Richard A. Bettis

Dynamic Core Competences through Meta-Learning and Strategic Context

Traditional approaches to studying competitive advantage, while valuable, are not adequate to explain how firms can operate effectively in turbulent and often chaotic environments. A resource or skill-based view focusing on development and application of core competences is offered to supplement the traditional approaches. We present a model of the development and outcomes of dynamic core competences based on organizational meta-learning. A firm’s core competence(s) is defined as a set of problem-defining and problem-solving insights that fosters the development of idiosyncratic strategic growth alternatives. Dynamic core competences are based on the integration into systemic meta-learning of universal and tacit knowledge through information transfer, redefinition of heuristics and continuous improvement based on experimentation and the development of firm-specific skills based on dynamic routines. Dynamic core competences can be leveraged to create growth alternatives of global diversification, new applications of existing technologies and/or the development of new lines of business. Finally, dynamic core competences can be used to reduce uncertainty and to induce path dependencies that create causal ambiguity (making imitation from other firms difficult). In so doing, they can form the basis of competitive advantages.

Diversification Strategy, Accounting Determined Risk, and Accounting Determined Return

Risk and return are studied in a sample of related and unrelated (conglomerate) diversified firms. The primary findings are that unrelated firms do not enjoy superior risk-pooling characteristics a...

Boards of Directors, Top Management Compensation, and Shareholder Returns

According to the corporate governance process and agency theory, boards of directors should reward executives on the basis of financial returns to shareholders. Studies of this issue have been inco...

Country risk measures: how risky are they?

As global competition drives corporations into distant, unfamiliar markets, managers are searching for ways to minimize their uncertainty. When formulating their strategies for such environments, managers frequently rely on country risk analysis. Assuming that country risk analysis is an objective, fact-finding process, many managers fail to question these risk reports. The focus of this paper is on the usefulness of these country risk measures. Specifically, the purpose is to investigate the extent to which country risk measures can predict periods of intense instability. We examine eleven widely used measures of country risk across seventeen countries during a nineteen-year time period. Currency fluctuations are used as a surrogate for overall country risk. Results from the empirical analysis indicate that commercial risk measures are very poor at predicting actual realized risks. This result raises important questions about the usefulness of these measures and why managers still choose to use them.

Strategic Portfolio Management in the Multibusiness Firm

Evidence suggests that effective use of the portfolio concept may improve financial performance. The authors discuss the implementation of the portfolio concept in large diversified firms, and review its use as both a tool of analysis and a complete system for strategic management.

Responding to Rivals and Complements: How Market Concentration Shapes Generational Product Innovation Strategy

This study examines how competitive market conditions shape the responsiveness with which businesses release generational product innovations (GPIs) following the introduction of GPIs by either competitors or complementary firms. GPIs are substantial technical advances in the performance of products within technology regimes. Prior studies of innovation timing in the organizational strategy literature emphasize internally driven strategies of GPI. Although internally driven strategies may predominate when businesses face diffuse competition for their product lines, the literature largely overlooks the point that businesses need to be increasingly responsive to external events as market concentration increases. This study, which examines businesses competing in the U.S. packaged software industry in the 1990s, shows that increasing industry concentration raises the stakes surrounding market positions and leads to greater interdependence of innovation strategies in an industry---including interactions both with competitors and with other players in a larger system of complementary products. As concentration increases, therefore, organizations are less driven by historical patterns of innovation and become increasingly responsive to innovations by both types of external actors.

Exploring Depth Versus Breadth in Knowledge Management Strategies

This paper provides an early attempt at operationalizing and testing the concept of knowledge strategy. Using a computer-simulated product development process, we compare the performance of generalist and specialist knowledge management strategies under conditions of market turbulence. The generalist knowledge strategy emphasizes breadth of knowledge in product development teams, while the specialist strategy focuses on depth of knowledge. Our generalist and specialist strategies are grounded in Eastern and Western perspectives of knowledge management, respectively. A primary difference between these two approaches is the strong emphasis on cross-learning, or learning across team members, in the Eastern perspective relative to the Western perspective. As such, we examine the performance implications of different modes of cross-learning for teams utilizing the generalist knowledge strategy. Specifically, we examine three modes of cross-learning, which are reflected in the use of three learning decision rules: (1) averaging, (2) majority, and (3) hot hand. A learning decision rule indicates how decision-makers learn from their fellow team members. Under the first rule, the decision-maker adopts an average of the beliefs held by fellow team members. Under the second rule, if a majority of fellow team members agree on a particular solution, then the decision-maker adopts the beliefs held by the majority. Under the third rule, the decision-maker learns from the team member whose beliefs have been consistent with market desires most recently. Surprisingly, we find that specialist strategies outperform generalist strategies under conditions of low and high market turbulence. We also find that cross-learning can be beneficial or detrimental, contingent upon the mode of learning. Generalist teams utilizing the averaging decision rule perform significantly worse, while generalist teams utilizing the hot hand decision rule perform significantly better.

The business portfolio approach—Where it falls down in practice

Abstract During the past decade the SBU (or portfolio) concept has enjoyed widespread popularity as a basis for corporate-wide strategic planning systems within large, diversified firms. This article discusses the implementation of such systems on the basis of 3 years of clinical and small sample research. A ‘basic model’ of implementation is used as a basis for comparison to progressive practice as observed in a sample of 13 firms. Furthermore, a new conceptual perspective for the portfolio concept is developed as a complement to the observed approach to implementation.

Strategic Momentum How Experience Shapes Temporal Consistency of Ongoing Innovation

Research on strategic momentum considers how experience with innovation affects firms’ subsequent innovativeness. Traditionally the momentum literature has emphasized arguments for an accelerating effect of innovation experience, but recent critiques and contrasting empirical results suggest ambiguity regarding how experience with innovation affects subsequent innovative activity. In this study, we develop arguments for a more expanded view of strategic momentum, examining momentum in the form of temporal consistency of ongoing innovation. This expanded view argues that organizations have incentives for steady-state patterns of innovation in the form of temporal consistency of ongoing innovation. To explore this expanded view of momentum, we examine how experience with innovation facilitates these temporally consistent patterns of innovation, as well as how increasing organizational age may inhibit such consistency. Analyses of generational product innovation in business productivity software highlight the importance of temporal consistency for innovativeness and momentum.

Surviving the Bulls and the Bears: Robust Strategies and Shareholder Wealth

Abstract This paper raises the issue of robustness of strategy over financial market cycles. Using an inductive approach, it examines the performance of companies in term of relative value creation or destruction over a bull and bear market cycle. The sample for this research consists of 54 large US firms from seven industries (airlines, banking, computers, network equipment, pharmaceuticals, retail, and semiconductors). The findings demonstrate that few firms performed well in both the bull and bear markets but those that did achieve superior performance over the market cycle employed innovative strategies that competitors struggled to imitate. These superior strategies resulted in lower cost structures and/or the ability to charge premium prices. It concludes by offering lessons that managers should integrate into their business models to obtain similar competitive advantage that is robust to drastically changing market conditions.