Growth Strategies & Organizational Challenges Notes PDF

Growth Strategies & Organizational Challenges notes =================================================== Lecture 1: Business planning vs. effectuation --------------------------------------------- Growth: profitable and also sustainable - Profitable 20^st^ century - Sustainable 21^st^ century...

Growth Strategies & Organizational Challenges notes =================================================== Lecture 1: Business planning vs. effectuation --------------------------------------------- Growth: profitable and also sustainable - Profitable 20^st^ century - Sustainable 21^st^ century *MANAGED GROWTH OR SHEER LUCK?* ***Brinckmann, J., Grichnik, D., & Kapsa, D. (2010). Should entrepreneurs plan or just storm the castle?*** Building a plan for growth, internal and external analysis - Cohesion -\> supportive plan Why do they make business plans? - Funding (investors want to see a bp) - Communication purposes - Helping you to speed up decision making Counter arguments, for not doing it: - Limited resources, time pressure - You don't know the market yet, you better start experiment Changing plans **Research interest** - Universities worldwide teach students the importance of business plans (BP) and the techniques of writing them. - BP competitions are a key instrument to facilitate entrepreneurship and\ regional development across the globe (Russell et al., 2008). - Professional investors require nascent entrepreneurs to write a BP before\ they will consider an investment. **Research gap** - Two opposing theoretical perspectives: - BP fosters firms' development due to increased decision speed and more efficient resource utilization. Goal setting fosters the identification of effective steps to realize these goals. - BP prevents dedicating time to activities such as acquiring resources or organizational development (Bhide, 2000). BP can lead to cognitive rigidities, organizational inertia, and limited strategic flexibility (Vesper, 1993). - Largely inconsistent empirical research on the planning--performance\ relationship in entrepreneurship: - Studies finding negative, null, or positive relations (e.g., Bracker et al., 1988; Lange et al., 2007; Gartner & Liao, 2005). - Extant empirical research base is heterogeneous: - Studies draw from both new and established small firm samples neglecting\ contextual differences between these different types of firms. - Without systematic integration of individual empirical findings, the external validity / generalizability of findings remains questionable. - Relying on few individual studies reporting a positive influence without considering studies with opposing evidence gives way to the risk of type one errors (i.e., false positives: assuming a positive influence of BP on performance when in fact there is none) - Evidence-based approach **Research aim -- Evidence-based approach (EBA)** - EBA (Rauch & Frese, 2006) to overcome limitations of individual findings and narrative reviews. - Individual findings can suffer from cognitive / normative biases, sampling and measurement problems, stochastic effects, or questionable external validity. - Narrative reviews often include stereotypes and biases. - Originating from medical research (Rosenberg & Donald, 1995), EBA is a systematic analysis and appraisal of extant empirical findings. 1\) The paper analyzes the general (i.e., main / direct) relationship between business planning and performance. 2\) The paper analyzes specific planning-contexts where a planning-based approach creates better performance. To this end, the paper draws on three moderating factors: Contribution (as outlined by the authors) The analysis \... - \... shapes our understanding of the information requirements for effective planning and the limits of planning in light of complexity and uncertainty - \... addresses the question whether a liability of newness can be overcome through BP - contributes insights concerning effective resource utilization - provides insights into how the legitimization and communication-based benefit of a written BP compares to a learning benefit the entrepreneurs obtain in the business-planning process - contribute insights with regard to the functions business planning fulfills for individuals in different cultural contexts and how different environments respond to the business planning efforts Theory / research model Purpose of a mata-analysis  Meta-analysis: Purpose & advantages - Assessment of overall direction(s) and effect size(s) by aggregating prior empirical evidence. - Aggregated effect sizes incorporate weighted (by sample size) magnitude and direction of each primary study. - Synthesized effect size estimate has higher statistical power than the integrated primary studies. - Accounts for moderating variables causing variance of effect sizes across primary studies. - Reduces subjectivity bias and enhances statistical accuracy. - **Meta-analytic results provide more than a summation of the integrated findings by generating additional insights and directions for future research.** (2 slides about meta-analysis: Caveat 1 and 2) Data & Methods - Literature search: - Keyword-search in electronic databases (e.g., EBSCO Host, JSTOR) - 4000 hits (= different articles) based on the keyword combinations (e.g., "planning", "small firm" ("small business"), "performance" , \...) - Issue-by-issue search in selected journals - Search in previous review articles - Study selection process: - Review of each title / abstract to check eligibility (initially 119 articles) - Only empirical studies - Only samples of small firms (\< 500 employees or \< 1m \$ in sales) - Studies with non-operational performance measures and long-term planning - Final sample: 47 studies with 52 independent samples Results: - Main effect (H1): V - confirmed - Moderating effects: - H2: V - confirmed - H3: X - rejected - H4: V -- confirmed Implications for theory - Overall, BP is a value creating activity (despite the required resources and small firms' resource constraints). - However, BP is not equally beneficial under all circumstances. - Findings challenge conventional entrepreneurship wisdom that BP is particular important for new firms: - High uncertainty and missing information reduce the positive effect of BP on performance in new firms (Forbes, 2007). - Higher UA reduces the benefits of BP: - Adhering to BP limits strategic flexibility and openness to changes. Unpredicted events as opportunities/exploitable contingencies (Sarasvathy, 2001). - Benefits stem from both the symbolic and the learning effects of BP. - Basic BP activities sufficient in the firm's initial years. - Allocate resources to other activities enabling information gathering,\ uncertainty reduction, and learning. - Long pre-planning activities detached from market interaction and feedback\ appear detrimental. - Mental preparation and willingness to adjust BPs is critical. Close execution\ of BP not beneficial per se. Limitations - Possible overlaps between new and established small firms (studies usually do not report the size distribution of the sampled firms). - Hofstede\'s four-dimensional concept of culture over-reduces cultural diversity and complexity factors (McSweeney, 2002). - Meta-analysis estimates the strength of a relationship, but cannot determine its causality (even if some primary studies are longitudinal) - importance of theory (!) *Sarasvathy, S.D. (2001). Causation and effectuation: Toward a theoretical shift from economic inevitability to entrepreneurial contingency.* Effectuation vs. causation - So, planning is good, but... - How do we make pricing decisions when the market for the product/service does not yet exist (i.e., no demand function given )? - How do we make pricing decisions when the firm does not yet exist (i.e., no revenue / cost functions given )? - How do we hire someone for an organization that does not yet exist? - How do we even get people to apply to such an organization whose existence hinges upon acquiring able employees (e.g., a knowledge-intensive firm)? - How do we value firms in an industry that did not exist some years ago and is barely forming at the moment (e.g., autonomous driving)? - How do we create a capitalist economy from a formerly communist economy?  Effectuation: basic principles 1. Bird in hand (given means) - Expert entrepreneurs seeking to build a new venture start with their given means: - Who am I? - What do I know? - Who do I know? - Using a combination of these means, entrepreneurs start to imagine possibilities and take actions. - Goals result from the entrepreneur's imaginations / aspirations and interactions during the process. 2. Affordable loss - Entrepreneurs decide what they are willing to lose rather than what they expect to make. - The affordable loss does not depend on the venture, but on the person. - By this, entrepreneurs stop depending on prediction and focus on cultivating opportunities with perceived low failure costs that generate future options. - New venture opportunities are difficult to value upfront, while time, money, and other resources are quantifiable and controllable. 3. Lemonade - If you come across lemons, make lemonade! - Expert entrepreneurs learn not only to work with surprises, but also to take advantage of them. - In most BPs, surprises are bad---the worst-case scenarios. But because entrepreneurs do not tie their idea to any theorized or preconceived "market", surprises can lead to valuable opportunities. 4. Crazy quilt - Focus on building partnerships rather than beating competitors. - In the absence of a predetermined market, competitive analyses have little value. - Instead, entrepreneurs take the product to the nearest potential customer. - Some of the interactions lead to commitments and self-selections into the\ new-venture creation process. - The expanding network of strategic partnerships determines which market/s\ the firm ends up entering or creating. 5. Pilot in the plane - Entrepreneurs should focus on the controllable aspects in their environment. - To the extent entrepreneurs can control the future, they don't need to predict it. - In fact, the future is shaped by human actions. - Thus, it is much more useful to understand and work with people who are engaged in the actions that bring it into existence. Lecture 2: Growth vs. survival in international markets ------------------------------------------------------- *Sapienza, H.J., Autio, E., George, G., & Zahra, S.A. (2006). A capabilities perspective on the effects of early internationalization on firm survival and growth.* Research interest - Early internationalizers (i.e., born global firms that go abroad shortly after their inception) challenge traditional theories of internationalization. - Process theory of internationalization (Johanson & Vahlne, 1977, 1990): - Internationalization as an incremental process that starts late in firms' lifecycle. - Potentially negative outcomes of early internationalization on firms' survival. - Early internationalization of firms in dynamic and technology-intensive\ sectors as an accelerator for growth (Oviatt & McDougall, 1994; Zahra et al., 2000). Traditional view: Process theory of internationalization (PTI) - PTI (Johanson & Vahlne, 1977, 1990): internationalization as a process in which firms incrementally increase their international involvement. - Interplay between the development of knowledge about foreign markets and an increasing commitment of resources to foreign markets. International new venture theory (INV) - Specific new ventures do not follow incremental internationalization patterns (Oviatt & McDougall, 1994). - Such ventures derive competitive advantages from the use of resources and the sale of outputs in multiple countries from their inception.  Research gap / aim - PTI and INV offer explanations for the timing of firms' international entry, but neither explains the implications of early internationalization for organizational survival and growth (Zahra, 2005). - The paper seeks to resolve some of the theoretical and empirical contradictions: - Develops a framework for the influence of internationalization on the survival and growth of firms by building on the dynamic capabilities view of the firm. - Explains why early internationalization has different effects on new firm's growth / survival perspectives. - Builds on the organizational survival literature and theorizes that 1) age at\ internationalization, 2) managerial experience, and 3) resource fungibility\ moderate the influence of internationalization on survival / growth. Theoretical framework Resource fungibility = the attributes of the resources that allow or inhibit their deployment for alternative uses Implications for theory - Extant internationalization frameworks emphasize the importance of experience, learning, and knowledge - PTI: constraining factors (leading to gradual internationalization) - INV: Enablers for early internationalization - Differentiation between growth and survival as outcomes of young firms\' internationalization: - Early stages of internationalization: costs of developing necessary capabilities and the lack of positional advantages threaten firm survival. - Later stages: capabilities developed during the internationalization process create an organizational imprint for adaptability and growth. - Early capability development and imprinting enable rapid growth: - Managers use routines from other settings to reduce time / costs of capability development in the absence of joint organizational experience. - Managerial experience substitutes for organizational experience. Implications for practice - Early internationalization is a risky choice for entrepreneurs who want to create a venture that provides long-term self-employment. - Internationalization improves the chances of building a venture of great\ potential. - Failures (in prior start-up attempts) before creating a \"winner\" provides experience that improves the odds of future success. - Older firms face learning disadvantages and their costs of capability development are higher. - Firms need to overcome structural inertia and rigidities hampering their ability to learn about new markets and to change routines / resource configurations. - Hiring managers with international experience enhances venture growth and survival prospects. *Lu, J. W. & Beamish, P. W. (2004). International diversification and firm performance: The S-curve hypothesis.* Research interest - Unclear performance implications of a firm's internationalization, as geographic expansion entails a set of costs (e.g., Tallman & Li, 1996) and benefits (e.g., Geringer et al., 1989) over time. - Research question: What is (which form takes) the relationship between multinationality and firm performance? - Research aim: - Synthesize prior studies on geographic diversification and performance. - Develop a theoretical framework integrating asset-based internalization advantages with other internationalization costs / benefits across time. - Explore how internationalization motives (i.e., intangible assets) affect the\ performance implications of a geographic diversification strategy. - Empirically test the theoretical model with longitudinal data comprising 1,489 Japanese firms and their internationalization activities Theoretical framework (H1)  Moderating influence of a firm's intangible assets (H2) - Intangible assets (IA) positively moderate the exploitation benefits of a firm's internationalization strategy. - IA: technological know-how, patents, management skills, brands, goodwill, etc. (= information intensive) - Development of IA requires considerable resources, BUT an IA's value does not depreciate when used in different (international) markets. - Firms with more IA generate higher returns from their FDI by realizing scale and scope economies in the exploitation of their IA. **Moderator analysis** Moderator: A categorical (e.g., gender) or metric (e.g., R&D intensity) variable that affects the direction and/or strength of the relation between an independent (predictor) variable and a dependent (outcome) variable. (Baron & Kenny, 1986) Data & Methods - Sample of 1,489 Japanese firms. - Among these, 1,059 firms were engaged in FDI activities from 1986--97. - Number of direct foreign investments: 1 to 601 (mean = 8.45) - Number of host countries: 1 to 61 (mean = 3.96) - FDI / performance data from various databases (longitudinal profile of Japanese firms' international activities). - General least squares (GLS) analysis to test the hypotheses\ ( used to perform linear regression when the residuals in a regression\ model considerably correlate). Results H1: V -- confirmed H2: V -- confirmed Implications for research & theory - Findings reconcile prior research (finding linear, U-shaped, inverted U-shaped relations between INT and performance). - IA augment the benefits from firms' geographic expansions. - Do not restrict samples when analyzing strategic questions (and use archival / secondary data) - Managers should take a long-term view of internationalization ( initially negative returns should not stop foreign expansion, benefits arise after overcoming liabilities of newness / foreignness). - Managers should develop capabilities for managing complexity (to extend the beneficial phase 2) Lecture 3: Organic vs. non-organic growth ----------------------------------------- **How to grow?** Acquisition vs. greenfield investment Acquisition: Full or partial purchase of an existing firm's equity (Slangen & Hennart, 2007) Greenfield investment: Firm builds a new subsidiary from scratch (Slangen & Hennart, 2007) Classification of entry mode choices  *Klier, Schwens, Zapkau, & Dikova (2017). Which Resources Matter How and Where?* **Research interest** - Establishment mode choice (EMC): acquisition vs. greenfield investment - Acquisitions and greenfield investments are both resource-intensive forms of (foreign) market entry (Dikova & Brouthers, 2015). - Gaps in EMC research: - Although firms possess different types of resources (Miller & Shamsie, 1996), prior EMC studies only focus on single resources (e.g., Mudambi & Mudambi, 2002). - Diverse theoretical arguments and inconclusive empirical findings regarding the influence of resources on firms' EMC (Dikova & Brouthers, 2015). - Unclear boundary conditions under which resources affect firms' EMC (e.g., Slangen & Hennart, 2008). - **Resource-based view** (RBV): firms have to manage their valuable, rare, inimitable, and non-substitutable resources to achieve sustainable competitive advantages (Sirmon et al., 2007). - **Context-dependency of the RBV** (e.g., Priem & Butler, 2001): unfamiliar\ environments cause "information deficit\[s\] affect\[ing\] the way firms must manage resources" (Sirmon et al., 2007, p. 275). - **Cultural distance** (CD) between home country and host country prevents the flow of information between markets (Johanson & Vahlne, 1977). - CD is a major source of information deficits (Gong, 2003; Roth & O\'Donnell, 1996). - Certain types of resources (e.g., international experience) become particularly valuable in the presence of CD (Slangen & Hennart, 2008). **Research aim and contribution** Research aim: - Examine the influence of **knowledge-based** and **experience-based** resources on a firm's EMC. - Examine how the relationships vary with CD. - Conduct a meta-analysis to identify overall directions and effect sizes based on\ broad empirical evidence. Contribution:\ 1. Develop an RBV-based framework explaining how firms exploit existing and seek\ new resources through their EMC.\ 2. Reduce inconclusive findings by studying an important boundary condition of the\ relationship between different types of resources and a firm's EMC. **Theoretical background: RBV** Resource-based view (RBV): Distinctive resources provide firms with a sustainable competitive advantages (and long-term superior performance)  Firms choose strategies which either exploit existing resources or access new resources (Das and Teng, 2000) VRIN framework: Resources have to be valuable, rare, inimitable, and non-substitutable to\ provide a sustainable competitive advantage (Barney, 1991) - VALUABLE: exploit opportunities and neutralize threads - RARE: not widely held among competitors (e.g., patents, specialized HR, reputable brand, etc.) - INIMITABLE: not easily replicable / obtainable by competitors (e.g., complexity) - NON-SUBSTITUTABLE: no equivalent resources available to competitors (e.g., experience) Theoretical background: Resources and EMC Research model  **Data & methods** Data: - Comprehensive search for published and unpublished studies (e.g., EBSCO Host, issue-by-issue search): 95 potentially eligible studies. - Applying inclusion criteria (e.g., information on focal relationships and outcome statistics): 31 eligible studies analyzing 13,559 establishment mode choices. Methods: - Correlation coefficients serve as effect-size indexes (Geyskens et al. 2009). - Tests for publication bias, outliers, and heterogeneity. - Hedges and Olkin (1985) meta-analysis to estimate the meta-analytic mean- correlations and the corresponding confidence intervals. - Meta-analytic regression analysis to analyze moderator effects (Lipsey & Wilson, 2001). Measurements Results: main effects H1: V and H2: V H3a: V and H3b: X **Implications & limitations** Implications: - Centrality of the RBV (i.e., VRIN resources) for firms' EMC (and other growth strategies). - The value of resources varies with the resource type and also with the context. - Managers should take the firm's different resources as well as the environment (e.g., cultural distance) into account when choosing an EMC. Limitations: - Limited number of primary studies in some resource sub-categories. - Study cannot differentiate between full and partial acquisitions / greenfield investments. - Focus only on two specific types of resources and on one contextual factor. *Puranam, P., Singh, H., & Chaudhuri, S. (2009). Integrating acquired capabilities: When structural integration is (un) necessary. Organization Science, 20(2), 313-328.* **Research interest & conceptualization** - Post-merger integration can destroy the very innovative capabilities that made the acquired organization attractive in the first place. - Interdependence motivates structural integration but pre-existing common ground offers acquirers an alternate path to achieving coordination. - Prior research on post-merger integration has focused more on its consequences than its causes. - Structural integration refers to the combination of formerly distinct organizational units into the same organizational unit following an acquisition. **The costs of structural integration in tech acquisitions:** - Short-term costs: the costs of processes by which structural integration is achieved. - Long-term costs: - 'loss of autonomy' effect, lower productivity and motivation, free-riding. -- Agency theory suggest that structural integration weakens the link between reward and effort, because the number of other agents whose actions influence unit performance increases when units are integrated. - Changes can alter valuable organizational routines within the acquired firm, and in doing so can undermine its innovative capabilities. **Interdependence and structural integration** "We argue that despite the "loss of autonomy" effect and its adverse consequences, structural integration is a powerful means of achieving coordination in the case of significant levels of interdependence between acquiring and target firms." Interdependence "\...\.....and refers to the property that says that the value of performing one activity depends on how another activity is performed." Pooled -- Sequential -- Reciprocal interdependency (Thompson,1967)   H1: COMPONENT TECHNOLOGY VS STANDALONE PRODUCT\ Hypothesis 1 (H1). Structural integration is more likely in technology acquisitions, when the acquisition is motivated by obtaining a component technology (rather than a standalone product). **Common ground, interdependency, and structural integration** - Clark defines common ground between two people as "the sum of their mutual, common or joint knowledge, beliefs and suppositions" - "I know that you know that I know that you know\..." - In contrast to structural integration, which enables coordination primarily through the use of formal mechanisms such as common authority, procedures, and goals, common ground can give rise to tacit or informal coordination (Camerer\ and Knez 1997) - Importantly, coordination based on pre-existing common ground is not subject to the disruption effects that accompany structural integration, because no substantial changes to the formal organization are necessary. Theoretical model H2: COMMON GROUND DOESN'T LEAD TO DISRUPTION.\ Hypothesis 2 (H2). The existence of high levels of common ground between individuals from the acquiring and acquired organizations lowers the likelihood that component technology acquisitions will be structurally integrated. Sample and data -- event study methodology - 'the acquisition of small (\1000) established firms.' - sample of acquirers from the information technology hardware industries for two reasons: - sector has been frequently profiled in popular publications as being extremely active in technology acquisitions. - able to obtain access for extensive interviews at three major firms in this sector--- Intel, Cisco Systems, and Hewlett Packard. - 207 acquisitions (1988-1998) by 49 acquirers. - Structural Integration (=1 if the acquisition disappeared from CORPTECH), cross-validation through press releases & primary data from top 3 acquirers. Other measures - *Component* vs. *Standalone technology* \> expert coding, inter-rater-\ reliability - *Common ground* \> the existence of pre-acquisition patenting activity by both targets and acquirers in the same technology classes ("proximity in the technology space") - Target Size and Age, Target Quality, Product Market Relatedness, Acquirer Size, Acquirer Acquisition Experience, Acquirer R&D Intensity. Support for both hypotheses **Implications** For theory: - Interdependence helps explain why acquirers pursue post-merger integration in technology acquisitions despite the significant disruptions it is known to cause. - Prior literature does not focus on the antecedents of structural integration decisions. - Much like absorptive capacity (Cohen and Levinthal 1990), common ground represents an instance in which some degree of knowledge overlap helps with the acquisition of non-overlapping knowledge and capability. For practioners:\ "Developing common ground reconciles the dilemma of structural integration versus providing autonomy". **Limitations** 1\. The authors assume that the technological interdependence between target and acquirer is the only relevant form of interdependence and that the coordination requirements with the product development teams of the target dictate the organizational treatment of the entire target firm.\ 2. Reliance on patenting data to measure common ground is also not free of problems. Lecture 4: Capturing Value from Innovation ------------------------------------------ Growing through innovation or imitation? In this lecture we focus on how to appropriate the value from innovation **Appropriation of Value**: How are the benefits from innovation distributed?  **Why is it always difficult to make money with innovation?** 1\. R&D (research and development) has a cost - Profits shared by the innovator and fast followers - R&D cost incurred primarily by the innovator 2\. Pioneering may have its disadvantages - Most first movers are solutions in search of a market - Nobody gets it right the first time - Fast-followers and late entrants enjoy all the free iterative learning that happens while the first mover is: - Distracted by providing customer support - Burning its brand due to quality issues and feature-needs mismatches 3\. (the suggestion of) imitation at favorable prices - Is it fake or real? 4\. The lack of complementary assets: the PFI framework (Teece, 1986) **Appropriability regimes** - If a particular innovation, or the knowledge on which it rests, can be completely "appropriated" it means that no one else can use it or copy it - Allows a large "share" of the pie to be retained by the "supply" side - Offers innovators enormous bargaining power in the value chain **Bargaining power in the supply chain (Pisano & Teece, 2007)** **Asset types**  **Who profits?** **Value capturing according to James, Leiblein and Lu (2013)**  - Patents - Characteristics that drive selection of value capture mechanisms (James et al., 2013) - IP protection measures - Patents - Copy rights - Design rights - Breeders rights - Trademarks - Complexity - Bundling of products & services - No possibility of reversed engineering - Lead-time advantage - Trade secrets - Human resources - Legal contracts - Psychological contracts - Reputational assets - Design-in switching costs - Lock-in raw materials/suppliers - Cannibalization concerns - Formal and informal appropriation mechanisms: the role of openness and innovativeness (Zobel et al., 2017) -  **The search breadth & depth of open innovation (Zobel et al, 2017)** "An obvious risk associated with such openness lies in the fact that resources are made available to others to exploit"\...\ "This might make it more difficult to protect the innovative efforts of firms and to capture benefits that accrue from collaborative and shared innovative efforts. **Incremental vs. Radical innovation (Zobel et al, 2017)** - Incremental innovations only offer minor improvements for markets; - Radical innovation implies the creation of advanced, distant knowledge; **Findings** **Zobel et al, 2017** 1\. Search breadth and depth → (+) use of informal appropriation measures.\ 2. Search breadth → (+) use of formal appropriation measures.\ 3. Firm's degree of radical(incremental) innovation orientation → (-/+) use of formal appropriation measures.\ 4. No association between innovation orientations and use of informal appropriation measures **Findings (2)** **Are appropriability regimes completely exogenous? (Pisano & Teece, 2007)**...The potential from mass-sequencing of genes for biomedical research was immense. For the first time, researchers could begin to explore the genetic bases for a variety of diseases such as\...\... \..., genes had enormous economic value if they could become IP. The concern among pharmaceutical companies was that they could essentially be held hostage by another entity that claimed ownership of a key gene or genes associated with a disease where they had strong commercial interest. Take a firm like Merck. **Merck's strategy was to attempt to alter the appropriability regime (Pisano and Teece, 2007).** - Merck had established a very strong research program in cardiovascular disease and cholesterol-lowering drugs in particular. - Merck's R&D and marketing capabilities in cardiovascular drugs represented strong co-specialized assets positions\... - If Merck could not continue to conduct certain research programs, it might not be able to leverage its existing co-specialized assets positions. - In 1994, Merck announced plans to collaborate with Washington University to create a database of expressed human sequence and to put these data into the public domain. - Merges cites this a 'property-preempting investment''. - This sounds highly altruistic, \...\... However, Merck was essentially preventing a privatization of genes that could block its future research objectives. **Strengthening appropriability regimes: promoting IP at standard-setting bodies. (Pisano & Teece, 2007, p. 288).** Maybe *persistence* is the most important precondition for value capturing Lecture 5: Stakeholder- vs. shareholder-oriented growth ------------------------------------------------------- Stakeholder management = building relationships  **Stakeholder vs. shareholders** *Stakeholder* = Individual, group, or organization that has direct or indirect stake in an organization because they can affect or be affected by the organization\'s actions, objectives, and policies. External stakeholder: - Competitor - Consumer - Distributor - Supplier - Bank - Government - Community - Peers Internal stakeholder: - Employees - Shareholders - Employee organization - Board of directors - Management *Shareholder* = Individuals or institutions (including corporations) that legally own any part of a share of stock in a public or private corporation. Institutional investors: banks, investment firms, insurances Individual investors: individuals who buy shares with their personal savings Milton Friendman's traditional view of a firm - Primary goal of a firm is profit maximization, not spending shareholder money for general societal interest. - Shareholders are the firm's economic engine and the only group to which the firm must be socially responsible. - Firms return a portion of their profits to their shareholders as a risk reward. - Shareholders can decide for themselves what social initiatives to support (instead of having appointed (for business reasons) executives decide for them). Coca-Cola shareholder mission statement (some years ago) "We exist to create value for our share owners on a long term basis by building a business that enhances the Coca-Cola company's trademark. This is also our ultimate commitment." Nowadays: The Coca-Cola company purpose remains clear: To refresh the world and make a difference. **Why a stakeholder approach?** - "Yes, the planet got destroyed, but for a beautiful moment in time we created a lot of value for shareholders" Stakeholder theory (Freeman, 1984) - Challenges the conventional market capitalist view of the firm. - Firms cannot maximize (discounted) value if they ignore the interests of their stakeholders. - Firms rely on the contribution of a much wider set of constituents (besides its shareholders). - Firms need to take the interests of these stakeholders (including shareholders) into account to ensure sustainable profitability and survival. Identifying and managing stakeholders: Porter's five forces  *Margolis, J. D., & Walsh, J. P. (2003). Misery loves companies: Rethinking social initiatives by business.* The neoclassical view on organizations: This view of the firm challenges the legitimacy of corporate responses to social misery 1\. Only free elected governments are legitimate actors (Jensen, 2002) to ameliorate social misery.\ 2. If shareholder wealth is maximized then social welfare is maximized as well.\ 3. "One thing that cannot survive is systematic efforts to fool participants" (Easterbrook and Fischel, 1991) \>\> The market will ultimately sort out whether it is the best use of a firm's resources. **Two central concerns: misappropriation & misallocation** \....the first concern is that managers will misappropriate corporate resources by diverting them from their rightful claimants, whether these be the firm's owners, or sometimes employees. Managers also misallocate resources by diverting those best used for one purpose to advance purposes for which those resources are poorly suited. (p. 272) RESULTS FROM (N=127) EMPIRICAL STUDIES INTO THE CSP-CFP RELATIONSHIP. - Positive association, and certainly very little evidence of a negative association between CSP and CFP. - However: by assaying the financial impact of CSP, organizational research helps to confirm the economic contractarian model and accept its assumptions. Meanwhile the work leaves unexplored questions about what it is firms are actually doing in response to social misery and what effects corporate actions have, not only on the bottom line but also on society **Three types of stakeholder theory (Donaldson and Preston, 1995)** 1\. Descriptive: to what extent managers do in fact attend to various stakeholders and act in accordance with their interests?\ 2. Normative: explores whether managers ought to attend to stakeholders other than shareholders, and if so, on what grounds these various stakeholders have justifiable claims on the firm?\ 3. Instrumental: delineates and investigates the consequences that follow from attending to a range of stakeholders Normative reasons to respect stakeholders - Employee dignity and self-efficacy (Shklar, 1991; Hodson, 2001) - Principles of fairness and reciprocity (Appelbaum, 1996; Philips, 2003) - Fundamental rights (Donaldson and Preston, 1995) - Respect for the intrinsic worth of human beings (Donaldson and Dunfee, 1999) **Exploring the antinomy: "Does the successful business try first to profit or the serve?"** Two avenues of intellectual response to remove the antinomy: 1\. Invalidation; 2\. Reconcilliation The grip of economic assumptions must be released in favor of an alternative premise "We suggest adopting a pragmatic stance toward questions about the firm's role in society, one articulated most clearly by William James (1975: 97): "Grant an idea or belief to be true" Toward a normative (stakeholder) theory of the firm "While acknowledging the conflict between social misery and economic efficiency, an inductive normative theory seeks not to resolve the conflict, but to clarify the competing considerations, probe what gives them weight, and explore their relationship." **Five areas of inquiry invite descriptive research** 1\. Appraising the stimuli: Which social ills garner attention by which firms?;\ 2. Generating response options: How do firms generate response options? (behavioral or cognitive approach)\ 3. Evaluating options: what assessment criteria are applied to corporate efforts to ameliorate social ills?\ 4. Implementation: How do firms implement responses to social misery? (e.g. equivocal, ambivalent or ambidextrous responses, or make, buy or ally)\ 5. Consequences: How do corporate efforts to redress social misery actually affect their intended beneficiaries? **Response types: equivocal, ambivalent, ambidextrous** **About the duty to aid and respond:** When a company: 1. contributes to the conditions that necessitate a response. 2. benefits from deleterious or unjust conditions. and there is (3) the *duty of beneficence*: "an individual needs only aid others to the extent that would be required were everyone to comply with the duty to aid others." How a company should respond will be a function of features of: - the problem (depth & breadth) - the company (contribution, proximity, benefits) - the company's relationship to the problem - the impact the company's response would have (boundary conditions, permitted vs prohibited) Conclusion: Before rushing off to find the missing link between a firm's social and financial performance, all in hopes of advancing the cause of social performance, we need to *understand the conditions under which a corporation's efforts benefit society*. *Jones, T. M., Harrison, J. S., & Felps, W. (2018). How applying instrumental stakeholder theory can provide sustainable competitive advantage.* **Instrumental stakeholder theory (IST)**.....,the core hypothesis of IST is that developing stakeholder relationships governed by the norms of traditional ethics --for example fairness, trustworthiness, loyalty, care, and respect- *will lead* to improved financial performance. - Reciprocity However, although.........IST is a powerful theory with strong prescriptive and normative conclusions, the IST literature has failed to answer a vital question: If the performance effects of ethical relationships with stakeholders are positive, according to both theory and empirical studies, *why do so many firms treat stakeholders selfishly at best and unethically at worst*? **Contribution of the paper is threefold** Shortcomings that limit the ability of scholars to fully understand the performance effects of IST-based measures: 1. Are the resources that result from IST-based stakeholder treatment also *rare* and difficult to *imitate*? RBV \ IST? 2. *"Sunny side"* bias of the ethical treatment of stakeholders, but what about the costs of close relationships with them? 3. *Context dependency* of ethically grounded stakeholder management strategies' association with higher financial performance. The authors draw on relational models (Bridoux and Stoelhorst, 2016)  To argue that a CSRE-strategy can lead to a CR-capability **A CSRE strategy is characterized by an intention to rely on relational contracts, joint wealth creation, high levels of mutual trust and cooperation, and communal sharing of property.** Linking a CSRE-strategy to sustainable competitive advantage  - VRI (value, rare, imitable) Competitive advantage **1. Reciprocity = basically the engine of creating value of the relationship with stakeholders** *Bosse, D. A., Phillips, R. A., & Harrison, J. S. (2009). Stakeholders, reciprocity, and firm performance.* **Legitimation**...the *self-interested maximizer* of economic theory 'who grabs what he can for himself, is an *inaccurate depiction of typical behavior*'. Instead most people assess the *fairness* of others and reciprocate by (1) rewarding those they deem fair, and (2) incurring costs to punish those they deem unfair. **Bounded self-interest: the homo reciprocans** **The reciprocity assumption does not suggest that people do not seek to maximize their utility; it suggests people seek to maximize their utility [while conforming to the norm of reciprocity].** **Value creation & Distribution** -...firms ultimately create value by distributing it ([in various forms]) to those stakeholders who *behave fairly*. -....and therefore the *reciprocity of fairness* is the engine of value creation. Distributing value in various forms: - Extra day off Fairness - Distributive - Procedural - Interactional Distributional fairness: "fair share" - Procedural fairness: "fair process" - Are the same steps followed? Interactional fairness: "fair enough" - Conclusion: Based on the assumption of reciprocity, firms should distribute (surplus) value to a broad group of stakeholders to create value. ***CSRE* versus *ALRE* strategies** **Communal Sharing Relational Ethics strategy** **A [CSRE strategy] is characterized by an intention to rely on relational contracts, joint wealth creation, high levels of mutual trust and cooperation, and communal sharing of property.** **Arm's-Length Relational Ethics strategy** **An [ALRE strategy] is defined as a shared intention to relate to a stakeholders group based on the norms of arm's length relationships.** **Why a close relationship capability is *Rare*:** 1. Arm's-length relationships with stakeholders tend to be the default position in stakeholder management strategies. 2. Several factors can reduce managers' motivation to adopt CSRE norms in pursuit of a close relationship capability. (*incentives*) 3. CSRE strategies are difficult to implement (\~50% of all individuals have social dispositions that are either self-regarding or competitive). 4. Difficulties with finding suitable stakeholder partners. **Why a close relationship capability is difficult to *imitate*:** 1. Path dependency; 2. Causal ambiguity; 3. Social complexity; **Path dependency**  - It is very difficult to move from path **Causal ambiguity** "The good news is, profits are up 74%, the bad news is, we don't know why..." **Social complexity** Building relationships is difficult to imitate **Limitations** - Stakeholder management strategies modeled as a dichotomy (CSRE vs ALRE); - Focus on dyadic relationships and stakeholder groups; - Cultural feasibility: collectivistic vs. individualistic cultures; - Measurement problems; - DV = Financial Performance \ Total Value Created \ Stakeholder utility \ happiness enhancement? Lecture 6: Growing with personal or self-services ------------------------------------------------- - Full service: - Self service: only check in / check out 2021 statistics about self-service - Overwhelmingly, 86% of consumers expect online self-service options. Global State of Customer Service Report by Microsoft. - All generations, but especially Millennials (48%), are increasingly trying to solve problems on their own by searching for answers in online communities, FAQs, and the like. Zendesk research - 73% of consumers want to be able to solve product/service issues on their own. Business Insider *Scherer, A., Wünderlich, N. V., & Von Wangenheim, F. (2015). The\ value of self-service* Theories: - Service Dominant Logic (Vargo & Lusch)\ "Value is created with the customer through a unique combination of the customer's and the provider's resources" - Media Richness Theory (Daft and Lengel 1986)\ "According to MRT, media can be characterized by their ability to convey communicative cues, give immediate feedback, support language variety, and allow personalization."\ "Users relying on lean media for complex and ambiguous tasks should encounter a lower outcome-quality". - Channel Expansion Theory (Carlson and Zmud 1999)\ "A user's perceived richness of a medium depends not only on its characteristics, but also on the user's unique experience with it"  Conceptual framework **Two value propositions are compared** 1\. Technology based self-services - Technology-based self-service channels entail a mere interaction between customer and technology. - Technology-based self-service channels do not support directed and dyadic communication between customer and service provider representatives. - Customers are not only cocreators of value in self-service channels, but also active coproducers of the core offering itself. - Self-service channels are rather lean, highly standardized, and do not include personalized attention to customer needs. 2\. Personal services - Personal service channels always involve the presence of a service provider representative and entail a direct interaction and communication between customer and service employee. - Once humans are aware of a human communication partner in a technology mediated encounter, they have been shown to act more sociably, show more mirth, and spend more time on a task. - Personal service channels also offer social benefits for customers in terms of familiarity, personal recognition, friendship, and social support. "Customers should derive most value from rich, personal service channels when tasks are complex and ambiguous and from lean, standardized self-service channels when tasks are easy and repetitive." When discussing how both self-service and personal service channels can impact a customer's relationship to a service provider, we will thus keep (1) the individual characteristics and resources of a customer, (2) the resource requirements of a task, and the (3) unique capabilities of a service channel in mind.  Hypotheses Sample, analysis and conclusions  **Three study limitations** - Focus on one firm limits the generalizability of findings; - The underlying assumption of the U-shaped relationship between the two variables relies on the basic idea of varying degrees of a task's complexity and ambiguity. However, the authors did not measure task complexity or ambiguity itself. - It might be helpful to segment customers based on demographic and attitudinal data. Future research could, for instance, assess the implications of our conceptual\ framework in an intercultural setting. **Managerial implications of the study** - To date, both business practice and research highlight the benefits of technology-based self-service channels. Given these apparent advantages, more and more businesses actively push customers to self-service channels. The present study demonstrates that this approach may not always be beneficial for the\ firm. - To avoid the possible dark side of technology-based self-service channels, managers should allow customers to experience their relationship with a provider through a variety of service channels-especially when they are new to a provider. *Collier, J. E., Breazeale, M., & White, A. (2017). Giving back the "self" in self-service: customer preferences in self-service failure recovery.* **Study purpose:** - When a failure occurs with a self-service technology (SST), do customers want to give back the "self" in self-service? - The authors explore employee's role in a self-service failure and how the presence of other customers can change that role. Specifically, they examine how the self monitoring of customers behavior during a failure can change recovery preferences. **What can be learned from previous research?** - Service failure is the process of NOT keeping promises - Previous research reports that infusing an employee into the recovery process can be frustrating for customers originally seeking to avoid human interaction by choosing this channel alternative. - Other research suggests some customers prefer to have an employee nearby in the event of a failure. **Self-monitoring theory**: A self-monitor refers to a person who adjusts his/her behavior and mannerisms according to the codes of society and the people around her/him. Hypotheses  Method - To test these hypotheses, four scenarios were developed to manipulate a 2 (employee takes over and finishes transaction vs customer finishes transaction) 2 (customers waiting in line vs no customers in line) experimental design. - The setting for the study was a self-service movie ticketing kiosk that would allow patrons to purchase movie tickets for upcoming shows. Three different studies - Study 1: employee's role during an SST failure - Study 2: customer-induced SST failure and the employee's role - Study 3: how the servicescape influences self-service recover **Findings** Results from these studies find that customers want employees to fully take over a transaction after a failure if it takes place in isolation. If other patrons are present or waiting in line, then customers prefer the employee to simply correct the problem and let them complete the transaction. Finally, the servicescape along with the presence of other customers in a self-service area can induce self-monitoring behaviors and alter optimal recovery strategies. **Managerial implications** - This research highlights the importance of appreciating the social environment in which SST failure occurs and allocating employee resources accordingly. - Situational awareness and the flexibility to select the appropriate recovery path allows customers to protect themselves from social embarrassment and ultimately\ produces a better self-service experience customized to the customer's current situation. - Service providers need to be acutely aware that the design of a self-service area can directly influence the preferred type of service recovery with a self-service transaction. **Study limitations** - One variable of additional importance is the type of service being provided. - No control for the characteristics of the employees or customers during our studies. - Another area of research could further explore how the length/time of recovery and overall motivations for customers seeking employee assistance influence recovery evaluations. - Recruiting procedures for the current research purposively limited the sample to SST users. Nonuser customers may exhibit differences in expectation that would inform recovery strategy upon their expected future adoption of SST. Lecture 7: Related versus unrelated diversification? ---------------------------------------------------- Diversification = a corporate strategy to enter into a new market or industry which the business is not currently in, whilst also creating a new product for that new market.  **Why do firms pursue a diversification strategy?** Firms pursue a diversification strategy for several reasons, primarily aimed at enhancing profitability, reducing risk, and achieving growth. The key reasons include: 1. **Risk Reduction**: Diversification spreads risk by expanding into different industries or markets. This minimizes the impact of adverse conditions in any single sector. 2. **Revenue Growth**: By entering new markets or offering new products, firms can tap into additional revenue streams, fostering growth even when their core business may be stagnant. 3. **Leveraging Core Competencies**: Firms often diversify to leverage existing strengths, such as technology, brand reputation, or supply chain efficiencies, in new areas where those competencies can offer a competitive edge. 4. **Synergies**: Diversification can create cost synergies by combining resources, expertise, or technologies across business units, leading to economies of scale and enhanced profitability. 5. **Market Power**: Expanding into different sectors can increase a firm\'s bargaining power over suppliers and customers, providing a stronger market position. 6. **Responding to Competition**: Firms may diversify to preempt competitors from dominating adjacent markets, or as a countermeasure to competitors' diversification strategies. 7. **Utilizing Excess Resources**: If a firm has excess financial or human resources, diversification allows it to put those resources to productive use, increasing overall efficiency. 8. **Long-term Stability**: A diversified portfolio of businesses can help smooth out income fluctuations over time, ensuring long-term financial stability, especially in cyclical industries. While diversification has potential benefits, it also carries risks such as dilution of management focus, inefficiencies from operating in unfamiliar industries, and potential loss of strategic coherence. Hence, firms need to carefully assess when and how to diversify. Unrelated diversification or seemingly unrelated? **Why do Firms Diversify?** - When they have excess resources, capabilities, and core competencies that have multiple uses - Diminishing growth prospects in present industry - Cost saving opportunities - Capture strategic fits - Capture financial economies - Spread business risk - Leverage brand name **Economies of scope** Exist when a firm expands the variety or scope of its activities, e.g., - A lumber company sells chipped bark for lawn decoration - A finance company uses their financial data to produce marketing reports - A slaughter house invents hot dogs **Strategic fit** expresses the degree to which an organization is matching its resources and capabilities with the opportunities in the external environment. **Building shareholder value** - Ultimate justification for diversifying - A diversification move must pass three tests - The industry attractiveness test - The cost-of-entry test - The better-off test Decision to diversify requires two additional decisions: - Level and degree of diversification - Number and relatedness - Mode of diversification - Acquisition, internal development, joint venture What is related diversification? - This means that there is a **technological similarity** between the industries, which means that the firm is able to leverage its technical know-how gain some advantage. - The **company could seek new products** that have technological or marketing synergies with existing product lines appealing to new group of customers. Example of related diversification: Proctor and gamble (distribution/marketing) - Provides branded consumer goods products worldwide - 3 GBU's - Beauty GBU - Beauty segment - Grooming segment - Health and well-being GBU - Health care segment - Snacks, coffee, and pet care segment - Household care GBU - Fabric care and home care segment - Baby care and family care segment Strategic appeal of related diversification - Capture strategic fits/synergies/scope economies - Strategic fits along value chain - Cost reductions - Spread investor risks over a broader base - Preserves strategic unity in its business activities - Achieve consolidated performance greater than the sum of what individual businesses can earn operating independently Example of unrelated diversification? Textron, Inc. - Operates in the aircraft, industrial, and finance industries worldwide - 4 segments - Bell -- helicopters plus parts and service - Cessna -- general aviation aircraft - Industrial -- auto parts, food containers, hydrolics, golf carts - Finance -- aircraft finance, asset-based lending, distribution finance, golf finance, resort finance What is unrelated diversification? - Involves diversifying into business with - No strategic fit - No meaningful value chain relationships - No unifying strategic theme - Approach is to venture into "any business in which we think we can make a profit" - Firms pursuing unrelated diversification are often referred to as conglomerates The link between resources and type of diversification (Chatterjee and Wernerfelt, 1991)\ The paper builds a theoretical foundation to identify systematic factors that influence the type of diversification (p.33). **Their RBV expectation** "\...we would expect managers to deploy firm resources to markets they believe would lead to the most profits". Their claim: the resource profile explains partially the type of diversification the firms in the sample engage in.  Hypotheses and controls: Conclusion - A strong association between intangible assets and more related diversification. - No association between the ability to raise equity capital and the type of entered market. - Higher-performing firms supported the model better. *Curvelinearity in the Diversification-Performance Linkage: An Examination of over Three Decades of Research (Palich et al., 2000)*  **The linear model rests upon three assumptions** 1\. Market power advantages, through: - Predatory pricing; - Cross subsidization; - A firm with deep pockets uses its asymmetric financial strength to drive a rival with shallow pockets from the market. - Constructing a reputation for predatory behavior, which may also deter market entry; - Reciprocal buying and selling. 2\. Internal Market Efficiencies The diversified firm has much greater flexibility in capital formation: - Access to external sources as well as internally generated resources; - The head-office can allocate investment cheaply and efficiently (vis-à-vis external sources), directing capital away from slow-growing, cash generating operations. - This is especially true for relatively new ventures which lack a track record and for which limited information is available to external resources. - However, to what extent may managers be drawn to overinvest in undeserving projects? 3\. Other advantages - Excess firm-specific assets that cannot be sold, e.g. brand reputation; - Tax and financial benefits associated with diversification: financial synergies; - Portfolio effects \> risk reduction \> decreases the costs of capital \> further tax advantages. **The inverted-U model** Focused businesses do not enjoy scope economies: - Marketing economies of scope; - Production economies of scope; - Share R&D facilities; - Asset amortization (Markides and Williamson, 1994); Not only benefits accrue to diversification: - Growing strain on top management; - Different dominant logics \> increasing coordination costs - Internal capital market inefficiencies \> decreasing responsiveness - Incompatible technologies - Marginal costs of diversification increase rapidly **The Intermediate model** - To what extent do firms exploit the relatedness? - Holds risk reduction not predominantly for unrelated diversification? **Measures (operationalization)** Diversification:\ Herfindahl\ Entropy\ Count of industries Performance:\ Accounting-based\ Market-based - Organizational learning and corporate diversification performance (Andreou et al., 2016) - "On average, diversification destroys shareholder value, a finding known as the diversification discount", (p. 3270) The diversification discount The "conglomerate discount" - Stock markets value diversified manufacturing conglomerates at 20% less than the value of the sum of their parts. - The discount applies despite economic influences - Only extraordinary manufacturers can defy it (for a while) "Scholars should pay attention to the cross sectional variance of corporate diversification performance" Absorptive capacity viewpoint:\ 'past relevant experience enables the firm to recognize and explicitly codify new knowledge into systems, routines, and procedures, that guide future actions'  Organizational learning and corporate diversification performance (Andreou et al., 2016) Testable relations  **Results**\ 1. A value discount only in single business firms that diversify once.\ 2. Firms with more diversifications achieve value premiums.\ 3. Firms using internal growth to diversify demonstrate higher valuations rather firms that pursue acquisitions. Wrap-up - There is a positive relationship between resource flexibility and unrelated diversification. - The diversification-performance relationship is curvelinear (inverted U-shape) - The diversification discount is not universal but rather affects single-business firms that diversify once. - You would better diversify through internal growth as opposed to pursuing acquisitions. However, also internationally? Lecture 8 Growing with products or services ------------------------------------------- ***Why would manufacturers expand their product portfolio with services?\ Or even offer their products as-a-service?*** - With services you have the opportunity to build a relationship with customers - For product innovation - Services is a way to update your products (cross-selling) **Drivers of servitization** Financial drivers - Higher profit margin - Less sensitive for price-based competition - More resistant to economic cycles Strategic drivers - Differentiate manufacturing offerings - Sustainable competitive advantage Marketing drivers - Total Cost of Ownership - Service tend to induce repeat-sale - Customer insights enable the development of tailored solutions In this example, a well-known lightning company evolves from selling bulbs to offering a complete energy management service. **To servitize or [not] to servitize?** Sales doesn't want to sell services \| Procurement doesn't want to buy services Selling product / selling service \| No service Services were always a dealmaker \| The product-service paradox Free services \| Products / services It's considered a shame to.. \| Services are considered a late career.. provide services \| destiny of senior employees Services are not tangible \| Services are labor-intensive **Solution providers' strategic capabilities -- Study** Materialization of solution providers' strategic capabilities  Results in -- industrial solution providers' strategic capabilities: - Value co-creation with who are they co-creating? With their customers - Technology-development capability - M&A capability - Supplier network management capability - Fleet management capability - Value quantifying capability - Project management capability Distinctive resources VRIN resources Important resources **Implications** - Managers can utilize the presented model to identify capability gaps and prioritize their development activities. - Managers can benchmark practices related to the application of strategic business processes, particularly to those enabling innovation. *Separate or integrate? Assessing the impact of separation between product and service business on service performance in products manufacturing firms* Theoretical framework  0 = no correlation 1= correlation  Results for financial performance OLS regressions in PP Results for non-financial performance OLS regressions in PP **Conclusions**\ 1. Separating a service organization will be more supportive of efforts to deploy a service strategy by product manufacturers. - Also for small and medium sized enterprises 2\. A separate service organization enables firms to engage directly with the customer's practices and processes, thus becoming, in partnership with the customer, a co-creator of value. **Limitations**\ 1. Sample is limited to product manufacturing firms: these firms are more interested in developing services for the installed base---i.e., "services required by an end-user over the useful life of a product. 2\. Common method bias 3\. The conceptualization of services as a single strategic response.