MANAGEMENT & ORGANIZATIONS; HEALTH ENTERPRISE MANAGEMENT
James F. Bere Professor of Management & Organizations
Professor Zajac’s research, teaching, and consulting focuses on strategic management issues. His award-winning research on strategic alliances, corporate governance, and strategic adaptation has been published widely in major academic journals, such as the Strategic Management Journal, Administrative Science Quarterly, Organization Science, Academy of Management Journal, American Sociological Review, and Management Science. Professor Zajac is Co-Editor of the Strategic Management Journal, and an editorial board member of the Asia Pacific Journal of Management. He has chaired the International Strategic Management Society Conference and the Business Policy and Strategy Division of the Academy of Management.
Professor Zajac has developed several popular courses at Kellogg in his areas of expertise: Creating and Managing Strategic Alliances addresses the design and management of strategic alliances such as joint ventures, licensing agreements, consortia, and other forms of cooperative strategies. Advanced Strategic Management examines how organizations can more effectively adapt to changing environments (with an emphasis on integrating strategy formulation and implementation challenges). Organizational Design examines the contribution that structure and systems can make in the implementation of an organization’s strategy. Corporate Governance analyzes the interdependent roles of the CEO, board of directors, shareholders and other stakeholders in the modern public corporation, both in the U.S. and abroad.
Professor Zajac has also created a highly successful executive education program on strategic alliances, and is active in executive education and consulting in North America, Europe, Asia, and Latin America in the areas of strategy formulation and implementation, strategic alliances, and corporate governance. He has worked with organizations such as Abbott, AstraZeneca, Aventis, Baxter, Blue Cross/Blue Shield (the Association, HCSC, and the Michigan, Minnesota, Illinois, and North Carolina plans), Brady, Bristol-Meyers Squibb, Brunswick, Cargill, Caterpillar, Chiron, Cigna, Commonwealth Edison, ConocoPhillips, Cooper Tire and Rubber, Dade Behring, R.R. Donnelly, Edwards Lifesciences, the FBI, FTI Ringtail, Gen-Probe, General Mills, W.W. Grainger, Harnischfeger, Hearst, Healthways, Hollister, IBM, the Institute for Corporate Directors (Canada), Johnson & Johnson, Land O’Lakes, Libbey, Eli Lilly, MARKEM, Merck, Monsanto, Moore, Novo Nordisk, Pfizer, Premier, Procter & Gamble, Public Service Company of New Mexico, Rockwell Automation, Rockwell Collins, Savoy Brands Internacional, Schering-Plough, Siemens, Topco, Toyota, the U.S. Customs Service, Vicinity, Zurich Insurance, numerous professional associations (particularly in health care), and a wide variety of other organizations. He served on the board of directors of Roberts Industries, and is currently a board member at PeopleFlo Manufacturing, Pioneer Surgical Technology, and The Wetlands Initiative.
Corporate Governance
Organizational Structure and Relationships
Strategic Management
Strategy
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The Mint (Dow Jones publication in India): When and how do markets learn? - 9/21/2008
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This study develops a symbolic management perspective on strategic change to predict and test the antecedents and consequences of how firms frame strategic change. Using data from a sample of contemporary German corporations, we find support for our predictions that firms (1) use specific framing language that fits better with their divergent stakeholder preferences, (2) use language that decouples espousal and actual implementation of strategic change, and (3) realize positive market responses to institutionally appropriate frames of change.
We investigated the effects of intragroup and cross-subgroup communications in an experimental field study on demographic faultlines. The results indicated that faultlines explained more variance in perceptions of team learning, psychological safety, satisfaction, and expected performance than single-attribute heterogeneity indexes. In addition, cross-subgroup work communications were effective for groups with weak faultlines but not for groups with strong faultlines. Overall, this study extends the original faultline model, documents the utility of the concept of faultlines, and identifies some of their effects on work group outcomes.
This study combines elements of the upper echelons and agency perspectives to resolve some of the ambiguity surrounding how corporate elites affect corporate strategy. We propose and test the notion that while differences in individual characteristics of corporate elites may imply different preferences for particular corporate strategies such as diversification and acquisitions, these basic preferences, when situated in different agency contexts (e.g., CEO, outsider director, non-CEO top management team member), generate very different strategic outcomes. Our detailed empirical findings, based on extensive longitudinal governance and corporate strategy data from large U.S. corporations, also highlight the pitfalls of using aggregate units of analysis (e.g., board of directors or top management team) when studying the influence of corporate elites on corporate strategy.
This study offers a sociopolitical perspective on the international spread of corporate governance models. We unpack the heterogeneity of interests and preferences across and within types of shareholders and senior managers over time in an analysis of the adoption of a shareholder value orientation among contemporary German firms. Using extensive data on more than 100 of the largest publicly traded German companies from 1990 to 2000, we find that the influence of major shareholder groups (e.g., banks, industrial corporations, governments, and families) and senior manager types (differing educational backgrounds and ages) can be clearly observed only after redefining these key actors according to common interests and preferences. We also find evidence that German firms engage in decoupling by espousing but not implementing a shareholder value orientation but show that the presence of more powerful and more committed key actors reduces the likelihood of decoupling. We discuss the implications of our findings for research on symbolic management, the diffusion of corporate practices, and the debate over the convergence of national governance systems.
Despite widespread recognition of the importance of strategy-structure fit, e.g., diversification and divisionalization, research has yet to address the possibility of similar fit issues for other structural forms of organization, such as the choice of franchised vs. company-owned governance structures. In this study, we depart from the usual debates regarding the superiority of one governance structure over another and argue that performance differences between these two alternative governance structures may be attributable more to the matching of one structure with a correspondingly appropriate strategy. Specifically, we posit that stores will act in fit-enhancing ways by pursuing strategies that are more congruent with their governance structure; i.e., that franchised stores, with their more flexible and decentralized structures, will be more likely to pursue strategies that emphasize flexibility and local adaptation, whereas company-owned stores will tend to pursue strategies that emphasize predictability and control. We also argue that those stores acting in such a manner will enjoy subsequent performance benefits. We develop these ideas around strategy/governance structure fit and test our hypotheses using longitudinal data from over 6000 stores within one of the biggest U.S. restaurant chains from 1991 to 1997.
This study examines firms' decoupling of informal practices from formally adopted policies through analysis of the implementation of stock repurchase programs by large U.S. corporations in the late 1980s and early 1990s, when firms were experiencing external pressures to adopt policies that demonstrate corporate control over managerial behavior. We develop theory to explain variation in the responses of firms to such pressures, i.e., why some firms acquiesce by actually implementing stock repurchase programs, while others decouple formally adopted repurchase programs from actual corporate investments, so that the plans remain more symbolic than substantive. Results of a longitudinal study of stock repurchase programs over a six-year time period show that decoupling is more likely to occur when top executives have power over boards to avoid institutional pressures for change and when social structural or experiential factors enhance awareness among powerful actors of the potential for organizational decoupling. The study has implications for future research on decoupling, organizational learning, and corporate governance.
This study examines how historical resource endowments and competencies affect strategic change and its outcomes amid environmental turbulence. Drawing from both behavioral and economics-based literatures, we develop four distinct perspectives regarding the likely effect of resources on strategic change. These four perspectives offer alternative predictions about how and why resource endowments should affect the likelihood or magnitude of strategic change, and how and why they should moderate the relation between strategic change and performance. We examine the predictive power of these four alternative arguments using extensive longitudinal data from a single industry context characterized both by substantial resource heterogeneity and environmental turbulence. Results indicate that organizations possessing greater stocks of historically valuable resources were much less likely to engage in adaptive strategic change, but also that this resource-driven disinclination towards change tended to have a benign or even beneficial effect on performance. We discuss the implications of our theory and findings for the strategic change literature and also for the literature on the resource-based view of the firm.
While boards of directors are usually recognized as having the potential to affect strategic change in organizations, there is considerable debate as to whether such potential is typically realized. We seek to reconcile the debate on whether boards are typically passive vs. active players in the strategy realm by developing a model that specifies when boards are likely to influence organizational strategy and whether such an influence is likely to impel vs. impede change. Specifically, we develop arguments as to when certain demographic and processual features of boards imply a greater inclination for strategic change, when these features imply a greater preference for the status quo, and how differences in such inclinations will influence strategic change. We then also propose that a board's inclination for strategic change interacts with a board's power to affect change, generating a multiplicative effect on strategic change. These ideas are tested using survey and archival data from a national sample of over 3000 hospitals. The supportive findings suggest that strategic change is significantly affected by board demography and board processes, and that these governance effects manifest themselves most strongly in situations where boards are more powerful. We discuss these findings in terms of their relevance for theories of demography, agency, and power.
This study develops and tests a dynamic perspective on strategic fit. Drawing from contingency and resource-based arguments in the strategy and organizational theory literatures, we propose a distinctive analytical approach to identify environmental and organizational contingencies that should predict changes in a firm's strategy and the performance implications of such changes. We test our model using extensive longitudinal data from over 4000 U.S. savings and loan institutions during a period when many S&Ls considered changing strategic direction. The findings support our model of dynamic strategic fit. Specifically, we find that (1) the timing, direction, and magnitude of strategic changes can be logically predicted based on differences in specific environmental forces and organizational resources, and (2) organizations that deviated from our model's prediction of dynamic strategic fit (i.e., changed more or changed less than our model prescribed) experienced negative performance consequences. We conclude by discussing the implications of our approach and findings for future research on strategic fit and strategic change.
This paper examines the consequences of symbolic action in corporate governance. Sepecifically, it examines: 1. whether the stock market reacts favorably to specific governance mechanisms that convey the alignment of CEO and shareholder interests, such as the adoption of long-term incentive plans (LTIP), even if such plans are not actually implemented, 2. whether providing agency-related explanations for the LTIPs affects the stock market response, and 3. whether the symbolic adoption of LTIPs deters other governance reforms that would reduce CEO's control over their boards. Analysis of data from over 400 corporations over a 10-year period suggests that symbolic corporate actions can engender significant positive stockholder reactions and deter other, more substantive governance reforms, thus perpetuating power imbalances in organizations.
This study seeks to reconcile traditional sociological views of the corporate board as an instrument of elite cohesion with recent evidence of greater board activism and control over top management. We propose that CEO-directors may typically support fellow CEOs by impeding increased board control over management but that CEO-directors may also foster this change if they have experienced it in their own corporation. Drawing on social exchange theory, we develop and test the argument that these CEO-directors may experience a reversal in the basis for generalized social exchange with other top managers from one of deference and support to one of independence and control. Using data from a large sample of major U.S. corporations over a recent ten-year period, we show (1) how CEO-directors "defect" from the network of mutually supportive corporate leaders, (2) how defections have diffused across organizations and over time, and (3) how this has contributed to increased board control, as measured by changes in board structure, diversification strategy, and contingent compensation. We also provide evidence that a social exchange perspective can explain the diffusion of these changes better than more conventional perspectives on network diffusion that emphasize imitation or learning.
This study advances research on CEO-board relationships, interlocking directorates, and director reputation by examining how contests for intraorganizational power can affect interorganizational ties. We propose that powerful top managers seek to maintain their control by selecting and retaining board members with experience on other, passive boards and excluding individuals with experience on more active boards. We also propose that powerful boards similarly seek to maintain their control by favoring directors with a reputation for more actively monitoring management and avoiding directors with experience on passive boards. Hypotheses are tested longitudinally using CEO-board data taken from 491 of the largest U.S. corporations over a recent seven-year period. The findings suggest that variation in CEO-board power relationships across organizations has contributed to a segmentation of the corporate director network. We discuss how our perspective can reconcile contrary views and debates on whether increased board control has diffused across large U.S. corporations.
While the "new institutionalism" has emerged as a dominant theory of organization-environment relations, very little research has examined its possible limits. Under what circumstances might the neoinstitutional predictions regarding organizational inertia, institutional isomorphism, the legitimacy imperative, and other fundamental beliefs be overshadowed by more traditional sociological theories accentuating organizational adaptation, variation, and the role of specific global and local technical environmental demands? We analyze longitudinal data from 1971 to 1986 for 631 private liberal arts colleges facing strong institutional and increasingly strong technical environments. Our findings reveal surprisingly little support for neoinstitutional predictions: (1) Many liberal arts colleges changed in ways contrary to institutional demands by professionalizing or vocationalizing their curricula; (2) global and local technical environmental conditions, such as changes in consumers' preferences and local economic and demographic differences, were strong predictors of the changes observed; (3) schools became less, rather than more, homogeneous over time; (4) schools generally did not mimic their most prestigious counterparts; (5) the illegitimate changes had no negative (and often had positive) performance consequences for enrollment and survival. Our results suggest that current research on organization-environment relations may underestimate the power of traditional adaptation-based explanations in organizational sociology.
It may be only a slight exaggeration to suggest that the topic of incentives in organizations-particularly managerial incentives-has received more sustained attention from a more diverse set of scholars, consultants, and business reporters than any other topic relevant to the functioning of organizations. Given these circumstances, our objective is to explain what appears to be a fundamental paradox: namely, that the massive amount of attention devoted to the topic of managerial incentives has not led to any corresponding growing consensus. Indeed, the opposite seems to be true.
Who Shall Succeed? How CEO/Board Preferences and Power Affect the Choice of New CEOs Edward J. Zajac and James D. Westphal, Academy of Management Journal, January 1996, Vol. 39, No.1, 64-90 This study shows how social psychological and sociopolitical factors can create divergence in the preferences of an incumbent CEO and existing board regarding the desired characteristics of a new CEO, and how relative CEO/board power can predict whose preferences are realized. Using extensive longitudinal data, we found that more powerful boards are more likely to change CEO characteristics in the direction of their own demographic profile. Outside successors are also typically demographically different from their CEO predecessors but demographically similar to the boards.
While current debates about CEO compensation have generally been dominated by economic and political perspectives on CEO/board relations, we argue in this paper that CEO compensation may be driven by symbolic as well as substantive considerations. We develop an interdisciplinary theoretical framework to (1) explain why alternative explanations rooted in agency and human resource logics may be used to reduce ambiguity surrounding the adoption of new incentive plans for CEOs and (2) identify the possible structural (e.g., institutional, demographic, and economic), and interest-based (e.g., political) factors influencing the use of such explanations. We generate and test hypotheses predicting the alternative explanations for new long-term incentive plans using data taken from proxy statements over a 15-year period. The findings support the notion that explanations for CEO compensation reflect both substance and symbolism.
Based on a recently completed study designed to help us understand what gives rise to various methods adopted by IPO firms for rewarding & controlling top managers. We argue that the answers to these questions reflect the resolution of fundamental concerns facing IPO firm managers and owners.
This study examines CEO influence in the board of director selection process and the theoretical mechanism by which CEO influence is presumed to affect subsequent board decision making on CEO compensation. We address both of these issues by linking political and social psychological perspectives on organizational governance. We propose that powerful CEOs seek to appoint new board members who are demographically similar, and therefore more sympathetic, to them. Using a longitudinal research design and data on 413 Fortune/Forbes 500 companies from 1986 to 1991, we examine whether increased demographic similarity affects board decision making with respect to CEO compensation contracts. The results show that (1) when incumbent CEOs are more powerful than their boards of directors, new directors are likely to be demographically similar to the firm's CEO; (2) when boards are more powerful than their CEOs, new directors resemble the existing board; and (3) greater demographic similarity between the CEO and the board is likely to result in more generous CEO compensation contracts. We discuss the implications of the strong effect of demographic similarity for corporate control issues.
We argue in this study that a resolution of the ambiguity and conflict surrounding executive compensation and corporate control practices requires a more unified perspective on top management compensation, ownership, and corporate governance. Drawing from agency and organizational research, the study develops and tests a contingency perspective on how organizations seek to ensure appropriate managerial behavior through a balancing of trade-offs between incentive, monitoring, and risk-bearing arrangements. We suggest that (1) the ability of firms to use executive compensation contracts to address managerial incentive problems is hampered by risk-bearing concerns that stem from the risk aversion of top managers, (2) this problem is particularly severe for riskier firms, and (3) firms seek to address this problem by structuring their boards of directors to ensure sufficient monitoring of managerial behavior, given the magnitude of the agency problem. This contingency perspective is then tested using a large sample of initial public offering firms. The findings and their implications for the debates about ownership and control and executive pay for performance are discussed.
This study theoretically and empirically addresses the possible separation of substance and symbolism in CEO compensation contracts by examining political and institutional determinants of long-term incentive plan (LTIP) adoption and use among 570 of the largest U.S. corporations over two decades. We find that a substantial number of firms are likely to adopt but not actually use-or only limitedly use-LTIPs, suggesting a potential separation of substance and symbol in CEO compensation contracts. Analyses suggest that this decoupling of LTIP adoption and use is particularly prevalent in firms with powerful CEOs and firms with poor prior performance. Further analyses show that whereas early adopters are more likely to pursue alignment between CEO and shareholder interests substantively, later adopters may pursue legitimacy by symbolically controlling agency costs. More generally, the study highlights how decoupling in organizations can be understood in terms of both micro-political and macro-institutional forces.
Recent research and public discourse on executive compensation and corporate governance suggests a growing consensus that firms can and should increase their control over top managers by increasing the use of managerial incentives and monitoring by boards of directors. This study departs from this consensus by offering an alternative perspective that considers not only the benefits, but also the costs of both incentives and monitoring in large corporations. The study develops and tests a contingency cost/benefit perspective on governance decisions as resource allocation decisions, proposing how and why the observed levels of managerial incentives and monitoring may vary across organizations and across time. Specifically, the study suggests that: (1) firms that are more risky face greater costs when using incentive compensation contracts for top managers, thus reducing the expected level of incentive compensation use for such firms; (2) firms facing this problem of low incentive compensation use can realize greater benefits from higher levels of board monitoring, and thus are likely to rely more on board monitoring; and (3) firms with more complex corporate strategies face higher costs in using board monitoring, and are thus likely to rely less on board monitoring as a source of controlling top management behavior. The study also proposes that within this contingency perspective there may be diminishing `behavioral returns' to increases in monitoring and incentives. These hypotheses are tested using extensive longitudinal data from over 400 of the largest U.S. corporations. The supportive findings suggest that maximal levels of incentives and monitoring are not necessarily optimal, and that a firm's strategy may not only have significant product/market implications, but also corporate governance implications.
This study examines the environmental and organizational forces, counter forces, andperformance consequences of strategic restructuring in the higher education industry. The study proposes a diametric forces model to address the conflicting pressures for strategic change faced by these organizations, and uses extensive longitudinal data spanning the last two decades to examine the ways in which restructuring has been used as a successful adaptive response. The results suggest that, contrary to ecological predictions, restructuring is a predictable, common, and performance-enhancing response to changing environmental conditions. The study concludes by discussing the applicability of its findings for research on corporate restructuring and strategic change.
This article examines interorganizational strategies from a transactional value, rather than transaction cost, perspective. It argues that the transaction cost perspective has at least two major limitations when used to analyze interorganizational strategies: (1) a single party, cost minimization emphases that neglects the interdependence between exchange partners in the pursuit of joint value, and (2) over-emphasis on the structural features of interorganizational strategies that addresses (1) joint value maximization, and (2) the processes by which exchange partners create and claim value. We discuss the implications of the present approach for the study of interorganizational strategies and for the transaction cost perspective itself.
This paper discusses the need and potential for a greater integration of economic and behavioral approaches to strategic management research questions. The paper examines several popular economics-based approaches (game theory, the structure-conduct-performance paradigm, transaction cost theory, agency theory, and the resource-based view of the firm) that have been used to examine strategy topics. The paper shows how a behaviorally-oriented approach could extend these economic/ rational approaches and provide a more valuable, integrative strategic management perspective.
This paper examines how third-party intervention affects the direct behavior of negotiators. Study 2 explores the impact of alternative third-party roles on negotiated outcomes, examining the impact of agents and mediators on the negotiated price and the likelihood of impasse. Results show that the selling price of a property is higher when an agent is used than when no intermediary is involved. However, the selling price was not affected bi the use of a mediator. The use of an agent is also shown to increase the rate of impasse. In Study 3, we explore the nature of the negotiated relationship between the “parties” and an agent involved in completing the transaction. Agent commission, measured as a percentage of the sale price of a property, is lower when the bargaining zone is reduced. These studies document the importance of analyzing the impact of autonomous third-party roles on the outcomes of negotiation.
This article bridges the literatures on competitor analysis and strategic decision making by (1) introducing the notion of competitive decision making into the strategic decision-making literature and (2) embedding this notion into a framework of industry and competitor analysis. The article shows that decision makers typically have specific "blind spots" when they consider the contingent decisions of competitors. The article identifies these blind spots and discusses how theymay explain persistent, commonly observed phenomena such as industry overcapacity, new business entry failures, and acquisition premiums.
This paper contends that the analysis of organizational design and the analysis of intraorganizational power are inextricably intertwined for all major models of organization. While the coalitional model of organization is often viewed as the only model that explicitly links these topics, we argue that power does in fact play a central role in the traditional, rational model of organization, and that it is only the conception of intraorganizational power that differs between the two models. After contrasting the design prescriptions and power implications of the coalitional and rational models, the paper reconciles these two models by developing an "adaptively rational" model of organization that takes into account both the political dynamics and the task requirements of organizations.
Organizations have increasingly turned to alternative organizational forms such as joint ventures and internal corporate ventures to enhance innovation. The present study examines the use of a similar, newly-developing organizational form for purposes of innovation; namely. the internal corporate joint venture (ICJV ), which has characteristics of both traditional joint ventures and internal corporate venturing. This study presents an industry-specific analysis of innovation across 53 ICJV's (hospital/physician group combinations), using qualitative and quantitative analyses to identify those factors most strongly associated with the degree of innovativeness in these new organizations. The empirical findings suggest three factors most significantly associated with innovation in the ICJV's in our sample: ( I) age similarity among organizational members, (2) the sponsoring organization's orientation towards innovation, and (3) ICJV participation in integrative activities with the sponsoring organization. The study concludes by suggesting that greater attention be devoted to studying "nested innovation," i.e., innovation within a new organizational form that is itself an administrative innovation.
This study critically examines the relevance of exchange theory in explaining the power of organizational sub-units. The study argues that sub-unit power is generated not by the balance of exchange dependencies between sub-units, but by workflow interdependencies created by the organization's division of labour. The findings support the arguments of the study. The paper concludes that dyadic power relationships between organizational sub-units can only be fully understood in terms of their location in organization-wide systems of functional interdependence.
This study seeks to extend and unify a set of research issues relating to CEO selection,succession, compensation, and firm performance. The study offers a model of these issues from a combined agency and organizational perspective, and tests the model using archival data and perceptual data from survey responses from 118 CEOs of the largest U.S. corporations. The results suggest that several CEO issues are significant predictors of variation in firm performance, supporting the paper's arguments for (1) a reinterpretation of the insider/outsider CEO distinction, (2) the relevance of CEO succession planning, and (3) the importance of CEOs' perceptions of the linkage between their personal wealth and firm wealth.
Despite the widespread research use of Miles and Snow’s typology of strategic orientations, there have been no systematic attempts to assess the reliability and validity of its various measures. The preset work provides such an assessment using data collected at two points form over 400 organizations in the hospital industry. We examined dimensions of the typology using both perceptual self-typing and archival data from multiple sources. The results generally support predictions across a variety of measures. Implications for further testing and research are discussed.
This study argues for greater research attention to the issue of changing generic strategies over time. The study proposes two sources of theoretical tension relating to changing strategies: (1) the notion of equally viable generic strategies versus particularly appropriate strategy/environment combinations, and (2) the relative influence of process (ability to change strategies) versus content (desire to change strategies) issues. Questions relating to these tensions are then examined empirically in an industry-specific analysis of the likelihood, direction, and performance implications of an organization’s changing its strategy in response to an environmental shift. The findings suggest that the changes in generic strategy are not rare, and that organizations do not perceive generic strategies to be equally viable in different environments across time. Performance differences were also found across generic strategies, but not between firms that changed their strategy versus those that did not.
This study identified some critical assumptions underlying the view that interlocking directorates are vehicles for intraorganizational coordination or control and examined them in a two-stage emperical analysis of interlocks among competing firms. The study (1) reexamined---on a disaggregated firm-by-firm basis---data previously used to identify interlocks between firms in the same industry and (2) constructed a baseline for assessing the significance of the incidence of interloking among competitors.
Joint venture activity and internal corporate venturing represent two administrative innovations receiving increased attention in strategic management research. This study investigates a new hybrid form of administrative innovation: internal corporate joint ventures, which combine the equity involvement typically found in joint ventures with the internal staffing of a semiautonomous unit typical of internal corporate ventures. Drawing on both a process model and a variance model, the structuring, development and performance of 53 such ventures in an industry-specific setting is examined.
This paper argues that the succession/performance relationship is a function of two distinct, complementary concepts: manager effects and succession effects. Hypotheses are tested using a cross-sectional/longitudinal research design, with a sample of 209 large corporations. The results suggest that announcements of CEO changes are typically associated with a reduction in the value of the firm, as reflected in the perceptions of the stock market, and that CEO successors tend to significantly influence the production and investment decisions of their firms. These results hold for both insider and outsider succession.
This paper argues (1) that intraindustry stratification is a function of both structural parameters and top managers’ responses to perceptions of their environments, and (2) that the notion of strategic groups can meaningfully extend to corporate and collective levels of strategy. We explored relevant research questions using survey data from 114 of the largest firms in the financial services industry. The results suggest that variables measuring managerial perceptions are useful predictors of intraindustry stratification and that the strength of the predictor variables differs across levels of strategies. Supragroups of firms with similar configurations of strategies across levels also emerged.
While analyzing how and why firms can respond to product market demands has long been a central issue in the strategy literature, recent research suggests the need for a comparable level of attention on how and why firms respond to non-market (i.e., institutional) demands. In this study, we theoretically and empirically analyze how Brazilian corporations responded to dramatic recent changes in their institutional environment. Specifically, using extensive qualitative and quantitative data, we show how the enactment of a new set of corporate governance guidelines by the Brazilian stock market (aimed at reducing longstanding agency problems related to pyramidal group ownership) generated a number of strategic responses by Brazilian firms that suggest improved corporate governance. However, we also find that for numerous firms, the changes observed are more symbolic than substantive.
Research in governance and its relationship both to leadership and corporate strategy is relatively sparse. In this paper we argue that the nature of the relationships between the CEO and the board is both a significant gap and a particularity fertile domain for research on corporate performance. First we present summaries of four widely-reported corporate transitions, identifying common themes and generating a set of research questions. Next we suggest two theoretical perspectives which might help order the phenomena. Finally, we sketch out an agenda for researchers interested in these issues.
There is no doubt that the U.S. health care environment is undergoing major changes that could be characterized as turbulent. The word was originally used to depict highly complex and rapidly changing environments; "turbulence" has been somewhat vaguely used to describe many industry contexts.2 However, a closer inspection of the Emery and Trist definition reveals that the term applies when two general conditions are met: (1) organizations are highly interconnected with one another, and (2) organizations are highly interdependent with the society in which organizations find themselves. This emphasis on connectedness and interdependence is an important basis for viewing a specific organization's environment not as some amorphous external force but rather as the set of other organizations that are interconnected or interdependent with it. This organization, in turn, is part of the environment for the other organizations. In other words, when an organization looks out with concern or anticipation at its turbulent environment, what it sees is other organizations looking out at that organization. This conceptualization of organizational environments suggests the need to focus more attention on how specific organizations interact with one another. This chapter emphasizes one such type of interaction; namely, cooperative interorganizational relations. Longest, in discussing what he terms "interorganizational linkages in health care," distinguishes between market transactions. voluntary relationships, and involuntary relationships. We focus most of our attention on those interorganizational relations that are noncoercive and entered into primarily for strategic purposes, that is, that are important to an organizations mission and expected to enhance organizational performance. Such relationships we term strategic alliances. which are defined as any formal arrangements between two or more organizations for purposes of mutual gain.
A brief overview of strategic management theory and the contributions of health care organizational research to that theory. The main focus, however, is on two subareas of investigation: strategic change and adaptation and the development of strategic alliances. These areas are selected because of their importance both to the health care sector and to the study of strategy in general. In each area we draw on recent research to illustrate its potential contributions for further theory development.
In the year 2000 Millennium Pharmaceuticals was the poster child for successful genomic companies. Millennium's fast growth and exuberant valuations were due to the elegant alliances the company had forged with top pharmaceutical, biotechnology, and agricultural companies. However as the market shifted and Millennium was forced to fully integrate, the type and structure of its alliances no longer worked. This case illustrates how strategic alliances are used in biotechnology as growth tools and demonstrates the impact that market conditions can have on the evolution of alliances.
This course counts toward the following majors: Health Enterprise Management, Health Industry Management
This course develops students' ability to understand and critically evaluate models and techniques relating to the notion of strategic organizational adaptation and to apply this knowledge to current issues in the healthcare industry. The course emphasizes the in-depth study of fundamental concepts such as strategy, structure and the environment and performance, and how these concepts can be used in analyzing the adaptation of healthcare organizations to changing environmental conditions. This course satisfies some course requirements for both the Health Industry Management and Management and Organizations majors.
Creating and Managing Strategic Alliances (MORS-454-A)
This course counts toward the following majors: Health Enterprise Management, Health Industry Management, Management & Organizations
Amid global competition, increased technological change and intense resource constraints, more firms are working cooperatively with other organizations their strategic objectives. But such alliances are often difficult to achieve. This course examines the theory and practice of creating and managing different types of strategic alliances such as joint ventures, licensing agreements, buyer-supplier partnerships and consortia. It will help students understand the costs and benefits of strategic alliances (and why such alliances may be preferred over other strategies such as internal development or mergers and acquisitions). In addition, the course covers how to design alliances, and how to avoid the many potential problems and complications in managing these relationships. It also provides a framework for managing multiple alliances at once. Prerequisite: MORS-430.
Corporate Governance defines the duties and responsibilities of board membership. This course describes the way corporate governance operates in today’s challenging business environment, as well as what it means to be an effective board member in such a climate.
Creating and Managing Strategic Alliances (MORSX-454-0)
Creating and Managing Strategic Alliances examines the theory and practice of strategic alliances such as joint ventures, licensing agreements, buyer-supplier partnerships and consortia.
This course addresses the preparation of studies and pilot testing of theories (in simulation form where applicable) in organization behavior. Primary emphasis is on the methodology and practice of fieldwork.
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