Anoop Madhok

The market for acquisitions has been a blind spot in exploration-exploitation research in the new venture context. The introduction of the acquisition exit outcome as a performance dimension for new ventures, especially among high-tech ventures, shifts the traditional temporal logic of exploration-exploitation theory by introducing previously unacknowledged short-term benefits of exploration. We bring the acquisition outcome into the picture and investigate the relationship between the exploration-exploitation continuum and profitability, survival, and acquisition likelihood simultaneously. Using the Kauffman Firm Survey data, we provide evidence for a link between exploration and the likelihood of acquisition (defined as the business being sold to or merged with another business), although industry technology level poses a boundary condition such that the association is not observed in low- and medium-technology firms. An inverse U-shaped relationship that is monotone negative for most of the data range was found between exploration and the profitability of low- and medium-tech firms, and a negatively linear relationship was found for exploration and the profitability of high-tech firms. Our findings lend some support to the viability of “born to flip” strategies involving comparatively higher exploration levels in high-tech start-ups and sacrifice of short-term profitability.

Platform sponsors and complementors co-create value in digital platform ecosystems. But how does a digital platform ecosystem emerge in the incipient stage, especially in a situation where value co-creation involves attracting complementors to platform sponsors who are unknown to one another? We posit that a platform sponsor’s choice of scope signals value co-creation opportunities and thereby attracts complementors and consumers. We draw upon the problem-solving perspective, rooted in the knowledge-based view of the firm, to shift the emphasis away from the actor (‘who’) to the problem at hand (‘what’) and demonstrate how incipient platform sponsors can align their scope with the problem to stimulate ecosystem emergence. Using fuzzy-set qualitative comparative analysis on a dataset of crowdfunding campaigns, we identify multiple pathways and associated propositions for successful emergence of digital platform ecosystems, notably for innovation, open-source, and information ecosystems. The framework we conceptualize highlights novel considerations to overcome the early-stage challenge of attracting participation to an ecosystem that is yet to emerge.

The Covid-19 pandemic has exposed many of the weaknesses in our current systems of government and commerce. In this essay, I provide some historical context to the recent era of “hyper-globalization.” I then present multiple factors—economic, social, political, technological, and governance-related—that collectively explain why globalization has peaked and is on the retreat. Following this, I use the analogy of a three-legged stool to explain the importance of recalibrating the economy, state, and society so as to realize a healthier alignment among them. Finally, I look at where globalization might be going next and the implications for firms, concluding with some lessons that we can take away from the COVID crisis.

Purpose This paper aims to analyse which firm-level characteristics drive their location decisions when investing in a foreign country. Focusing on origin clusters, the authors will study the potential influence of the home country context and, in particular, the impact of firm-level factors, both investor- and investment-related, underlying heterogeneity in their location choice decisions. Design/methodology/approach The empirical analysis draws on data gathered from mainland Chinese MNEs that have invested in Germany between 2005 and 2013 (269 firms). The authors chose a single host (Germany) and a single home (China) country for their representativeness and for methodological reasons to control for country effects. The authors used a multinomial logit model to assess the effects of the independent variables on the probability that each of the three location possibilities would be selected. Findings The results suggest that investors preferring co-location in origin clusters have distinct structural and strategic characteristics. From a more structural point of view, Chinese foreign direct investment (FDI) undertaken by smaller firms and those without prior experience in the EU prefer an area where there are other Chinese investors. From a more strategic perspective, these FDI flows are more likely to tap into industry agglomerations when the investors’ objective is strategic asset seeking, and they have less knowledge-intensive investments. Practical implications The findings may be of great practical value to practitioners and policymakers. Knowledge of the advantages and disadvantages of the types of agglomeration networks can help managers to balance the rewards and risks in their decision-making and to select a suitable development path for their FDIs. For policymakers, an understanding of the structure and formation of different groups of firms in one location and the characteristics of investors who may enter the location can help them to improve their regulatory work and to develop policies to attract investments, thereby enhancing local economic development and community stability. Originality/value The research shifts the emphasis of the location choice decision beyond just where to locate toward with whom to collocate. It also contributes to the growing research on emerging market multinationals by providing further insight into understanding of FDI location behavior by firms from emerging economies.

In this paper, we investigate the ways in which new forms of organization enabled by digital technologies, such as crowdsourcing and digital marketplaces, are allowing firms to circumvent and defy traditional knowledge constraints. This is part of the broader question of when and why these forms of organization are more efficient relative to alternatives, given that some firms simultaneously utilize crowdsourcing, marketplaces, and traditional forms of organization. We observe that an important cluster of these new organizational forms are able to circumvent knowledge constraints, because they combine elements of market and hierarchical organization in firm-designed hybrid arrangements. We further categorize these firm-designed markets into one-sided market arrangements (crowds) and two-sided market arrangements (marketplaces). To explain their efficiency relative to hierarchies and relative to each other, we take a knowledge-based perspective and review ways in which firm-designed markets reduce or remove both first-order (known unknown) and second-order (unknown unknown) knowledge constraints compared with hierarchies. Our argument hinges on the notion that firm-designed markets provide semidirected and undirected search and generativity mechanisms that allow firms to go beyond what is possible with centrally directed search.

Research Summary – We analyze a novel way to configure and manage multinational networks and propose a model of “co‐parenting,” characterized by the sharing of parenting roles and distribution of responsibilities between two units. We develop our argument around the notion of the springboard subsidiary, an operating subsidiary that assumes headquarters’ functions since it shares greater institutional closeness with both the headquarters’ country as well as with the host region. Based upon qualitative data, our inductive model revolves around three stages: establishment, consolidation, and maturity, each of which reflects distinct roles and loci of decision making among the three actors involved: headquarters, springboard subsidiary, and local subsidiary. Overall, our study sheds distinct light on when and how headquarters add value by matching parenting to context. Managerial Summary In expanding across regions, multinational firms often face a situation where neither the local unit nor the corporate headquarters possesses the competencies to be at the competitive forefront. This article analyzes a model of interregional expansion of multinational firms by using springboard subsidiaries—operating subsidiaries that can serve as a bridge between headquarters and local subsidiaries since they share institutional and business ties with both. We develop a model in which some parenting functions—coordination, control, and knowledge creation—are distributed between headquarters and the springboard subsidiary along an accumulative process of capabilities. By demonstrating how a springboard subsidiary can help align control to context, the model offers a tool for strategic analysis that helps avoid potential value destruction by headquarters.

Exploration-exploitation research to date has not properly addressed the issue of multiple performance dimensions and their potential trade-offs, especially in the context of start-ups where unique performance dimensions such as acquisition likelihood are relevant and coveted. This paper utilizes the recently completed Kauffman Firm Survey data to investigate the relationship between exploration- exploitation and the profitability, survival, and acquisition likelihood of start-ups simultaneously and to investigate potential trade-offs among these performance dimensions. A balance-is-best relationship is found for profitability of survived firms and for the acquisition likelihood of high tech firms, while an exploitation focus is found to maximize the survival chances of low and medium tech firms. For low and medium technology start-ups our findings are consistent with a trade-off between survival likelihood and profitability-given-survival, and for high tech start-ups our findings are consistent with a differently shaped trade-off between acquisition likelihood and profitability-given-survival.

While strategy theory relies heavily on equilibrium theories of economic rents such as Ricardian and monopoly rents, we do not yet have a comprehensive theory of disequilibrium or entrepreneurial rents. We use cooperative game theory to structure computer simulations of the market process in which acts of creation and discovery disequilibrate and equilibrate the market over time. Using simulation experiments, entrepreneurial rents can be isolated from structural rents by keeping initial structural advantages constant. We impute entrepreneurial rents to underlying actions of creation and discovery under various combinations. Our results have relevant implications for entrepreneurship strategy, particularly for firm boundaries and resource allocation decisions.

Alliances have been studied extensively in the past and various arguments have been suggested to explain their evolution and eventual termination. We argue that one important explanation of alliance termination has remained overlooked, one where the mechanism revolves around resource value and is independent of any mismanagement, opportunism, lack of trust, interpretive misunderstanding, or perceptions of inequity. In this explanation, we recognize explicitly that resources undergo transformation through an alliance, and this transformation reveals new previously imperfectly predicted costs to remain in the alliance as well as new opportunities outside the alliance. We apply the concepts of direct and indirect adjustment costs and inter-temporal economies of scope to explain these phenomena and demonstrate that, depending on the particular structure of incentive asymmetry between the two firms after alliance formation, the new circumstances may motivate a revised cost/profit sharing arrangement, a change in ownership of alliance resources, or a complete dissolution of the alliance. Some determinants of adjustment costs are explored in detail, covering resource characteristics, resource combination characteristics, and environment characteristics. Based on the economics of resource value, our argument has implications not just for alliance evolution and termination but also provides a distinct lens to explain the evolution of firm boundaries and the manner of transition of alliances into acquisitions.

The notion of advantage is central to many of the arguments regarding the multinational enterprise (MNE), both with respect to the existence of the MNE as an institution, (i.e. why the MNE), as well as challenges in managing the MNE. In this paper, I critically examine three aspects of advantage: the firm advantage, the multinational firm advantage and the implications of advantage for multinational and multinationalizing firms. With respect to the first, I complement the market failure argument with the relational failure argument. With respect to the second, I complement the multinational as ‘internalizer of externalities’ perspective with that of the multinational as a knowledge integrator. With respect to the third, I question the (over) emphasis on extant firm specific advantages and introduce elements of entrepreneurship into the argument, shifting the emphasis from ability to agility.

Existing theoretical frameworks typically revolve around sustainability of competitive advantage and attribute superior firm performance to its position in the industry structure and/or the possession of critical resources. However, the equilibrium-oriented logic implicit in these perspectives is not consonant with today’s environment, characterized by more dynamic and complex behavior of markets and firms, which renders competitive advantages obsolete faster than ever. We propose an alternative action-based perspective on firm competitiveness one that revolves around the logic of action and emphasizes an entrepreneurial orientation and firm agility as the basis of firm competitiveness. This logic of action shifts the focus away from just industry position or resource possession and provides more scope for less advantaged firms to compete with the incumbents.

Strategic management is a relatively youthful discipline that has steadily matured over the past fifty years. The field has become consolidated over this period, while simultaneously expanding the range of topics analyzed and research methodologies used. Different theories and approaches, addressing different research topics, have been developed to explain the reasons underlying firms’ competitive advantage and success. In this paper, we posit the existence of two pendulums in constant motion that, on the one hand, reflect the tension that has historically existed between the focus on internal firm factors and external environmental attributes respectively and, on the other hand, the tension between a more macro level of analysis, i.e., the firm and its environment, and a more micro level one, i.e., individuals and their relations within the firm. The frontier of research in strategic management is shaped by the simultaneous movement of both pendulums.

Research on agglomeration finds that either a higher survival rate of incumbent firms or a higher founding rate of new entrants, or both, can sustain an industry cluster. The conditioning effects of time on the two distinct mechanisms of survival and founding are, however, rarely examined. We argue that the forces driving geographic concentration vary across the industry life cycle. Data from Ontario’s winery industry from 1865 to 1974 demonstrates a dynamic model of geographic concentration: agglomeration attracts more new entry in the growth stage only, whereas it contributes to firm survival in the mature stage only. The results not only establish the importance of understanding the temporal dynamics underlying agglomeration externalities, but also provide a possible explanation for the mixed empirical results found in previous studies.

We investigate the rapid internationalization of many multinationals from emerging economies through acquisition in advanced economies. We conceptualize these acquisitions as an act and form of entrepreneurship, aimed to overcome the ‘liability of emergingness’ incurred by these firms and to serve as a mechanism for competitive catch‐up through opportunity seeking and capability transformation. Our explanation emphasizes (1) the unique asymmetries (and not necessarily advantages) distinguishing emerging multinationals from advanced economy multinationals due to their historical and institutional differences, as well as (2) a search for advantage creation when firms possess mainly ordinary resources. The argument shifts the central focus from advantage to asymmetries as the starting point for internationalization and, additionally, highlights the role of learning agility rather than ability as a potential ‘asset of emergingness.’