When does prior experience pay? — Susan Perkins

MIT Sloan Visiting Assistant Professor Susan Perkins

MIT Sloan Visiting Asst. Prof. Susan Perkins

Conventional wisdom says that repetition leads to efficiency. The firm that produces 1,000 widgets should be more efficient at making widgets than the firm that only makes 100. We’ve seen this paradigm applied to many aspects of business over the last 30 years, including the internationalization of multinational corporations.  Some maintain that the more countries a firm enters, the more efficient it is and the better its chances of success.

However, in a recent study I found that the conventional wisdom doesn’t hold up when it comes to understanding the impact of country selection on internationalization patterns and firm performance. I looked at whether it’s beneficial for firms to have prior experience before deciding to enter a new country and, if so, which experiences will help versus hinder success. My main question was: When does prior experience pay and are there penalties for having the wrong type of experience? Read More »

MIT Sloan Management Review's David Kiron on C-Suite Executives’ Perceptions on the Value of Social Business

Marshall Van Alstyne, associate professor at Boston University and a visiting professor at MIT, recently relayed the following story about SAP, a software corporation that produces enterprise software, and its developer ecosystem, where developers can ask and answer each others’ questions:

“Previously, a value-added reseller on top of SAP’s software had no particular reason to help out another value-added reseller. As a matter of  fact, one might not want to answer the question of another reseller because it might actually help them out and make them more competitive. But after the introduction of this question-and-answer marketplace, things shifted completely. Now you earn points in proportion to the value of your answers. Now the value-added resellers are telling their employees to go in and answer the questions of other resellers to prove, ‘Hey, we’re the ones with the expertise, not those guys.’ It’s completely shifted the incentives. Folks are now pushing their information into the marketplace in a way that benefits SAP. It’s a really clever mechanism that completely inverts the incentives from one of hoarding to one of information sharing.” Read More »

Xavier Giroud: “Location, location, location” applies within companies too

MIT Sloan Asst. Prof. Xavier Giroud

According to my latest research,* companies invest more in plants located closer to headquarters and those plants tend to be more productive. Combining plant-level data with airline data in the U.S. from 1977-2005, I analyzed how the launch of new airline routes affected plant investment and productivity. I found that a new direct route from headquarters city to the city where the plant is located led to an increase in plant investment of 8% to 9%. Also, plants’ total factor productivity rose by 1.3% to 1.4%. In both cases, the effect was only seen when the new route reduced travel time by at least two hours round trip; the larger the reduction in travel time, the stronger the effect. Read More »

Visiting Prof. Laurence Capron on the corporate growth dilemma: Build, borrow or buy?

MIT Sloan Visiting Prof. Laurence Capron

There is something broken in the way many businesses obtain the resources necessary for growth. Most companies are very good at identifying what those new resources are, and nearly all of them take that challenge seriously. Yet, we have seen company after company– even highly regarded ones — get into trouble as they grow because they pay much less attention to choosing the right way to obtain resources than to the task of identifying them. They have underestimated the importance of making a well-considered decision in choosing the right pathway to growth: whether to build, borrow or buy new resources. Read More »

MIT Sloan Management Review's David Kiron: What’s needed to transform companies’ use of analytics

A majority of companies are now using huge streams of data and sophisticated analytic tools to transform how they strategize, operate, and engage with customers. According to a new global study by MIT Sloan Management Review (MIT SMR), 58% of organizations now apply analytics to create a competitive advantage within their markets or industries, up from 37% just one year ago.

Yet there is a growing gap between the most sophisticated users of data and analytics, and those just getting onto the path towards analytics competency.

MIT SMR’s initial joint study in 2010 identified three progressive levels of analytical sophistication: Aspirational, Experienced and Transformed.   When we compared this year’s results to last year’s, we found that Experienced and Transformed organizations are expanding their capabilities and raising their expectations of what analytics can do, while the Aspirational organizations are falling behind. Read More »