A structural approach to handling endogeneity in strategic management: the case of RBV


European Management Review

April 2014, vol. 11, n°1, pp.47-62

Departments: Strategy & Business Policy, GREGHEC (CNRS)

Keywords: Resource based view, Bayesian modeling, Endogeneity, Structural modeling, Competitive strategy

In this paper we posit that the lack of consensus about empirical tests of resource based view (RBV) could be the result of endogenous resource picking on the part of firms. If resources are endogenously selected, regression based methods that examine their connection to firm performance will be mis-estimated. We show that traditional remedies for endogeneity do not resolve this problem when returns to resources are heterogeneous (as theorized under RBV) and when managers act with at least partial knowledge of the expected, idiosyncratic return (as theorized under the strategic factor market hypotheses). As such, we develop a Bayesian approach that solves this endogeneity problem by directly incorporating resource picking into the modeling framework. We illustrate the validity of our approach through the use of a comprehensive simulation study and show that our proposed approach outperforms traditional linear models (including traditional cures of endogeneity and unobserved heterogeneity) under a variety of conditions. Our findings suggest that: (1) research in strategy requires a more careful and deeper understanding of potential sources of endogeneity and (2) the use of Bayesian methods in management can help develop more theoretically motivated empirical approaches to hypothesis testing

Attributional Tendencies in Cultural Explanations of M&A Performance


Strategic Management Journal

September 2014, vol. 35, n°9, pp.1302-1317

Challengers from within economic institutions: A second-class social movement? A response to Déjean, Giamporcaro, Gond, Leca and Penalva-Icher's comment on French SRI

Diane-Laure ARJALIES

Journal of Business Ethics

August 2014, vol. 123, n°2, pp.257-262

Departments: Accounting & Management Control

Keywords: Institutional change, Mainstreaming, Social movement, Socially responsible investment

In a recent comment made about my paper 'A Social Movement Perspective on Finance: How Socially Responsible Investment Mattered' (J Bus Ethics 92:57-78, 2010), published in this journal, Déjean, Giamporcaro, Gond, Leca and Penalva-Icher (J Bus Ethics 112:205-212, 2013) strongly criticize the social movement perspective adopted on French SRI. They both contest the empirical analysis of the movement and the possibility for insiders to trigger institutional change towards sustainability. This answer aims to address the different concerns raised throughout their comment and illuminate the differences between both approaches. It first explains why SRI in France can be considered as a social movement, despite not being protest-oriented. It then reflects on the dangers of systematically associating societal change with radical activism. It concludes by elaborating on the importance of acknowledging the potential contribution of reformist movements from within the economic institutions to the enhancement of the social good

Firm-Specific Human Capital, Adverse Learning, and Agency Costs: Evidence from Retail Banking


Strategic Management Journal

September 2014, vol. 35, n°9, pp.1279-1301

Departments: Strategy & Business Policy, GREGHEC (CNRS)

Keywords: Agency costs, Organizational incentives, Performance pay, Adverse learning, Firm-specific human capital

This paper explores conflicting implications of firm-specific human capital ( FSHC) for firm performance. Existing theory predicts a productivity effect that can be enhanced with strong incentives. We propose an offsetting agency effect: FSHC may facilitate more-sophisticated 'gaming' of incentives, to the detriment of firm performance. Using a unique dataset from a multiunit retail bank, we document both effects and estimate their net impact. Managers with superior FSHC are more productive in selling loans but are also more likely to manipulate loan terms to increase incentive payouts. We find that resulting profits are two percentage points lower for high- FSHC managers. Finally, profit losses increase more rapidly for high- FSHC managers, indicating adverse learning. Our results suggest that FSHC can create agency costs that outweigh its productive benefits

Governance mode vs. governance fit? Performance implications of Make-Or-Ally choices for product innovation in the worldwde aircraft industry, 1942-2000


Strategic Management Journal

September 2014, vol. 35, n°9, pp.1386-1397

Departments: Strategy & Business Policy, GREGHEC (CNRS)

Keywords: Product innovation, Horizontal collaboration, Autonomous governance, Discriminating alignment, Endogeneity, Aircraft industry

We examine the impact of governance mode and governance fit on performance in make-or-ally decisions. We argue that while horizontal collaboration and autonomous governance have direct and countervailing performance implications, the alignment of make-or-ally choices with the focal firm's resource endowment and the activity's resource requirements leads to better performance. Data on the aircraft industry show that relative to aircraft developed autonomously, collaborative aircraft exhibit greater sales but require longer time-to-market. However, governance fit increases unit sales and reduces time-to-market. We contribute to the alliance and economic organization literatures

How Do Strategic Factor Markets Respond to Rivalry in the Product Market?


Strategic Management Journal

December 2014, vol. 35, n°13, pp.1952-1971

Departments: Strategy & Business Policy, GREGHEC (CNRS)

Keywords: Strategic factor markets, Resource development, Rivalry, Product market competition, Formal foundations of strategy

This paper explores the interplay between product market, strategic factor market, and resource development. More competition in the product market makes resource buyers bid higher for resources, as the value of trying to preempt the resources is higher. Holding other initial conditions constant, resources are developed more in industries with factor markets than in industries without. When buyers of resources cannot integrate more than one resource, developers choose to develop either at a low or high level, generating a type of heterogeneity that would not arise otherwise. Changes in the intensity of competition in the product market can have the opposite effect on resource development efforts depending on the presence or absence of factor markets

Intra-organizational information asymmetry in offshore ISD outsourcing



2014, vol. 44, n°1, pp.94-120

Departments: Information Systems and Operations Management, GREGHEC (CNRS)

Keywords: Offshore outsourcing, Agency theory, Information asymmetry, Information system development

Contemporary offshore Information System Development (ISD) outsourcing is becoming even more complex. Outsourcing partner has begun ‘re-outsourcing’ components of their projects to other outsourcing companies to minimize cost and gain efficiencies. This paper aims to explore intra-organizational Information Asymmetry of re-outsourced offshore ISD outsourcing projects.Design/methodology/approach - An online survey was conducted to get an overall view of Information Asymmetry between Principal and Agents (as per the Agency theory).Findings - Statistical analysis showed that there are significant differences between the Principal and Agent on clarity of requirements, common domain knowledge and communication effectiveness constructs, implying an unbalanced relationship between the parties. Moreover, our results showed that these three are significant measurement constructs of Information Asymmetry.Research limitations/implications - In our study we have only considered three main factors as common domain knowledge, clarity of requirements and communication effectiveness as three measurement constructs of Information Asymmetry. Therefore, researches are encouraged to test the proposed constructs further to increase its precision.Practical implications - Our analysis indicates significant differences in all three measurement constructs, implying the difficulties to ensure that the Agent is performing according to the requirements of the Principal. Using the Agency theory as theoretical view, this study sheds light on the best contract governing methods which minimize Information Asymmetry between the multiple partners within ISD outsourcing organizations.Originality/value - Currently, to the best of our knowledge, no study has undertaken research on Intra-organizational Information Asymmetry in re-outsourced offshore ISD outsourcing projects

Kitchen Confidential? Norms for the Use of Transferred Knowledge in Gourmet Cuisine


Strategic Management Journal

November 2014, vol. 35, n°11, pp.1645-1670

Departments: Strategy & Business Policy, GREGHEC (CNRS)

Keywords: Social norms, Knowledge transfer, Institutional theory, Thick rationality, Intellectual property

When will knowledge holders share their knowledge with peers? Several studies suggest that norms of knowledge disclosure encourage knowledge transfer. More recently, scholars have hypothesized that norms of knowledge use may indirectly promote it. In this article, we synthesize a theoretical framework of the effect of norms of knowledge use and test its predictions by means of a field experiment involving more than 500 Italian chefs. For the literature on knowledge transfer, we confirm the importance of norms, but we also show that they are not complete substitutes for other means of protecting private knowledge. For the literature on social norms, we provide evidence of how actors assess others’ propensity to conform and how this influences the intention to participate in the norm-regulated exchange

Knowledge transfer in multinational corporations: Productive and counterproductive effects of language-sensitive recruitment


Journal of International Business Studies

June-July 2014, vol. 45, n°5, pp.600-622

Lost in Translation: The Social Shaping of Marketing Messaging


GfK Marketing Intelligence Review

November 2014, vol. 6, n°2, pp.22-27

Departments: Marketing, GREGHEC (CNRS)

Keywords: Blogs, Consumer-Marketer, Network Co-Production, Product seeding, Social brand engagement, Social media

Managing Retention in Service Relationships


Management Science

February 2014, vol. 60, n°2, pp.415-433

Departments: Information Systems and Operations Management, GREGHEC (CNRS)

Keywords: Customer satisfaction, Lifetime value optimization, Retention, Service quality, Service relationships

In a repeat business context, past experiences with a service provider affect customers' decisions to renew their contract. How should a strategic firm manage customized service over time to maximize the long-term value from each customer relationship? We propose a dynamic model that relies on behavioral theories and empirical evidence to capture the effect of past service experiences on service quality expectations, customer satisfaction, and retention. Although firms can benefit from managing service expectations at the beginning of a relationship, we find that varying service in the long run is not optimal. Behavioral regularities explain the structure of optimal service policies and limit the value of responsive service. Loss aversion expands the range of optimal constant policies; however, if satisfying experiences are more salient, then firms should constantly vary service levels. Loyal or high-margin customers need not warrant better service; those who anchor less on past service experiences do—provided that retention is improved by better past experiences. The effect of customer memory on service levels is determined by whether habituation or rather goodwill drives defection decisions.Behavioral regularities explain the structure of optimal service policies and limit the value of responsive service. Loss aversion expands the range of optimal constant policies; however, if satisfying experiences are more salient then rms should constantly vary service levels. Loyal or high-margin customers need not warrant better service; those who anchor less on past service experiences do|provided that retention is improved by better past experiences. The eect of customer memory on service levels is determined by whether habituation or rather goodwill drives defection decisions

Moving Beyond Stylized Economic Network Models: The Hybrid World of the Indian Firm Ownership Network


American Journal of Sociology

May 2014, vol. 119, n°6, pp.1629-1669

Departments: Strategy & Business Policy

Keywords: Network, Organization, Structure

A central theme of economic sociology has been to highlight the complexity and diversity of real-world markets, but many network models of economic social structure ignore this feature and rely instead on stylized one-dimensional characterizations. Here, we return to the basic insight of structural diversity in economic sociology. Using the Indian interorganizational ownership network as our case, we discover a composite – or “hybrid” – model of economic networks that combines elements of prior stylized models. The network contains a disconnected periphery conforming closely to a “transactional” model; a semi-periphery characterized by small, dense clusters with sporadic links, as predicted in “small world” models; and finally a nested core composed of clusters connected via multiple independent paths. We then show how a firm’s position within the meso-level structure is associated with demographic features such as age and industry, and differences in the extent to which firms engage in multiplex and high value exchanges

Moving forward: Developing theoretical contributions in management studies


Journal of Management Studies

September 2014, vol. 51, n°6, pp.995-1022

Departments: Strategy & Business Policy, GREGHEC (CNRS)

Keywords: Theory, Theoretical contribution, Analogy, Counterfactuals, Management research

How do we, as management researchers, develop novel theoretical contributions and, thereby, potentially break new ground in management studies? To address this question, we review previous methodological work on theorizing and advance a typology of the reasoning processes that underlie theoretical contributions and significant advances in management studies. This typology consists of various types of analogical and counterfactual reasoning, ranging from focused thought experiments aimed at prodding existing theory in the direction of alternative assumptions, constructs, and hypotheses to more expansive efforts for inducing new theoretical models and alternative explanations. Applying this typology, we detail the mechanisms behind the formation of novel theoretical contributions and illustrate the currency of our typology through a review of 24 major theoretical breakthroughs in management studies. We conclude the paper by discussing the implications of this typology for our collective efforts in building, elaborating, and expanding theory in management studies

Network ties and absorptive capacity for learning and decision-making


Journal of Decision Systems

January 2014, vol. 23, n°1, pp.4-23

Departments: Strategy & Business Policy, GREGHEC (CNRS)

Keywords: Inter-organizational network, Individual’s absorptive capacity, Personal network, PLS analysis

The decision-making literature emphasizes that social ties play an important role in high-stake decisions. However, research on small- and medium-sized enterprises has only partially covered these influences by focusing on the direct link between social ties and the effectiveness of decision-making. In this paper, we focus on absorptive capacity of decision-makers as a critical mechanism that gives social ties their potency in explaining collaborative decision-making in an inter-organizational network (ION) context. In a sample of key individuals in 13 export consortia, this study identifies the extent to which the characteristics of personal network affect individuals’ absorptive capacity. Our results suggest that weak and heterogeneous ties between key individuals in an ION are central mechanisms that influence their ability to access, assimilate, transform and utilize information. However, indirect ties do not show a positive impact on absorptive capacity, as it was hypothesized. Our findings add to the literature on the role of network ties in collaborative decision-making by making explicit a mechanism through which personal network of individuals in an ION influence their information-processing capabilities for effective decision-making. We show that decision-making in interfirm networks is not only a political process but also a learning process

Outsourcing Failure and Reintegration: The Influence of Contractual and External Factors


Long Range Planning

December 2014, vol. 47, n°6, pp.365–378

Departments: Strategy & Business Policy, GREGHEC (CNRS)

Keywords: Reintegration, Outsourcing failure, Contracting, Isomorphism

This paper discusses the reasons that drive organizations to interrupt outsourcing, reverse their previous decision, and then reintegrate activities formerly delegated to providers. Contractual approaches, mainly derived from Transaction Costs Economics, offer some plausible explanations for reintegration originating from outsourcing failure. These explanations are mainly related to asset specificity, poor contractual design, and deficient monitoring. The study of a real case of outsourcing interruption in industrial maintenance illustrates these different factors. However, some other determinants might complement the contractual and strategic background, namely bandwagon behavior and institutional pressure exerted by external actors. Finally, we propose an integrative framework that combines micro- and macro- levels of organizational analysis. We argue that some existing complementarities between the different theories we use here can shed some light on real organizational problems. Besides the implications for theory, our work can help managers to understand the dynamics of organizational boundaries, thus allowing them to make better choices in both outsourcing and reintegration decisions

Placing Strategy Discourse in Context: Sociomateriality, Sensemaking, and Power


Journal of Management Studies

March 2014, vol. 51, n°2, pp.175-201

Struggles over legitimacy in the Eurozone crisis: Discursive legitimation strategies and their ideological underpinnings


Discourse & Society

July 2014, vol. 25, n°4, pp.500-518

The Contraction of Meaning: The Combined Effect of Communication, Emotions, and Materiality on Sensemaking in the Stockwell Shooting


Journal of Management Studies

July 2014, vol. 51, n°5, pp.699-736

The fruitfulness of disagreement - Reading "Logics of Organization Theory" (Hannan, Polos, and Carroll, 2007) and "The Emergence of Organizations and Markets" (Padgett and Powell, 2012)


Academy of Management Review

July 2014, vol. 39, n°3, pp.387-396

Departments: Strategy & Business Policy, GREGHEC (CNRS)

The Future of Outsourcing in the Asia-Pacific Region: Implications for Research and Practice—Panel Report from PACIS 2014


Communications of the AIS

December 2014, vol. 35, n°17, pp.317-331

Departments: Information Systems and Operations Management, GREGHEC (CNRS)

Keywords: Outsourcing, Emerging Challenges in Offshoring, Outsourcing Large Packaged Applications, Rural IT Sourcing, Innovation in Outsourcing

This paper summarizes a panel discussion held at the 18th Pacific Asia Conference on Information Systems (PACIS) in Chengdu, China, 2014, with the same title. The panel discussed the future of outsourcing in the Asia-Pacific region (specifically the importance of outsourcing, new trends, and issues in outsourcing). This paper provides directions for future research that surpasses regional specificity (i.e., the Asia-Pacific region), and contributes to research interests on outsourcing in general

The New Ugandan Anti-Homosexuality Bill


Quaderni di SIDIBlog

2014, vol. 1, n°16, pp.320-324

Departments: Tax & Law, GREGHEC (CNRS)

The organizational drivetrain: A road to integration of dynamic capabilities research


Academy of Management Perspectives

November 2014, vol. 28, n°4, pp.307-327

Departments: Strategy & Business Policy, GREGHEC (CNRS)

Keywords: Dynamic capabilities, Bibliometrics, Development path, Resource-based, Organizational drivetrain, Dynamic bundles

Although the research domain of dynamic capabilities has become one of the most active in strategic management, critics have charged that it is plagued by confusion around the construct itself. In this paper, we uncover a potential reason for this confusion embedded in the unique nature of the construct's development path – a peculiarity that has led to split understandings of what constitutes a dynamic capability. We suggest a solution to this problem in the form of an illustrative metaphor – what we call the “organizational drivetrain”. Our drivetrain represents a theoretical model aimed at combining different views of the definition of dynamic capabilities by explaining how routines and simple rules interact. This shows that it is possible to advance the development of the framework by combining divergent understandings into a coherent whole. We conclude by offering specific recommendations for how to achieve a greater unity of understanding, and move the field even further forward

Vehicle Procurement Policy for Humanitarian Development Programs


Production and Operations Management

June 2014, vol. 23, n°6, pp.951-964

Departments: Information Systems and Operations Management, GREGHEC (CNRS)

Keywords: Fleet management, Humanitarian logistics, Development programs, Procurement

This article aims to identify optimal vehicle procurement policies for organizations engaged in humanitarian development programs and to derive general insights on the characteristics of these policies. Toward that end, we follow an inductive approach. First, we study the operations of the International Committee of the Red Cross (ICRC) in three representative countries: Sudan, Afghanistan, and Ethiopia. Using a linear programming (LP) model primed with field data provided by the ICRC, we calculate the optimal vehicle fleet size and compare it with the policies actually implemented. Second, drawing from results of the LP model, we develop a stylized quadratic control model and use it to characterize the general structure of the optimal policy under different demand scenarios and operational constraints. After demonstrating that the results of the control model are consistent with those of the LP model in the specific context analyzed, we discuss the optimal policies and the applicability of the former as a practical tool for strategic asset planning

Case studies

African Solar Rise: Electrifying Rural Tanzania



The case is about a German NGO that provides solar energy solutions in Tanzania and faces several challenges in order to scale its organization to generate much-needed revenue.
It examined the NGO, African Solar Rise (ASR), as it worked to improve its supply chain operations and last-mile distribution challenges while raising necessary capital to put it on more solid footing

Keywords: Accounting/Finance; Base of the Pyramid; Economics; Emerging and Developing Economies; Emerging Markets; Entrepreneurship & Innovation; Frontier Markets; International Business; Marketing/Sales; Operations Management/Supply Chain; Social Enterprise (Social Entrepreneurship); Social Impact; Strategy & Management; Sustainability

Combining Business and Societal Objectives at Danone



Danone is a leading European food multinational company who has been aggressively pursuing societal ("CSR") objectives for more than 40 years, and has developed an even more ambitious dual project since 2008. In 2011, in the aftermath of the worldwide crisis, the firm finds it increasingly difficult to meet its growth and profit objectives. Some voices in the Executive Committee are complaining that the societal agenda is putting undue pressure on the business.

The case briefly outlines Danone history and describes the organization and platforms enabling the firm to implement its new vision, which integrates business and societal objectives. The different platforms are illustrated by 12 examples of societal projects conducted throughout the world. In many instances the case hints at the way Danone uses CSR as a lever for transforming the company.

Danone needs to reexamine its societal approach to see whether it hinders or helps achieve business results. This begs the questions of 1) the legitimacy of Danone's management to develop these CSR initiatives 2) the method chosen by the firm to do so (how is Danone developing its dual approach?) and 3) the results accomplished so far.

Keywords: Corporate Social Responsibility (CSR), General Strategy, Inclusive Business Models, Social Business.

Jerónimo Calderón and euforia: Mobilizing youth for social impact



Since its founding in 2007, euforia - a Swiss social initiative "by youth, for youth" - and hundreds of volunteers have administered dozens of events and activities that have offered concrete opportunities for over 3,500 youth to make a social impact. euforia and its co-founder Jerónimo Calderón have been recognized for catalyzing social change both within Switzerland and internationally, attracting support from a range of national and international partners. Originally focusing on certain core programmatic offerings, euforia also experimented with new initiatives and funding sources as it grew. As a result, in 2013, euforia was at a crossroads. It could continue down the path of revising its business model to scale its activities; pull back to preserve its original youth-centric social mission, organizational structure, and programs; or find a solution somewhere in between.

Keywords: Social Entrepreneurship, social impact, social value, impact investing, double bottom line, social mission, scaling, social business, business model, non, profit.

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