“Investments in Pharmaceuticals Before and After TRIPS,” Margaret K. Kyle and Anita M McGahan, Review of Economics and Statistics (November 2012), pp. 1157-1172.

The TRIPS Agreement, which specifies minimum levels of intellectual property protection for countries in the WTO, has increased levels of patent protection around the world. Using variation across countries in the timing of patent laws and the severity of disease, we test the hypothesis that increased patent protection results in greater drug development effort. We find that patent protection in wealthy countries is associated with increases in R&D effort. However, the introduction of patents in developing countries has not been followed by greater R&D investment in the diseases that are most prevalent there.

“Challenges of the Informal Economy for the Field of Management,” Anita M. McGahan, Academy of Management Perspectives 26 (August 2012), pp. 12-21.

The informal economy is comprised of business activities that are unregistered and unregulated but not otherwise illegal (Hart, 2006). Studying informal activity yields important insights for mainstream theories of management, pointing to areas for new theorizing on the boundaries of the firm, diversification, dynamic capabilities, absorptive capacity, property rights, governance, stakeholder theory, disruptive technology, innovation, and organizational legitimacy. I argue that research on this sector is not only an opportunity for management scholars but also essential to the continued relevance and vitality of management as a discipline.

“A Property Rights Approach for a Stakeholder Theory of the Firm,” Peter Klein, Joseph T. Mahoney, Anita M McGahan and Christos Pitelis, Strategic Organization 10:3 (2012), pp. 304-315.

Debates on “shareholder” and “stakeholder” approaches to corporate governance often get bogged down in competing normative claims about economic rent streams, entitlements of different group members, fairness, and similar distributional issues. These concerns are important, but core economic issues in shareholder-stakeholder debates revolve around the positive analysis of property rights, transaction costs, ownership, and control. Going beyond the stylized assumptions of neoclassical economics, which assume away co-investment by the firm’s transactional and contractual partners, we show how theories of implicit and explicit contracting help us understand better joint investments and the creation of joint value. We call on scholars of Strategic Organization to embrace more robust theories of the firm and interfirm relations that take seriously the complex web of investments and residual claims that characterize team production and co-created value.

“Innovation for Inclusive Growth: Towards a Theoretical Framework and a Research Agenda,” Gerry George, Anita M McGahan and Jaideep Prabhu, Journal of Management Studies 49:4 (June 2012), pp. 661-683.

Inclusive innovation, which we define as innovation that benefits the disenfranchised, is a process as well as a performance outcome. Consideration of inclusive innovation points to inequalities that may arise in the development and commercialization of innovations, and also acknowledges the inequalities that may occur as a result of value creation and capture.  We outline opportunities for the development of theory and empirical research around this construct in the fields of entrepreneurship, strategy and marketing.  We aim for a synthesis in views of inclusive innovation and call for future research that deals directly with value creation and the distributional consequences of innovation.

“How Much Does Home Country Matter to Corporate Profitability?,” Anita M McGahan and Rogerio Victer, Journal of International Business Studies Vol 41, No. 1 (January 2010), pp. 142-165.

This paper provides researchers in the fields of international business and strategic management with information on the relative importance of home country, industry, and firm influences on corporate profitability for firms with varying degrees of multinationality. The analysis relies principally on the Compustat Global reports for 1993–2003. The findings demonstrate that home-country and industry effects are more important to domestic firms than to multinationals. However, home-country influences are important even for firms with high degrees of multinationality. The evidence suggests that multinationals profit from industry-grounded opportunities to distribute activities across the countries in which they operate, but there are tradeoffs associated with internationalization. Multinationals may suffer from less protection afforded by the home-country environment and greater industrylevel competition, but gain a broader scope for deploying idiosyncratic, firm specific advantages through mechanisms enhanced by home-country experience. We conclude that industry effects in single-country studies should be interpreted carefully as influenced by the home countries of the multinational firms that are under study.

“The Development of Capabilities in New Firms,” Asli Arikan and Anita M McGahan, Strategic Management Journal, Vol. 31, No. 1 (January 2010), pp. 1-18 (lead article).

This research explores evidence of corporate capabilities for conducting acquisition and alliance deals in young firms. We hypothesize that investors conjecture about the future based on information about a firm’s capabilities. Each successive deal carries intrinsic value, creates experience, generates feedback, and yields information about the firm’s underlying capabilities. We evaluate whether stock prices impute expectations that firms will capably pursue particular programs of acquisitions and alliances. The analysis covers how investor responses change across successive deals on the theory that firms with a concentrated program of deals may develop capabilities more intensively than those with programs that involve both acquisitions and alliances. The dataset covers the population of firms that went through an initial public offering (IPO) in the United States between 1988 and 1999. It contains information on all of their post-IPO acquisitions and alliances, and on how their stock prices changed in response to the announcement of each deal. The results suggest that within the first year after IPO, investors expect firms to execute particular streams of alliances and acquisitions that reflect their unique histories of demonstrated capabilities. We also find evidence that investors cannot fully anticipate deal programs. The findings support a capabilities-based view of the firm and also show that accurate inference using event-study methods may require digging deep into the early histories of firms.

“Business-Model Innovation, General Purpose Technologies, Specialization and Industry Change,” Alfonso Gambardella and Anita M McGahan, Long-Range Planning 43  (2010, special issue on Business-Model Innovation guest-edited by Charles Baden-Fuller and Ian McMillan), pp. 262-271.

This article describes a business model that is growing in prevalence and that carries novel implications: the development of general-purpose technologies for licensing to downstream specialists. In their archetypical format, these general-purpose technologies are constructed in ways that can be employed by different potential downstream licensees, and can accommodate their different strategies. This strengthens the hand of innovative firms in the rising markets for knowledge-based assets, and can be expected to improve their ability to capture a greater share of the value their technology creates. The innovation of business model designed for licensing such technologies will have unpredictable, but inevitable, consequences for industry structure and organizational capabilities, as well as for the content and context for the upstream science.

“Performance measurement,” Palgrave Encyclopedia of Strategic Management, eds. David Teece, Mie Auger; vol. ed. Alfonso Gambardella (forthcoming)

In the field of strategy and innovation management, ‘performance measures’ are constructs that describe organizational output. Classical examples of performance measures are profitability, financial value and patent rates. While performance may also be measured at the individual level, only organizational performance is considered in this entry.

“Strategy in the public interest,” Peter G. Klein and Anita M. McGahan, Palgrave Encyclopedia of Strategic Management, eds. David Teece, Mie Auger; vol. ed. William Mitchell (forthcoming)

The public interest is frequently described as ‘common well-being,’ ‘general welfare,’ ‘the common good,’ and ‘sustainable shared values.’  We focus in this article on public interests that are widely acknowledged as privately worthwhile but not fully aligned with the individual private interests of each member of the relevant community.  Strategy in this context is the management of organizational tradeoffs in pursuit of the public interest.

“The New Agenda for Business Schools:  Creating Problem Solvers for the World,” Rotman Magazine (Spring 2012), pp. 21-27.

Inequality, climate change and disease are generally considered public policy issues; but at their core, they are also management issues.

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“Outsourcing War:  Private Military Companies and Command-and-Control Capabilities after the Cold War,” with Joel A.C. Baum (October 2012), submitted, R&R

The field of strategic management offers several distinct perspectives on the emergence of industry structures. We seek to contribute to a growing literature that bridges these approaches by examining the development of private military and security companies (PMSCs) over the half-century since Eisenhower’s famous “military-industrial complex” speech. During this period, PMSCs transformed from minor subcontractors to major corporations that play essential roles in Afghanistan and Iraq. We examine how and why PMSCs came to occupy such central roles and, based on our findings, identify opportunities for further theorizing on the emergence of new industry structures. Our analysis reveals a coevolution of markets, capabilities, transactions, relationships, and governance rights over several decades. A turning point occurred when the specialized capabilities of PMSCs enabled sovereigns to achieve desirable military goals that had previously been unattainable. Once PMSCs delivered performance that could not be achieved by any other organizational form, including sovereign militaries, they constituted a distinct industry on which sovereigns became dependent. We suggest the emergence of unique performance characteristics as definitive for the establishment of an industry and emphasize that performance objectives are as important as transaction costs in shaping the coevolution of firm capabilities and industry structures.

“The Influence of TRIPS on Global Trade in Pharmaceuticals, 1994-2005,” with Mercedes Delgado and Margaret K. Kyle, manuscript (April 2011), submitted, R&R

This paper examines the impact of intellectual property rights on trade in knowledge-based products. An explicit goal of the TRIPS (trade-related aspects of intellectual property) agreement of the World Trade Organization (WTO), which required member countries to adopt and enforce laws to protect intellectual property (IP), was to promote “the transfer and dissemination of technology,” particularly from high-income to poorer countries. Using data on trade flows from 1993-2009 for 158 WTO countries, we examine whether developing countries increased their trade in knowledge-intensive goods following TRIPS implementation, and whether this change differed by the direction of trade (import or export), by type of IP (patent, trademark, and copyright), across sectors with varying IP intensity, and across countries of different income levels. We find that post-TRIPS, trade of IP-intensive products in both directions increased relative to sectors with low levels of IP for developing countries  across all types of IP. However, imports from innovative high-income countries into developing countries – an indicator of the dissemination of knowledge into poorer settings – was sensitive to other factors that affected receptiveness to these goods. These findings suggest that the patent system alone may not be sufficient for promoting knowledge diffusion from high-income to developing countries.

“Strategy and the Libecap Paradox:  Efficiency and Co-Adaptation of Organizations and Institutions,” with Peter Klein, Joseph Mahoney and Christos Pitelis (February 2011), submitted, R&R

Innovation in governance is central to the realization of value in an organization as resources and capabilities evolve over time.  In this paper, we theorize on the mechanisms that support and constrain governance adaptations by organizations that respond to the institutional environment, diverse coalitional interests, and the opportunities created by new resources for accruing sustainable competitive advantage (SCA). We show how the SCA of an organization depends on governance innovation that unlocks the value attainable through the deployment of the firm’s resources. We propose that both the opportunities and constraints on governance innovation depend on the nature of underlying resources and the property, decision and managerial rights of entrenched stakeholders. The analysis stipulates several propositions that describe how organizations overcome constraints to achieve SCA.

“The Reorganization of Legitimate Violence: Private Military Companies in the Post-Cold War Era,” with Joel A.C. Baum (January 2011), preparing for submission

In this study, we investigate the roles of institutional structures, agency and their interplay in the development of private military and security industry (PMSI), which, despite its controversial nature, has achieved sufficient organizational legitimacy in the decades since the end of the Cold War to account, at times, for the majority of the military personnel deployed in Afghanistan and Iraq. We find both structure and agency central to the PMSI’s development. The analysis points to central roles played by actors with expertise, reputation and credibility grounded in prior institutions, and by structural shifts that reconfigured the military field in ways that both enabled and constrained agency. Structural shifts were important in shaping opportunities for entrepreneurial activity. By using these openings to discredit prevailing institutional logics in the eyes of critical audiences, and construct bridges between old and new institutions, actors lent credibility to new activities that coexisted with previously legitimate approaches. Thus, the interplay of structure and agency shed the greatest light on the emergence of this new industry and the conditions and strategies fostering (and impeding) its legitimacy.