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Working Papers

Leiblein, M. J.  Comparing capability acquisition mechanisms: Experience, Organizational Form and the development of new semiconductor capabilities

Does it matter whether new capabilities are developed within the firm, are co-developed through collaborative alliances, or are accessed through production sourcing contracts?  While prior research indicates that capabilities may be developed through each of these mechanisms, little research exists which describes the relative effectiveness of these different approaches.  This paper comparatively assesses the relationship between organizational form and the development of new experientially derived capabilities in the semiconductor industry.  The primary propositions state that production experience managed within the firm will have a more positive influence on the adoption of systemic technologies than experiences accessed through co-development alliances or production sourcing contracts and that the magnitude of this comparative advantage will diminish over time as a technology matures.  Findings from a ten-year study of 216 semiconductor firms provide support for the model. 

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Madsen, T. & M.J. Leiblein .  “Resource Stocks, Innovation & Persistent Heterogeneity,” 

Many strategy scholars believe that variance in competitors’ resources and capabilities largely determine differences in firm performance. It also is widely accepted that when conditions exist to isolate a firm’s resources and capabilities from imitation, advantages associated with these factors may translate into sustained differences in performance. Yet, the existing longitudinal empirical work often investigates how resources and/or capabilities increase or decrease performance or survival chances rather than how these factors contribute to enduring performance differences among close rivals. This paper offers empirical evidence regarding the association between capability-enabling resource stocks and persistent differences in the superior performance and innovation activity of firms competing in the global semiconductor industry between 1990 and 1999. We find that innovation activity is associated with persistent above average firm profits. We also compare the durability of different resource stocks to understand which stocks might assist a firm in sustaining its lead in innovation activity relative to industry competitors. The results demonstrate that advantages associated with a firm’s patent stock and with the experience held by a firm’s partners erode at a faster rate than advantages associated with a firm’s cumulative production experience.

  • This paper was awarded a 2007 Distinguished paper award by the Business Policy & Strategy division of the Academy of Management. 
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Leiblein, M. J. and J. T. Macher.  Collaborative alliance organization and technological performance. 

This paper investigates whether and how the organization of production sourcing alliances affects technological performance. The paper describes why firms utilize different production sourcing arrangements via collaborative alliances and how these decisions relate to technological performance. Building on concepts from transaction cost economics (TCE) and the knowledge-based view (KBV), the paper conceptualizes alliance form along two dimensions that summarize its underlying coordination and control features. More specifically, we associate four different forms of organization commonly used in production sourcing alliances—arms’ length (cash- & license-based) production sourcing, codevelopment production sourcing, equity partnership, and parent-child joint venture—with distinct positions in this two dimensional space. We then develop a series of propositions regarding the firm- and exchange-level factors that favor the use of these four types of alliances and their performance consequences, which are tested on a sample of 621 semiconductor production sourcing alliances using a polychotomous two-stage analysis. The first stage examines the factors affecting the propensity to choose each of the four alliance organization arrangements. The second stage examines alliance performance, measured as the level of “technological advancement” of the focal alliance versus the sample average within each type of alliance arrangement.  Overall, our results support the notion that firms select the specific alliance arrangement that best meets the problem-solving requirements and objectives of technological development project undertaken by the focal firm.  

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Leiblein, M. J. and J. T. Macher.  Why Do Small Firms Systematically Benefit Less from Collaborative Activity than Large Firms?

A great deal of academic and practitioner research argues that small (young, private) firms are disadvantaged in their ability to utilize strategic alliances.  Despite this attention, little careful empirical work documents the specific organizational factors that make collaboration difficult for small (young, private) firms, whether decisions regarding the organization of collaborative alliances may mitigate these problems, and whether these considerations significantly affect firm performance.  Building on concepts from the resource-based view (RBV) and transaction cost economics (TCE), this paper examines the extent to which exchange- and firm-level characteristics affect decisions regarding the organization and performance consequences of collaborative.  Using a sample of 603 semiconductor production sourcing alliances and polychotomous two-stage analysis, our empirical results indicate that partner and firm capabilities, the relative “distance” between these capabilities, and the coordination requirements of technological development have distinct effects on alliances’ technological performance.

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Leiblein, M. J. and A. Ziedonis.  An option pricing approach to technological adoption in environments characterized by a sequence of innovations

This paper develops a conceptual model that explains technological adoption as a sequence of embedded options.  Upon the introduction of each generation of a technology, a firm must decide whether to exchange its old technology for the current generation, minus the cost of upgrading.  Unlike previous studies, as firms choose whether or not to adopt the current technological generation, they must also consider the implications of their ability to respond to future technological generations of uncertain value and arrival time. That is, the firm must also consider its expectations regarding the value of subsequent generations of the technology.  The paper considers four potential technology migration strategies; compulsive, buy-and-hold, leapfrogging, and laggard.  The model proposes that these four technology migration strategies are dependent on the magnitude of cross-generational technological change, the frequency of cross-generational technological change, and the uncertainty of cross-generational technological change.  Propositions are offered for future research.

A related version of this paper is published as:

  • Leiblein, M.J. and A. Ziedonis.  2007.  Distinguishing between Deferral and Growth Options.  Chapter in J. Reuer and T. Tong (eds.) Real Options Theory Greenwich, CT: Elsevier  Vol. 24. 
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Leiblein, M. J..  How Industry, Firm, and Exchange Factors Lead to Changes in Vertical Scope

Drawing on theory from industrial organization, transaction cost economics, and the resource based view, this paper examines the factors which underlie the shifting use of governance mechanisms over time.  Specifically, the paper addresses (1) whether and how changing industry-, firm-, and exchange-characteristics affect the choice or organizational governance form, (2) whether and how the influence of industry-, firm-, and exchange-characteristics on organizational governance form varies over time, and (3) whether these changes are systematic.  Preliminary evidence is presented from 4015 make or buy decisions involving 125 firms in the global semiconductor industry between 1990 and 1999.

Practitioner Papers

Reuer, J. J. and M. J. Leiblein.  "Real Options: Caveat Emptor" In Financial Times (London). May 9, 2000.

Executives keen to manage organizational risks are often well-acquainted with financial options and other hedging instruments. Financial options, for instance, exist for foreign currencies, commodities, and corporate securities. But real options? What makes an option real, and how might firms use real options to manage risk?  This article describes the promise and limitation of applying a real option approach to corporate strategy investment. 

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Galbraith, C., Merrill, G., and Leiblein, M.  1992.  "Matching Executive Compensation to Competitive Strategy." In Handbook of business strategy.   Warren-Gorham-Lamont, Boston, Mass

  • (reprinted in John B. Miner and Donald P. Crane (eds.) Advances in the practice, theory, and research of strategic human resource management Harper Collins, New York, NY. pp. 340-353).

An appropriately designed executive compensation program is one of the primary tools to reconcile the wishes of a firm's owners and the strategic behavior of that firm's management. While much has been written on executive compensation in the popular business press, in actuality, most firms still have a relatively crude understanding of the power of such programs to influence strategic behavior. Academic understanding is equally weak; most theoretical development and empirical analysis to date, for example, has simply focused on the effect various compensation programs have upon "corporate-level" or diversification strategy. Little work has been accomplished with respect to the effect executive compensation has upon "business-level," or the competitive strategy of a division or strategic business unit (SBU). Just as the form of executive compensation affects diversification strategy, so should the form of executive compensation affect issues of cashflow generation, marketing, research and development, innovation, capital investment, employee training, and product quality. For most corporations the management of these strategic elements are ultimately under the jurisdiction of the relevant SBU manager. In addition, each SBU in a firm will likely have a different mix of strategic objectives; and it is at this SBU level that the real corporate competitive successes or failures are realized. The purpose of this paper is to therefore examine the extent to which compensation programs for divisional and SBU managers impact their strategic thinking and behavior, and to suggest some approaches in compensation programs appropriate to the strategy of a given SBU.

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