Research
My research considers how sectors evolve, why the division of labour between different types of institutions changes over time, and also looks at the implications of changes in terms of "who does what" to "who takes what". I have also been increasingly interested in the policy implications of such dramatic changes in the division of labour- such as the one we saw in the financial services sector- on the stability of sectors, as highlighted by the recent near-collapse of financial services. I look at how firms structure their boundaries; at how they determine their business models; and at how, on the basis of all this, they help shape their institutional environment, affecting stability and payoff structures for all involved. I am interested to understand what leads to different types of structures in the economy; and how we can help both executives and policy makers better navigate the increasingly complicated strategic landscape they inhabit. In this section, I provide a sense of the different topics that my research has looked at, and I briefly sketch out some of my more recent or ongoing research projects.
A major theme of my research have been the causes and consequences of the division of labour, between and within organizations.
At the level of an industry, I consider how sectors shift from integration, to disintegration, and then to strategic re-integration. Instead of taking the vertical organization of a sector as a given, and presuming that firms can decide to make or buy, I have examined the emergence of new intermediate markets. My focus has been on the endogenous forces of industry evolution that change the vertical structure of a sector, thus gaining insights that are often lost when examining "one transaction at a time", as is often the case in New Institutional and Transaction Cost Economics (TCE). I consider how capabilities and knowledge bases drive scope and how scope affects capabilities and strategic dynamics. My work thus informs research on the Resource-Based View and on capabilities. I also extend work on evolutionary economics by focusing explicitly on vertical scope and on industry "architectures" - stable but evolving ways in which labour and profit is divided in a sector. I look at how firms try to change the architecture of their sector, to improve their competitive prospects.
At the level of the organization, I consider how firms set their boundaries and link to markets along their value chain, examining how this affects their capabilities. I also look at an organizations' internal division of labour, focusing on how divisionalization shapes the way it perceives and responds to its environment. I consider how hierarchy can help overcome inherent limitations arising from the unavoidable de-composition of tasks into smaller chunks: thus, drawing on the Carnegie tradition, I try to bridge organization theory and strategy. Most of my papers published up to 2007 or so focus on a particular aspect of this research agenda. Some focus primarily on the causes of the division of labour between firms; and some on its implications. Other papers shed light on what drives division of labour within organizations, as well as how this affects them. More specifically, there are six key questions that my research helps address. While these questions have puzzled strategy scholars, the answers to date are not fully satisfactory, as I explain below. Specifically, first I consider what drives the vertical structure of a sector, focusing on the endogenous forces that drive value chain evolution. Second, I consider how the division of labour between firms in a sector (i.e., the industry's architecture) shapes the capability development process and strategic dynamics. Third, I ask how firms can manage industry architectures to their advantage, and how such architectures explain broader patterns of globalization. I then shift from the industry to the individual firm. So, fourth, I ask how firms structure their boundaries to improve their capabilities or benefit from innovation. Fifth, I look at the process through which firms set up their boundaries, and how they use IT to link to markets. Sixth, I look at intra-organizational boundaries, and ask why divisionalization emerges in the first place; what are its implications for an organizations ability to perceive its environment; and what hierarchy can do to help. Click on any of the questions to see my views- and the associated papers!
Some of my more recent work has focused on how firms and policy-makers should navigate an increasingly complicated strategic landscape; and look at the specific details of how changes in the strategic landscape are affecting the payoffs for different types of industry participants.
The link between my earlier and current research has been the analysis of Industry Architectures (jointly with T. Knudsen and M. Augier), and my evolving stream of work with Sid Winter on how firms shape their environment- and how this affects profits, rents, and value. In my current research, the focus has shifted to the implications of the changes in terms of firm and industry boundaries (which has now broadened to consider changes in business models and the context in which they operate) on profitability. As an analytical stepping stone, in joint work with Sid Winter and Stefan Kassberger, I consider the nature and operation of non-oligopolistic profits. Starting with the observation that firms of blatantly different efficiency do coexist, even in the absence of price fixing, we consider a part of the total profits that has been largely ignored by economic and strategic analysis- efficiency profits, and look at how firms of differing capabilities may co-exist in the short and long term, and why. We argue that customization of generic resources alone can produce an interesting set of phenomena, and drive profit evolution, and we see how this combines with firm heterogeneity.
Related modelling work, with Claudio Wolter and Francisco Veloso looks at the formal link between the evolution of scope and the evolution of profit. Drawing on my Org Science model, we look at the profits over time, as scope evolves, under different transactional conditions. We also consider how innovations that affect one particular part of the value chain (say, upstream) shape the downstream players; and we find a set of fascinating results linking upstream innovation, transaction costs, and profits along the value chain, giving some intuition on "profit ripples along a sector's value chain". In parallel, empirical work has gone into providing some flesh around the bones of an idea of "industry architecture". First, with Jennifer Tae, my PhD in LBS, we have looked at the evolution of profit along the computing and the automobile value chains, extending our earlier work with Carliss Baldwin and Reza Dizaji. We find that in segments of a value chain dominated by a "bottleneck", ie a very asymmetric leader, value flows. Thus, we establish that conditions within a part of the overall industry can shape the part of the value of that segment when compared to the total value available. This is the first paper to establish some of the econometric patterns of value migration, linking dynamics within a segment to the overall levels of profitability, and thus supporting the conjectures in the work on Industry Architecture. The global dimension of the Industry Architectures has been further supported in my more recent work with Alina Kudina, in my paper on the role of similarity and modularity of industry architectures, as predictors of success in global expansion. Drawing on a sample of firms that expanded in CIS countries, we find that some of the most robust predictors of the perceived success of their global expansion is the extent to which industry architectures differ or not- and whether the parts of the value chain are more or less modular, as our theory would predict.
In addition to my own work, I have co-edited, with Stefano Brusoni and Andrea Prencipe, a very interesting special issue of the European Management Review that looks at knowledge dynamics and the ability of firms to shape their sector's architectures. Take a look at the introductory note - which also provides a sense of the papers involved. The analysis of industry architectures has also come to encompass the role of business models, and to show that industry architectures provide the contours that delimit, enable and constrain business models; and that business model innovations often expand the boundaries of existing industry architectures. My white paper on "shaping your industry and win", builds on this observation and on the insights developed in the IA line of work, to yield specific prescriptions. Ditto for my recent work in Harvard Business Review, which builds on all the research noted above, in addition to my executive work. This work, noted under the "executive involvement" heading, is part and parcel of my research, as my research and executive focus are becoming ever more intertwined. A related area of research, which has contributed to the recent HBR, is the analysis of representations in strategy research and strategy tools and teaching, which we have found with Massimo Warglien to be overly reliant on visualizations. So- read the HBR to get a sense, or see the presentation we had with Massimo on the topic, based on a workshop we co-organized in Venice! Finally, a particular area of focus I have had of late is the evolution of the industry architecture in the financial services sector. The current meltdown, I recently argued, is at least partly the result of an unwitting set of changes on the divison of labour and the change in rules and roles in financial service firms. And the greatest challenge is that this happened with no-body noticing, as nobody was on the lookout for such changes! Some of my recent work in research, executive development and thought leadership with financial institutions, and new work with a policy angle, tries to expand on this theme, and to yield some fresh conclusions that might help inform the policy debate. This should be an area with new results coming up- and Sid Winter and I are preparing a presentation for the American Economic Association meetings in January, in a session with Giovanni Dosi, Joe Stiglitz, and Bob Schiller. This, and a set of research, policy and strategy topics- so much more to come.
A number of related stoves are currently on the fire- and while I don't update this website as frequently as I should, I'll try posting some recent work shortly! In terms of more details, feel free to look at the earlier research questions I focused on; a more detailed discussion of my more recent work; to my involvement in the academic community and my institutional (research) work; some musings on my views on what to research, and why; or to a list of my research publications, with hyperlinks. And, do note that some of my research (targeted to managerial or policy audiences) can be found under the "executive involvement" heading.
Feedback, thoughts, reactions, always welcome- even though my email response speed is sadly often less than perfect...