Time Compression Diseconomies Research Articles

The Cost of Accelerating Technology Transfer: An Empirical Analysis of Time Compression Diseconomies

We empirically investigate acceleration costs in technology transfer via a replication of Teece’s (1977) early work on time-cost elasticities. Our dataset on the development of oil production facilities worldwide between 1997 and 2010 is similar to Teece (1977), but over 20 times larger. Our results contrast with previous studies. On average, the cost of accelerating technology transfer is negative: firms could have cut $7.2 million in costs by developing projects one month faster. For 87% of our projects, time compression diseconomies are not binding. Industry-average technology transfer inefficiencies are significant: over 36% of project time and costs are unnecessary delays and overspending. Finally, we estimate the determinants of time-cost elasticities. Our findings reassess firms’ capital allocation decisions and the role of time in Strategy theories.

SEMI-GLOBAL STRATEGIES OF SERVICE MNEs: AN EMPIRICAL CASE OF GLOBAL RETAIL INDUSTRY

Previous studies on location choices of MNEs have identified regional pattern of foreign expansion and framed it as “semiglobalization”. We extend the semiglobalization framework on service multina...

Speed of SME Internationalization and Performance

This paper studies the performance consequences of the speed of SME internationalization. The authors identify three research gaps: few studies treat speed as an independent variable; most studies analyze speed only until internationalization starts; and, finally, studies have paid little attention to the multidimensionality of the speed concept. The authors seek to address these gaps and to contribute to the literature on the dynamics of internationalization by developing three measures of internationalization speed, which capture its multidimensionality. Building on the theories of learning advantage of newness and time compression diseconomies, the study presents three hypotheses on speed’s effect on performance, and the theoretically derived research model is tested on a sample of 183 SMEs visited on site. The analysis demonstrates that the speed of a firm’s increase in the breadth of its international markets has a positive but curvilinear effect on firm performance. It also demonstrates that the speed of a firm’s increase in commitment of foreign resources has a negative but curvilinear effect on the performance of the firm. These results have implications both for scholars interested in the dynamics of firm internationalization and for SME managers.

Time compression diseconomies in environmental management: The effect of assimilation on environmental performance

This research addresses the relationship between an organisation's assimilation of its environmental management system (EMS), the experience it gains through it, and its environmental performance. Assimilation here refers to the degree to which the requirements of the management standard are integrated within a plant's daily operations. Basing ourselves on the heterogeneity of organisations, we argue that assimilation and experience will inform environmental performance. Furthermore, we posit that the relationship between assimilation and environmental performance depends on experience. The attempt to obtain greater assimilation in a shorter time leads an organisation to record a poorer environmental outcome, which we shall refer to as time compression diseconomies in environmental management. We provide empirical evidence based on 154 plants pertaining to firms in Spain subject to the European Union's CO2 Emissions Trading System.

Do Accelerators Accelerate? A Study of Venture Accelerators as a Path to Success?

A fundamental challenge for new ventures is overcoming liabilities of newness - particularly, lack of business knowledge and lack of social embeddedness. Accelerators, intense, time- compressed entrepreneurial programs, attempt to alleviate these liabilities and accelerate venture development by facilitating learning and network development in new ventures. However, because of time compression diseconomies and the potential for inappropriate standardization, the literature suggests that such attempts at acceleration may be ineffective or even counterproductive. We test these competing ideas by comparing performance effects of accelerator-backed new ventures to a matched set of non–accelerator new ventures. Compared to the non-accelerator new ventures, we find that ventures backed by top accelerators are faster in raising venture capital and gaining customer traction. Intriguingly, our results also indicate that prior founder experience (e.g., prior entrepreneurial experience, formal education) is not a su...

"Technological Overlap, Location, and Time Elapsed until the Initial Post-Acquisition Innovation"

Technological acquisitions have become a popular complement to internal innovation to overcome the time-compression diseconomies of internal innovation. Therefore, acquisition success greatly depends on the expeditious leveraging of the target’s technological knowledge. Confounding our understanding of leveraging target knowledge is the fact that target knowledge workers play two distinct roles post-acquisition: to conduct innovative activities in conjunction with the acquirer (integrative innovation) and to continue independent innovative activities (independent innovation). I extend our conceptualization of relative absorptive capacity by integrating geographic distance and cultural distance with the standard measure of relative absorptive capacity—technological overlap. I suggest that relative absorptive capacity possesses opposing effects on integrative innovation and independent innovation. While relative absorptive capacity hastens integrative innovation, it leads to excessive intervention into the ...

Isolating mechanisms as sustainability factors of resource-based competitive advantage

Isolating mechanisms as sustainability factors of resource-based competitive advantage Strategic resources which fulfill conditions of VRIN generate extraordinary profits for organizations. The possibility of these long-term profits (rents) to achieve can be protected by isolating mechanisms. These mechanisms can be different but the most important are causal ambiguity, lead time, path dependency, the role of history, socially complex links and the time compression diseconomies. These mechanism can be WIM and AIM type (based on willingness or ability). They can be also analyzed on individual, organizational or social levels. The article presents the case study which supports available systems of mechanism categorization.

Time compression diseconomies in foreign expansion

Time compression diseconomies (TCD) in resource development impact the durability of competitive advantage according to the resource-based view. The Uppsala Model emphasizes experiential learning, which is subject to TCD. TCD joins the two perspectives and can help explain the foreign expansion process. We found the existence of TCD in post-entry expansion by examining the speed of establishing subsequent subsidiaries and the performance outcomes. Speed was negatively associated with subsidiary survival. TCD was exacerbated with environmental uncertainty and lack of vicarious learning, so that early mover subsidiaries are less likely to make a profit when they are established with faster speed.

How to Accelerate Learning: Entrepreneurial Ventures Participating in Accelerator Programs

While prior research establishes that firms learn at different rates, less is known about how some firms accelerate learning. This study uses theory building and theory elaboration methods to suggest how organizations might accelerate learning. The research setting is accelerators, limited duration entrepreneurship education programs that accelerate learning during venture gestation. There are several findings. First, learning is accelerated via mentor whiplash - time compressed interactions with external advisors that delays implementation. Learning is also accelerated through cohort pacers - peer ventures who are concurrently both rivals and helpers. Finally, director visionaries accelerate learning by foreshadowing the future and transferring templates for novice entrepreneurs. More broadly, this study contributes to organizational theory by bringing to light the central, but heretofore hidden role of learning-coordination costs. This study also contributes to strategy by challenging the widely held assumption of time compression diseconomies and to entrepreneurship by pioneering academic research on the purpose and effectiveness of accelerators.

How Corporate Social Responsibility Engagement Strategy Moderates the CSR–Financial Performance Relationship

abstractWe propose that firm profits are shaped by how firms engage in corporate social responsibility. Recent research on the corporate social responsibility (CSR)–corporate financial performance (CFP) relationship proposes a variety of contextual and organizational factors to create a more robust link. However, few of these studies explore the role of the CSR engagement strategy. Drawing on absorptive capacity theory and related perspectives such as time compression diseconomies, asset mass efficiencies, and path dependence theory, we argue that when a firm engages in CSR slowly and consistently, focuses on related CSR dimensions, and starts with internal dimensions of CSR, CFP will be enhanced. With longitudinal data collected from 130 firms from 1995 to 2007, we find that firms benefit more when they adopt a CSR engagement strategy that is consistent, involves related dimensions of CSR, and begins with aspects of CSR that are more internal to the firm. The pace of the CSR engagement strategy, however, does not moderate the CSR–CFP relationship. This study helps fill the gap in CSR research by showing that, regardless of contextual factors, a firm can choose the proper strategy to enhance the financial benefits of the CSR engagement.

Reconceptualizing the spillover effects of foreign direct investment: A process-dependent approach

Theory suggests that FDI spillovers are a function of the level of foreign presence. We extend this view by developing and testing the premise that variations in spillover effects are the result of differences in the process of foreign entry. Drawing from the concept of time compression diseconomies, we develop the constructs of pace and irregularity of foreign entry, and demonstrate that they negatively moderate the relationship between the level of foreign presence and the productivity of host-country firms. We also explain how and why the moderating role of the process of foreign entry is influenced by the intensity of R&D and technical knowledge in domestic industries. We find evidence that firms operating in low-tech sectors are better able to absorb fast foreign entry.

Location choice and the internationalization sequence

PurposeThe purpose of this paper is to contribute to the literature on emerging multinationals by studying the internationalization strategies of two established companies in the Indian pharmaceutical industry: Ranbaxy and Wockhardt.Design/methodology/approachThe study utilizes a longitudinal case‐study approach to capture Ranbaxy's and Wockhardt's dynamic internationalization patterns. An extensive literature review using recently published works, government documents, and organizational reports was employed to give a clearer description of the two case companies.FindingsThe internationalization patterns of Ranbaxy and Wockhardt suggest that the mainstream internationalization models are more effective in explaining exploitative learning in terms of utilizing the firm's existing knowledge stock in the early stages of internationalization, while the emerging internationalization models (e.g. the LLL framework and accelerated internationalization) are more effective in explaining exploratory learning in terms of seeking novel knowledge flows in firms' later stages of internationalization.Research limitations/implicationsThe empirical base is limited and the use of case studies has its shortcomings (e.g. in terms of sample size, generalizations, etc.). As such, the exploratory findings of this study must be further verified and extended at other sites, especially to firms operating in regulated industries in other emerging countries. Second, the author analyzed the decision to enter a foreign market, without studying subsequent performance and its effects on further entries. The accelerated international growth may have negative consequences for the two cases, as time compression diseconomies may emerge when the firm has a fast foreign expansion pace. Further research using data from other industries and countries, and taking into account entry mode and performance could shed more light into this controversial issue. Third, the author only compared an early‐mover and a latecomer in the comparative case analysis. One of critical topics for further study is to compare different three types of MNEs, e.g. latecomer, newcomer and early‐mover, from the same industry to understand how their geography of learning and knowledge acquisition are influenced by their internationalization and locational choices.Practical implicationsOverseas acquisition, as compared to greenfield investment (e.g. wholly owned subsidiaries), offers more benefits to Indian pharmaceutical firms. Overseas acquisition provides access to established marketing networks, augments Indian firms' ownership advantages with new products and other firm‐specific intangible assets and, offers economic gains from improved operational synergies.Originality/valueThe paper is one of the few which has dealt with an important aspect of firm internationalization, i.e. country selection, the sequence of internationalization across foreign markets and their modes of integration.

A passage to India: A dual case study of activities, processes and resources in offshore outsourcing of advanced services

Research has shown that offshore outsourcing processes may influence the behavior and strategic choices of firms, but little is known about the determining factors that influence the evolution and outcomes of those processes. Furthermore, longitudinal studies able to generate such insights are lacking. This paper suggests a detailed, activity-based approach to the study of the process of offshore outsourcing of high-value, advanced service activities. While earlier research has considered either firm-internal or firm-external sources of resource building, this study offers a more comprehensive theoretical model that combines resource-based theory and international business network theory. It aims to investigate how determinants of the offshore outsourcing process contribute to the resource stocks of client firms. Based on two longitudinal case studies of offshore outsourcing to India, the study finds that offshore outsourcing operations, in general, make positive contributions to the resource stocks of client firms. Some determinants contribute to the building of resources (partnership commitment decisions, knowledge creation and learning, trust building, the interconnectedness of resources) while others impede resource building (time compression diseconomies, lack of resource mass efficiencies). Notably, the interconnectedness among onshore activities, offshore activities and the underpinning knowledge resources reduces the risk of erosion of client firm resources, although this remains a long-term risk.

HOW CORPORATE SOCIAL RESPONSIBILITY IS PURSUED AFFECTS FIRM FINANCIAL PERFORMANCE

In this paper we draw from time compression diseconomies, asset mass efficiencies, and the path dependence theory to explain why the potential financial benefits of Corporate Social Responsibility ...

New Product Development Speed: Too Much of a Good Thing?

New product development (NPD) speed has become increasingly important for managing innovation in fast-changing business environments. In this work, we question the implicit assumption that speed has a linear relationship with success from the perspectives of time-compression diseconomies and absorptive capacity. We further argue that time-compression diseconomies depend on the levels of uncertainty involved in NPD projects. Using survey data from 471 NPD projects, we found that NPD speed has a reverse U-shaped relationship with new product success, and the nature of the speed–success relationship varies depending on type and level of uncertainty. The findings suggest NPD teams take different time-based strategies in emerging markets versus fast-changing markets. Moreover, NPD teams need to balance how fast they can go with how fast they need to go by considering team and customer absorptive capacity.

Explaining Total Factor Productivity Trend in Building Construction: Empirical Evidence from Hong Kong

This paper attempts to explain the total factor productivity (TFP) trend in Hong Kong’s building industry. Two major forces that shaped the TFP trend over the period 1972–2005 are identified. First, empirical evidence from Hong Kong suggests that technological progress from imported technologies has been the major source of long term TFP growth in the building industry. However this source of TFP growth is diminishing, as the technology gap between Hong Kong and other technologically advanced countries narrows over time. Second, short-term fluctuations in the TFP trend can be explained by movements in the real interest rate due to “time compression diseconomies”. An increase in ex post real interest rate will increase the developer’s cost of holding undeveloped land, which causes developers to accelerate the rate of development at the expense of the higher cost of construction. This will have a negative, but short term, impact on the industry level TFP trend.

Assessing the strategic value of Information Technology: An analysis on the insurance sector

Even though companies today are well aware of the pitfalls in making IT investments and that many IT applications have become commodities, IT projects still fail. Obviously IT has a strategic value to firms but they have not determined how IT management capabilities and IT governance schemes explain commonalities and differences in their use of IT. We analyzed the insurance industry in the US and Europe through case studies and an analysis of 30 Italian firms. Twenty case studies carried out between 1998 and 2003 led us to conclude that technological and business path dependencies, along with time compression diseconomies, resulted in diversities in IT adoption dynamics due to their differences in IT governance and management practice. Our analysis showed that most of the firms in the Italian insurance sector increased their productivity through IT regardless of their IT management capabilities. It also showed that competitive advantages were not correlated with IT spending levels nor with the kind of IT investments that made general productivity growth in the industry possible.

The Timing of Resource Development and Sustainable Competitive Advantage

We develop a formal model of the timing of resource development by competing firms. Our aim is to deepen and extend resource-level theorizing about sustainable competitive advantage. Our analysis formalizes the notion of barriers to imitation, particularly those based on time compression diseconomies where the faster a firm develops a resource, the greater the cost. Time compression diseconomies are derived from a micromodel of resource development with diminishing returns to effort. We use a continuous time model of the flows of development costs and market revenues, which allows us to integrate strategic and financial analyses of firm investment problems. We examine two dimensions of sustainability: whether the resources underlying a firm’s competitive advantage are economically imitable and, if so, how long imitation takes. Surprisingly, we show that sustainable competitive advantage does not necessarily lead to superior performance. We find that imitators sometimes benefit from reductions in their absorptive capacity and that innovators should license either all or none of their knowledge. Despite recent criticisms, we reaffirm the usefulness of a resource level of analysis for strategy research, especially when the focus is on resources developed through internal projects with identifiable stopping times.

Leader succession and organizational performance: Integrating the common-sense, ritual scapegoating, and vicious-circle succession theories

Our study examines the impact of leader succession on organizational performance. We use organizational learning theory and the concept of time compression diseconomies to frame our conceptual arguments. Previous sports-related studies have concluded that between-season succession (ritual scapegoating theory) does not impact team performance, and within-season succession (vicious-circle theory) tends to worsen team performance. We confirm these conclusions. We also argue that it takes time for a new team leader to “take charge,” and the taking charge process requires that the team and new leader experience regular-season play together in addition to off-season practice to improve performance in the subsequent season (common-sense theory). Evidence from a 60-year data set from the National Hockey League provides support for our hypotheses.

Strategizing by firms in the presence of markets for resources

Strategizing by firms from the resource-based view is concerned with the process through which firms acquire a distinctive bundle of resources that is costly and time-consuming for competitors to duplicate or imitate. A central question facing any firm, therefore, is its strategy for accumulating the resources that underpin its production activities. In this article, the process of resource accumulation is discussed as one involving potentially both internal resource development and external resource acquisition, from the perspective of the strategic issues involved in making a choice between these options. Emerging markets for technologies and know-how, through licensing and other forms of resource exchange, have opened up new avenues through which firms may jostle for advantage. The article is concerned with three major aspects of this process, illustrating the discussion with cases from biotechnology and pharmaceuticals. First, the strategizing by firms around the 'internal development' vs. 'external sourcing' issue is discussed, as informed by the practices of leading firms, and how these lend greater variety of strategic options for firms; second, the potential competitive advantages as well as disadvantages to be secured by firms through the process of external sourcing (as compared with the well-known potential advantages accruing to incumbents through internal development, such as time compression diseconomies and causal ambiguity); and third, the criteria to be used by firms to strategically evaluate resources individually, as contrasted with the strategic evaluation of the resource bundle, or totality. These criteria, it is argued, turn on the issues of marginal value contribution, resource complementarities and synergies, resource variety and transferability (involving intellectual property issues). Successful firms, it is argued, expand their options through blending internal resource accumulation with external resource leverage, thereby deepening their distinctive dynamic capabilities. This approach extends the framework of the RBV, enabling it to encompass resource-driven Schumpeterian competition and such aspects of industrial dynamics as specialization, modularization and imitative challenge. Copyright 2003, Oxford University Press.