Exchange complexity: a multi-method analysis of firm configurations

Abstract

PurposeThe purpose of this study is to investigate if a firm's exchange complexity profile (that is, the linkages between the firm and its environment) influences investor behavior at the negotiation table where a firm valuation is derived.Design/methodology/approachThe authors utilize Qualitative Comparative Analysis (QCA). Specifically, the authors utilize fuzzy-set Qualitative Comparative Analysis (fsQCA), a QCA variant that allows the researcher to assign graduated membership in sets.FindingsWhen the authors dichotomize their positions as either higher stakes that favor the seller (high capital, low equity, high valuation) or lower stakes that favor the buyer (low capital, high equity, low valuation), and when the authors focus primarily on the equity outcome, the authors find that investors adopt a reductionist stance that adheres to a transaction cost economics logic under conditions of lower stakes and higher complexity as well as higher stakes and lower complexity conditions. The authors interpret this to mean that equity serves as a counter-balancing lever for a firm's exchange complexity configuration.Originality/valueOn a theoretical level, the authors showcase the exchange complexity framework and differentiate its position within the extant frameworks that address a firm's competitive advantage. More generally, the authors note that this framework brings the discipline of micro-economics and the field of strategic management closer together, providing scholars with a new tool enabling research across industries for the portfolio level of analysis.