Palestra Internacional Divisão ESO

Micro-foundations in Strategy Research

Prof. Ulf Andersson

Do micro-foundations increase our understanding of ‘the’

phenomenon?

ANPAD Strategy DivisionOctober 2019, São Paulo

Ulf AnderssonMälardalen University, Sweden & BI Norwegian Business School, Norway

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Agenda

• Micro-foundations in Strategy research– What is it?– Opportunities and Challenges

• The micro-foundations of subsidiary initiatives– Presentation of a paper

• Q & A

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What is micro-foundations in Strategy research

• Macro

– (e.g. Strategic Management, Organization Theory) focus RQs and analysis on the firm level

• Micro

– (e.g. Organizational Behavior, HRM) examine RQs at individual and group levels

– The collective behavior of a system, the firm, is the consequence of actions and interactions of its components, individuals

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What is micro-foundations in Strategy research ctd.

• Managerial intervention, to gain and sustain firm competitive advantage, takes place at the micro (individual) level.

• To fully explicate any strategic topic at the firm level (capabilities, knowledge, learning), one must begin with and understand the individuals that compose the whole as the central actors.

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What is micro-foundations in Strategy research ctd.

• In essence, we need to explore ‘how relationships between macro variables are mediated by micro actions and interactions’ (Felin et al., 2015: 576)

• There is a heightened awareness of the contribution of key individuals to value generation, and more specifically, that unlocking the benefits of entrepreneurship may be contingent on intervening factors at individual levels in organizations.

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Potential and opportunities for improving strategy research

• What is the relative importance and influence of individual vs collective variables on firm performance?

• What are the micro-origins of organizational capabilities, competitive advantage, and firm performance?

• How do individual characteristics scale to collective variables?

• How do collective capabilities emerge through social processes of aggregation and interaction of individual variables?

• Multilevel research!7

Challenges and barriers to overcome

• Micro-macro level research is more difficult than either or, as more time, effort, knowledge and research capacities are needed.

• Difficult to have time to master both after a PhD program and at the same time swiftly learn how to publish

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The micro-foundations of subsidiary initiatives:

How subsidiary-manager activities unlock entrepreneurship

O’Brien, D., Sharkey-Scott, P., Andersson, U., Ambos, T. & Fu, N. (2019) Global Strategy Journal, Vol. 9, No. 1, pp. 66—91.

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Background

• An important source of FSA is the realization of subsidiary initiatives in the form of new products, processes or services (Kanter, 1982; Miller,

1983; Birkinshaw et al., 1998)

• For subsidiaries to innovate, a supportive entrepreneurial context needs to be developed (Lumpkin & Dess, 1996; Wiklund & Shepard, 2005)

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Background ctd.• Studies of subsidiary entrepreneurship are largely at an

aggregate organizational level

• Yet, while recognizing that opportunities for initiatives are accessed through interactions both within the organization (O’Donnell, 2000; Schotter and Beamish; 2011; Williams and

Lee, 2011) and with the external environment (Andersson and

Forsgren, 1996; Andersson, Forsgren and Holm, 2002; Birkinshaw and Lingblad,

2005; Marx and Lechner, 2005), the activities of central individuals in such interactions are crowded out in favor of largely aggregated explanations of initiative realization within the MNC.

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Background ctd.

• We develop arguments for how Sub. Managers can unlock the entrepreneurial potential through their micro-activities.

• Targeted in three directions to mobilize the benefits of entrepreneurship for initiative realization:

– Downwards (Facilitating adaptability)

– Upwards (Championing alternatives)

– Horizontaly (Enabling embeddedness)12

Hypotheses• H1: Subsidiary Entrepreneurial Orientation (SEO)

is positively related to Initiative Realization (IR)

• H2a: Subsidiary managers mediate the relation between SEO and IR through facilitating adaptability

• H2b: Subsidiary managers mediate the relation between SEO and IR through championing alternatives

• H2c: Subsidiary managers mediate the relation between SEO and IR through enabling embeddedness

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Method

• Sample

– 186 (out of a total of 1100) subsidiaries in Ireland

Organization level variables (established scales)

Individual level variables (established scales + one new with the same logic)

Controls: Size, Age, Industry sector, Parent country, Tenure of the CEO

SEM with Mplus

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Structural Model

Subsidiary Entrepreneurial

Orientation

0.22*

0.30**

0.27**

-0.34**

0.68***

0.13n.s.

Subsidiary

Level

Initiative Realization

0.35***Individual

Level

Enabling Embeddedness

Facilitating Adaptability

Championing Alternatives

(0.30**)

Two main contributions

• Greater clarity to our understanding of entrepreneurship within the MNC by looking deeper into the established positive relation between sub. entrepreneurship and initiative realization on the org-level.

• Integrate the theories of middle-managers and the subsidiary literature by extending the Floyd & Wooldridge seminal framework to the MNC arena.

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