Management and Technology

This article is a first attempt to line out the
conditions under which executives might have a real selfinterest
in pursuing a broad stakeholder management
(SM) orientation to enlarge their power. We suggest that
managers have wider latitude of action under an SM
approach, even when this is instrumental to financial
performance. The causally ambiguity of the performance
effects of idiosyncratic relationships with stakeholders not
only makes SM strategy difficult for competitors to imitate
but also increases managerial discretion. When
managers use this situation for their own benefit, they can
undermine the purported goals of the SM approach. By
analyzing some of the factors that might lead to such
disfunctionalities, this article advances a theory of the
potential dark side of SM.

Firms differ in the level of engagement with their stakeholders, and while some firms care more broadly and actively about their constituencies, others fail to be receptive to societal demands. To date, however, theoretical insights explaining these differences are fragile and inconsistent. In this paper, we present a theoretical model that, focusing on the primary role of executives as decision-makers, outline the conditions at the organizational level facilitating or inhibiting the intensity of Proactive Stakeholder Engagement (PSE). We argue that managers’ ability to explore different practices in an attempt to learn about and meet stakeholders’ needs depends on the level of explorative capacity, managerial empowerment, and the salience of PSE related criteria in the incentive alignment system. We further postulate the presence of factors within the firm (resource slack), competitive environment (environment dynamism), and manager level (individual values) that moderate these dynamics. Finally, we propose several scenarios that consider the combined or interactive effect of the three predictors on the firm’s PSE

We study the relationship between competitive intensity and product quality and ask whether, and how, competition in a product’s niche affects the quality of products introduced in that niche. This question assumes increased relevance in the context of platform markets, where platform success depends on the variety and quality of the complementary products being offered through it. We analyze 4,543 platform-products in the video games market, covering the industry’s period from September 1995 to June 2008, and find that higher competition across products within a platform’s product-market category is associated with higher quality. This relationship is stronger for
complementary products supplied in exclusivity to the platform; yet, we find weak evidence of this effect for vertically integrated products (those produced by the platform’s provider). Finally, we find a reinforcing effect between within-platform
competition across video games and competition across rival platforms: competition across game titles has a positive impact on quality for increasing levels of competition across platforms.

Network markets are often characterized by technological battles, where firms race for the market by striving to secure critical assets – such as complementary products and users’ installed base – faster than rivals. In this article, we examine how technology characteristics, market evolution and firm-level capabilities affect the ability of platforms of new technology generation to acquire more complementary resources over time. We examine these dynamics in the U.S. video game industry and find that rapid market growth for the new technological generation hinders a pioneer’s ability, whereas technology continuity between two generations has no effect. However, such ability increases when the pioneer develops capabilities for producing internally some of the required complementary resources, and for harnessing a larger number of external providers of such resources around the platform system.

"Because the literature on platform competition emphasizes the role of network effects, it prescribes rapidly expanding a network of platform users and complementary applications to
capture entire markets. We challenge the unconditional logic of a winner-take-all (WTA) approach by empirically analyzing the dominant strategies used to build and position platform systems in the U.S. video game industry. We show that when platform firms pursue two popular WTA strategies concurrently and with equal intensity––growing the number and variety of applications while also securing a larger fraction of those applications with
exclusivity agreements––it diminishes the benefits of each strategy to the point that lowers platform performance. We also show that a differentiation strategy based on distinctive positioning improves a platform’s performance only when a platform system is highly distinctive relative to its rivals. Our results suggest that platform competition is shaped by important strategic tradeoffs, and that the WTA approach will not be universally successful."

While family business research has prominently recognized that family firms are motivated by non-financial factors, the literature has remained relatively silent about whether or not these firms are more likely than others to engage actively with their stakeholders, who often have non pecuniary demands. This paper argues that family firms are more prone to adopt proactive
stakeholder engagement (PSE) activities because by doing so they preserve and enhance their socioemotional wealth (SEW). We explore the impact of the different dimensions of SEW on
PSE and identify distinctive logics that explain the adoption of such practices. Finally, we offer a set of topics for future studies.

Abstract This paper challenges the view that a stakeholder management (SM) strategy constitutes a competitive advantage. Idiosyncratic relationships with stakeholders are causally ambiguous. This a mbiguity makes SM strategy difficult for competitors to imitate, but also increases managerial discretion and internal disagreement about p olicy.

Next-generation technology provides users with new, advanced functionality that often renders the past technology obsolete, opening a window of opportunity for challengers. Major benefits can accrue to technology leaders, but for platform technologies that require complementary innovation from external complementors to create value for users, those benefits are limited by the difficulty of securing complements. The focus of this article is on the value users derive from the variety and quality of platform complements and its impact on leaders' performance over time relative to followers. The article shows that next-generation platform leaders that build in-house complements and encourage broader participation by external complementors can enhance platform value to users at early market stages. Yet, later on, when the market has taken off, continuing to leverage these strategies will negatively affect the variety and quality of their complements, constraining their growth capacity and performance relative to followers. Leaders may thus lock themselves into suboptimal performance patterns and eventually fall behind their followers. The analysis provided herein offers new insights about what drives platform competition by highlighting the challenges platform leaders face, particularly in the growth stage of a platform's market evolution, and the critical role played by complement quality in shaping platform competition over time. Wohlgezogen, and seminar participants at the London Business School 2012 Sumantra Ghoshal Strategy Conference, Esade Business School, IE University, for their helpful feedback on earlier drafts of the article and two anonymous reviewers and associate editor Anne Parmigiani for their valuable comments and suggestions. All limitations are my own. I am indebted to Juan Santaló for his constant and valuable support in the early development of this project and to the PhD Program and Strategy Department of IE Business School for generous funding support of data collection.

We ask whether choices aimed at preserving socioemotional wealth (SEW) represent an asset or a liability in family-controlled firms. Specifically, we consider one major SEW-preserving mechanism—having as chief executive officer (CEO) a member of the controlling family—and hypothesize that this choice is (1) an asset in business contexts, such as industrial districts, in which tacit rules and social norms are relatively more important, but (2) a potential liability in contexts like stock exchange markets, where formal regulations and transparency principles take center stage. The results from our empirical analysis confirm these hypotheses.

Companies as diverse as Apple, Facebook, and Uber all have transformed industries through platform business models. But the increasing popularity of platform strategies masks a difficult truth: Such strategies are hard to execute well — and are prone to several common pitfalls.