nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2007‒07‒13
two papers chosen by
Joao Jose de Matos Ferreira
University of the Beira Interior

  1. How Does Outsourcing Affect Performance Dynamics? Evidence from the Automobile Industry By Sharon Novak; Scott Stern
  2. Competence-based Competence Management: a Pragmatic and Interpretive Approach. The Case of a Telecommunications Company By Lorino, Philippe

  1. By: Sharon Novak; Scott Stern
    Abstract: This paper examines the impact of vertical integration on the dynamics of performance over the automobile product development lifecycle. Building on recent work in organizational economics and strategy, we evaluate the relationship between vertical integration and different performance margins. Outsourcing facilitates access to cutting-edge technology and the use of high-powered performance contracts. Vertical integration allows firms to adapt to unforeseen contingencies and customer feedback, maintain more balanced incentives over the lifecycle, and develop firm-specific capabilities over time. Together, these effects highlight a crucial tradeoff: while outsourcing is associated with higher levels of initial performance, vertical integration will be associated with performance improvement over the product lifecycle. We test these ideas using detailed data from the luxury automobile segment, establishing three key results. First, initial performance is declining in the level of vertical integration. Second, the level of performance improvement is significantly increasing in the level of vertical integration. Finally, the impact of vertical integration on alternative performance margins is mediated by the level of pre-existing capabilities, by the salience of opportunities to access external technology leaders, and by the scope for learning over the product lifecycle. Together, the findings highlight a strategic governance tradeoff between short-term performance and the evolution of firm capabilities.
    JEL: L24 L25 L62 O32
    Date: 2007–07
  2. By: Lorino, Philippe (ESSEC Business School)
    Abstract: In this research we explore the issue of “competence management”, as usually defined in the corporate vocabulary, mostly in the human resource (HR) function, and more particularly of “strategic competence management” (long run management of competences which are critical to achieve strategic goals). We try to show that competence management is a dynamic organizational competence. We analyze it in the case of a large European telecommunications company, France Télécom, in the years 2001-2003. The telecommunications sector is characterized by quick changes in technology, markets and industrial structures, and therefore a high level of uncertainty. It is also a high tech activity, based upon continuously evolving personal skills which require long education and training times. There is an apparent contradiction between uncertainty, which makes planning difficult, and the necessity to plan new competence development with long response times. This contradiction cannot be solved if competences are defined in a static way, as structural attributes of actual or potential employees or groups of employees. The strategic competence management issue must be considered rather in the frame of a dynamic, process-based view, which involves an on-going collective and reflexive activity of actors themselves to define and manage their competences. We tested process-based competence management in the case of two telecommunication domains: high bit-rate ADSL telecommunications and Internet services to small and medium businesses. The reflexive and collective competence management process had to be instrumented with instruments which did not aim at an accurate representation of competences as objects, but rather tried to offer a meaningful support for actors’ continuous (re)interpretation of present and future work situations in terms of critical competences. As a conclusion we extend the example of competence management instruments to the general issue of management instruments, in the context of uncertain and dynamic environments. Information-based theories of instruments view instruments as specular representations of situations, which allow optimal or satisficing problem-solving procedures. But when business environments continuously evolve and resist prediction, we must move towards an interpretive view of management instruments as meaningful signs, which help actors to make sense of the situations in which they are involved. Their relevance is not an absolute ontological truth but the practical effectiveness of their context-situated utilization and interpretation. A semiotic and pragmatist theory of activity and instruments can then be proposed.
    Keywords: Business Process; Competence; Competence Management; Interpretation; Management Instruments; Pragmatism; Semiotics; Telecommunications
    JEL: Z00
    Date: 2007–05

This nep-cse issue is ©2007 by Joao Jose de Matos Ferreira. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.