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EditorialDaniel A. Levinthal
Living Up to Expectations: Corporate Reputation and Persistence of Firm PerformanceLuís Cabral
Interdependence and Performance: A Natural Experiment in Firm ScopeGabriel Natividad, Evan Rawley
Diversification and Performance: Linking Relatedness, Market Structure, and the Decision to DiversifyRon Adner, Peter Zemsky
Calls for Papers
Special Issue of Strategy Science: Capital Allocation Within FirmsJavier Gimeno, Daniel Levinthal, Todd Zenger, editors
Special Issue of Strategy Science: Evolutionary Perspectives on StrategyWilliam Barnett, Daniel Levinthal, editors
Editor-in-ChiefDaniel A. LevinthalThe Wharton SchoolUniversity of Pennsylvania3209 Steinberg-Dietrich HallPhiladelphia, PA [email protected]
Managing EditorKathleen LuckeyINFORMS5521 Research Park Drive, Suite 200Catonsville, Maryland [email protected](443) 757-3583
Production EditorKara Tucker
INFORMS5521 Research Park Drive, Suite 200Catonsville, Maryland [email protected](443) 757-3572
Senior Editors
Ron AdnerTuck School of BusinessDartmouth College
Gautam AhujaRoss School of BusinessUniversity of Michigan
William BarnettStanford Graduate School of BusinessStanford University
Laurence CapronINSEAD
Giovanni GavettiTuck School of BusinessDartmouth College
Javier GimenoINSEAD
Michael LenoxDarden School of BusinessUniversity of Virginia
Myles ShaverCarlson School of ManagementUniversity of Minnesota
Dennis YaoHarvard Business SchoolHarvard University
Todd ZengerOlin Business SchoolWashington University in St. Louis
Editorial Review Board
Juan AlcacerHarvard University
Bharat AnandHarvard University
Ramon Casadesus-MasanellHarvard University
Olivier ChatainUniversity of Pennsylvania
Wilbur ChungUniversity of Maryland
Felipe CsaszarUniversity of Michigan
John de FigueiredoDuke University
Jerker DenrellUniversity of Warwick
Dan ElfenbeinWashington University in St. Louis
Mi FengPeking University
Peer FissUniversity of Southern California
Timothy FoltaUniversity of Connecticut
April FrancoUniversity of Toronto
Melissa GraebnerUniversity of Texas at Austin
Witold HeniszUniversity of Pennsylvania
Glenn HoetkerArizona State University
Quy HuyINSEAD
Arturs KalninsCornell University
Rahul KapoorUniversity of Pennsylvania
Samina KarimBoston University
Thorbjorn KnudsenUniversity of Southern Denmark
Gael Le MensUniversity of Pompeu Fabra
Michael LeibleinThe Ohio State University
Dan LovalloUniversity of Sydney
Kyle MayerUniversity of Southern California
Anita McGahanUniversity of Toronto
Gabriel NatividadUniversidad de Piura
Elena NovelliCity University London
Joanne OxleyUniversity of Toronto
Elizabeth PontikesUniversity of Chicago
Hart PosenUniversity of Wisconsin
Phanish PuranamINSEAD
Evan RawleyColumbia University
Jan RivkinHarvard University
Scott RockartUniversity of North Carolinaat Chapel Hill
David RossColumbia University
Robert SalomonNew York University
Melissa SchillingNew York University
PK TohUniversity of Minnesota
Freek VermeulenLondon Business School
Govert VroomIESE Business School
Brian WuUniversity of Michigan
Mark ZbarackiUniversity of Western Ontario
Rosemarie ZiedonisUniversity of Oregon
Subscription ServicesStrategy Science (ISSN: 2333-2050 (Print), 2333-2077 (Online)) is a quarterly journal published by the Institute for Operations Research and the
Management Sciences, 5521 Research Park Drive, Suite 200, Catonsville, MD 21228.
Submission of manuscripts: Detailed instructions for authors can be found at http://pubsonline.informs.org/page/stsc/submission-guidelines.
POSTMASTER: Send address changes to Strategy Science, INFORMS, 5521 Research Park Drive, Suite 200, Catonsville, MD 21228.
Copyright 2015. Printed in the United States of America.
ISSN 2333-2050 (print) � ISSN 2333-2077 (online)10.1287/stsc.2015.0007
© 2015 INFORMS
Editorial
Daniel A. LevinthalThe Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104, [email protected]
This issue marks the beginning of a new INFORMSjournal: Strategy Science. Although Strategy Science
is a new journal, the contributions of INFORMS tothe strategy field are longstanding, with many impor-tant papers appearing in both Management Science andOrganization Science. The strategy field is sufficientlylarge so as to merit a dedicated INFORMS journaland, further, a journal dedicated in the INFORMS tra-dition to intellectually rigorous, methodologically andtheoretically eclectic, problem-driven research.
The strategy field is large and intellectually diverse,with scholars drawing on a broad set of underlyingdisciplines and considering a wide range of ques-tions. Furthermore, strategy research is often inter-disciplinary in nature as its questions may requireapproaches that do not necessarily conform to theboundaries of a single discipline. The intent of Strat-egy Science is to offer a “big tent” that will accommo-date high-quality scholarship across this spectrum.
Strategy Science seeks to publish outstandingresearch directed to the challenges of strategic man-agement in both business and nonbusiness organiza-tions. The critical issue with respect to publicationis whether the work enhances, in some meaningfulmanner, our understanding of some substantive issuein the strategy domain. Work is expected to be of ahigh level of rigor, but rigor itself is not a basis forpublication. We encourage authors to take chances,operate at the boundaries and intersections of existinglines of inquiry, and, ultimately, to aim high—to pro-duce work that truly pushes the field forward. Indeed,not only does the journal seek to publish outstand-ing work with these qualities, but by doing so it is
hoped that the journal will inspire scholars to engagein more challenging and less conventional researchprograms than they might otherwise.
The editorial structure of Strategy Science matchesthese aims of the journal. The journal has a large andoutstanding set of senior editors who take primaryresponsibility for the evaluation of a manuscript. Thisstructure allows for a close link between the exper-tise of the senior editor and the content domain of themanuscript. Ultimately, a journal cannot produce abroad and intellectually diverse body of work unlessthe set of individuals responsible for the work that isselected reflects a broad and intellectually diverse setof scholars. The journal is fortunate in its initial incar-nation to have such an outstanding group of senioreditors and members of the editorial board.Strategy Science is a quarterly journal, publishing a
modest number of articles per issue. It will providea steady stream of work that influences the conversa-tion in and direction of the field. While the journal isopen and eclectic with respect to method used, the-oretical approach, and question asked, there will besome clear and specific characteristics of a StrategyScience article. It will make the reader think differ-ently about some key questions in the strategy field.It will be rigorous, but technical rigor and purity ofexperimental design will not act as a substitute forsubstantive contribution. It will be a journal in whichauthors will be proud to have their work publishedand that members of the field will eagerly read. I amhonored by the task of serving as the founding editorand comforted by the tremendous team with which Iwill carry out this endeavor.
ISSN 2333-2050 (print) � ISSN 2333-2077 (online)http://dx.doi.org/10.1287/stsc.2015.0002
© 2015 INFORMS
Living Up to Expectations:Corporate Reputation and Persistence of
Firm Performance
Luís CabralDepartment of Economics, Stern School of Business, New York University, New York, New York 10012,
Idevelop a theory of corporate reputation as a source of persistence in firm performance. I show how arelatively simple and reasonable assumption regarding the dynamics of corporate reputation leads to a self-
reinforcing process whereby cross-firm differences in corporate reputation (and performance) are significant andrelatively permanent. Numerical simulations suggest that persistence in cross-firm differences is largely due toendogenous investment incentives: firms with higher corporate reputations invest more in corporate reputation.I provide a series of examples consistent with the model’s prediction.
Keywords : persistence of firm performance; reputation; resource-based approachHistory : Received March 31, 2014; accepted March 5, 2015. Published online in Articles in Advance.
ISSN 2333-2050 (print) � ISSN 2333-2077 (online)http://dx.doi.org/10.1287/stsc.2015.0004
© 2015 INFORMS
Interdependence and Performance:A Natural Experiment in Firm Scope
Gabriel NatividadDepartment of Economics, Universidad de Piura, Lima 18, Peru, [email protected]
Evan RawleyColumbia Business School, Columbia University, New York, New York 10027, [email protected]
This paper shows how interdependencies influence performance following a reduction in firm scope. We testthe predictions of the theory using detailed microdata on every Peruvian fishing firm before and after a
regulatory ban on mackerel fishing, finding that a reduction in the scope of activities causes the productivityof firms’ legacy anchovy operations to fall sharply, before recovering in the long run. The results are mostpronounced for firms with the strongest interdependencies between activities. Moreover, we find evidence thatthe persistence of the productivity decline is explicitly tied to a failure to adapt quickly following the ban.Consistent with our conceptual characterization, the evidence suggests that interdependencies between activitiessimultaneously create benefits as well as costs, but that costs are more persistent when the firm reduces itsscope of activities.
Keywords : theory of the firm; corporate strategy; organizational economics; industrial organization;diversification; scope; refocusing; internal organization; interdependence; coordination costs; organizationalrigidity; organizational routines; productivity; performance
History : Received February 17, 2014; accepted April 25, 2015. Published online in Articles in Advance.
ISSN 2333-2050 (print) � ISSN 2333-2077 (online)http://dx.doi.org/10.1287/stsc.2015.0006
© 2015 INFORMS
Diversification and Performance:Linking Relatedness, Market Structure, and
the Decision to Diversify
Ron AdnerTuck School of Business, Dartmouth College, Hanover, New Hampshire 03755,
Peter ZemskyINSEAD, 77300 Fontainebleau, France, [email protected]
An extensive empirical literature in strategy and finance studies the performance implications of corporatediversification. Two core debates in the literature concern the existence of a diversification discount and the
relative importance of industry relatedness and market structure for the performance of diversifiers. We addressthese debates by building a formal model in which the extent of diversification is endogenous and dependson the degree of industry relatedness. Firms’ diversification choices affect both their own competitiveness andmarket structure. We find a nonmonotonic effect of relatedness on performance: whereas greater relatednessincreases the competitiveness of diversified firms, it can also spur additional diversification, thereby erodingmarket structure and performance. In this way, our theory also elucidates how heterogeneity in firm scopestrategies can emerge even when firms are initially identical. We use the model to generate data and show howthe negative effect of relatedness on market structure can give rise to spurious inference of a diversificationdiscount in cross-sectional regressions. We extend our model to show how increases in relatedness can lead toboth entry and exit dynamics. A second extension investigates the conditions under which resource endowmentsmake firms more or less likely to diversify.
Keywords : diversification discount; horizontal scope of the firm; formal foundations of strategyHistory : Received February 2, 2014; accepted May 21, 2015. Published online in Articles in Advance.
ISSN 2333-2050 (print) � ISSN 2333-2077 (online)10.1287/stsc.2015.0003
© 2015 INFORMS
Call for Papers
Special Issue of Strategy Science:Capital Allocation Within Firms
EditorsJavier Gimeno
INSEAD
Daniel LevinthalThe Wharton School, University of Pennsylvania
Todd ZengerDavid Eccles School of Business, University of Utah
Submission Deadline: September 1, 2015
Capital allocation is a central activity for firmsand is a critical mechanism by which firm strate-gies are enacted. However, the topic has generallynot been central in current strategy research. We feelthat this is a particularly opportune time to addressthis imbalance, as there are a number of excitingresearch strands in related disciplines that speak tothe question of capital allocation within the firm. Text-book accounts of capital allocation focus on compos-ing appropriate discount rates to apply to projectsand operating units within the firm. However, empir-ical research on the resource allocation process hasquestioned the validity of those prescriptive mod-els. More contemporary research within organiza-tional economics and corporate finance focuses on thechallenge of information asymmetries between thoseproposing projects and initiatives within the firm andactors responsible for the allocation of scarce capi-tal. Scholars have enriched such discussions with con-siderations of power and politics, within the con-text of both rational choice models and behavioralapproaches to the question of resource allocation. Inaddition, behavioral decision theorists have consid-ered how biases in judgment and decision makingmight impact the capital budgeting process. Ques-tions of internal selection processes are arguably cen-tral to an evolutionary account of the firm, and theeffectiveness of internal versus external capital allo-cation is central to discussions of the appropriateboundaries of the firm.
We hope to solicit manuscripts that speak to theseimportant phenomena, and we are quite open to the
theoretical approach authors may choose to take. Weare also happy to receive both theoretical and empir-ical contributions. We anticipate contributions poten-tially speaking to a broad range of specific topicssuch as
• Efficiency of internal capital markets• Influence of organizational design on capital
allocation• Role of power and politics in capital allocation• Effects of judgment heuristics and biases on
capital allocation• Linkage between the firm’s selection criteria and
the external marketWe mention these specific topics as illustrative sug-
gestions, but by no means do we wish to limit authorsto these particular topics.
Manuscripts for the special issue are to be submit-ted to https://mc.manuscriptcentral.com/stratsci bySeptember 1, 2015. Manuscripts that do not appearto fit the topical focus of the special issue will beconsidered, with the authors’ approval, for a regularissue of Strategy Science. The special issue will be pub-lished in the 2016 volume of the journal. Strategy Sci-ence is a quarterly journal looking to publish a smallset of high-quality articles in each issue that addresscentral topics in the field. As a consequence, submis-sions will be subject to high standards with respectto both rigor and relevance to the substantive issuesposed by this call. Authors can expect rapid and high-quality reviews by appropriate leading scholars in thefield and clear editorial guidance should a revision berequested.
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ISSN 2333-2050 (print) � ISSN 2333-2077 (online)10.1287/stsc.2015.0005
© 2015 INFORMS
Call for Papers
Special Issue of Strategy Science:Evolutionary Perspectives on Strategy
EditorsWilliam Barnett
Graduate School of Business, Stanford University
Daniel LevinthalWharton School, University of Pennsylvania
Conference: January 29–30, 2016, Stanford University
Submission Deadline: October 15, 2015
Evolutionary perspectives on organizations, markets, and economies continue to advance across various disci-plines. Often work in these disciplines applies to the study of strategic management, but develop apart from oneanother. The Evolutionary Perspectives on Strategy Conference brings together scholars from various disciplineswho share a common interest in understanding strategic management through an evolutionary lens.
Papers for this special issue should be original research on strategic management that takes an evolutionaryapproach, broadly defined. Research can include studies within the many schools of thought that allow forindustrial, organizational, and industry dynamics: emergent process theories, organizational learning theories,sociocognitive theories, complexity theory, ecological theories, dynamic institutional and political theories, neo-institutional theories, dynamic industrial organization, and theories of dynamic strategy. We mention thesespecific topics as illustrative suggestions, but by no means do we wish to limit authors to these particular topics.
Selected papers will be featured at a conference to be held on January 29–30, 2016 at the Stanford GraduateSchool of Business. A special issue of Strategy Science will include some of the papers from this conference.
Manuscripts for the special issue are to be submitted by October 15, 2015. Manuscripts that do not appear tofit the topical focus of the special issue will be considered, with the authors’ approval, for a regular issue ofStrategy Science. Strategy Science is a quarterly journal looking to publish a small set of high-quality articlesin each issue that address central topics in the field. As a consequence, submissions will be subject to highstandards with respect to both rigor and relevance to the substantive issues posed by this call. Authors canexpect rapid and high-quality reviews by appropriate leading scholars in the field and clear editorial guidanceshould a revision be requested.