Robin Kramar, Vijaya Murthy, and James Guthrie
This article discusses how the shift to a knowledge-based economy has propelled firms' human capital (HC) and associated intellectual resources to center stage. It notes that while organizational researchers have highlighted the increasingly strategic role of HC, and despite a growing realization among firms that their human-knowledge resources are becoming more important, managerial awareness of the value of HC remains low. The article suggests that HC management, measurement, and reporting are increasingly vital capabilities that all organizations will need to acquire. It proceeds to analyse the nature of HC, trace the evolution of HC accounting, identify current accounting challenges, and describe contemporary frameworks that are seeking to address these challenges. The article defines HC within organizations as ‘employee capability, knowledge, innovation, adaptability, and experience’, noting that it is typically represented as one element in a tripartite framework of intellectual capital, the other two being relational capital and organizational capital.
Mooweon Rhee and Tohyun Kim
This article reports a behavioural theory of reputation repair with a focus on the behavioural mechanisms underlying an organisation's response to a reputation-damaging event. The reputation repair model views reputation repair as a process of problem solving, consisting of three steps: problem recognition, search for solutions and implementation of solutions. Both an organisation's successful reputation repair and an ideal research program on reputation repair must cover both the issues of repairing or reviving the stakeholders' perceptions of the organisation by protecting these stakeholders from the harm of the reputation-damaging event, and determining the root causes and restructuring or reorganising the organisation's behaviour and position to prevent the recurrence of similar events. Managing the stakeholders' perceptions of the organisation can serve as a key supplement to the substantive reputation repair process and as a crucial part of an organisation's successful reputation repair.
Geoffrey Wood and Douglas Michael Wright
The financial crisis of 2008 has prompted some people to ask basic questions about the extent to which large-scale corporate governance failures have underestimated the basis of the global economy. This chapter carefully critiques the financialization perspective on corporate governance, and argues that the financialization process does not comprise a new epoch and is not a coherent phenomenon. It suggests that socio-economic change is a process of continual change that embodies continuities going back to previous eras. It states that institutions are highly unlikely to be perfectly aligned with and follow what is done at firm level, which may be the reason behind the various strengths and weaknesses encountered in Chandlerian managerial capitalism. The literature on financialization is also examined.
Samira Nuhanovic-Ribic, Ermanno C. Tortia, and Vladislav Valentinov
Over the last decades, agricultural co-operatives grew substantially in most developed and developing countries, often reaching dominant market positions. We inquire into the economic mechanism behind this growth, by elaborating on the relation between co-operative identity and co-operative benefits. We highlight the ability of agricultural co-operatives to co-ordinate large-scale production, to monitor work contributions and product quality, and to ensure economic independence of farmer members. Following the two principal streams in the economic literature, we distinguish between the conceptions of agricultural co-operatives as units of vertical integration and as firms characterized by common governance of collective entrepreneurial action and ability to reduce transaction costs and economic risk. We describe the financial and governance limitations of agricultural co-operatives while taking account of new co-operative models presenting institutional tools introduced to overcome these limitations. We conclude by suggesting directions for enhancing the role of co-operatives in agricultural and rural development.
Co-operatives have played a significant role in the agricultural sector in China, particularly since the promulgation of a first national co-operative law in 2007. This chapter offers an analysis of the evolution, diversity, and dynamics of agricultural co-operatives in contemporary China and the institutional environments in which the development of these organizations took place. A multi-dimensional typology of co-operatives is proposed in order to provide a framework of analysis. This analysis enables one to understand the diversified driving forces, the operational patterns, and the organizational missions of agricultural co-operatives in China. The significant contributions provided by each type of co-operative to poverty reduction, work integration, and local community development is emphasized. The chapter concludes with a discussion on the challenges and opportunities for Chinese co-operatives’ future development.
David P. Lepak, Riki Takeuchi, and Juani Swart
This article focuses on the alignment between human capital (HC) and organizational needs. It focuses on the question of how alignment between HC and organizational strategy influences individual and organizational performance. The starting point for this article is the human-resource architecture proposed by Lepak and Snell (1999), which suggests that firms' decisions to build or buy in HC are influenced by its strategic value and uniqueness. At the individual level of analysis, the article investigates the potential influence of job security/career prospects and the target of an individual's commitment on performance. In a wide-ranging analysis, it questions whether conventional goals of maximizing workforce commitment are necessarily desirable, given that, while core workers and firm's targets of commitment are likely to be in alignment, the targets of commitment for those in job–productivity relationships are more likely to align with their future careers outside the firm.
Tina Dacin, Douglas Reid, and Peter Smith Ring
This article defines collaborations between firms that involve the creation of a separate, autonomous, and legally recognized firm — a ‘newco’ — as a joint venture. Joint ventures usually, but not always, involve parties who have contributed equity in creating the ‘newco’, so the term joint venture in this article refers to equity joint ventures. Joint ventures typically involve collaborations between two parties, but there can be more. This article defines an alliance as a cooperative agreement between at least two firms. These firms combine their resources and capabilities in the pursuit of collective and individual strategic objectives. This article begins with a discussion of the frequency with which firms rely on joint ventures and alliances and the motivations that lead economic actors to develop joint ventures and/or alliances. It provides a detailed discussion of the theory underlying partner selection in joint ventures and alliances.
This article considers the analysis of the firm's strategic environment. Its objectives are to examine the concept of the environment in the context of strategic management, the role of the environment in the development of the field of strategic management, the implications of the environment for strategic management, and the role and analysis of the common strategic environment and of the industry and business unit environment. Strategic management is concerned with, amongst other things, how firms relate to each other, whether by competing, cooperating, or just coexisting. Consequently, the most relevant distinction to be drawn amongst potential subsets of the strategic environment surrounding the firm is between those factors and conditions which affect all related firms.
This article aims to explain the concept of organizational competences and its central role in contemporary strategic thinking about how a firm creates competitive advantages, to clarify the strategic roles of resources, capabilities, and management processes in creating organizational competences and competitive advantages, and to explain the essential aspects of a competence framework for the strategic analysis of organizations. The emergence of the field of strategic management in the last decades of the twentieth century may be broadly divided into two major periods of development of foundational concepts and theory. Both periods of development have tried to contribute to answering the central concern of strategic management, which is understanding how a firm might achieve competitive advantage in its industry.
James M. Poterba
This article summarizes the current operation of annuity markets and the potential role of these markets in providing retirement security. It is divided into six sections. The first describes the basic structure of annuity products, with particular reference to those that are currently available in the United States and the United Kingdom. The second section explains the standard analysis of why annuities are attractive to individuals who face uncertainty about length of life, and describes several hypotheses that have been advanced to explain the limited size of private annuity markets. The third section describes the standard methodology for comparing the expected present value of annuity payouts with their cost. The fourth section examines several aspects of individual demand for annuity products. The fifth section briefly discusses the role of regulation in annuity markets. The brief conclusion considers a number of emerging issues that bear on the role of private annuity markets in providing retirement-income security.
Johnny Sung and Arwen Raddon
The developmental state model was proposed in the early 1990s as a better means of understanding the mechanisms underlying the rapid growth of the Asian Tiger economies, when compared to classic economic models. The national skills systems of South Korea and Singapore are examined in order to consider how the Asian developmental state approach has worked in practice. It is shown that, whilst the state identifies and firmly guides the direction of economic development, the market plays a fundamental role in the concrete delivery of long-term economic objectives. Within this approach, education and training act as a vehicle to achieve broader economic and social development goals. Examples are used to consider how these systems changed throughout the industrialisation process. We reflect on some of the challenges faced over time, which have put the long-term viability of the developmental state approach in question. Most notable is the gradual erosion of the state’s ability to lead capital and labour in order to achieve long- rather than short-term goals, particularly in the face of globalisation.
David Levy and Benyamin Lichtenstein
This article explores the contribution of complexity theory to the understanding of business and the natural environment (B&NE), concentrating on climate change. It uses the term “complexity” to refer to a group of concepts derived from systems theory, including complex dynamic systems theory, chaos, and emergence, among other disciplines. In addition, some of the features of the business interface with the climate system that present challenges for timely and effective governance are explained. It also investigated the difficulties of intervening in complex dynamic systems, including problems of collective action, unintended consequences, and inherent limitations on effective management. The theory of emergence provides understanding of how dynamic systems generate order and exhibit “self-organization”. Life-cycle analyses can help identify resource synergies among partner firms. The development of modeling tools to represent the complexities of business-environment interactions offers substantial potential for future research.
Andrea Mennicken and Michael Power
This chapter explores the role of auditors in systems of corporate governance. The discussion refers to international comparisons, where the changing regulatory, methodological, and institutional dimensions of internal and external auditing are emphasized. The first section takes a look at auditing within a fluid and developing corporate governance space, which provides guarantees regarding internal control quality and financial statement. It then discusses auditing standards and knowledge, and related pressures to direct the quality of the auditing market. Finally, the chapter shows auditing as a powerful model of governance.
This article outlines different approaches to the analysis of contemporary capitalism and considers what role they allocate to the business organization. Three distinct positions are distinguished. First, there are those who cling to the idea of distinctive national business systems and retain a belief in the organization of work, management, and employment relations characterized by a national system of institutions. Second, there are those who argue for the importance of globalizing trends and the convergence between organizational forms and policies and, by extension, more general features of economic organization. Third, between the extremes, there are arguments that suggest that a small number of patterns, of distinctive varieties of capitalism, can be distinguished. It is proposed that there is merit in all these positions, but none recognizes the complexity of real economies and none are able to explain the extent of change and continuity actually existing.
John R. Ehrenfeld
This article concentrates on creating sustainability that is already becoming central to business strategy formation and implementation. It is believed that business will be shaped by a different sense of the term “sustainability”. The most important sustainability beliefs are that the world operates as a complex, not mechanistic, system, and human beings operate out of a bundle of care, not needs. The institution called “business” has a very special role in modern societies with respect to sustainability and to the culture change needed to create it. Sustainability exists in a new paradigm, where the fundamental beliefs that underlie the place, role, and practices of business are no longer capable of producing what is wanted without unintended consequences that more than negate the positive outcomes. As business has become more powerful, changing its ways becomes equivalently more problematic.
Big business has been at the heart of business history from its very beginnings, whether as a mere literary genre; or, more seriously in the last half century, as an academic discipline. The Chandlerian paradigm has considerably reinforced this trend, with other approaches to the subject being largely marginalized. Interest in big business has not waned with the advent of the post-Chandler era and is unlikely to do so, given its crucial role in economic development; but this role has been put in proper perspective and alternative forms of business organization reappraised as part of modern societies rather than mere archaisms. This article concentrates on defining the notion of big business; on comparing the various stages and the specific context of its development, especially in the United States, the major economies of Western Europe, and Japan; and on briefly discussing the socio-political dimension of the phenomenon.
Atif Ansar, Bent Flyvbjerg, Alexander Budzier, and Daniel Lunn
This chapter characterizes the propensity of big capital investments to systematically deliver poor outcomes as “fragility”—a notion suggested by Nassim Taleb. A thing or system that is easily harmed by randomness is fragile. It is argued that, contrary to their appearance, big capital investments break easily—they deliver negative net present value—due to various sources of uncertainty that impact them during their long gestation, implementation, and operation periods. The existence of economies of scale and scope is not refuted; instead, it is argued that big capital investments have a disproportionate (non-linear) exposure to uncertainties that deliver poor or negative returns above and beyond their economies of scale and scope. It is further argued that to succeed, leaders of capital projects need to carefully consider where scaling pays off and where it does not. To automatically assume that “bigger is better,” which is common in megaproject management, is a recipe for failure.
Biggest Infrastructure Bubble Ever?: City and Nation Building with Debt-Financed Megaprojects in China
Since the early 1990s, China has built more megaprojects than any other country in the world. This chapter examines the economic and sociopolitical conditions in China that have made the massive investment and construction of megaprojects possible, such as the deregulatory reforms in the land and housing sector and the rise of local investment corporations for megaproject financing. The chapter also compares megaproject developments before and after 2008—a tumultuous year marking both the Beijing Olympics and a global economic recession. Before 2008, the hosting of mega-events often legitimized the construction of megaprojects. After 2008, the recession became the new legitimizing tool, as the Chinese government implemented a large stimulus program that directed more investment in infrastructural megaprojects. With the slowdown of the Chinese economy, many local governments today find themselves in deep debt from overinvestment in infrastructural megaprojects over the past two decades. Examples from Shanghai, Beijing, and Guangzhou are used to illustrate the contested processes and mixed legacies of city building with megaprojects.
Michael Shayne Gary, Giovanni Dosi, and Dan Lovallo
This article examines the underlying cognitive and behavioral factors responsible for strategic decisions driving B&B dynamics, discusses the reasons firms do not learn to avoid boom and bust, and identifies tentative strategies for mitigating B&B (Boom and Bust) behavior. At the same time, it conjecturally concludes, there might be a positive collective side to B&B behavior fostering accumulation of knowledge and physical infrastructure, especially regarding new technological paradigms. The next section discusses a number of real world cases of B&B dynamics. The examples illustrate quite common dynamic behaviors and highlight the crucial role of capacity investment decisions in B&B outcomes. Subsequent sections review the findings from prior experimental research on B&B dynamics and discuss some key decision biases and heuristics that play important roles in B&B decision making. The final section outlines some tentative strategies for moderating B&B decision making. The conclusion highlights some of the collectively positive aspects of booms and busts.
This article has various aims: to demonstrate that the central concept of a ‘firm’ is more complicated than might immediately appear; to examine various explanations that have been put forward for why firms exist at all; to examine the factors which constrain the size and range of activities of firms; to compare the nature of relationships within firms with relationships between firms; and to consider how ownership of assets affects incentives. Any discussion of business strategy inevitably presupposes the existence of a business firm, for which the strategy is intended. Furthermore, the outcome of the strategic discussion will be aimed at changing the nature of the firm in various ways: the products it produces, the ways in which it produces and sells them, and the activities performed by the firm and those performed outside the firm.