Market position, resource profile, and governance: linking Porter and Williamson in the context of international courier and small package services in Japan

Abstract

Two economic theories that have had an immense impact on modern strategic management research are Porter's strategic positioning framework (SPF) and Williamson's transaction cost economics (TCE). While both theories have contributed to our understanding of strategic management and to the choice of strategy and structure, each theory offers managerial prescriptions that are incomplete at best. We contend that if followed in isolation, each theory can lead to inferior performance. This paper, which studies the international courier and small package (IC&SP) services in Japan, improves upon prescriptions from both theories by linking Porter's and Williamson's approaches. Our main proposition is contained in three relationships that predict a fit among three strategic choices: market position, resource profile, and organizational structure. We test our predictions with a three-stage, reduced-form, endogenous selfselection model. While our empirical methodology is complicated and relies on a multilevel analysis, the methodology is necessary both for analyzing a constellation of activities in the vertical chain and for assessing strategy, structure, and performance when data can be drawn from only a limited number of firms. Our results suggest that a firm's market position, resource profile, and organizational choice are related in ways predicted by a positioning-economizing perspective. To be sure, our study is ambitious and suffers from a number of limitations; nevertheless, it provides one of the first attempts to theoretically and empirically link Porter's SPF and Williamson's TCE.

The licensing dilemma: understanding the determinants of the rate of technology licensing

“…Each transaction is treated as an independent item, bearing almost no relationship with previous or future transactions, and with the rest of the firm's activity (Argyres and Liebeskind, 1999;Nickerson, Hamilton and Wada, 2001). If interaction effects are missed or if holistic consequences are glossed over, transaction costs theory would suggest that licensing is chosen when the transaction costs of using a market-based mechanism for profiting from innovation are sufficiently small (Teece, 1988).…”

Does Ownership Affect the Variability of the Production Process? Evidence from International Courier Services

“…In short, efforts to decrease variability in product attributes require superior adaptation to disturbances, as well as investment in highly specialized assets to detect nonconformities. If the benefits from reducing variability supplant the added costs to control sequential processes of a given value chain, then ownership is warranted.We test this claim using data from the international courier and small package (IC&SP) services industry in Japan (Nickerson et al 2001), which is a market segment where low variability in the delivery time of shipments is desirable and valued by customers. Instead of analyzing delivery time directly, we compute how the delivery time of each parcel deviated from what would be expected given certain parcel-and firm-specific characteristics.…”

“…Many, but not all, of these components that make up courier IT systems are idiosyncratic. More importantly, the ownership of these components to make them work together as a single system can be substantial and is highly idiosyncratic (Nickerson et al 2001).6 Ownership can play a role by safeguarding these investments against expropriation hazards that are likely to occur in other types of arrangements. Because those investments are likely to heighten reliability or diminish variance, a negative (positive) association between ownership and variance (reliability) should be expected.…”

Testing Organizational Economics Theories of Vertical Integration

“…For example, Spiller (1985) compares asset specificity and market-power explanations for vertical integration. Zenger (1995, 1998) and Nickerson, Hamilton, and Wada (2001) also provide exemplar research designs for comparative examination of alternative theories. Beyond econometric model specification, another important class of empirical problems involves econometric identification problems.…”