FormalApproachestoManagementTheory

RonAdner(Dartmouth)

LászlóPólos(Durham)

MichaelRyall(Melbourne)

OlavSorenson(Toronto)

AperusalofthepagesoftheAcademyofManagementReview(AMR)overthepast

decademightleadonetoconcludethatformalmethodshavenoplaceinthe

developmentofmanagementtheory.From1998to2007,forexample,wecould

onlyfindonearticleinthisjournalthatactuallyusedaformalapproach–either

analyticmethods,asimulationorformallogic–tobuilditspropositions.One

thereforemightnaturallywonderwhyformalapproacheshavenotbeenmore

prevalentinmanagementresearch.

Onepossibilityisthatformalmethodshavelittletocontributetomanagement

theory.Thatexplanationseemsunlikelytous(andnotjustbecausethearticlesin

thisissueserveasexamplesthatstronglycontradictit).Considerthedisciplineson

whichmanagementtheorymostcommonlydraws:economicsandsociology.Nearly

everytheoreticalarticleoverthelastdecadethatappearedintheAmerican

EconomicReviewusedformalmethods(almostexclusivelyanalyticmodels).Evenin

sociology,thelasttenyearsoftheAmericanJournalofSociology(AJS)featuredat

leasttenarticlesthatbuilttheoryusingformalapproaches(dividedfairlyevenly

acrossthemethodsfeaturedinthisspecialtopicforum).GiventhatAJSpublishesfar

fewerarticlesperyearthanAMRandthatmorethanhalfofthosearticlesare

empirical,theratiooftentoonewouldactuallyappeartounderstatetheextentto

whichsociologyrelativetomanagementfavorstheuseofformalmethods.Seeingas

closelyrelatedsocialscienceshavegainedgreatlyfromformalapproaches,one

mightexpectthatmanagementtheorycouldbenefitsimilarly.

Asecondpossibilityisthatmanagementscholarshavenotinvestedinacquiringthe

skillsrequiredtouseformalmethods.Thatexplanationtooappearstofallshort,

especiallywhenoneconsiderstheresponsetothecallforthisspecialtopicforum.

Wereceivedatotalof75submissions,awealthofriches.Almosteveryoneofthese

submissionsmoreovercamefromsomeonesittinginabusinessschoolandmore

than90%oftheauthorsofthesemanuscriptsholddoctoraldegreesfrombusiness

schools(ratherthan,say,fromeconomicsdepartments).Wealsobenefitedfromthe

adviceofanextremelyhighqualitypoolofreviewers,manyofwhomhadnever

beforebeeninvolvedwithAMR.Thisoverwhelmingresponsesurprisedevenus,the

SpecialTopicForumguesteditors.Butitnonethelessrevealsthatalargesegmentof

managementscholarshavethetrainingtopursueformalapproachestobuilding

theory,andthusascarcityofskillscannotaccountfortheinfrequentusageofthese

toolsinmanagementresearch.

Thoughitfallsbeyondthescopeofthisintroductoryessaytodetermineprecisely

thereasonsforthepaucityofformaltheorybuildinginmanagementresearch,we

speculatethatatleasttwofactorscomeintoplay.First,wesuspectthatreaders,

reviewersandeditorsmaynotfullyappreciatetherelativeadvantagesofformal

versusinformalapproaches.Theymaythereforefeelthattheinvestmentinvolved

inreadingandunderstandingtheseformalapproachesistoodear.Second,those

thatdouseformalmethodsmaynotconsiderAMRasapotentialoutletsimply

becauseithaspublishedsofewarticlesusingthesemethodsinthepast.Atleast

partlyinsupportofthissecondpoint,wewouldnotethatManagementScienceand

OrganizationScienceregularlypublishpapersthatuseanalyticmethods,

simulationsandformallogictobuildmanagementtheory.

Withthisspecialtopicforum,wehopetostimulateboththedemandforandthe

supplyofmanagementresearchusingformalapproaches.Bydescribingtheir

advantagesandbydemonstratingthemthroughexample,wehopethatreadersand

reviewerswillbecomemoreattunedtothevalueofresearchthatadoptsaformal

approachtotheorybuilding.And,bydemonstratingthatAMRhasaninterestin

publishingthesepapers,wehopetoencouragemanagementresearcherstouse

themmoreoften.

Thebenefitsofbuildingtheoryformally

Formalapproachestotheorybuildingcomeinthreemainflavors,definedprimarily

bythemethodsusedforarticulatingassumptionsandthenmovingfromthose

assumptionstopropositions.Inmathematicalmodels,theresearcherbeginsby

outliningasetofmathematicalconditionsthatdescribethephenomenonofinterest

andthenusesmathematicalproofstodemonstratepropositionsthatfollowfrom

them.Insimulations(alsoknownascomputationalmodels),onesimilarlywritesa

setofconditionsthatrepresenttheassumptionsofthemodel,butinsteadof

validatingtheirimplicationsviaanalyticalproofs,onegeneratesoutcomes

computationallyacrossrangesofvaluesfortheparametersthatdeterminethose

outcomes.Formallogic,meanwhile,translatesnaturallanguageassumptionsinto

statementsinsymboliclogicandthenusesitsownmethodsforprovingthe

propositionsimpliedbythosestatements.Althoughtheseapproachesvary

somewhatintheirstrengthsandweaknessesforaddressingparticulartheoretical

questions,theynonethelessshareatleastthreestrengthsrelativetoverbal

theorizing(thenaturallanguageapproachmostcommonlypursuedinmanagement

research):(1)Precisionandtransparency;(2)Logicalconsistency;and(3)An

abilitytoidentifyunanticipatedimplications.

Precisionandtransparency:Debatesoverthemeaningofcertaintermsinthe

managementliteraturehavebecomenotorious.Whatconstitutesa“resource”inthe

resource‐basedview?Whatisa“dynamiccapability”?Whatdoesitmeanto“learn”,

ortobe“boundedlyrational”?Althoughthesedisputesoccasionallyconverge

towardoneaccepteddefinition,theycanjustaseasilycontinuewithoutany

apparentresolutiondespitedecadesofdebate.Management,moreover,isnotalone

inthissituation;allofthesocialscienceshavehadvigorous(andfrequently

unresolved)argumentsoverthemeaningsofkeyconcepts.

Inlargepart,thesedebatesovertermsandtheapplicabilityoftheoriesreflectthe

imprecisionofnaturallanguages,suchasEnglish.Naturallanguageshaveevolved

overtimeandcontinuetochange.Foravarietyofreasons,many,ifnotmost,words

innaturallanguagesthereforehavemultiplemeanings.Thelistenerorreader

attemptstoinferwhichoneofthesemeaningsthecommunicatorintendedby

consideringthecontextinwhichtheyfindit.Butthisprocessleavesampleroomfor

ambiguityandsubjectiveinterpretation.Onelistenerorreadermightdecidethata

phrasemeanssomethingverydifferentfromwhatanotheronedoes.

Althoughonecanattempttocommunicateideasclearlythroughnaturallanguages,

theveryflexibilityandinstabilityoftheselanguagesmakesdoingsoanuphillbattle.

Bycontrast,mathematicsandformallogichavebeendesignedwithprecisionin

mind.Becauseofthisprecision,translatinganaturallanguageideaintoaformal,

symbolicrepresentationcanbechallenging.Whereasonecanstateanassumption

orapropositioninnaturallanguagewithoutevenfullyunderstandingoneselfthe

meaningofthestatement,formallanguagesrequirethatthecommunicator

understandstheconceptdeeply.Infact,wewouldassertthatmuchofthevalueof

usingformalmethodsstemsfromthefactthatitforcestheresearchersusingthem

tothinkthoroughlythroughtheconceptsthattheyinvoke.Oncethetheoryhasbeen

translatedintoaformallanguage,everyonewhoseesitknowsexactlywhatit

means.Thoughtheinformalinterpretationofthetermsoftheformaltheorymight

varyfromreadertoreader,theformalcharacterizationensuresthatallofthese

interpretationshaveacommoncore.

Thatprecisionhasatleasttwoadvantagesinmanagementresearch.First,it

facilitatestheaccretionofknowledge.Ifdifferentresearchersusethesametermto

refertoseveraldifferentconceptswhentheydeveloptheoreticalpropositions,then

itbecomesexceedinglydifficulttounderstandwhetherandhowtheirarguments

interact.Sometimes,researchersduplicateeffortbyforwardingfundamentally

equivalentideasundernewnames.Atothertimes,progresscomestoahaltwhen

researchersappeartoarriveatcontradictoryconclusions(perhapsbecausethey

usethesamenaturallanguagetermsbutimbuethemwithdifferentmeanings).

Second,empiricalresearcherscanmoreeasilyandaccuratelytesttheoretical

propositionswhenlittleambiguitysurroundsthemeaningof–andhencethe

appropriatemeasurementof–thecentralconcepts.Progressinempiricalresearch

comesprimarilyfromtheabilitytofalsifytheories.Butwithoutprecise

propositions,oneoftencannotsaywhetheranempiricaltestrefutesatheoryor

whetheritsimplyfailedtooperationalizeitadequately.

Logicalconsistency:Nooneintentionallyforwardsalogicallyinconsistentargument,

butitisnonethelesssurprisinglyeasytodo.Forexample,onemightnotrecognize

animplicitassumptionandthereforefailtoidentifysomecriticalcondition

necessaryforthetheorytohold.Or,onemightmissthefactthattwo(ormore)

assumptionsactinoppositedirections.Or,lesscrucially,onemightsimplyimpose

anunnecessary,possiblyredundant,assumption.Astheoriesbecomeincreasingly

involvedandincorporatemoreandmorefactors,theopportunitiesforerrorsof

omissionandcommissioninevitablyincrease.

Buteveniftheassumptionshavebeencorrectlyspecifiedandstated,peoplestill

regularlycometothewrongconclusionsabouttheimplicationsofthose

assumptions.Theproblemisthatwhenrelyingonverbaltheorizing,peoplerarely

thinklogicallythrougheachstageofthechainofanargument;rather,theyrelyon

theirintuitionstoidentifytheimplications.Ourintuitions,however,oftenprove

wrong.ConsidertheMontyHallproblem(Selvin,1975).Acontestantonagame

showcanchoosefromcurtainsA,BandC.Twoofthesecurtainshavegoatsbehind

themandonehasacar;ifhepickstheonewiththecar,hewinsit.Let’sassumethat

heinitiallychoosescurtainA.ThehostthenopenscurtainB,whichhasagoat

behindit,andasksthecontestantwhetherhewouldliketochooseadifferent

curtain.Shouldheswitch?Mostpeoplebelievethateachoftheremainingtwo

curtainshasa50%chanceofhavingthecarand,therefore,thatthecontestant

shouldbeindifferentbetweenstayingwithhisoriginalchoiceandshiftingtocurtain

C(GranbergandBrown,1999).Butmathematicsdemonstratesclearlythatthe

contestantshouldswitch.Infact,hisoriginalchoice,curtainA,hasonlyaone‐third

chanceofhavingthecarbehindit,whilecurtainChasatwo‐thirdsprobabilityof

beingthewinningcurtain(becausethehostintentionallychoosesacurtainthat

doesnothavethecarbehindit,therebyrevealinginformationabouttheother

option).Onecouldthereforeeasilyimaginethatsomeonedevelopinganatural

languagetheoryoftheMontyHallproblemmightpositanintuitivelyappealingbut

incorrectproposition.Moregenerally,researchersthatrelyentirelyonverbal

theorizinghavelittletopreventthemfromarrivingaterrantconclusions.

Allformalapproachessharetheadvantageofhavingtoolsavailableforensuring

logicalconsistency.Analyticmodelsandformallogicuseproofs.Simulations

meanwhilecalculatetheimplicationsofavarietyofscenariosnumerically.Inanyof

theseapproaches,researchersmustexplicateallofthenecessaryassumptions

because,withoutthem,onecouldnotderivetheresults.Redundantandsuperfluous

assumptionsmoreoverbecomerelativelyobviouswhenwritingproofs(though

thoseusingsimulationscannotspotthemsoeasily).Proofsandcomputational

methods,moreover,ensurethattheresultsdofollowfromtheassumptions.Inthe

MontyHallexample,onecouldhaveusedanyoftheseapproachestoarriveatthe

correctanswer.Theresearchermightmakeanerrorintheapplicationofthese

methods,but,becausetherulesareclearlydefined,readersandreviewersalikecan

easilyaudittheassumptionsandthechainsoflogicleadingtothepropositions.

Unanticipatedimplications:Theavailabilityofthesetoolshasanotheraddedbenefit:

onecanusethemtoderiveunanticipatedimplicationsoftheassumptions.Most

exercisesinverbaltheorizinginvolverecognizingarelationshipbetweentwo

factors,sayresourcesandprofitability,andthentryingtodetermineasetof

assumptionsthatwouldleadtosucharelationship.Inessence,onemoves

backwardsfrompropositionstoassumptions.Acleardisadvantageofthisapproach

isthatonecannotfindtheunexpected(thoughitmaylaterrearitsheadinempirical

researchtestingthesepropositions).Bycontrast,formalapproachescanhelpthe

researchertoidentifyeventhemostsurprisingandcounterintuitiveimplications

thatmightfollowfromasetofassumptions.

Consumersofresearchusingformalapproachesoftencannotfullyappreciatethis

abilitytoidentifyunanticipatedimplicationsfortworeasons.Insomecases,when

theseimplicationsclearlyruncountertoreality,theymayforcethetheoristto

revisittheinitialpremisesofthemodelandthereforetheymayappearonlyasan

intermediate(andunpublished)stageoftheresearch.Inothercases,bythetime

theyappearinprint,notonlyhavetheseimplicationsbeenderived,butalsothe

intuitionunderlyingthemhasbeenexplicatedandthereforetheresults–though

originallysurprising–mayevenseemsomewhatobvious(thoughonlyin

retrospect).

Butthevalueofthisabilitytoexplicatemorecompletelytheimplicationsofasetof

assumptionscanbeseeninthebreadthofpropositionsderivedfromrelatively

simplemodels.Readersnewtoformalapproachesareoftensurprisedbythe

complexityofthebehaviorsthatemergefromrelativelyfewassumptions.

Simulationsofthebehaviorofflocksofbirds,herdsofanimalsandschoolsoffish,

forexample,havedemonstratedthataverysmallnumberofrules(asfewasthree)

cangeneraterealisticsimulationsofgroupsofanimalsinmotion(Reynolds,1987).

Inmanagementresearch,Postrel(thisissue)alsoillustratesthewiderangeof

implicationsthatonecanderivefromasmallsetofassumptions.

Beyondsimplygeneratingadditionalinterestingpropositions,thisabilitytoidentify

unintendedimplicationsalsoacceleratesprogressinunderstandingaphenomenon.

Additionalpropositionsofferempiricalresearchersmoretargets,more

opportunitiestofalsifythetheory.Ifthepropositionsfollowfromtheassumptions

andempiricalanalysisfalsifiesoneormoreofthesepropositions,thenitsuggests

thanoneormoreoftheassumptionsmustnotholdaswell.Researchersmustthen

revisittheirtheories.

Analyticalmodels,simulationsandformallogic

Despitetheseadvantages,eachapproachtoformaltheorybuildingisnotwithoutits

limitations.Theuseofmathematicalmethods,forexample,sometimesrequires

unappealingassumptions.Simulationshavethedisadvantageofonlybeingableto

provetheexistenceofarelationshipbetweenasetofinputsandanoutcome;they

cannotdeterminethenecessityofasetofconditions.Formallogic,meanwhile,does

notasreadilyaccommodatefunctionalformsofrelationshipsandthereforecannot

alwaysadjudicatebetweentheexpectedeffectsofcountervailingforces.

Eachoftheselimitationsneverthelessappliesonlytoaparticularformalapproach.

Thesetradeoffsthereforemightconstituteareasonforchoosingoneformalmethod

overanother,butnoneofthemsuggeststhatonewouldwanttoeschewformal

methodsaltogether.Althoughitisbeyondthescopeofthisintroductiontoreview

eachapproachindetail,letusexpandalittleontherelativestrengthsofeach.1

Analyticmodels:Someseeanalyticmodelsasthe“goldstandard”offormal

approaches.Thetranslationofassumptionsanddefinitionsintomathematical

statementsandthentheuseofproofstovalidatepropositionsmeanthatthese

methodsimposeastrictdisciplineonclarityandlogicalconsistency.Theuseof

mathematics,moreover,allowsonetomodeltheinteractionsofmany,many

“movingparts”–piecesofthemodelthatinfluenceitsbehavior–withthe

confidencethatone’sconclusionsdoindeedfollowfromone’spremises.

Boththegreateststrengthandthegreatestlimitationofanalyticmethodsstemfrom

theneedtoproduceamodelwithanalyticallytractablesolutions.Onthepositive

side,mathematicalmethodsencouragethetheoristtodistillasituationtoits

essence.Consider,forexample,thePrisoner’sDilemma.Thisscenarioelegantly

capturestheproblemofshirkinginteamcooperation.Itdoesnotdescribeallofthe

complexityofareal‐lifeencounter,butitdoescapturetheproblem’sessential

features.Byabstractingawayfromthedetailsofaparticularcase,itprovidesdeep

insightintoanentireclassofsituations.Indeed,theartofanalyticanalysisappears

intheabilitytoidentify,toabstractandtomatchtoamathematicalapproachthe

1Forthosewhowishtodelvemoredeeplyintooneormoreoftheseapproaches,wewouldrecommendHarrisonetal(2007)forsimulationandHannan,PólosandCarroll(2007)forformallogic.Mathematicsincludessuchavastarrayofapproachesandtoolsthatwecannotrecommendanysinglesurvey.

essentialelementsofthesituationbeingmodeled.Butsometimesthedepictionofa

situationdoesnotfitwellwithanyanalyticalframework.Attemptstoforceitinto

onemaythereforeresultinatheorywithlittlefacevalidity.

Simulation:Insituationsthateludemathematicalmethods,simulationmayprovide

anattractivealternative.Beforemovingforward,weshouldnotethatalthough

simulationresearchsometimesreferstoparticularsetsofinputsas“experiments”

andtheresultsoftheseexperimentsas“data”,simulationisalmostalwaysan

exerciseintheorybuilding;itisnotempiricalresearch.

Simulationsrunthegamutfromthesimpletothecomplex.Theprimaryadvantage

ofthesecomputationalmodelsrelativetoanalyticmethodsisthattheyallowmuch

greaterflexibilityincertainsortsofassumptionsmadebythetheorist.Forexample,

simulationscanaccommodateanyfunctionalformthatonemightimaginelinking

two(ormore)variables.Butsimulationsalsofacetheirownconstraints.The

investigationofsomeclassesofproblems–suchasgameswithaninfinitenumber

ofperiods–remaincomputationallyintractableevenwithaccesstocolossal

computerpower.Whethermathematicalmethodsorsimulationoffersthe

preferableapproach,therefore,dependsontheproblem.

Relativetoanalyticmodels,simulationshaveatleasttwodisadvantages.First,

becausethemethoditselfimposesrelativelylessdisciplineonthetheorist,these

modelscanbecomesocomplexthattheirinnerworkingsendupbeingopaque.One

canstillobservehowoutcomesvarywithchangesintheinputs,buttheinteractions

becomesoconvolutedastopreventtheresearcherfrombeingabletodetermine

whytheserelationshipsexist.Whentheindividualcomponentsofthesimulationare

wellunderstood,however,evensuchhighlydetailedandcomplexsimulationscan

beuseful.Forexample,physicistsoftenbuildincrediblycomplicatedsimulationsto

determinetheexpectedbehavioroflarge‐scalesystems.Theyunderstandthe

behaviorofeachcomponent–forexample,amoleculeoranelementaryparticle–

extremelywell,andtheyalsohavedetailedknowledgeofhowsmallnumbersof

thesecomponentsinteract,buttheymustnonethelessrelyonsimulationstopredict

thebehaviorofhundreds,thousands,millionsorevenbillionsofthesecomponents.

Second,simulationdoesnotconstituteaproof.Simulationssampleafinite–though

potentiallyverylarge–numberofcasesfromaninfinitesetofpossibilities(atleast

whenthemodelincludescontinuousparameters).Onethereforecansaythatsome

specificsetofassumptionsleadstoaparticularoutcome,butonedoesnotknow

whetheranyofthoseassumptionsarenecessary,orwhethersomeunanalyzedset

ofassumptionsmightalsoprovesufficienttoyieldtheresults.Samplingthe

parameterspaceaswidelyandwithasfinearesolutionaspossiblecanhelptoallay

theseconcerns,butitdoesnotalleviatethem.

Inmanycases,theoristscancombinesimulationmethodswithanalytictechniques,

capturingalittlebitofthebestofbothapproaches.Onemight,forexample,builda

simplifiedmodelthatdoesnotincorporatealloftheinterestingfeaturesofa

phenomenonbutthatdoesfitwithintherestrictionsofsomemathematical

framework.Aftercharacterizingthatmodel,onemightthenexploitcomputational

methodstorelaxsomeoftheassumptionsortoextendthefeaturesofthemodel.

Suchanapproachnicelyexploitstheabilityofanalyticmethodstoidentifyboth

necessaryandsufficientconditions,whilestillallowingtheconsiderationofthose

casesthatstymieanalyticalanalysis(butthatremainamenabletosimulation).

Formallogic:Inmanyways,formallogicissimilartomathematicalmethods.Indeed,

mathematicsusesfirst‐orderlogic.Sincemanyoftheapplicationsofformallogicto

managementandorganizationsalsorelyonafirst‐orderlogic,suchasPéli(this

issue),thesepapersdifferlittleintheirrelativestrengthsandlimitationsfrom

mathematicalmethods.

Thebiggestdifferencebetweenformallogicandbothanalyticandsimulation

methodsariseswhenresearchersselectordefinealternativelogics(i.e.otherthan

first‐orderlogic).Inmanagementresearch,forexample,Hannan,PólosandCarroll

(2007)havedevelopedanon‐monotoniclogic,aformallanguage,fortheory

building(foranexampleoftheapplicationofthislogic,seeKuilman,Vermuelenand

Li,thisissue).Thislogicincludesanumberofmodifiersandrelationshipsthatallow

theresearchertorepresentmoreaccuratelytheincompletenessofourempirical

understandingofaphenomenon.Forexample,itallowsquantifierslike“normally”

and“presumably”thatfirst‐orderlogiccannotaccommodate(anddefinesa

consistentsetofrulesfordealingwiththesequantifiers).Itthereforecanprovidea

morerealisticbasisfordevelopingandcombiningtheoryfragmentsthatdescribe

phenomenathatstillrequireagreatdealofempiricalexploration.

Althoughtheabilitytodevelopthelanguageusedtobuildtheorymightseemto

reducedramaticallythedisciplineimposedbyformalizationontheorists,logicians

havedevelopedastrictsetofrulesthatallformallanguagesshouldmeettoensure

theirprecisionandcompleteness.Allformallogicsthereforehavealltherigorof

mathematicalmethods,requiringpreciseassumptionsanddefinitionsandallowing

onetoprovepropositionsandtoidentifynecessaryandsufficientconditions.

Thoughformalmethodsprovidepowerfultoolsfordevelopingtheory,wewouldnot

claimthatverbaltheorizing–thatis,theuseofnaturallanguagestobuildtheory–

hasnoplaceinmanagementresearch.Whereasformalmethodsoperate

deductively,naturallanguagesmorereadilyaccommodateinductionandintuition.

Hence,whenaninterestingphenomenonisfirstidentified,conjectures,expressedin

naturallanguages,canprovideausefulstartingpoint.Theseconjecturescanhelpto

guideempiricalresearchersintermsofwhatdatatheyshouldcollectandwhat

questionstheyshouldattempttoanswer.Asthephenomenonbecomesbetter

understood,researcherscanthenrevisitthetheorywithformaltoolstodevelopa

moreprecise,transparentandlogicallyconsistentdescriptionofit.

Thepapersinthisissue

Asnotedabove,wehadanembarrassmentofrichesfromwhichtochoose.We

selectedpapersforthisspecialtopicforumnotjustfortheirhighqualityandthe

importanceoftheirmanagerialimplications,butalsofortheirabilitytohighlightthe

varietyandvalueofformalapproaches.

Becauseofthebreadthofpapersinthespecialissue,onecouldchoosetoorder

theminmultipleways.Wehavechosenaroughgroupingbysubject,butthepapers

havemanyotherpointsofcontact.

Thefirstthreepapersdealbroadlywiththeissueofentrepreneurialentry,buteach

approachesitusingadifferentformalmethod.ParkerandAlvarez(thisissue)

modelthedecisionproblemofhowapairofentrepreneursshouldallocatethe

rightstocontrolanewventure.Althoughperfectlyrationalactorswouldgive

controltothehigherabilitymemberoftheteam,theyinterestinglydemonstrate

that,underconditionsofsubjectiverationality,theteamwillallocatecontrolrights

tothemoreoptimisticofthetwo.2Thismisallocationofcontrolrightscanlead

startupstoperformpoorly.Giventhewell‐knownpropensityofentrepreneurstobe

over‐optimistic,thisresultstrikesusaparticularlyinteresting.

GancoandAggrawal(thisissue)meanwhiledevelopasimulationtodevelopabetter

understandingoftheperformancedifferentialsbetweenstartupsanddiversifying

entrants,andhowthosedifferentialsdependontheenvironment.Theybuildtheir

simulationonavariantoftheNKmodelthathasbeenwidelyusedinmanagement

research(e.g.,Rivkin,2000).Theirmodel,extendingthecounter‐intuitiveideathat

adaptationactuallyhurtsorganizationsinturbulentenvironments,canbothaccount

foralloftheexistingempiricalregularitiesthathavebeenfoundandsuggests

severalnewpropositionsthatresearchersshouldexplore.

Finally,Kuilman,VermuelenandLi(thisissue)considerhowthenatureofthe

environmentatthetimeoffoundinginfluencesthelifechancesofentrants.

Empiricalresearchhasusuallyfoundthatfirmsthatenterduringperiodsofintense

competitivecrowdingsufferhighermortalityrates.Butsomestudieshavealso

foundtheoppositepattern–lowermortalityratesamongthosethatenterduring

timesofhigherdensity.Thearticlesreportingthesefindingsappeartoarriveat

2Subjectiverationalityreferstotheideathatactorsmustbehaveinawaythatappearsoptimalgiventheirbeliefsandobservationsoftheenvironment,butthatmaynotberationalfortheomniscientactor(Ryall,2003).

contradictoryconclusions,butKuilmanetal.demonstratethatonecanincorporate

themintoasingletheorybyintroducingthestageofthepopulation’shistoryasan

additionfactor.Whetherdensityatthetimeoffoundingconstitutesanadvantageor

adisadvantagedependsonwhetherthepopulationremainsinthelegitimating

phaseorwhetherithasachievedlegitimacyandinteractionshavebecomeprimarily

competitive.Inessence,theyintroduceascopecondition.

Weshouldnotethattheapplicationofthenon‐monotoniclogicinthispaperis

particularlyinstructive.WhereasthelogicthatKuilmanetal.usewouldhave

allowedthemtoresolvetheseconflictingfindingssimplybyassumingthat

legitimacytakesprecedenceovercompetition(orviceversa),theyavoidthiseasy

solution.Theyavoiditbecausetheyhavenogoodsubstantivereasontointroducea

precedenceorderingbetweencompetitionandlegitimacy.Theythereforewisely

avoidsuchanadhocassumption.

Thenexttwopapersinvestigate,againbroadly,theproblemofcoordinationand

incentives.Postrel(thisissue)introducesthenovelideaofgoalambiguityintothe

well‐understoodeffectsofsubstitutionversuscomplementarityinjointproduction.

Heshowsthatgoalambiguitycanleadtoafailureintheallocationofefforteven

whenbothactorshaveincentivesonlyintermsoftheirjointoutput.Althoughthis

failurelookslikeacoordinationproblem,standardsolutionstocoordination

failures–suchassequencingactors’decisions–maynotsolvethisproblemand

mayevenexacerbateit.Themanagerialimplicationsareclear:coordinationand

goal‐clarificationhavesynergisticeffectsonteamperformance.

CoffandMakadok(thisissue)similarlyexploreanissueofclearmanagerial

importance:Howcanaprincipal(anowner)ensurethatagents(employees)donot

freeride?Indevelopingtheirtheory,theypointoutthatthemanageractuallyhasat

leastthreeleversunderhercontrolinachievingthisoutcome:authority,incentives

andownership.Allofthesevaryfrombeingmorefirm‐liketobeingmoremarket‐

like.Managersthereforehaveeightdifferentformsofhybridorganizationattheir

disposal,andCoffandMakadokdemonstratethatatleastoneofthemshould

generatetheoptimalallocationofeffortacrosstheagentsforanytypeoftask.

Finally,weendwithtwopiecesthatprovidenewinsightintomacro‐organizational

behavior.CowanandJonard(thisissue)developamodelofallianceformationin

whichsuccessfulpartnershiprequiresthattwofirmshavemoderatelysimilar

characteristics.Theydemonstratethatthissingleassumptioncangeneratea

surprisinglywidevarietyofnetworkstructures,includingatendencyforrepeated

interactionandsmall‐worldstructures.Theirresultsthereforeraisethepossibility

thattheneedforsomewhatsimilarpartners,ratherthansocialfactors,mayexplain

anumberofinterorganizationalstructures.Sinceonecouldimaginethe

developmentofaparallelmodelattheleveloftheindividual,theirresultsmayalso

provideinsightintointerpersonalnetworks.

Péli(thisissue)meanwhileattemptstoreconciletheideathatinertiaand

imprintingimplythatpopulation‐levelchangeshouldoccurthroughtheselection

(failure)oforganizationswiththeintuitionthatpopulationssometimesshift

throughtheadaptationoftheirindividualmembers.Toresolvethisapparent

inconsistency,hesuggeststhatenvironmentalchangemayeitherbequantitativeor

qualitativeinnature.Thefirst,aquantitativechange,mightforcefirmstoadjust

theirintensityofvariousactivities,butthelatterrequiresthemtodoentirely

differentthingstosurvive.Theformerthereforeallowsadaptation,whileselection

reignssupremeinthelatterregime.Hisapproachtoresolvingthisconundrum

thereforerecallsasimilarsolutionthathepositedtowhenbroadversusnarrow

scopewouldbenefitorganizations(Péli,1997).

WeapplaudtheauthorsincludedinthisSpecialTopicForumfortheircreativeand

compellingcontributionstomanagementtheoryandfortheirableapplicationsof

formalmethods.Wealsoappreciatetheeffortsofallofthosethattookaninterestin

ourcall.Wehopethatthepapersthatappearherebecomebutthebeginningina

longlineofinterestingandinsightfulinvestigationsthatuseformalapproachesto

developmanagementtheory.

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