David Breecker wrote:
70 years too late? ;-) >From my thesis: Coase (1937, in Foss, et al. 2000) referenced the advantage of a firm over the market in leveraging incomplete contracts and managerial discretion to provide low-cost controlled experiments. Extending the idea, “Suppose that the market, that is, a system of legally independent agents and no central direction, was to organize controlled experimentation with a complex production system. What would be the costs of organizing this, that is, why would there be ‘costs of discovering what the relevant prices are’ in this situation?” (Foss, et al., 2000:133). This controlled experimentation has an interesting similarity to offshoring opportunities – low barrier to entry, low switching costs, variable labor pools available, reasonable infrastructure and resources. Depending on the level of commitment, make-or-buy decisions may be required to enter the agreement, or “attributes” may be overt or hidden outcomes of the contract or experiment itself which gain definition over time using repetition and feedback. The company offshoring might not even see itself as experimenting – it may be simply doing business, a practical art in which we learn from doing. .... Edith Penrose in The Theory of the Growth of the Firm (1959) created the resource-based theory of the firm (Besanko, 2004). She focused on how firms grow and sees the internal usage of resources as services leading to productive opportunities (rather than resources in and of themselves). Improved usage of internal resources frees up unused capability, while the act of producing creates production-related knowledge (Best & Garnsey, 1999). Her path dependency was not just that situations were based upon past experience – managers’ assessment of opportunities were restricted by their experience as well (Hilliard, 2004). ============================= At the same time, the diverse portfolio approach had horrible results when the diversification was far removed from core competences (Porter's analysis for one). Of course Microsoft sits on hundreds of standards initiatives, waiting for the "right ones" to take off. At a higher strategic level, it becomes more difficult to hedge your bets because of the resources involved and path dependencies - it's hard to be Microsoft and Apple at the same time, they're simply different mindsets.
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