Richard Makadok

Can first‐mover and early‐mover advantages be sustained in an industry with low barriers to entry/imitation?

This study examines whether first-mover and early-mover advantages can be sustained in an industry where the barriers to entry are generally low and new product innovations can be easily imitated—namely, the money market mutual fund industry. Using a simultaneous-equation supply-and-demand model of panel data from a variety of money market fund product categories, the study finds that first-movers and early-movers enjoy both a highly sustainable pricing advantage and a moderately sustainable market share advantage. These counterintuitive results are interpreted in terms of the structural characteristics of demand in the industry. Implications of these results for the ongoing debate between the ‘sustainability’ and ‘hypercompetition’ perspectives are discussed.

Interfirm differences in scale economies and the evolution of market shares

Evolutionary and resource‐based theories imply that firms in an industry with different resources and capabilities may differ in critical characteristics of their production functions, such as economies of scale. This paper measures these inter‐firm differences in economies of scale and examines how they affect the subsequent evolution of the market share distribution in the money market mutual fund industry. The findings indicate that fund families with larger marginal benefits to increasing their scale do subsequently gain market share at the expense of their rivals, but that this effect diminishes as the fund family ages, perhaps as a consequence of imitation. Copyright

Identifying a distinctive competence: forecasting ability in the money fund industry

Testing the causal link between a firm‐specific competence and its antecedents or consequences has become a key objective for strategy research over the past decade. On one hand, case studies can identify a competence, but with their small sample size, their retrospective research design, and their tendency toward sampling on the dependent variable, they can not reliably test the causal connection between a competence and its antecedents or its consequences. On the other hand, variance decomposition studies demonstrate the existence of firm‐specific performance differentials but have not identified which particular competencies are responsible for them. The present paper avoids both of these problems by measuring a particular competence across a large sample of organizations over a long period of time, so that a test of statistical causality can be applied to the relationship of this competence to both its antecedents and its consequences. The particular competence studied is the ability of money market mutual funds to forecast changes in short‐term interest rates—a competence known from prior research to be both valuable and rare. In particular, we test the effect of forecasting ability on the economic surplus generated by the fund and its growth. Conversely, we also test the effect of growth on the subsequent development of forecasting ability. Copyright

Invited Editorial: The Four Theories of Profit and Their Joint Effects

As a theory of profit, resource-based theory is focused on a single causal mechanism—competitive advantage. Although this focus has been useful in helping to understand some sources of interfirm profit differentials, it is nevertheless highly limiting because competitive advantage is not the only causal mechanism by which profit can be generated. Three other mechanisms, labeled here as rivalry restraint, information asymmetry, and commitment timing, have also been extensively studied as sources of profit. Rather than continuing to examine each of these four mechanisms’ main effects on profit in isolation, and thereby generate increasingly incremental knowledge over time, the author proposes an alternative agenda for future research—namely, to synthesize multiple mechanisms in order to focus on their relatively unexplored interaction effects on profit. This article reviews the small but emerging literature of research that has already begun to pursue this agenda and outlines some logical next steps for further development.

The Interaction Effect of Rivalry Restraint and Competitive Advantage on Profit: Why the Whole Is Less Than the Sum of the Parts

Rivalry-restraint-based theoretical mechanisms predict that an industrys profits will increase when its firms engage in less price competition, or less direct competition, with each other. Competitive-advantage-based theoretical mechanisms predict that a firms profits will increase when it creates superior economic value that direct and indirect competitors cannot fully compete away. But what is the interaction effect on profit of simultaneously restraining rivalry and increasing competitive advantage? Do they positively amplify/reinforce each other, or negatively dampen/undermine each other? This papers theoretical model predicts a negative interaction effect, with potentially significant implications for theory, practice, and pedagogy.

The Health of the Corporate Body: Illness and Organizational Dynamics

The search for ways to cut health care costs in organizations has rarely considered the direct relationship between organizational variables and health. This article hypothesizes that health and illness within a particular organization may be related to the social dynamics of the work setting. Data was gathered from a survey of a corporation with 13,000 employees who work in 16 organizations. An index of reported health symptoms was correlated with scales developed from questions related to organizational issues. Using stepwise multiple regression, 20% of the variance of the aggregate health symptoms was accounted for by three organizational scales (organization-person balance, managerial treatment, and discrimination) after controlling for demographic variables. A second analysis, which focused on the collective dynamics of the 16 organizations, supported the findings of the first analysis. This study found that issues of support, balance, change, and inequity are crucial factors in fostering a healthy work environment.