What Firms Make vs. What They Know: How Firms’ Production and Knowledge Boundaries Affect Competitive Advantage in the Face of Technological Change

This paper is an exploration of how the relationship between technological change and firm performance is affected by ways in which firms are organized. According to transaction cost theory, firms typically choose to vertically integrate (hierarchies) or not (markets), whereas knowledge-based view says that firms have the option to integrate knowledge even they don’t want to integrate labor (vertical integration). Draw on these notions, this paper proposes that, when facing technological change, 1) vertically integrated firms generally perform better and have greater competitive advantage than non-integrated firms; 2) the type of technological changes (component change vs architectural change) moderates the advantage firms gain from vertical integration; and 3) among non-integrated firms, those with knowledge integration generally do better than those without knowledge integration.

The research is conducted in the context of global dynamic random access memory (RAM) industry. Firms’ performance as the dependent variable is measured by the time needed to launch product with new technology to the market (time-to-market). Key independent variables include a dummy to indicate vertical integration or not, knowledge of externally produced components (patent-based measurement), and a dummy to indicate the type of technological changes. The paper adopts an accelerated failure time (AFT) model, which is one kind of survival analysis assuming that the effect of a covariate is to accelerate or decelerate the life course of a process by some constant.

The empirical findings show that vertical integration increases time-to-market performance, moderating by the type of technological changes, and knowledge integration also increases time-to-market performance. However, the results reveal an interesting fact that knowledge integrated firms with partial vertical integration benefit less than their counterparts with no vertical integration at all.

Social contagion theory suggests that when performance is uncertainty, decision makers will imitate others within their ecosystem. Such contagion occurs either through the direct transmission of information during interactions between adopters and nonadopters, or via an observational process where managers scrutinize their environment and attend to the adoption decisions of other organizations. Based on social contagion theory,   the author hypothesized a hospital’s likelihood of adopting EMRs as a function of its susceptibility to the influence of prior adopters, its proximity to prior adopters, and the infectiousness or potency of influence exerted by adopting hospitals.

They apply a heterogeneous diffusion model (HBM) technique to perform a temporal analysis of the dynamic contagion process, using archival data from a sample drawn from an annual survey spanning 1975 to 2005 of almost 4,000 U.S. hospitals. 7 out of 9 hypotheses are supported, suggesting that with respect to susceptibility to influence, greater hospital size and age are positively related to the likelihood of adoption for nonadopters. Also, the adoption of EMRs by young and large or old and small hospitals exerts almost no infectious influence on potential adopters, whereas adoption by large, old hospitals is the most contagious.  A  hospital’s “celebrity” status also contributes to its infectiousness. Furthermore, they also find strong effects for social proximity on a hospital’s likelihood of adoption, and regional effects for spatial proximity. In contrast to a view that size and age are impediments in innovation because they create apathy in organizations, maturity provides more opportunities for learning from others.  This study yields important insights into what factors increase the likelihood of adoption of EMRs, which will benefit both practitioners and researchers.

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: An Empirical Investigation of Ride Sharing and Alcohol Related Motor Vehicle Homicide

Preliminary analysis conducted by Uber and several industry analysts suggest that introduction of Uber and other ride sharing services has a negative influence on DUI arrests. However, these studies have been questioned on several grounds: including involvement of Uber in the data analysis, methodological rigor (i.e. single city estimations), and the presence of confounding factors such as changes in city’s population, bar scene, and tougher enforcement. In this work, they investigate how the entry of the driving service Uber influences the rate of alcohol related motor vehicle homicides. Using  a   difference  in  difference   approach  to  exploit  a  natural  experiment,  the  entry  of  Uber  into  markets  in   California between 2009 and 2013, findings suggest that the entrance of Uber X results in a 3.6% – 5.6% decrease in the rate of motor vehicle homicides per quarter in the state of California. These results extant understanding of the sharing economy.

Normally, novelty and flexibility is perceived valuable due to its predicted positive influence on outcome. This article pinpointed the area of software process and reported the drivers, which can increase software process diversity. The software process is varied in plan-based and agile-process approaches at the firm. First, the authors conceptualized the degree of fit (or match) between a projects’ software process diversity and the level of process compliance by conducting focus group meetings and interviews. Next, in the second stage, they tested using empirical data from 410 large commercial software projects of a multinational firm.

The findings suggest that higher level of requirements volatility, design and technological novelty, and customer involvement increase software process diversity within a project. As expected, on the other hand, software process diversity decreased relative to increase in the level of process compliance to the firm’s process standards, enforced on the project. The attributes to increase diversity is reversely correlated with the level of process compliance. Overall, a higher degree of fit between the process diversity and process compliance of a project, which are largely associated with each other, are again correlated with a high level of project performance, based on project productivity and software quality. Boundary effect was found. The results was significant only when there is an increase in organizational process compliance efforts.

For the managerial implication, it is highly recommended to the project designers to suggest an appropriate fit between process diversity and process compliance for improving software project performance. The novel part of this study compared to the previous literature is the authors differentiate the level of process maturity organizations and the conflicting effect of process diversity and compliance efforts. In my opinion, weighing the fit between process diversity and process compliance is highly dependent on the project organizations.

The variety dimension of diversity was measured using the Blau’s index. Process compliance, team size, and team experience were in a reversely related to the effect on process diversity.