Tailan Chi

Option to Acquire or Divest a Joint Venture

This is the authors final draft. The publishers official version is available from: http://dx.doi.org/10.1002/(SICI)1097-0266(200006)21:6<665

The Structuring of Interfirm Exchanges in Business Know-How: Evidence from International Collaborative Ventures

This study investigates the effect of transaction cost considerations on the apportionment of residual bearing, and the assignment of managerial control between two firms involved in the exchange of business know-how. Data were collected from contractual agreements between multinational enterprises and indigenous firms that formed collaborative ventures in developing countries. A simultaneous-equation model was employed to test hypotheses that were derived under a theoretical framework based on the new institutional economics. The empirical results are supportive of the hypotheses.

Product Life Cycle, and Market Entry and Exit Decisions Under Uncertainty

A key characteristic of the Product Life Cycle (PLC) is the depletion of the products market potential due to technological obsolescence. Based on this concept, we develop a stochastic model for evaluating market entry and exit decisions during the PLC under uncertainty. The model explicitly shows the conditions for the optimality of a two-threshold policy based on the estimated earnings potential of the product, and can be used by manufacturing firms to assess entry and exit decisions under such conditions. To aid the applications of the model in actual decision situations, we also provide the procedures for computing the exact and approximate values of the two thresholds.

An economic analysis of matrix structure, using multinational corporations as an illustration

This paper applies a comparative institutional perspective to the organizational design called matrix structure. After discussing the motivations for a multidimensional form of organization, the paper compares the transaction cost characteristics of the matrix (MX-form) structure with those of the well-known multidivisional (M-form) structure. This analysis reveals three advantages and three disadvantages of the matrix structure as well as two conditions affecting the efficacy of a matrix. Examples from multinational corporations are used throughout the paper to illustrate the analysis.

Venture Capitalists’ Decision to Withdraw: The Role of Portfolio Configuration from a Real Options Lens

When does a venture capital firm withdraw from an investment project prior to its completion? This study offers a real options view on this decision by examining the contingent effects of portfolio configuration. We explore how project withdrawal can be influenced by two distinct dimensions of portfolio configuration, portfolio focus in a strategic domain and portfolio diversity across multiple domains. The empirical analysis shows that while portfolio focus weakens the negative effect of industry-level uncertainty on a venture capitalist’s propensity to withdraw from a project, portfolio diversity strengthens the effect of uncertainty. This study informs current research on the boundary of real options theory and sheds light on the behavior of venture capitalists in financing entrepreneurship.

Decision dilemmas facing managers: recognizing the value of learning while making sequential decisions

The paper brings attention to an often neglected factor that can have a significant impact on whether a multi-stage project is worth continuing--the potential for learning in its development process. After explicating the economics of a projects learning potential, the paper explores its implications for the practice of project management and for the design of future experimental studies on managerial behavior in funding multi-stage projects.

Business Strategies in Transition Economies

The article presents a review of the book “Business Strategies in Transition Economies,” by Michael W. Peng. Despite the title, the bulk of the book presents an analysis of the relations between the unique institutions of the transition economies (TEs) and the behaviors of firms that operate in those economies. This analysis is particularly helpful to business executives (especially those based in industrialized market economies) seeking an in-depth understanding of their potential competitors, collaborators, suppliers, and customers from TEs.

An Examination of Options Embedded in a Firm's Patents: The Value of Dispersion in Citations

This paper applies and empirically tests a real options approach to conceptualizing the value of patents. Based on a theorem derived by Merton (1973), we propose that greater dispersion in the citations of a firms patents represents greater flexibility for the firm to exercise the option rights embedded in the patents and thus enhances the option value of the patents. A test of this proposition using a sample of 128 US-based biotechnology firms found corroborative results.

Resource Complementarity, Institutional Compatibility, and Some Ensuing Methodological Issues in Testing the Resource-Based View

We argue that resource-based view (RBV) researchers must take into account three interdependencies, (i) intrafirm resource complementarity, (ii) interfirm resource complementarity or rivalry, and (iii) compatibility or incompatibility of firm resources to broader socio-economic institutions, when attempting to empirically verify the RBV. However, these interdependencies lead to three potential causes of statistical bias, which can reduce the interpretability of such empirical examinations. First, omitted variable bias results from a researchers inability to find and include in empirical analyses appropriate operationalizations of constructs. Second, selection bias can arise when a researcher samples only from one subset of the population, and not others. Bias in estimates can occur if a correlation between unobserved determinants of the outcome and factors affecting the selection process exist. Finally, joint dependence, where two explanatory variables are themselves mutual determinants, can lead to biased estimation.

OPERATIONAL AND MOTIVATIONAL EFFICIENCY IN INTERNATIONAL STRATEGY AND STRUCTURE

Previous studies on international competitive strategies identify a number of loosely defined strategy types and suggest that the choice among them is based on their relative productive efficiency (i.e. ability to exploit such factors as economies of scale, economies of scope, and location economies). Our analysis highlights the additional role of motivational efficiency. We propose that the proportion of available productive efficiency that is actually realized under each strategy depends on the motivational efficiency of the best possible incentive system for implementing the strategy. Our conceptual framework allows the identification of precise theoretical relationships for empirical measurement and testing.