While judgment has hitherto typically been viewed as a discrete decision process, we propose that it be conceptualized instead as a continuous and dynamic process of reassessment and revision. ...Adopting this approach, we revisit the nature of entrepreneurial decision making under uncertainty. We begin with a novel typology of uncertainty that defines and delineates different types of uncertain contexts. We then examine the nature of decision making within these distinct contexts, highlighting differences in how entrepreneurs make decisions within different types of uncertainty. We build these insights into a theory of the entrepreneurial process that highlights the transitory nature of uncertainty as entrepreneurs make certain judgments and revise those judgments over time. We discuss how uncertainty transitions throughout the judgment process, how the judgment process continues dynamically even after a judgment is made, and how the nature of uncertainty shifts over time due to endogenous and exogenous change.
The economics and management literatures pay increasing attention to the technological, competitive, and institutional environment for entrepreneurship. However, less is known about how context ...influences the judgment of entrepreneurs. Focusing on the emerging judgment‐based approach to entrepreneurship, we argue that economics can say much about how the organizational, market, and institutional context shapes entrepreneurial judgment. We describe entrepreneurs as individuals who deploy scarce, heterogeneous resources to service customer preferences at a profit. Because of uncertainty, this process is essentially experimental, and context influences the experimental process. Thus, entrepreneurs will seek to design the internal organization of the firm so that it facilitates internal experimentation. Moreover, the market or task environment determines the need for experimentation (e.g., how fast do consumer preferences change, how does technology evolve, which assets are available at which terms, etc.). Finally, the institutional environment influences, for example, the transaction costs of acquiring and divesting assets as firms adjust their boundaries through ongoing commercial experimentation.
Entrepreneurship, long neglected by economists and management scholars, has made a dramatic comeback in the last two decades, not only among academic economists and management scholars, but also ...among policymakers, educators and practitioners. Likewise, the economic theory of the firm, building on Ronald Coase's (1937) seminal analysis, has become an increasingly important field in economics and management. Despite this resurgence, there is still little connection between the entrepreneurship literature and the literature on the firm, both in academia and in management practice. This book fills this gap by proposing and developing an entrepreneurial theory of the firm that focuses on the connections between entrepreneurship and management. Drawing on insights from Austrian economics, it describes entrepreneurship as judgmental decision made under uncertainty, showing how judgment is the driving force of the market economy and the key to understanding firm performance and organization.
Debate in management research on the status of the opportunity construct is now more than a decade old. We argue that the debate has led to little additional insight in entrepreneurship, and we ...develop the case for abandoning the construct altogether. Uncertainty is central to entrepreneurship and innovation yet absent from opportunity-based approaches. We offer instead a judgment-based approach of entrepreneurship that revolves around the nexus of resource heterogeneity and uncertainty and is operationalized in the beliefs-actions-results (BAR) framework.
Ownership competence Foss, Nicolai J.; Klein, Peter G.; Lien, Lasse B. ...
Strategic management journal,
February 2021, Volume:
42, Issue:
2
Journal Article
Peer reviewed
Open access
Research Summary
Ownership is fundamental to firm strategy, organization, and governance. Standard ownership concepts—mainly derived from agency and incomplete contracting theories—focus on its ...incentive effects. However, these concepts and theories neglect ownership's role as an instrument to match judgment about resource use and governance with the firm's evolving environment under uncertainty. We develop the concept of ownership competence—the skill with which ownership is used as an instrument to create value—and decompose it into matching competence (what to own), governance competence (how to own), and timing competence (when to own). We describe how property rights of use, appropriation, and transfer relate to the three ownership competences and show how our theory offers a fresh perspective into the role of ownership for value generation.
Managerial Summary
Business owners own with different levels of competence, and differences in ownership competence matter for value creation. We argue that ownership competence consists of competence about what to own (matching competence), competence about how to own (governance competence), and competence about when to own (timing competence). We clarify the role played by each of the three competences for value creation. We also show how the importance of ownership competence for value creation alters depending on ownership concentration, life cycle effects, uncertainty of the environment, and the efficiency of resource markets. With our paper, we prepare the ground for a fuller understanding of the strategic role of owners for value creation.
Governance gives life to an organization by establishing the rules that shape organizational action. Structures of governance rest on stakeholder engagement, particularly on how stakeholders assess ...the prospects for earning a return by committing their specialized resources to the organization. Once formalized, governance structures and processes can resist change. Yet, under special circumstances, some stakeholders that are a party to an organization may seek to adapt governance in response to changes in the external environment that surrounds the organization. Adaptation often requires renegotiation: who has claims on the organization and who gets what? In this article we analyze the relationship between the institutional change that drives adaptation and the outcome of renegotiation. We draw on institutional economics and organization theory to identify four pathways of governance adaptation: continuity, architectural change, enfranchisement change, and redistribution. We call for further theoretical and empirical research on governance adaptation and its implications for organizational value creation and capture.
We study knowledge flows between organizations through secondments, short-term employee assignments at an organization different from the home institution. Secondments allow the sending organization ...to capture knowledge and network resources from the receiving organization without an organization-level contract, alliance, or colocation, a process we term
learning by seconding
. We focus on the National Science Foundation (NSF) rotation program, under which the NSF employs academics, called rotators, on loan from their university, to lead peer reviews. We ask how rotators affect the behavior of their academic colleagues after returning from a secondment. Using difference in differences estimations, we show that rotators’ colleagues raise considerably more research funds than similar scientists who do not have a rotator colleague. Additional quantitative and qualitative evidence implies that the treatment effect occurs via knowledge transfer, as rotators help generate ideas, frame proposals, and explain processes, rather than rent-seeking on the part of the rotator. Overall, the results suggest that strong ties and shared social identity play an important role in organizational knowledge acquisition.
The online appendix is available at
https://doi.org/10.1287/orsc.2018.1245
.
Why Do Companies Go Woke? Foss, Nicolai J.; Klein, Peter G.
Academy of Management perspectives,
11/2023, Volume:
37, Issue:
4
Journal Article
Peer reviewed
"Woke" companies are those that are committed to socially progressive causes, with a particular focus on diversity, equity, and inclusion as these terms are understood through the lens of critical ...theory. There is little evidence of systematic support for woke ideas among executives and the population at large, and going woke does not appear to improve company performance. Why, then, are so many firms embracing woke policies and attitudes? We suggest that going woke is an emergent strategy that is largely shaped by middle managers rather than owners, top managers, or employees. We build on theories from agency theory, institutional theory, and intraorganizational ecology to argue that wokeness arises from middle managers and support personnel using their delegated responsibility and specialist status to engage in woke internal advocacy, which may increase their influence and job security. Broader social and cultural trends tend to reinforce this process. We discuss implications for organizational behavior and performance, including perceived corporate hypocrisy ("woke-washing"), the potential loss of creativity from restricting viewpoint diversity, and the need for companies to keep up with a constantly changing cultural landscape.
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