Practice question 1
Imagine two US firms in the same industry. In the last five years, both companies have been trying to expand their presence in China. While one has been very successful in their efforts, the other has not. Agency Theory, Transaction Cost Theory, and theories of Dynamic Capabilities would likely offer some common and several unique explanations for the differences in these firms’ performance in this market. Develop the unique explanations and design a study that would effectively confirm or eliminate one or more of these explanations.
In order to answer this question, I need to:
- Define how each theory offers different explanations for performance
- Agency Theory
- Management structure
- Transaction Costs
- Vertical Integration, make-or-buy
- Dynamic Capabilities
- Routines of the organization
- Having defined how each theory offers different explanations, I must design a study:
- Structure the previous explanations into testable hypothesis or propositions
- The management controls in one company create the right incentives
- The successful company has integrated key operations in China
- The successful organization is more efficient
- Define the variables
- DVs (outcome - success)
- IVs (based on the hypotheses)
- Controls (age, funding)
- Discuss sampling and data collection issues
- Selection of the sample
- Archival and survey methods
- Length of the study
- Discuss what data is necessary to confirm or eliminate each hypothesis
- Cites
- Agency:
- Jensen and Mekling 1976
- Fama 1980
- Demsetz 1983
- Fama and Jensen
- Jensen 1986
- TCE:
- Coase 1937
- Williamson
- Hill 1990
- Jones and Hill 1988
- Teece 1982
- Alchain and Demsetz
- RVB:
- Alchain
- Schumpeter
- Nelson and Winter 1950
- Teece
Creating this outline took me about 25 minutes. I did not recall many of the years of the citations. My goal is to create the outline and the cites in 20 minutes. Furthermore, I should be able to detail one or two words about each paper. I also did not include the critics of TCE.
During the exam, I will have two hours to complete this question. In this case, the key ideas have been detailed and it is a matter of making this into paragraph form.