Flexible Production and Entry: Institutional, Technological, and Organizational Determinants

Belenzon, Sharon; Bennett, Victor Manuel; Patacconi, Andrea

doi:10.1287/stsc.2019.0081

Cited by 13 publications

(14 citation statements)

References 87 publications

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“…On the basis of these results, we hypothesize that MNE subsidiaries are able to hedge macroeconomic, political and other risks better than domestic firms. Our hypothesis is consistent with the argument that MNEs are able to shift resources across units and countries as economic and political conditions change (e.g., Belenzon et al, 2019;Kogut & Kulatilaka, 1994).…”

Section: Resultssupporting

confidence: 90%

Corruption level and uncertainty, FDI and domestic investment

et al. 2021

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Based on real options theory and institutional factors, we develop a theoretical framework for investment in the presence of corruption and use a sample of private firms in 13 European countries over 2001-2013 to carry out the first large-scale analysis of the impact of the level of corruption and uncertainty about corruption on post-entry investment of MNE subsidiaries. We employ several waves of managerial surveys (the Business Environment and Enterprise Performance Survey; BEEPS) to construct local-rather than merely countrylevel measures of corruption level and uncertainty. In combination with a large European firm-level database (Amadeus), we show that corruption uncertainty and corruption level do not have an effect on the investment of MNE subsidiaries. We next carry out the analysis on the sample of domestic firms and find a negative investment effect that is driven primarily by corruption uncertainty rather than corruption level. We also show that investment of domestic firms that are similar (matched) to MNE subsidiaries is unaffected directly by corruption, but is affected by uncertainties related to finances and judiciary. Our results are robust to controlling for various types of uncertainty, and they provide new insights into the effects of corruption on investment.

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Section: Resultssupporting

confidence: 90%

Corruption level and uncertainty, FDI and domestic investment

et al. 2021

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“…We find evidence consistent with software making existing labor more productive, and thus making firms less susceptible to demand uncertainty. This adds to the Strategy literature on entry and uncertainty (e.g., Belenzon et al, ; Lieberman et al, ; O'Brien et al, ; Wu & Knott, ). We also find evidence consistent with large firms struggling to adapt to this change and exiting, building on the literature on disruptive effects of new technologies (Christensen & Bower, ; Henderson & Clark, ).…”

Section: Discussionmentioning

confidence: 73%

“…Entry —We follow Belenzon et al () and construct our sample using the ORBIS ownership and financial database, which provides standardized financial items for European firms, including private, that compares favorably to the actual firm size distribution of each European country (Kalemli‐Ozcan, Sorensen, Villegas‐Sanchez, Volosovych, & Yesiltas, ). The initial firm‐level sample contains over 12 million firms from 42 countries.…”

Section: Data: Software and Entrymentioning

confidence: 99%

“…The number of entrants is highly skewed with a median of zero, so we use a log transformation of the variable in our analysis. We distinguish between entrants that are affiliated with corporate groups (defined as in Belenzon et al, , i.e., receiving a C or D grade from ORBIS for independence) and standalone firms with no equity ties to other firms. We augment this sample with data from other sources described below.…”

Section: Data: Software and Entrymentioning

confidence: 99%

“…For example, Lieberman, Lee, and Folta () propose a model in which firms with redeployable assets have lower thresholds for both entry and exit because they have lower sunk costs. Belenzon, Bennett, and Patacconi () find evidence consistent with firms with more flexible production being less exposed to uncertain demand and thus more likely to enter. We also focus on entry under uncertainty, but suggest that flexibility can come from individual productivity as well as redeployability.…”

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confidence: 92%

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Software availability and entry

Bennett

Hall

2019

Strategic Management Journal

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Research Summary What happens to market structure as an industry's operations lean ever more on software? We find that software availability is associated with an increase in entry and an increase in exit by the oldest and most established firms. We suggest three potential mechanisms and, through post hoc analysis, determine which is most consistent with observed patterns. We find the effect of software availability on entry is stronger in settings with more available IT talent, more permissive labor policies, and greater demand uncertainty. Observed patterns are most consistent with software enhancing labor productivity and thus reducing exposure to uncertainty. Managerial Summary Managers and policymakers are concerned with whether technologies like software and robotics spreading to new industries can make powerful firms even harder to unseat. For software, we find evidence consistent with the opposite: as software becomes more prevalent, entry by new firms increases and the likelihood that older firms exit increases. The patterns of entry we observe are consistent with the following mechanism. Software allows the same number of employees to serve a wider range of production levels, meaning that potential startups are less likely to be deterred by uncertain demand.

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Changes in persistence of performance over time

Bennett

2020

Strategic Management Journal

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Research Summary I revisit a research tradition laying out trends in persistence of performance, to create shared facts to inform theory development. I build on prior work in Strategy by: (a) bringing together two distinct measures of persistence of performance and explaining how they complement each other and help distinguish theories, (b) extending the time series from those prior studies and applying modern statistical improvements to demonstrate new patterns. Specifically, while I find ordinal persistence increased monotonically since the 1980s, autocorrelation of performance was not monotonic and is now approaching lows from the mid‐1990s. These patterns are inconsistent with mechanisms raised in the debate about declining competition. I suggest that these facts can inspire Strategy theory, which would contribute to that debate. Managerial Summary A central concern of managers is how precarious is their position, or for new ventures, whether they will be able to displace current leading firms. Even within the same year, management writing and the media might claim that it is both: a) a time of faster‐than‐ever turnover, b) or that large firms have become unassailable. This manuscript tracks two measures of performance persistence over time. I find that persistence of rank has increased roughly steadily since the 1980s. How associated are performance measures year‐to‐year was actually at its peak in the mid 1980s, potentially explaining the debate. The final patterns are consistent with top firms separating from followers in performance so much that increasing volatility in their performance does not lead to changes in rank.

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Flexible Production and Entry: Institutional, Technological, and Organizational Determinants

Cited by 13 publications

References 87 publications

Corruption level and uncertainty, FDI and domestic investment

Corruption level and uncertainty, FDI and domestic investment

Software availability and entry

Changes in persistence of performance over time

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