The role of managers, entrepreneurs and the literati in enterprise performance and economic growth

International Journal of Technological Learning, Innovation and Development

Volumn 1, Issue 1, 2007, Pages 43-64

  Teece, David J ^a  

^a UNIVERSITY OF CALIFORNIA   (United States)

Author keywords

economic growth; enterprise performance; entrepreneurs

Indexed keywords

EID: 70350483377     PISSN: 17531942     EISSN: 17531950     Source Type: Journal    
DOI: 10.1504/IJTLID.2007.015018     Document Type: Article

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50. I owe Dick Rumelt for this example and many other insights about strategy.
51. One classic case of sensing the future, but failing to act on it is Xerox’s investment in the 1960s and 1970s in digital electronics and computing. It understood the potential, set up Xerox PARC, created many of the key technologies of the PC industry, but failed to invest what was necessary to take advantage of the opportunity (see Smith and Alexander, 2003).
52. What is elaborated upon below was not strongly featured in Teece et al. (1990, 1997), although it was more central in Teece (1998).
53. This decision resulted in a very expensive failure for Motorola.
54. The most elementary n-sided market occurs when n = 2. Two-sided markets occur when activity in one ‘market’ has a positive feedback effect on another market. The classic case is traveller’s checks or credit cards. In both circumstances, consumers will not carry travellers checks or credit cards unless merchants are willing to accept them; but merchants will not accept them unless a sufficient number of consumers are willing to carry them. One ‘side’ of the market simply cannot develop without the other. Once momentum is established on one side, it helps stimulate activity on the other (Evans, 2003).
55. One company with a reputation for investment discipline is Exxon Mobil. Only the projects the company is confident in will grow, shareholder value makes the grade, and every investment at Exxon greater than $50 million goes before the management committee. And as one observer notes, “Exxon is a machine. It has been operating well for over 100 years” (Business Week. “Strategies: Exxon Mobil. The Cautious King of the Oil Patch”, 4 April 2005, p.73.) Exxon clearly has rigorous investment protocols in place that cause it to be very prudent with shareholder funds, and its protocols have served it well. Over many years it has avoided big blunders; when it broke from its disciplines, it ran into problems for example, the acquisition of Reliance Electric and the formation of Exxon Enterprises.
56. In Teece et al. (1997), particular classes of assets were recognised, including technological assets, complementary assets, financial assets, operational assets and structural assets.
57. Ghemawat (1991) and many others have examined uncertainty and irreversibilities. However, cospecialisation has received very little attention.
58. The decision skills required of management have limited commonality with those of an investor. One difference is the illiquidity and irreversibility of most managerial investment decisions. Another is the need to achieve continuous alignment amongst the assets at work in the firm. Both public and private equity investor typically lack this kind of orchestration and integration capability or capacity. Moreover, their skills are most applicable when investments are liquid.
59. Cospecialisation is defined and discussed in Teece (1986).
60. Monteverde and Teece’s (1982) study of the automobile industry showed that ‘systems integration’ considerations impacted make-buy decisions. This evidence hints at the value to be created from figuring out heuristics and protocols likely to aid decisions involving interrelated investments.
61. Anecdotal evidence supports the view that early commitment to an emerging market can lead to sustained competitive advantage, particularly when there are scale and scope economics and network externalities. As already mentioned, IBM’s commitment in the 1960s to the 360 and follow-along mainframe computing programs gave it several decades of leadership in (mainframe) computing. Intel’s willingness to commit billions to microprocessor fabrication with each successive generation of new processors is also indicative of the importance of bold investment decisions. The manner in which Boeing also bet on the 747 jumbo jet without a clear quantification of future profits is also legendary (Serling, 1992). Indeed, one observer notes that Boeing is losing market share to Airbus and will continue to do so because its management is “increasingly sceptical of large investments in new aircraft, dropping plans for a sonic cruiser and a stretched jumbo jet” (Kay, 2003). Only time will tell whether these judgement calls were good ones.
62. See Baden-Fuller and Stopford (1994) for an excellent analysis of how certain firms have rejuvenated themselves.
63. As Capron et al. (1998) explain, failures in the market for resources sometimes cause firms to buy and sell business. What they refer to as market failure appears to relate to the ‘thin market’ problem discussed in this paper.
64. See Fischer and Boynton (2005).