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Roland Bel

Kedge Business School, Strategy and Environment, Faculty Member

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Papers by Roland Bel

Access, Veto and Ownership in the Theory of the Firm

Social Science Research Network, May 1, 2008

Ownership may not always be the best driver for investment incentives in an incomplete contract c... more Ownership may not always be the best driver for investment incentives in an incomplete contract context. This paper shows that ownership has two facets (access and veto) which can be used specifically, and sometimes independently, to foster investment. Access is more efficient than ownership when assets are complements at the margin, and veto is sometimes more efficient when assets are substitutes at the margin. In particular, outside veto is more efficient than ownership because it reduces the incentive to invest on substitute assets. And joint veto is more efficient than ownership because it protects the incentives of highly productive agents while preventing them to merge the asset with substitute assets. We discuss several implications, in particular the existence of shareholders and non-owner workers, the optimality of outside ownership, joint ownership and partnerships, hybrid governance structures, employments contracts and capital structure (debt vs equity).

Innovation: Misconceptions, trends, and directions

Global Business and Organizational Excellence, Dec 20, 2012

Close observation of innovative organizations ranging from 3M to Cirque du Soleil sheds light on ... more Close observation of innovative organizations ranging from 3M to Cirque du Soleil sheds light on common principles and philosophies that have spurred their groundbreaking development. To maintain a leading edge, companies must first dispense with a series of myths that have arisen around the topic of innovation. Contrary to popular belief, innovation is taking place in developing countries, and the most successful companies are followers rather than pioneers. Innovative companies know when to kill projects and learn how to exploit the sources of innovation more comprehensively and more efficiently, leveraging technology and ideas coming from universities, suppliers, competitors, users, other industries or customer segments, and employees. The most successful companies foster an innovation‐oriented culture, are customer‐oriented, and become masters of execution. In sum, innovation is a complex process that requires discipline and methodology. © 2013 Wiley Periodicals, Inc.

Leadership and innovation: Learning from the best

Global Business and Organizational Excellence, Dec 14, 2009

In surveys of most innovative companies, firms like Apple, Google, Microsoft, or Virgin regularly... more In surveys of most innovative companies, firms like Apple, Google, Microsoft, or Virgin regularly top the ranks, and stories of their emblematic leaders are recurring topics for management books and magazines. But what do Steve Jobs, Larry Page and Sergey Brin, Bill Gates, and Richard Branson have in common? What do they do that steers innovation in their companies? Are they the sole drivers of innovation leadership? And is there a direct link between the innovation capability of a firm and the charisma of its leader? After all, companies such as Toyota, 3M, Samsung, and Logitech are also recognized for their innovation capabilities, even though it would be more difficult to put a face on their innovation leadership.

Innovating in China: Lessons for Global Companies

Global Business and Organizational Excellence, Dec 22, 2014

The strategy of multinational companies in China has evolved in three phases: from (1) making Chi... more The strategy of multinational companies in China has evolved in three phases: from (1) making China the factory of the world, through (2) addressing the second-largest market in the world, to (3) making China the new battleground for innovation. Not only are global companies, such as IBM and General Electric, building up technology and development centers in China, but local companies, such as BYD, Lenovo, and Haier, are also flexing their innovative capabilities. To succeed, global innovators must adapt their innovation strategy and move up the innovation value chain in China. To cope with the specific challenges there, leaders of global companies must learn to shape their markets, partner locally, manage talents, leverage on a global scale, and foster support from headquarters.

A note on asset specificity

Economics Bulletin, Jul 24, 2015

In this note, we discuss the theoretical formulation of the concept of specificity and expose pre... more In this note, we discuss the theoretical formulation of the concept of specificity and expose preliminary results showing that different types of asset specificity call for the use of different control rights. Contrary to transaction cost and property right theories, but in line with increasing empirical evidence, high levels of specificity do not necessarily lead to unified ownership.

Scope strategies: the choice of optimal organizational forms

Proceedings - Academy of Management, 2016

Meaningful organizations maximize welfare. In a context of incomplete contracts, we draw from the... more

Productivity, Focus and Property Rights

International Advances in Economic Research, Jul 18, 2008

We show the scope of the firm is determined by three parameters: the relationships between assets... more We show the scope of the firm is determined by three parameters: the relationships between assets at the margin (whether the assets are complementary or substitutes at the margin), the marginal productivity of the agents with their asset, and the focus effect (when assets are substitutes at the margin, focusing on fewer assets increases the incentives of the agents). In the Property Right Theory of Grossman, Hart and Moore (Grossman and Hart, Journal of Political Economy, 1986, and Hart and Moore, Journal of Political Economy, 1990, hereafter GHM), ownership of an asset provides “residual rights of control.” This can improve the ex-post bargaining power of the owner and, thus, creates ex-ante incentives to invest. Therefore, ownership provides incentives. But, why should asset ownership be so central to the production activity? After all, most productive agents in an economy do not own assets and most asset owners (shareholders) do not produce. In this paper, we view property rights as the privilege to access (or use) an asset and the ability to exclude (veto) others from using it. Ownership of an asset is defined as having both of these benefits. Under GHM, ownership provides control. Integrating Rajan and Zingales’ (RZ) intuition that access provides power (Quarterly Journal of Economics, 1998), we define control over an asset as access, provided that no one else has veto. In this conception (compatible with both GHM’s and RZ’s intuitions), access gives control and veto removes control from the other agents. This allows for a more general view of the idea of control of an asset, thereby expanding the set of available contracts. Applying the framework developed by Hart and Moore (1990), we highlight the specific roles access and veto can take to mitigate inefficiencies in ex-ante investment. Complementarity or substitution between assets at the margin, marginal productivity of the agents with their asset, and the focus effect determine the optimal allocation of access and veto and, hence, the scope of the firm. Thus, we rationalize many observed governance structures. Outside ownership, joint ownership, partnerships, hybrid governance structures can all be optimal. Int Adv Econ Res (2008) 14:352 DOI 10.1007/s11294-008-9159-6

Access, Veto, and Ownership in the Theory of the Firm

The journal of law, economics, & organization, Mar 13, 2012

Ownership may not always be the best driver for investment incentives in an incomplete contract c... more Ownership may not always be the best driver for investment incentives in an incomplete contract context. This paper shows that ownership has two facets (access and veto) which can be used specifically, and sometimes independently, to foster investment. Access is more efficient than ownership when assets are complements at the margin, and veto is sometimes more efficient when assets are substitutes at the margin. In particular, outside veto is more efficient than ownership because it reduces the incentive to invest on substitute assets. And joint veto is more efficient than ownership because it protects the incentives of highly productive agents while preventing them to merge the asset with substitute assets. We discuss several implications, in particular the existence of shareholders and non-owner workers, the optimality of outside ownership, joint ownership and partnerships, hybrid governance structures, employments contracts and capital structure (debt vs equity).

A property rights theory of competitive advantage

Strategic Management Journal, Nov 2, 2017

This paper proposes a formal organizational economics approach to strategic management. Using a P... more This paper proposes a formal organizational economics approach to strategic management. Using a Property Rights Theory (PRT) framework, it rationalizes and provides a constructive contribution to two of the main strategy theories: the Resource-Based View (RBV) and Porter Generic Strategies (PGS). The paper shows that the welfare maximizing PRT conditions that characterize the existence and boundaries of a firm parallel both the RBV and Porter conditions for a sustainable competitive advantage, and provides a formal rationalization of Barney's categorization of resources and Porter's generic strategies. The article reveals some underexplored aspects of current informal theories, and extends their scope with the integration of strategic networks of complementors and social welfare considerations, opening up new avenues for research.

Team composition, worker effort and welfare

International Journal of Industrial Organization, 2015

ABSTRACT

Leadership, communication and innovation

We study the interplay between communication, leadership attributes and the probability of succes... more We study the interplay between communication, leadership attributes and the probability of successful innovation. Although a firm requires both strong leadership and sufficient communication to overcome inertia, we posit that frequent communication – particularly amongst strong managers and in larger firms – can cause leaders to pull the firm in different directions, resulting in disagreement and a failure to successfully innovate. Using a uniquely detailed establishment-level data set we find that, on their own, firm size, regular communication and result-oriented leadership are all positively associated with innovation. However, as predicted by our model, the use of frequent communication in successfully innovating firms is moderated: (i) when leaders tend to be strongly focussed on results; and (ii) in larger firms.

A Swarm of Innovators: Information, Leadership and Innovation

We study the interplay between innovation, communication in an organization and leadership. Altho... more We study the interplay between innovation, communication in an organization and leadership. Although a firm requires both strong leadership and sufficient communication in order to innovate, we posit that frequent communication - particularly amongst strong leaders and in larger firms - can lead to disagreement and innovation breakdown. Using a survey of 3000 French firms we find that, on their own, firm size, regular communication and result-oriented leadership are all positively associated with innovation. However, there is a negative relationship between successful innovation and: (i) frequent communication in larger firms; and (ii) frequent communication with result-oriented leadership.

On Broadway and strip malls: how to make a winning team

A successful organization - or Broadway production - needs the right team. A potential issue is t... more A successful organization - or Broadway production - needs the right team. A potential issue is that an existing synergy between complementary agents (or assets) can reduce the marginal return of effort, creating a disincentive to invest. While agents always prefer to be in a team of complementary workers, a principal may wish to use non-complementary agents; this can occur if the loss from lower investment is sufficiently large. A principal, however, may opt for non-complementary agents when complementary workers would produce greater surplus. These insights have implications for job rotation, the centralization versus decentralization of decision making and mergers.

Scope strategies: the choice of optimal organizational forms

Meaningful organizations maximize welfare. In a context of incomplete contracts, we draw from the... more

On Broadway and sports: how to make a winning team

A successful organization – or Broadway production – needs the right team. A potential issue is t... more A successful organization – or Broadway production – needs the right team. A potential issue is that incumbent workers in a team might have a lower marginal return of effort, reducing the incentive for them to invest relative to newcomers. While agents always prefer to be teamed with others they have worked with before, a principal may wish to use new team members; this occurs when the loss from lower investment is sufficiently large. In fact, a principal may select a team of newcomers even when incumbents produce greater surplus. These insights have implications for job rotation, centralization-versus-decentralization and mergers.

Managing change: Communication, managerial style and change in organizations

Economic Modelling

A Property Rights Theory of Competitive Advantage

Strategic Management Journal

On Broadway and strip malls: how to make a winning team

On Broadway and sports: how to make a winning team

Organizational Economics Proceedings, Mar 24, 2014

A successful organization-or Broadway production-needs the right team. A potential issue is that ... more A successful organization-or Broadway production-needs the right team. A potential issue is that incumbent workers in a team might have a lower marginal return of effort, reducing the incentive for them to invest relative to newcomers. While agents always prefer to be teamed with others they have worked with before, a principal may wish to use new team members; this occurs when the loss from lower investment is sufficiently large. In fact, a principal may select a team of newcomers even when incumbents produce greater surplus. These insights have implications for job rotation, centralization-versus-decentralization and mergers.

Spoiling synergy

Economics Letters, 2016

Access, Veto and Ownership in the Theory of the Firm

Social Science Research Network, May 1, 2008

Ownership may not always be the best driver for investment incentives in an incomplete contract c... more Ownership may not always be the best driver for investment incentives in an incomplete contract context. This paper shows that ownership has two facets (access and veto) which can be used specifically, and sometimes independently, to foster investment. Access is more efficient than ownership when assets are complements at the margin, and veto is sometimes more efficient when assets are substitutes at the margin. In particular, outside veto is more efficient than ownership because it reduces the incentive to invest on substitute assets. And joint veto is more efficient than ownership because it protects the incentives of highly productive agents while preventing them to merge the asset with substitute assets. We discuss several implications, in particular the existence of shareholders and non-owner workers, the optimality of outside ownership, joint ownership and partnerships, hybrid governance structures, employments contracts and capital structure (debt vs equity).

Innovation: Misconceptions, trends, and directions

Global Business and Organizational Excellence, Dec 20, 2012

Close observation of innovative organizations ranging from 3M to Cirque du Soleil sheds light on ... more Close observation of innovative organizations ranging from 3M to Cirque du Soleil sheds light on common principles and philosophies that have spurred their groundbreaking development. To maintain a leading edge, companies must first dispense with a series of myths that have arisen around the topic of innovation. Contrary to popular belief, innovation is taking place in developing countries, and the most successful companies are followers rather than pioneers. Innovative companies know when to kill projects and learn how to exploit the sources of innovation more comprehensively and more efficiently, leveraging technology and ideas coming from universities, suppliers, competitors, users, other industries or customer segments, and employees. The most successful companies foster an innovation‐oriented culture, are customer‐oriented, and become masters of execution. In sum, innovation is a complex process that requires discipline and methodology. © 2013 Wiley Periodicals, Inc.

Leadership and innovation: Learning from the best

Global Business and Organizational Excellence, Dec 14, 2009

In surveys of most innovative companies, firms like Apple, Google, Microsoft, or Virgin regularly... more In surveys of most innovative companies, firms like Apple, Google, Microsoft, or Virgin regularly top the ranks, and stories of their emblematic leaders are recurring topics for management books and magazines. But what do Steve Jobs, Larry Page and Sergey Brin, Bill Gates, and Richard Branson have in common? What do they do that steers innovation in their companies? Are they the sole drivers of innovation leadership? And is there a direct link between the innovation capability of a firm and the charisma of its leader? After all, companies such as Toyota, 3M, Samsung, and Logitech are also recognized for their innovation capabilities, even though it would be more difficult to put a face on their innovation leadership.

Innovating in China: Lessons for Global Companies

Global Business and Organizational Excellence, Dec 22, 2014

The strategy of multinational companies in China has evolved in three phases: from (1) making Chi... more The strategy of multinational companies in China has evolved in three phases: from (1) making China the factory of the world, through (2) addressing the second-largest market in the world, to (3) making China the new battleground for innovation. Not only are global companies, such as IBM and General Electric, building up technology and development centers in China, but local companies, such as BYD, Lenovo, and Haier, are also flexing their innovative capabilities. To succeed, global innovators must adapt their innovation strategy and move up the innovation value chain in China. To cope with the specific challenges there, leaders of global companies must learn to shape their markets, partner locally, manage talents, leverage on a global scale, and foster support from headquarters.

A note on asset specificity

Economics Bulletin, Jul 24, 2015

In this note, we discuss the theoretical formulation of the concept of specificity and expose pre... more In this note, we discuss the theoretical formulation of the concept of specificity and expose preliminary results showing that different types of asset specificity call for the use of different control rights. Contrary to transaction cost and property right theories, but in line with increasing empirical evidence, high levels of specificity do not necessarily lead to unified ownership.

Scope strategies: the choice of optimal organizational forms

Proceedings - Academy of Management, 2016

Meaningful organizations maximize welfare. In a context of incomplete contracts, we draw from the... more

Productivity, Focus and Property Rights

International Advances in Economic Research, Jul 18, 2008

We show the scope of the firm is determined by three parameters: the relationships between assets... more We show the scope of the firm is determined by three parameters: the relationships between assets at the margin (whether the assets are complementary or substitutes at the margin), the marginal productivity of the agents with their asset, and the focus effect (when assets are substitutes at the margin, focusing on fewer assets increases the incentives of the agents). In the Property Right Theory of Grossman, Hart and Moore (Grossman and Hart, Journal of Political Economy, 1986, and Hart and Moore, Journal of Political Economy, 1990, hereafter GHM), ownership of an asset provides “residual rights of control.” This can improve the ex-post bargaining power of the owner and, thus, creates ex-ante incentives to invest. Therefore, ownership provides incentives. But, why should asset ownership be so central to the production activity? After all, most productive agents in an economy do not own assets and most asset owners (shareholders) do not produce. In this paper, we view property rights as the privilege to access (or use) an asset and the ability to exclude (veto) others from using it. Ownership of an asset is defined as having both of these benefits. Under GHM, ownership provides control. Integrating Rajan and Zingales’ (RZ) intuition that access provides power (Quarterly Journal of Economics, 1998), we define control over an asset as access, provided that no one else has veto. In this conception (compatible with both GHM’s and RZ’s intuitions), access gives control and veto removes control from the other agents. This allows for a more general view of the idea of control of an asset, thereby expanding the set of available contracts. Applying the framework developed by Hart and Moore (1990), we highlight the specific roles access and veto can take to mitigate inefficiencies in ex-ante investment. Complementarity or substitution between assets at the margin, marginal productivity of the agents with their asset, and the focus effect determine the optimal allocation of access and veto and, hence, the scope of the firm. Thus, we rationalize many observed governance structures. Outside ownership, joint ownership, partnerships, hybrid governance structures can all be optimal. Int Adv Econ Res (2008) 14:352 DOI 10.1007/s11294-008-9159-6

Access, Veto, and Ownership in the Theory of the Firm

The journal of law, economics, & organization, Mar 13, 2012

Ownership may not always be the best driver for investment incentives in an incomplete contract c... more Ownership may not always be the best driver for investment incentives in an incomplete contract context. This paper shows that ownership has two facets (access and veto) which can be used specifically, and sometimes independently, to foster investment. Access is more efficient than ownership when assets are complements at the margin, and veto is sometimes more efficient when assets are substitutes at the margin. In particular, outside veto is more efficient than ownership because it reduces the incentive to invest on substitute assets. And joint veto is more efficient than ownership because it protects the incentives of highly productive agents while preventing them to merge the asset with substitute assets. We discuss several implications, in particular the existence of shareholders and non-owner workers, the optimality of outside ownership, joint ownership and partnerships, hybrid governance structures, employments contracts and capital structure (debt vs equity).

A property rights theory of competitive advantage

Strategic Management Journal, Nov 2, 2017

This paper proposes a formal organizational economics approach to strategic management. Using a P... more This paper proposes a formal organizational economics approach to strategic management. Using a Property Rights Theory (PRT) framework, it rationalizes and provides a constructive contribution to two of the main strategy theories: the Resource-Based View (RBV) and Porter Generic Strategies (PGS). The paper shows that the welfare maximizing PRT conditions that characterize the existence and boundaries of a firm parallel both the RBV and Porter conditions for a sustainable competitive advantage, and provides a formal rationalization of Barney's categorization of resources and Porter's generic strategies. The article reveals some underexplored aspects of current informal theories, and extends their scope with the integration of strategic networks of complementors and social welfare considerations, opening up new avenues for research.

Team composition, worker effort and welfare

International Journal of Industrial Organization, 2015

ABSTRACT

Leadership, communication and innovation

We study the interplay between communication, leadership attributes and the probability of succes... more We study the interplay between communication, leadership attributes and the probability of successful innovation. Although a firm requires both strong leadership and sufficient communication to overcome inertia, we posit that frequent communication – particularly amongst strong managers and in larger firms – can cause leaders to pull the firm in different directions, resulting in disagreement and a failure to successfully innovate. Using a uniquely detailed establishment-level data set we find that, on their own, firm size, regular communication and result-oriented leadership are all positively associated with innovation. However, as predicted by our model, the use of frequent communication in successfully innovating firms is moderated: (i) when leaders tend to be strongly focussed on results; and (ii) in larger firms.

A Swarm of Innovators: Information, Leadership and Innovation

We study the interplay between innovation, communication in an organization and leadership. Altho... more We study the interplay between innovation, communication in an organization and leadership. Although a firm requires both strong leadership and sufficient communication in order to innovate, we posit that frequent communication - particularly amongst strong leaders and in larger firms - can lead to disagreement and innovation breakdown. Using a survey of 3000 French firms we find that, on their own, firm size, regular communication and result-oriented leadership are all positively associated with innovation. However, there is a negative relationship between successful innovation and: (i) frequent communication in larger firms; and (ii) frequent communication with result-oriented leadership.

On Broadway and strip malls: how to make a winning team

A successful organization - or Broadway production - needs the right team. A potential issue is t... more A successful organization - or Broadway production - needs the right team. A potential issue is that an existing synergy between complementary agents (or assets) can reduce the marginal return of effort, creating a disincentive to invest. While agents always prefer to be in a team of complementary workers, a principal may wish to use non-complementary agents; this can occur if the loss from lower investment is sufficiently large. A principal, however, may opt for non-complementary agents when complementary workers would produce greater surplus. These insights have implications for job rotation, the centralization versus decentralization of decision making and mergers.

Scope strategies: the choice of optimal organizational forms

Meaningful organizations maximize welfare. In a context of incomplete contracts, we draw from the... more

On Broadway and sports: how to make a winning team

A successful organization – or Broadway production – needs the right team. A potential issue is t... more A successful organization – or Broadway production – needs the right team. A potential issue is that incumbent workers in a team might have a lower marginal return of effort, reducing the incentive for them to invest relative to newcomers. While agents always prefer to be teamed with others they have worked with before, a principal may wish to use new team members; this occurs when the loss from lower investment is sufficiently large. In fact, a principal may select a team of newcomers even when incumbents produce greater surplus. These insights have implications for job rotation, centralization-versus-decentralization and mergers.

Managing change: Communication, managerial style and change in organizations

Economic Modelling

A Property Rights Theory of Competitive Advantage

Strategic Management Journal

On Broadway and strip malls: how to make a winning team

On Broadway and sports: how to make a winning team

Organizational Economics Proceedings, Mar 24, 2014

A successful organization-or Broadway production-needs the right team. A potential issue is that ... more A successful organization-or Broadway production-needs the right team. A potential issue is that incumbent workers in a team might have a lower marginal return of effort, reducing the incentive for them to invest relative to newcomers. While agents always prefer to be teamed with others they have worked with before, a principal may wish to use new team members; this occurs when the loss from lower investment is sufficiently large. In fact, a principal may select a team of newcomers even when incumbents produce greater surplus. These insights have implications for job rotation, centralization-versus-decentralization and mergers.

Spoiling synergy

Economics Letters, 2016