Organizational capabilities, organizational structure, and their dynamics: three essays on boundary choice and capability development in entry decisions

One recent development in the organizational economics approach to strategy management concerns the integration of the organizational capabilities view and the transaction costs theory. My dissertation takes on this task focusing on transaction costs economics, dynamic capabilities, and temporal dimensions in the evolution of an industry. Essay one provides a constructive literature review on recent works and develops a framework to facilitate further integrative efforts in our inquiry into the firm boundary question. Essay two studies a firm’s boundary choice for a given value-chain activity when entering a new industry, asking: what are the main and moderating effects of transaction hazards and pre-entry organizational capabilities on the choice between internalization and external development of a value-chain activity? Essay three examines a firm’s technology management and industry entry strategies when facing an emerging radical technology, asking how non-redeployable complementary assets embedded in an incumbent’s existing capabilities and boundaries affect managers’ decision-making in the face of uncertainties. I further enhance the theoretical coherence across the three essays by employing the same empirical setting for hypotheses testing: the nascent U.S. biofuels industry. I collect secondary data about boundary choice and primary data about managerial decision-making. I triangulate data from archival sources, surveys, and interviews to operationalize variables. The dissertation’s research questions center on the non-redeployability of firm assets (specific asset and non-redeployable capabilities in essay one, specific asset and industry life cycle in essay two, and non-redeployable complementary assets and R&D investment as well as industry entry in essay three). Findings of the dissertation shed light on the fundamental implications of non-redeployability of firm assets on a range of strategic issues related to firm boundary choice, R&D investment, and industry entry, contributing to the evolving science of strategic organization.