Corporate initiative programs
Corporate initiative programs are an important, yet understudied mechanism through which multinational enterprises (MNEs) execute their corporate strategic priorities and renew. Many MNEs execute their strategic priorities through a program of coordinated strategic initiatives geared to pursue a common strategic goal. For instance MNEs might pursue corporate growth through a combination of internal organic growth initiatives and selected acquisitions or may pursue a corporate efficiency improvement through a cost cutting program combined with restructuring and divestments. Yet, research in strategic management has largely ignored this program level of analysis and has focused either on a lower level of analysis, i.e. individual activities such as individual alliances, individual acquisitions or strategic initiatives or a higher level of analysis focusing for example on the firm level. Only recently a small literature has started to investigate corporate programs in the context of alliance portfolios, corporate venture programs, and acquisition programs.
In this research program, we intend to create a better empirical and theoretical understanding of corporate initiative programs and in particular will answer the questions of (1) how firms design these programs, (2) how they manage them and (3) how design and management affects the performance outcomes of corporate initiative programs.
The research is carried out in close corporation with Professor Christoph Lechner at the University of St. Gallen, Switzerland and Professor Markku Maula at Aalto University, Finland.
Behavioral theory of corporate strategic transactions
The behavioral theory of the firm originally developed within the Carnegie School has recently received renewed attention as an explanation of firm behavior. One of the central arguments within this theory is that firms are more likely to engage in risky transactions such as acquisitions when their performance falls behind performance aspirations. This behavior is explained mainly by two arguments: first, managers’ willingness to take risky actions increases when they are facing certain losses as implied by prospect theory, and second problemistic search of alternative solutions triggered by the unsatisfactory performance. Drawing on these arguments, a stream of research has emerged that examines acquisition and divestment behavior based on performance relative to aspiration levels.
While this literature has made important contributions to our understanding of acquisition and divestment behavior it has left an important question unanswered: When do firms engage in acquisitions rather than divestments to address performance shortfalls? How do acquisitions and divestments perform when triggered by performance shortfalls?
We address these research questions through a large scale quantitative study of the acquisition and divestment behavior of North-American firms in the information and communication technology sector. The project is carried out jointly with Professor Markku Maula at Aalto University.
Mergers and Acquisitions
After successfully acquiring 39 smaller companies from 1993 to 1999, on August 26, 1999, Cisco acquired Cerent Corporation for USD 6.9 Billion in what turned out not only the largest acquisition in Cisco’s history but also as one of its most troublesome. Given the size of the acquisition, Cisco faced significant difficulties in integrating Cerent and capturing value from the transaction. Cisco is not alone with its experience. Recent research suggests that while a controlled program of small acquisitions may create performance benefits, large acquisitions can destroy value on a “massive scale”. Moreover, when large acquisitions follow a series of smaller transactions their performance is likely to be particularly strongly negatively affected due to inappropriate experience transfer effects. One could be forgiven for thinking that top level managers should shy away from large mergers and acquisitions. But why do we continue to see a persistent stream of large acquisitions being carried out? In this project we develop and test new theoretical arguments why MNEs engage in large mergers and acquisitions and under what circumstances such transactions may provide positive performance benefits.
The project is carried out in cooperation with Professors Yuval Deutsch from York University in Toronto, Canada, Tomi Laamanen from University of St. Gallen, Switzerland, and Markku Maula from Aalto University, Finland.
Resource-based and Demand-based Theories of Innovation in Pharmaceuticals
Successful new product introduction is central to the long term survival and performance of firms in many technology-intensive industries and in particular in the global pharmaceutical industry. For successful product introduction, a firm needs to assemble a variety of technological inputs into a novel combination that meets the demands of the market. However, the novel combination of technologies, that is invention, is by no means enough for successful new product introduction as several studies have shown. A key finding in the innovation literature is that demand side factors and complementary assets are additional factors that positively affect the likelihood of successful new product development. Despite the broad acceptance that multiple factors may be needed for successful new product development, research is only beginning to examine how these factors interact during different stages of the innovation process.
In this research program, we intend to create a better empirical and theoretical understanding of innovation processes in the pharmaceutical industry by drawing upon resource-based and demand-based theories of strategic management. We further investigate how the gradual shift to open innovation has affected these innovation processes.
The research is carried out in close corporation with Assistant Professor Konstantinos Kostopoulos at the University of East Anglia, UK