities in turbulent markets, rather than a logic of positioning in relatively stable markets (Porter, 1985) or a logic of resource leverage in incrementally changing markets (Barney, 1991; Wernerfelt, 1984). This Austrian-based theory would focus on seeking out (rather than avoiding) uncertainty, and on managers who are especially alert to opportunities derived from unlikely sources. Along parallel lines, Austrian economics also suggests a theory of organization that relies on structures and processes that enable experimentation and flexibility. Pushing these ideas a step further, an Austrian orientation (perhaps uniquely) implies the confluence of strategy and organization. Indeed, in turbulent settings the organization itself may be the strategy.

Evaluative Schemas and the Mediating Role of Critics

How do critics enable producers and consumers to come to mutually agreeable terms of trade? We propose that critics offer more guidance to those who set prices when their quality assessments are structured by clearer evaluative schemas. Schema clarity enables producers to accurately anticipate the quality assessments that critics will disseminate to the market. This allows their posted prices to center more faithfully on prevailing conceptions of quality. We then argue that the position of a producer within the markets social structure—in terms of its prior coverage, reputation, and niche width—influences the degree to which it is guided by clear evaluative schemas. We test these predictions in the market for U.S. wines. After elaborating a novel approach to inferring the clarity of evaluative schemas within different varietal categories, we demonstrate that list prices are less variable around expected levels when the schemas used to evaluate quality are clearer. Moreover, this effect is stronger among more relevant and more focused producers in each category.

Network Progeny? Prefounding Social Ties and the Success of New Entrants

Entrepreneurs that were employed by successful industry incumbents prior to founding tend to confer advantages on their new organizations. We propose and then demonstrate a similar “network progeny” effect rooted in the social relationships that form among entrepreneurs. Our analysis of new entrants into the Ontario wine industry shows that prefounding friendship ties of the founders of one especially prominent entrepreneurial firm led to significantly higher ice wine prices. This attests to the promise of a network progeny extension of the parent--progeny account of new firm success. Follow-on analysis indicates that this effect is not attributable to an entrants ability to make ice wines of superior quality or to it having access to better distribution knowledge. We therefore conclude that having a social tie to this prominent entrepreneurial firm generated reflected prominence that enhanced the valuations and therefore prices of wines made by connected market entrants. This paper was accepted by Jesper Sorensen, organizations.

Balancing the skill sets of founders: Implications for the quality of organizational outputs

The jack-of-all-trades theory of entrepreneurship suggests that technically adept employees require additional skills in order to effectively transition to the more generalist role of founder. However, it is silent about the effect of broader skill acquisition on the quality of the outputs that new ventures produce. This silence is problematic given ecological research that indicates how working across categories can hinder one’s performance in a focal role. This article examines the relationship between the pattern of prior career experiences of founders in the restaurant industry and consumer evaluations of the food that their restaurants produce. According to this analysis of 404 Toronto restaurants, founders with more prior kitchen experience receive superior food quality evaluations. However, their prior ownership experience – that which broadens their skill sets – has more tenuous implications. At the extreme, food quality ratings associated with restaurant founders who also claim to be head chefs at founding are harmed by their accumulated ownership experience.

Crossing a categorical boundary: the implications of switching from non-kosher wine production in the Israeli wine market

With growing interest in the penalties associated with straddling market categories, it is important to develop a stock of evidence about the relative importance of consideration and valuation penalties in different empirical settings. In this chapter, we isolate the possible adverse implications for currently kosher Israeli wine producers that were established as non-kosher producers. Our analysis suggests that crossing the kosher categorical boundary exposes these producers to experience-based penalties that are reflected in lower product quality ratings. However, we find no evidence of additional penalties associated either with consideration (i.e., market access) or with the possession of a convoluted organizational identity.

Founders and the Social Performance of B Corporations

Despite increasing attention in management journals, we still have little evidence about the factors that systematically influence the social performance of organizations. This is due in part to th...

The Changing Effectiveness of Local Civic Action: The Critical Nexus of Community and Organization

We examine changes in the effectiveness of local civic action in relation to changes over time in racial diversity and income inequality. Local civic action comprises situations in which community members come together—typically with support from local organizations—to address common issues. The collective orientation of local civic action makes it sensitive to changes in local social conditions. As these changes unfold, local organizations become differentially able to support civic action. Here, our core argument features the process through which community members associate with different local organizations and how mandated versus voluntary association results in distinct responses to increased social and economic heterogeneity. We test this argument using three decades of data describing local campaigns of the annual Trick-or-Treat for UNICEF program. A baseline model shows that within-county increases in racial diversity and income inequality are associated with diminished campaign effectiveness. Subsequent models that separate out campaigns organized by schools, churches, and clubs show that schools are relatively more effective mobilizers as racial diversity and income inequality increase, arguably due to the greater demographic matching that is induced by mandated school participation.

Sean Safford: Why the Garden Club Couldn't Save Youngstown: The Transformation of the Rust Belt.SaffordSean. Why the Garden Club Couldn't Save Youngstown: The Transformation of the Rust Belt.Harvard University PressCambridge, MA:2009. 212 pp.

There is much to like about Why the Garden Club Couldn’t Save Youngstown . In the spirit of well-researched regional analyses like Saxenian’s (1994) Regional Advantage , Safford amasses, organizes, and interprets a large volume of detailed historical information. This allows the reader to understand how prevailing social structures can infl uence how some but not all regions rebound from adverse economic shocks. Just as the more fl uid social structure within Silicon Valley gave it entrepreneurial advantages relative to the more rigid structures that characterized Route 128, we see how latent cross-cutting community structures can allow otherwise disconnected and potentially antagonistic factions to come together in times of crisis.