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Research Articles

Leiblein, M.J.  2011.  “What do resource and capability based theories propose?” Journal of Management. Vol. 37(4): 909-932.  DOI 10.1177/0149206311408321.

This paper reviews the basic definitions, assumptions, and propositions offered by the resource based, strategic factor market, and dynamic capability literature streams. Considering the underlying definitions and assumptions associated with these approaches leads directly to a set of refutable propositions that highlight the distinction insights offered by each of these arguments.  It is hoped that accentuating these distinctions may stimulate dialogue regarding the underlying causal mechanisms associated with these approaches and foster future empirical work testing these related perspectives.

Gray, J., A. Roth, and MJ Leiblein.  2011. “Quality Risk in Offshore Manufacturing.” Journal of Operations Management. Vol. 29(7-8): 737-752.

This paper examines whether and to what extent offshore production poses a quality risk relative to domestic production in the pharmaceutical industry.  It notes the difficulties in controlling for a wide range of factors that may potentially affect quality risk in offshore manufacturing and the lack of available measures that are consistent across geographic regions. The paper aims to contribute by empirically assessing differences in quality risk across domestic and offshore plants in a setting that naturally controls for many confounding factors. Specifically, the study examines a sample of 30 pairs of regulated drug manufacturing plants in the U.S. mainland and Puerto Rico matched both by parent firm and by product standard industrial code (SIC). Using a plant-level measure of quality risk that is measurement invariant, the findings indicate that Puerto Rican plants operate with a significantly higher quality risk than matching plants operated by the same firm located in the mainland U.S., on average. This finding persists above and beyond potentially important factors, such as geographic distance and the local population’s general and industry-specific skills. Thus, challenges related to the transfer and maintenance of the knowledge required to operate with a low quality risk across non-geographic distance are left as the most plausible explanatory factor. Practically, our research highlights the need for manufacturing firms to carefully consider increased quality risk associated with the offshoring of production, particularly with regard to process-sensitive products like drugs. From a policy standpoint, our study highlights the need for the Food and Drug Administration (FDA) to continue to intensify its inspection focus on international manufacturing.

 Leiblein, M.J., and T. Madsen.  2009.  “Unbundling Competitive Heterogeneity: Incentive Structures and Capability Influences on Technological Innovation,”  Strategic Management Journal, Vol. 30.

Many studies argue that the continual creation of new ideas by small and young firms steadily destroys the competitive positions of their larger, more established rivals. Despite this attention, empirical results relating firm size to innovation remain exceedingly fragile. This study proposes three reasons for the empirical inconsistencies in the literature: that small and large firms differ in their: (1) stock of technological experiences, (2) use of own- and partner-firm experiences, and (3) abilities to translate own- and partner-firm experiences into innovation activity. Results from a 10-year study of 463 semiconductor firms demonstrate that the mixed findings generated from prior work are partially attributed to these three general propositions. In particular, resource flows, in the form of operating experience developed internally and accessed through codevelopment partners, positively affect innovation activity; but these benefits diminish as a firm increases in size. The findings broadly support the notion that differences in the incentives and abilities of small and large firms give rise to heterogeneity in the firms’ innovation activity.

  • This paper was awarded a 2005 Distinguished paper award by the Business Policy & Strategy division of the Academy of Management. 

 Leiblein, M.J.  2007.  “Environment, Organization, and Innovation: How Entrepreneurial Decisions Affect Innovative Success,”  Strategic Entrepreneurship Journal, Vol. 1(1), pp. 141-144.

Although a large body of research on innovation exists in industrial organization, organization theory, sociology, and strategic management, we still know relatively little about how innovative opportunities are identified or created.  This commentary presents a simple conceptual model through which strategic entrepreneurship research may address this gap in the literature.  This model links recent work that emphasizes the different processes used to recognize, discover, or create innovative opportunities with a simple stimulus—response—consequence framework.  The resulting outline may be used to tackle questions such as: How are innovative opportunities recognized, discovered, and created? What approaches are helpful in implementing and diffusing innovation?  Once identified or created, how do organizations capture value by implementing or commercializing their innovations? Are particular types of organization more successful at managing particular stages of the innovation process?  Responses to these and similar questions promise to help us to understand why some entrepreneurial firms seem to be more innovative than others and how entrepreneurial managers can enhance the probability that their firms create competitive advantage and economic value through innovation.

 Leiblein, M. J.  2003.  “The choice of organizational governance form and firm performance: Predictions from transaction cost, resource-based, and real options theories,” Journal of Management, Vol. 29(6), pp. 937-962. 

This paper develops an approach to organizational governance decisions that recognizes how the choice of organizational governance form affects both the creation and appropriation of economic value. The paper begins with a detailed survey of three theoretical approaches-- transaction cost economics (TCE), the resource based view (RBV), and real options analysis (RoA) to the study of organizational governance. This review serves to provide background material on each theory as well as to identify the similarities and differences in the assumptions underlying these perspectives. A concluding section provides a series of propositions for future empirical research that may help to integrate these theories by incorporating notions of both value creation and value appropriation.

Leiblein, M. J. and D. J. Miller.  2003.  “An empirical examination of transaction- and firm-level influences on the vertical boundaries of the firm,” Strategic Management Journal, Vol. 24, pp.  839-859. 

This paper examines the influence of bargaining conditions, product demand uncertainty, firm capabilities, and product-market strategy on the vertical boundaries of firms. Drawing on theory from both the transaction cost economic and real option literature streams, the paper examines the extent to which uncertainty in product demand affects the decision to vertically integrate. Using logic derived from resource-based and real options theory, the paper examines the extent to which firm-specific resources and product market diversification strategy influence firms’ vertical boundary choices. Empirical evidence is presented from an analysis of 475 make-or-buy decisions involving 119 firms in the global semiconductor industry. The results confirm that small numbers bargaining situations are associated with a greater likelihood of integration even after controlling for firm effects. Nevertheless, firms’ capabilities and diversification strategy are directly related to vertical integration. Finally, as suggested by real option theory, our results indicate that high demand uncertainty is associated with a preference for outsourcing.

Leiblein, M. J. and J. Reuer.  2004.  “An analysis of the effects of firm capabilities and international collaboration on the foreign sales of semiconductor firms,” Journal of Business Venturing, Vol. 19(1), pp. 285-307.   

This study examines how technological capabilities and international collaborative linkages affect entrepreneurial firms' abilities to build a foreign sales base in a highly competitive, global industry.  The empirical evidence from a sample of North American semiconductor firms indicates that both technological capabilities and international collaboration potentially aid firms' development of foreign sales.  Our results also provide initial evidence that the influence of technological capabilities and international alliances differ across entrepreneurial and non-entrepreneurial firms.  The paper argues that these differences are due to the dissimilar strategies and resource characteristics associated with entrepreneurial and established firms. 

  • This research has been discussed in Red Herring magazine (April 9, 2001).  

 Leiblein, M. J., J. J. Reuer, and F. Dalsace.  2002.  “Do make or buy decisions matter?  The influence of governance on technological performance,” Strategic Management Journal, Vol. 23, pp. 817-833.

This paper investigates how firms’ decisions to outsource or internalize production affect their technological performance.  While several popular arguments and some anecdotal evidence suggest a direct association between outsourcing and technological performance, the effects of firms’ governance decisions are likely to be contingent upon several specific attributes underlying a given exchange.  This paper first demonstrates how standard performance models can improperly suggest a positive relationship between firms’ outsourcing decisions and their technological performance.  Models that account for firm- and transaction-specific features are then presented, which indicate that neither outsourcing nor internalization per se result in superior performance; rather, a firm’s technological performance is contingent upon the alignment between firms’ governance decisions and the degree of contractual hazards.

Cabral, R. and M. J. Leiblein.  2001.  “Adoption of capital embodied process innovations in industries with learning by doing,” Journal of Industrial Economics, Vol. 49 No. 3, pp. 269-280.

This article considers why firms differ in the timing of adoption of capital embodied process innovations by analyzing the adoption of process innovations by semiconductor manufacturers. The study introduces a model that integrates factors associated with the diffusion and learning curve theories of firm behavior. The results suggest that larger firms, memories manufacturing firms, and firms with greater information assets have higher likelihood of adoption. The results further indicate that these information assets become rapidly obsolete. In addition, the study provides mixed evidence on strategic models of adoption, finding no ‘stock’ effects, but suggesting ‘order’ effects. Finally, the results emphasize the role of learning-by-doing in this industry, both as an information asset and as a strategic asset.

Reuer, J. J. and M. J. Leiblein.  2000.  “Downside risk implications of international investments in subsidiary networks and joint ventures,” Academy of Management Journal, Vol. 43 No. 2, pp. 203-214.

Investments in dispersed foreign subsidiaries and international joint ventures (IJVs) are often thought to enhance corporate flexibility and thereby reduce risk. This paper empirically tests these predictions from real options theory and the international strategy literature, using a set of recently-developed downside risk measures. The evidence reveals that U.S. manufacturing firms with greater multinationality or investment in IJVs do not generally obtain lower levels of downside risk. Implications for theory and future empirical research are offered.

  • This research has been discussed in the Mastering Strategy series published by the Financial Times (10/4/99), Les Echos, Business Finance (October, 2000), as well as the industry newsletter, Chemical Matters (issues 367 & 368).

 Leiblein, M. J. & C. Y. Woo, 1996.  The impact of technological experiences and collaborative manufacturing arrangements on the likelihood and timing of process technology adoption.  Academy of Management Best Paper Proceedings.* 

Why do firms differ in their propensity to adopt new process technologies? This paper argues that investment in prior generations of technology and inter-organizational linkages critically affect a firm’s knowledge base and, therefore, its propensity to adopt a new technology. Our results indicate that both fabrication experience with prior generations of technology and the use of inter-firm collaborative ventures increase the likelihood of adoption. However, important differences exist in the timing of adoption associated with these two knowledge accumulation mechanisms. Specifically, the relationship between internal experience and new technology adoption is highest just after the new technology is first introduced and decreases with time. In contrast, the relationship between collaborative linkages and technological adoption is initially insignificant but increases with time.

  • This paper was honored as a semifinalist for the 1996 Best Paper Award by the Technology & Innovation Management division of the Academy of Management. 

Miller, K. D. and M. J. Leiblein. 1996.  “Corporate risk-return relations: Returns variability versus downside risk,” Academy of Management Journal, Vol. 39 No. 1, 91-122.

This study tests a model of firm risk-return relations in which risk is conceptualized in terms of downside outcomes. The behavioral theory of the firm motivates a set of hypotheses involving downside risk, return, and organizational slack. The hypothesized risk and return relations are tested using both downside risk and the conventional standard deviation of returns measures of risk. The results indicate downside risk results in improved subsequent performance. Performance shows a negative relation with subsequent downside risk.

Folta, T. B. & M. J. Leiblein, 1994.  “Technology acquisition and the choice of governance by established firms: Insights from option theory in a multinomial logit model,”  Academy of Management Best Paper Proceedings.* 

Traditionally, academic studies have relied on insights from transaction cost economics to explain which governance mode a firm will choose to access new technology.  This paper examines how the governance decisions of established firms seeking technological know-how are affected by real options embedded in non-equity forms of collaboration such as licensing agreements or non-equity joint ventures and equity forms of collaboration such as joint ventures or minority equity investments.  Specifically, the paper examines whether established firms are more likely to utilize non-equity or equity forms of collaboration under high uncertainty when such linkages provide a claim for the established firm to subsequently extend its position through acquisition.  Empirical results obtained from an analysis of 947 transactions in the biotechnology industry suggest that transaction costs and option value jointly determine the choice of governance among established firms.

  • This paper was awarded the 1994 William H. Glueck Best Paper Award by the Business Policy & Strategy division of the Academy of Management.