William S. Hesterly

Independence of the Chairman and Board Composition: Firm Choices and Shareholder Value:

This paper examines the role of leadership structure and board composition in the context of poison pill adoptions. We distinguish, for the first time, independent, separated leadership structures from non-independent, separated leadership structures. Our results suggest that there is an important interaction effect between board composition and the independence of the board Chairman, and that while there is a critical monitoring role for outside directors, inside directors also provide a critical informational role in board decision-making.

The impact of firm-specific assets and the interaction of uncertainty: an examination of make or buy decisions in public and private hospitals

Abstract This study examines the impact of uncertainty, as articulated in the transaction cost economics framework, and its interaction with asset specificity in determining make or buy decisions. Our analysis of a sample of over 2900 transactions supports the view that in the presence of specific assets increased uncertainty will induce firms to integrate at lower levels of asset specificity. We also find that transaction cost explanations are subject to contextual factors. In particular, the results support transaction cost predictions for private hospitals, but not for public hospitals, where market efficiency pressures are not as strong.

Transaction costs, quality, and economies of scale: examining contracting choices in the hospital industry

Abstract This study examines make or buy decisions for 196 hospitals in the United States using transaction costs as the basis for analysis. We examine the potential effects of quality and economies of scale on these decisions. We find evidence to support the view that transaction costs, quality and economies of scale play an important role in the integration decision and that this role depends on whether the transaction is industry-specific or generic in nature. This study examines the contracting choices of many firms across multiple transactions with a significantly larger data set than previous work in the area.

Innovations and Value Creation in Major League Baseball, 1860–2000

‘I take it as given that markets provide efficiency and innovation. The question then becomes, where would you oppose a market? For example, I oppose a market in professional baseball. I do not care about other sports, but in baseball I value equity and tradition more than efficiency and innovation. I would like to see the cities own the teams, with revenue sharing and no free agency for players. That would lead to team continuity and to fewer advantages for big-market teams. In education, I also value equity. However, in contrast with baseball, I do not dismiss innovation and efficiency. In baseball, if there is no innovation, and the quality of play holds steady, that is acceptable. Not so with education, where I believe that we need progress.’ (Arnold Kling, 2000)

Evolution of Industry Clusters through Spin-offs and the Role of Flagship Firms

The manner in which clusters emerge and evolve is important for public policy and corporate strategy. Understanding how and why clusters emerge and develop provides insights into agglomeration phenomena, innovation capacity, location advantages, and may influence local governments’ investments. Extant research has traced the origins of clusters to historical trajectories and to reasonably random and undefined exogenous events (Hendry et al., 2000). In other instances, scholars identify life-cycle patterns to show that clusters are living entities that thrive and fail in response to environmental shifts (Swann, 1998). Others focus on unusual entrepreneurial dynamism and innovation in some regions (Saxenian, 1994; Pinch and Henry, 1999; Feldman, 2001; Zander, 2003). Extant research has two main perspectives: first, the discussion on how innovation may or may not occur as the density of firms in the cluster increases; second, the idea that firms’ co-location induces isomorphic behavior.

A New Perspective on Parenting Spin-offs for Cluster Formation

The factors propelling the competitiveness of industry clusters have been subject to extensive research. While these factors are reasonably understood, the conditions that lead to the emergence and evolution of clusters still warrant further examination. This chapter proposes that the emergence and development of at least some clusters are endogenously driven by the generation of new insider entrepreneurial spin-offs1 from incumbent firms. The specific conditions that lead to spin-off opportunities are beyond the scope of this chapter, but because these opportunities exist — for example because of technological or market changes or employee dissatisfaction — new firms will be founded. The majority of these spin-offs shape the cluster’s birth, configuration, technological specialization and evolution by remaining in the same region as the parent firm (Arthur, 1990; Zander, 2003). Hence, knowledge of the genesis of inter-firm ties in a cluster may permit a better understanding of the formation and evolution of the inter-firm organizational forms that prevail in clusters. This line of enquiry builds on recent research on how the emergence and growth of clusters are essentially an entrepreneurial process and on research studying entrepreneurship as a regional phenomenon associated with unusual innovativeness and dynamism (for example Saxenian, 1994; Zander, 2003).

Change dynamics in institutional discontinuities: Do formal or informal institutions change first? Lessons from rule changes in professional American baseball

Abstract Extant research presents a conflicting picture of change dynamics during institutional discontinuities. Some studies propose or depict formal rules as changing first. Others argue that norms need to change before formal rules can be revisited, let alone change. An examination of the literature suggests a contingency theory. In mature organisational fields with institutionalised informal rules, norms need to be questioned and changed before any change in formal rules can take place. On the other hand, in emergent organisational fields – where no particular rules of the game have been institutionalised ‒ change in higher-level institutions begins with a change in formal rules. The article also presents two historical cases of major institutional change in professional American baseball that illustrate the theory proposed.