Normative implications of culture research

These arguments have a variety of normative implications, both for man- agers in firms without valuable cultures and for managers in firms with valuable cultures. 1. FIRMS WITHOUT VALUABLE CULTURES For firms without valuable cultures, the normative implications of these analyses are somewhat limiting. Such firms cannot expect to obtain even temporary competitive advantages

Defining trust and trustworthiness

Numerous definitions of trust and trustworthiness have been presented in the literature (Gambetta 1988; Bradach and Eccles 1989; Lewicki and Bunker 1994). For purposes of this chapter, Sabel’s definition of trust (1993: 1133) has been adopted: trust is the mutual confidence that no party to an exchange will exploit another’s vulnerabilities. Parties to an

Types of trust

While trust is the mutual confidence that one’s vulnerabilities will not be exploited in an exchange, different types of trust can exist in different eco- nomic exchanges. These different types of trust depend on different reasons parties to an exchange can have the confidence that their vulnerabilities will not be exploited. At least three

Trust and competitive advantage

Trust can emerge in economic exchanges in any of the three ways discussed. However, these three types of trust are not equally likely to be sources of competitive advantage. A strategic analysis of trust and trustworthiness focuses on the conditions under which a particular type of trust will be a source of competitive advantage.

Discussion on Trust as a source of sustained competitive advantage

Trust, in economic exchanges, can be a source of competitive advantage. However, trust in these exchanges is not always a source of competi- tive advantage. Weak form trust is only a competitive advantage when competitors invest in unnecessary and costly semi-strong governance mechanisms. Semi-strong form trust is only a source of competitive advan- tage when

Resource-based analysis of human resources

1. THE ECONOMIC VALUE OF HUMAN RESOURCES Firms create value by either decreasing product/service costs or differenti- ating the product/service in a way that allows the firm to charge a premium price. Thus, the ultimate goal of any HR executive is to create value through the HR function. The first question that an HR

Human resources and sustainable competitive advantage

The VRIO analysis above illustrates how a variety of firms have attempted to develop their human resources to provide sources of sustainable com- petitive advantage. The VRIO framework (summarized in Table 3.1) pro- vides a tool to assist managers to evaluate the potential for specific firm resources to be sources of competitive disadvantage, competitive

Implications of Resource-based theory for HR executives

This resource-based analysis has a number of implications for HR execu- tives. In general, it highlights the fact that HR executives play an important role in managing the firm’s human assets, those that possess the great- est potential for being sources of sustained competitive advantage. More specifically, it provides guidance regarding the management of

The value of Information technology

Traditionally, most research in strategic IT has focused on the ability of IT to add economic value to a firm by either reducing a firm’s costs or differentiating its products or services (see McFarlan 1984; Porter and Millar 1985; Bakos and Treacy 1986; Wiseman 1988). For example, when Wal-Mart adopted its purchase–inventory–distribution system, it

Information technology and sustained competitive advantage

Five attributes of IT have been suggested as possible sources of sustained competitive advantage in the literature. These five attributes are evaluated here using resource-based logic. 1. CUSTOMER SWITCHING COSTS At one time, it was suggested that customer switching costs could create competitive advantages for some firms. This logic was summarized in the ‘create-capture-keep’

Empirical examination of resource-based arguments on Information technology

1. Empirical examination of resource-based arguments Recently, some of the empirical implications of these arguments have been examined (Ray, Barney, and Muhanna 2004; Ray, Muhanna, and Barney 2005). This research focused on the role of IT investments in the customer service function in North American insurance companies. These studies examined the impact of the

A brief summary of transactions cost economic analyses of firm boundary decisions

In order to set the groundwork for this discussion, it is helpful to begin by briefly summarizing transactions cost logic as applied to vertical inte- gration decisions. Three sets of concepts are important in understanding TCE as applied to firm boundary decisions: governance, opportunism, and transaction-specific investment. In TCE, governance is simply the mechanism

Resource and capability considerations in firm boundary decisions

Only three apparently minor additions to traditional transactions cost logic lead to the conclusion that resources and capabilities can be an impor- tant determinant of a firm’s boundary; and hence its vertical integration strategy. First, it must sometimes be the case that a firm does not possess all the resources and capabilities it needs

Bringing resources and capabilities back into governance choices

When the three conditions outlined in this chapter exist—when a firm does not possess all the resources and capabilities it needs to be competitively successful, when it is very costly for firms without resources and capabilities to create them on their own, and when acquiring another firm to gain access to its resources and

How common are these exchange conditions?

At this point, a careful reader is probably asking: so what? All this discus- sion of the value of gaining access to a capability, the cost of creating a capability, and the cost of acquiring a firm to gain access to a capability is only relevant if the conditions described above actually exist in

Resources, market failures, and corporate diversification

In their very influential article, Prahalad and Hamel (1990) define a firm’s core competence as ‘the collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies.’ Such core competencies have many of the attributes of resources and capabilities described in Chapter 3 of this book: They

Diversification and the creation of core competencies

Much of this corporate diversification literature takes the existence of core competencies as given and asks, ‘What is the most efficient way to exploit the value of these core competencies?’ Diversification is one of the answers that is provided to this question. However, a logically prior question is also possible. That question is: ‘Where

A financial definition of relatedness

From a financial point of view, two firms are related when the net present value (NPV) of the cash flow of the combination of these firms is greater than the sum of the NPVs of the cash flows of these firms acting indepen- dently (Copeland and Weston 1983): NPV (A + B) > NPV

Competitive parity for bidding firms from acquiring related targets

Strategic relatedness between bidding and target firms, as defined in equa- tion (10.1), is not a sufficient condition for the shareholders of bidding firms to earn competitive advantages from mergers or acquisitions (Jensen and Ruback 1983; Lubatkin 1983). If the value of the combined cash flow of target and bidding firms is publicly known,

Superior returns to bidding firms from acquiring related targets

Thus the existence of bidder and target relatedness, per se, is not a source of superior returns to the shareholders of bidding firms. However, if a market for corporate control is imperfectly competitive, then bidding firms may be able to obtain a superior return for shareholders from imple- menting merger and acquisition strategies. Three