Greg Linden’s research while affiliated with University of California, Berkeley and other places

The Reinventing Capitalism series seeks to feature explorations about the crisis of legitimacy facing capitalism today, including the increasing income and wealth gap, the decline of the middle class, threats to employment due to globalization and digitalization, undermined trust in institutions, discrimination against minorities, global poverty and pollution. The series is intended to be a collection of authoritative literature reviews of foundational topics on renewing capitalism. Being grounded in a business and management perspective, the series incorporates insights from multiple disciplines that promise to substantiate the causes of the current crisis and potential solutions what needs to be done. This Element provides an overview of the series, explains the background of its development and contains eight sections that deal with various facets of the subject from the perspectives of a group of top-notch authors.

Pisano's recent ICC article offers some clarity around the pursuit and development of new capabilities, but it overreaches by equating this with dynamic capabilities as a whole. The capabilities that he discusses are, for the most part, simply technologies that can be thought of as “ordinary capabilities”. Moreover, his approach isolates capability selection from strategy. Opportunities must be sensed and calibrated and a strategy developed before capability gaps can be identified. Pisano also treats general-purpose capabilities as an option without acknowledging their dependence on the stage of the industry lifecycle. In mature industries, general-purpose technologies are less likely to be relevant. While there is much of value in Pisano's article about technology selection and risk, this is overshadowed by the claims he makes for the magnitude of the article's contribution to dynamic capabilities research.

Switching costs are the anticipated procedural, financial and relational costs to an economic agent if the agent were to a change from one product or service to another. Switching costs can be inherent in a product or created as the result of strategic actions, such as the creation of a loyalty programme. If the expected costs of a switch are greater than the expected benefits, the switch may not occur. In practice, switching costs do not necessarily save a weak company from losing customers.

Appropriability is the degree to which the social returns to innovation can be privately appropriated. Strong appropriability is seen as a prerequisite for continued investment in R&D. The economic study of appropriability has focused on intellectual property rights and market share as the mechanisms by which firms can increase the likelihood of capturing the benefits of innovation. The strategic management literature has augmented the economics perspective by pointing out that firms in any industry are potentially able to enhance the appropriability of their innovations by positioning astutely with respect to 10.1057/978-1-137-00772-8_340 that are necessary to commercialize innovations. Survey results confirm that firms pursue a variety of methods beyond patents, such as secrecy or 10.1057/978-1-137-00772-8_602, to improve appropriability.

Conglomerates are multiproduct companies in which the requirements and output of at least one product division in terms of physical capital and technical skills are very different from the others. In the United States, this organizational form was more common in the middle of the twentieth century than it is today. In emerging economies, conglomerates remain more important and may be well suited to the business environment. Competing theories attribute conglomeration either to economically efficient shareholder value enhancement or to attempts by managers to secure personal gain. Empirical studies show that, on average, conglomerates destroy value compared with similar single-product firms. However, numerous cases of successful conglomerates exist, suggesting that management matters considerably.

Moore’s Law is a productivity projection that was initially made in 1965, based on early trends in the integrated circuit (chip) industry. The projection became a goal that leading chip companies have striven to meet even as the technological barriers became higher with each generation of technology. The consequence of Moore’s Law has been smaller, faster and cheaper electronics that have impacted virtually all aspects of daily life worldwide. The pace of technological change driven by Moore’s Law has spurred successive waves of creative destruction, as incumbent businesses fall prey to entrants who find new and better applications for the latest technologies.

M-form firms are multidivisional organizations in which each division is a product or geographic unit responsible for its own operations and profit while the corporate head office sets overall strategy and monitors the divisions. The M-form emerged as the dominant organizational design for large corporations in the twentieth century and continues to be so, with variations that include some decentralization of strategy responsibilities to operating units. A positive performance effect of M-form early adoption has been documented, at least for US and UK firms. The effectiveness of the M-form requires appropriate incentive design, good leadership and a division of labour appropriate to the relatedness of the firm’s diversification.

Managerial discretion is the latitude that executives have to affect the activities of the companies they run, as opposed to merely accepting internal and external influences. There are two distinct streams of literature. In one, 10.1057/978-1-137-00772-8_570, managers are assumed to be opportunistic and likely to misallocate firm resources to their own use unless restrained by well-designed incentives, weighty governance or heavy debt burdens that limit the availability of discretionary capital. The other stream is sanguine about managerial motivation and measures discretion by the financial latitude that management has to allocate or reallocate resources to high-yield purposes. Empirical research is ongoing in both streams.

System integrators are economic agents at the apex of a supply chain who are responsible for combining components or modules into a complete product. Some degree of 10.1057/978-1-137-00772-8_730 is usually involved. The integrator must develop the initial concept or design, manage suppliers, and add value through logistics, specialized know-how, a valuable brand or other means. System integration is enabled by modularity, but outsourcing does not relieve the integrator of the need to understand the underlying technologies and to monitor the performance of suppliers.