Richard J. Arend

Assessing the dynamic capabilities view: spare change, everyone?

Why do some firms succeed in a dynamic competitive environment when others fail? Recently, concepts and models addressing this question have increasingly clustered around the dynamic capabilities view (DCV). Citation counts suggest that the DCV is the new touchstone firm-based performance-focused theory (Teece et al. [1997], for example, had received 1180 citations in the ISI Web of Knowledge as of June 2008), and case studies of innovative firms such as IDEO (Hargadon and Sutton, 1997) have fueled interest. We take a step back to assess the ability of the DCV to explain successful change with logical consistency, conceptual clarity and empirical rigor, criteria suggested by Laudan (1977). Such an assessment is important not only because of the DCV’s popularity, but also because of the theoretical and practical significance of the issues it addresses. While the arguably static resource-based view (RBV) emphasizes the value of resources, the DCV addresses the need to explain changes in valuable resources, e.g. the erosion of asset stocks (Dierickx and Cool, 1989) and the changes in asset values (Miller and Shamsie, 1996). The DCV also addresses a practical need to understand how firms can change effectively, given perceptions that many competitive environments now change at increasing rates, and that firms have difficulty changing successfully (Beer and Nohria, 2000; Strebel, 1996). Our assessment identifies four major problems that limit the potential contribution of the DCV: (1) unclear value-added relative to existing concepts; (2) lack of a coherent theoretical foundation; (3) weak empirical support; and (4) unclear practical implications. Although potentially interrelated, each problem presents different difficulties and raises different questions.

The business model: Present and future—beyond a skeumorph

In this essay, we address the research question of when is the business model idea useful? We argue that the use of the term “business model” as a “description” of how a traditional venture operates is strong on redundancy and weak on theoretical grounding. We argue that the idea behind a “model” of value creation, especially involving nonmonetary exchanges is, however, of great importance moving forward. Up to this point, there has been a quite practical approach used in understanding the idea and its effects. But now, there is a need to transition from the “idea-as-given” perspective to a “not-given” perspective in order to place the business model in a theoretical perspective where it can be understood in more abstract terms and then applied in new ways. That transition leads to new research questions, a new determination of the idea’s value in nontraditional contexts, and new effects on existing related theories and on policies to control potential effects.

Using an Iterated Prisoner's Dilemma with Exit Option to Study Alliance Behavior: Results of a Tournament and Simulation

Nearly half of all strategic alliances fail (Park and Russo, 1996; Dyer et al., 2001), often because of opportunistic behavior by one party or the other. We use a tournament and simulation to study strategies in an iterated prisoners dilemma game with exit option to shed light on how a firm should react to an opportunistic partner. Our results indicate that a firm should give an alliance partner a second chance following an opportunistic act but that subsequent behavior should be contingent on the value of the next best opportunity outside the alliance. Firms should be more forgiving if the potential benefits from the alliance exceed other opportunities. The strategies were also found to be robust across a wide range of game lengths. The implications of these results for alliance strategies are discussed.

Volatility-based Effects on Shareholder Value: Alliance Activity in the Computing Industry

We use an event-study analysis to understand how alliance activity affects firm risk. The risk measure is the implied volatility of a firm’s stock price and the events are alliance announcements to the market. We build on the previous event-studies in the alliance literature that focus on the change in shareholder value by taking the first step in delineating what part of that value arises from the changes in the firm’s risk. The analysis reveals that a number of factors within a firm’s control can be used to manipulate risk exposure in an alliance, including the similarity of the firm’s and the alliance’s core activities, the governance form of the alliance, and the function of the alliance.

Mobius’ edge: Infinite regress in the resource-based and dynamic capabilities views

The study of strategic organization involves many delicious ironies, one of which is the goal to prescribe general paths to sustainable competitive advantage. Twenty years after Collis and a few good men and women originally exposed and confronted the infinite regress problem in the resource-/capabilities-based theories, we revisit this problem to resolve it. We consider the linkages between the infinite hierarchical levels that form the paths to the origins of sustainable competitive advantages in both the resource-based view and the dynamic capabilities view. We find that there are logical factors that limit the number of levels that need to be traversed to reach the origins. We discuss the implications to academics, managers and policy-makers from our resolution to the infinite regress problem to provide a more crystal clear understanding of the strenuous objective that continues to challenge all strategic theory.

Promises, Premises . . . An Alternative View on the Effects of the Shane and Venkataraman 2000 AMR Note

In this article, we provide a contrasting view to that of the original authors about the impact of their Research Note on the promise of entrepreneurship (ENT) research. We draw on citations in the top general business journals to assess where, how, and why the Note was referenced. This leads to a consideration of issues related to citation “quality” and the various types of “impact” that can exist. In light of such issues related to the Note, and in light of the present state of legitimacy of the field, we argue that the Note may have in fact had a negative impact, specifically on theory development unique to ENT. We conclude with directions for moving forward in fulfilling the promise of the ENT field.

Bursting Bubbles What the Internet Could Have Meant to Strategic Management Academia

This article explains that the Internet bubble was a unique and unfortunately missed opportunity for strategic management academia to vastly increase the fields perceived legitimacy. This author challenges strategic management scholars to acknowledge this failure, understand it, and reconsider their responsibilitiesto the public and to the field.

Entrepreneurship as dynamic, complex, disequilibrious: A focus that benefits strategic organization:

We continue the conversation in SO! about possible beneficial relationships between the fields of entrepreneurship and strategic organization, consistent with SO!’s ambition of reducing the distances currently separating fields that share research phenomena (Baum et al., 2003). We do so with a focus on how entrepreneurship (ENT) – as a field with a central focus on dynamic, complex, disequilibrium problems (Bygrave, 1989; Herron et al., 1991) – can add to the understanding of strategic organization (SO). We complement the approaches taken in past SO!apbox essays that have advocated how ENT insights (e.g., on newer and smaller firms, on individual-level versus organizational-level processes, on social welfare, on left-censoring issues, on constrained, bricolagelike resource use, on opportunity recognition, and on other ‘entrepreneurial’ capabilities – Baker and Pollock, 2007; Phillips and Tracey, 2007) can inform SO research.

Abandoning (entrepreneur)ship: children and victims first

This essay is about strategic organization. I begin and end with its relation to the field of entrepreneurship (ENT). This essay is about the strategic (re)organization of the field of entrepreneurship. Like other newer, perhaps niche fields (e.g. international business [IB]), entrepreneurship scholars have been adrift in perceived pre-paradigmatic frustration trying to find a collective voice that could move the field toward the legitimacy and rewards of more established business disciplines. Since neither the 200 year history of the field nor the current array of definitions and research questions has provided closure, I take a different and objective (but still provocative) approach to the problem. I see the current conundrum in entrepreneurship as an opportunity to exploit, i.e. a unique time to assess the field and to determine and unite around a path that is best for ENT researchers as a whole, as opposed to letting other fields, or an imperfect history, or any individuals, set the agenda. I call on interested ENT researchers to continue the conversation started here toward a closure that sets the best direction for the field’s future. I begin by arguing that the current entrepreneurship field can benefit from greater definitional consensus. I then drill down to first principles to understand from where consensus can emerge. I propose five possible alternative directions for building on those principles toward possible field definitions. I close with a preliminary analysis of the possible criteria to use to assess the array of possible definitions.

A Dyad-Based Analysis of New Venture Success: Comparing Recent Internet to Non-Internet Related IPOs

We examine variance in the performance of new ventures that emerged prior to the Internet bubble burst with data that spans beyond it. These firms faced high uncertainty, and were hoping to compensate founders and investors with appropriately high returns. We address the performance issues through the use of dyads, where Internet-related ventures are matched to non-Internet ventures. We find that the Internet has a positive effect on both performance and volatility measures. We also find that incentive, value proposition, and context factors explain performance variance within the sample of Internet-related ventures, as well as terminal events within that sample.