Kathleen R. Conner’s research while affiliated with University of Michigan and other places

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Publications (2)


A Resource-Based Theory of the Firm: Knowledge Versus Opportunism
  • Article

October 1996

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717 Reads

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3,222 Citations

Organization Science

Kathleen R. Conner

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Coimbatore Krishnao Prahalad

This paper develops a resource-based--knowledge-based-theory of the firm. Its thesis is that the organizational mode through which individuals cooperate affects the knowledge they apply to business activity. We focus on the polar cases of organization within a firm as compared to market contracting. There will be a difference in the knowledge that is brought to bear, and hence in joint productivity, under the two options. Thus, as compared to opportunism-based, transaction-cost theory, we advance a separate (yet complementary) answer to the question: why do firms exist? Our aim is to develop an empirically relevant and complementary theory of why firms are formed: a theory based on irreducible knowledge differences between individuals rather than the threat of purposeful cheating or withholding of information. We assume limited cognitive abilities on the part of individuals (bounded rationality), and assume that opportunistic behavior will not occur. The latter allows us to determine whether resource-based theory has independent force, as compared to the opportunism-based, transaction-cost approach. The paper predicts choice of organizational mode, identifying whether firm organization or market contracting will result in the more valuable knowledge being applied to business activity. The resource-based predictions of organizational mode are compared and contrasted with corresponding opportunism-based, transaction-cost ones. A principal point is that knowledge-based considerations can outweigh opportunism-related ones. The paper also establishes the relation of a theory of the firm to a theory of performance differences between competing firms.


Obtaining Strategic Advantage from Being Imitated: When Can Encouraging "Clones" Pay?

February 1995

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80 Reads

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198 Citations

Management Science

An important business strategy research theme concerns finding ways to minimize competition faced by the firm. This paper, however, focuses on a different set of situations: the model developed suggests that an innovator's best strategy may be to encourage "clones" of its product when a network externality is present. Key factors to consider in assessing whether encouraging cloning is the innovator's best strategy are: (1) the benefit to be derived in terms of added user base "contributed" by the clone sales, traded-off against (2) the unit sales that will be lost to the clone(s). These factors in turn depend upon the strength of the network effect and the degree to which the innovator's product quality is perceived by consumers to be superior to the clone's. The model further suggests that both the innovator and clone earn their highest payoffs when the clone takes the lead in price-setting, i.e., when the clone establishes its own price by considering, for each price it might set, how the innovator will react to that price, and the innovator, as price-follower, responds to the price the clone chooses. The paper demonstrates that the clone-leader/innovator-follower situation represents the unique Nash equilibrium in price-setting strategies. A central implication is that when operating in a network externality environment, instead of a problem to be avoided, clones may be valuable assets to an innovating firm, building up the user base for the innovator's technology by bringing lower-valuing consumers into the market, which in turn makes the innovator's product more attractive to high- and medium-valuing purchasers. Thus when the above-described conditions hold, being cloned can be more profitable for an innovating firm than dominating the market alone.

Citations (2)


... In addition to selling goods, the streamer also promotes products in the live-streaming, which leads to a strong network externality. With reference to previous studies such as Conner (1995), Feng et al. (2020), Niu et al., (2022aNiu et al., ( , 2022b, and Niu et al. (2023), we assume that the demand potential of the live-streaming e-commerce mode will expand to 1+βq, where β ∈ [0, 1] represents the intensity of network externality, while q represents the quantity of products sold in the live-streaming e-commerce mode. ...

Reference:

Should we keep the tradition or follow the trend? The optimal live-streaming e-commerce mode selection in a sustainable and circular supply chain under competition
Obtaining Strategic Advantage from Being Imitated: When Can Encouraging "Clones" Pay?
  • Citing Article
  • February 1995

Management Science

... However, the modern role of GCs has evolved, emphasizing tasks like surveying, contract management, budget estimation, and the planning, direction, and control of projects. Moreover, outsourcing offers companies the opportunity to enhance operational efficiencies by freeing up capacity and focusing on their core strengths, thereby increasing flexibility [4]. ...

A Resource-Based Theory of the Firm: Knowledge Versus Opportunism
  • Citing Article
  • October 1996

Organization Science