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Brian Wu

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Xun (Brian) Wu is an Associate Professor of Strategy (with tenure) and Michael R. and Mary Kay Hallman Fellow at the Ross School of Business at the University of Michigan. He received his B.S. from Tsinghua University in China, M.Sc. from National University of Singapore, and Ph.D. from the Wharton School at the University of Pennsylvania prior to joining the Ross School of Business in 2007. He serves as the faculty director of China Initiatives.His research examines the role of firm capabilities in influencing the dynamics of corporate scope and the evolution of industries. His work can be organized into two streams, with the first stream related to firms’ strategies for reconfiguring their business portfolios in dynamic environments, and the second related to industry evolution driven by entry, exit, and incumbent adaptation. These two streams are linked by a common concern with how competitive advantage is created and destroyed when industry landscapes are reshaped by economic, technological, and institutional factors. His research has been published or is forthcoming in top scholarly journals including Management Science, Organization Science, and Strategic Management Journal.He served on the Research Committee (2010-12) and the Executive Committee (2013-15) of the Academy of Management (AOM) Business Policy and Strategy Division. He was elected as Representative at Large for the Corporate Strategy Interest Group and the Behavioral Strategy Interest Group of the Strategic Management Society (2014-16). He serves as an Associate Editor for Strategic Management Journal, the strategy field’s flagship journal. He serves on the Academic Committee of Alibaba Group Research Institute.He has consulted and conducted executive sessions for companies such as 3M, American Industrial Partners, Bank Mandiri of Indonesia, China Development Bank, Denso, Didi, Industrial and Commercial Bank of China, Masco, Medtronic, and Nexteer.He has been recognized with the US Small Business Administration Best Student Paper Award, AOM Technology and Innovation Management Division Stephan Schrader Best Conference Paper Award, INFORMS Organization Science Dissertation Proposal Competition Award (finalist), AOM Technology and Innovation Management Division Past Chairs Emerging Scholar Award (runner-up), Academy of Management BPS Division Distinguished Paper Award, Neary PhD Teaching Excellence Award, 3M Nontenured Faculty Award, Sanford R. Robertson Professorship (school-wide junior faculty award that recognizes career achievement and outstanding performance in research and teaching), and Michael R. and Mary Kay Hallman Fellowship. He was named one of Poets

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Papers by Brian Wu

Managerial hierarchy in AI-driven organizations

Journal of organization design, Jun 1, 2023

The performance effects of creative imitation on original products: Evidence from lab and field experiments

Strategic Management Journal, Nov 15, 2019

Capability Interactions and Adaptation to Demand-Side Change

Social Science Research Network, 2019

U.S.–China Collaboration is Vital to Global Plans for a Healthy Environment and Sustainable Development

Environmental Science & Technology, 2021

A Resource-Based Theory of Hyperspecialization and Hyperscaling

Social Science Research Network, 2020

Compared to enterprises of the past, digital firms tend to be simultaneously narrower in their ve... more Compared to enterprises of the past, digital firms tend to be simultaneously narrower in their vertical scope and larger in their scale. We explain this phenomenon through a theory about how attributes of a firm’s resource bundle impact its scale and specialization. In particular, we highlight that the high scalability of digital firms’ resource bundles may drive “hyperspecialization” and “hyperscaling” due to the opportunity costs of not intensively deploying these resources. We use descriptive theory and a formal model to develop a number of propositions that are consistent with observed features of digital businesses. Our research provides a parsimonious modeling framework for future resource-based theorizing about digital firms, and sheds light on the far-reaching ways that technology-enabled resources are reshaping firms in the digital economy.

Hyperspecialization and hyperscaling: A resource‐based theory of the digital firm

Strategic Management Journal, 2021

Digital firms tend to be both narrow in their vertical scope and large in their scale. We explain... more Digital firms tend to be both narrow in their vertical scope and large in their scale. We explain this phenomenon through a theory about how attributes of firms’ resource bundles impact their scale and specialization. We posit that highly scalable resource bundles entail significant opportunity costs of integration (versus outsourcing), which simultaneously drive “hyperspecialization” and “hyperscaling” in digital firms. Using descriptive theory and a formal model, we develop several propositions that align with observed features of digital businesses. We offer a parsimonious modeling framework for resource-based theorizing about highly scalable digital firms, shed light on the phenomenon of digital scaling, and provide insights into the far-reaching ways that technology-enabled resources are reshaping firms in the digital economy.

AI and Emerging Technologies Track: The Digital Firm and New Forms of Economic Organizing

Proceedings - Academy of Management, Aug 1, 2022

Hyperspecialization and hyperscaling: A resource-based theory of the digital firm

by Brian Wu and D. Somaya

Strategic Management Journal, 2023

Digital firms tend to be both narrow in their vertical scope and large in their scale. We explain... more Digital firms tend to be both narrow in their vertical scope and large in their scale. We explain this phenomenon through a theory about how attributes of firms' resource bundles impact their scale and specialization. We posit that highly scalable resource bundles entail significant opportunity costs of integration (vs. outsourcing), which simultaneously drive "hyp

The many dimensions of research on designing flat firms

Journal of Organization Design

Editorial Vol. 10

Journal of Organization Design, 2021

The publication of the Journal of Organization Design's (JOD's) first issue in 2021 gives occasio... more

Entrepreneurship in Emerging Economies

SSRN Electronic Journal, 2020

Research Summary: The economic center of gravity is shifting from mature markets to emerging regi... more

An Exploration of the Micro-Level Impacts of Shanzhai (Copycat) Products on the Originals in China

SSRN Electronic Journal, 2018

Incumbent Repositioning with Decision Biases

SSRN Electronic Journal, 2018

Incumbent firms often reposition themselves in response to competitive entrants, but when doing s... more Incumbent firms often reposition themselves in response to competitive entrants, but when doing so the firm incurs repositioning costs. To model strategic interactions between incumbents and entrants this article proposes an approach that incorporates both repositioning costs and associated decision biases, which have been identified in the economics and strategy literatures as critical aspects of strategic change, but have been largely ignored in game-theoretic treatments at the strategy level. Using formal models, we analytically characterize the impacts of repositioning costs and biases on firms' equilibrium strategies and profits. Including these costs and biases changes the nature of strategic dynamics as well as introduces new implications for strategic choice.

Resource Redeployment and Corporate Strategy

Advances in Strategic Management, 2016

Organizational Constraints to Adaptation: Intrafirm Asymmetry in the Locus of Coordination

Organization Science, 2015

We assemble a panel data set of firms in the U.S. defense industry between 1996 and 2006 to exami... more We assemble a panel data set of firms in the U.S. defense industry between 1996 and 2006 to examine the drivers of heterogeneous incumbent firm adaptation following the industry-wide demand shock of September 11, 2001. This shock entailed not only an increase in aggregate demand but, more importantly, a shift in the relative attractiveness of individual product areas, resulting in the need for firms to reshuffle their product portfolios in response to changing demand conditions. The exogenous nature of the shock allows us to empirically identify the effect of preshock interdependence structures on postshock adaptation outcomes. We find that the locus of coordination inside a firm can explain differential postshock adaptation performance: because interdependencies spanning organizational boundaries are more difficult to manage than those contained within such boundaries, coordination across product areas creates greater adaptation challenges compared with coordination within product ...

When Suppliers Climb the Value Chain: A Theory of Value Distribution in Vertical Relationships

SSRN Electronic Journal, 2014

A lthough offshore outsourcing has become an important strategy to lower production costs among W... more A lthough offshore outsourcing has become an important strategy to lower production costs among Western firms, it gives rise to the phenomenon of value chain climbing-suppliers in emerging markets can develop capabilities by supplying, with aspirations to compete with the buyers in the product market. We build an analytical model to study the impact of value chain climbing on value distribution in vertical relationships. The analysis identifies a set of dominant relationships, characterizes how the buyer's optimal choice among these relationships depends on firms' relative competitiveness in the product market and the supplier's speed of capability development, and shows how the optimal choice evolves with the dynamics of the supplier's capability development. The results provide new insights into our understanding of value distribution in vertical relationships across different contexts and over time. By endogenizing the supplier's entry into the product market, our study enriches the literatures on vertical relationships, market entry, and the management of global value chains.

Institutional barriers and industry dynamics

Strategic Management Journal, 2013

This study demonstrates that new entrants exhibit higher productivity but also higher exit hazard... more This study demonstrates that new entrants exhibit higher productivity but also higher exit hazard than incumbents in post-liberalization China. We argue this seemingly paradoxical relationship is attributable to institutional barriers, defined as the hindrance in the institutional environment that prevents market selection forces to function. New entrants require higher productivity to compensate for those institutional barriers, which in turn implies a higher exit hazard after controlling for productivity. Our empirical findings support this argument and further show that the differences in productivity and exit hazard between new entrants and incumbents become smaller where and when institutional barriers recede. By integrating economic and institutional perspectives, we highlight the importance of institutional factors in shaping industry evolution.

Lessons from Alibaba.com: government's role in electronic contracting

info, 2004

Although electronic commerce (e‐commerce) can be a source of competitive advantage, will e‐commer... more Although electronic commerce (e‐commerce) can be a source of competitive advantage, will e‐commerce businesses in countries like China flourish when governments still take a “wait‐and‐see attitude” as to prompting, protecting, and regulating e‐commerce? The paper employs transaction cost economics in analyzing the role of government in regulating electronic contracting. Due to the transaction costs arising from e‐commerce, explicit contracts between parties are usually incomplete. The paper argues that these contracts should always be backed by implicit contracts, which are determined by default rules in various governments. Therefore, it behoves governments urgently to fill gaps in incomplete contracts in e‐commerce in order to foster a predictable legal environment for e‐businesses, minimize legal risks and transaction costs, and maximize economic and social benefits. The authors believe that governments must also act in concert with one another at the international level to creat...

Opportunity costs, industry dynamics, and corporate diversification: Evidence from the cardiovascular medical device industry, 1976-2004

Strategic Management Journal, 2013

This paper examines how demand conditions across alternative markets impact diversification decis... more This paper examines how demand conditions across alternative markets impact diversification decisions and firm performance by influencing the opportunity costs of deploying non-scale free capabilities. Using data within the cardiovascular medical device industry, this study shows that: (1) firms with a larger stock of pre-entry innovation experience are more likely to diversify; (2) firms in a current market with greater relative demand maturity are more likely to diversify; (3) diversification is associated with a performance decrease in the current market; and (4) diversification is associated with a performance increase at the corporate level. These findings shed new light on the self-selection process of corporate scope, the conceptualization of firm capabilities, and the connection between industry dynamics and resource deployment. Copyright  2013 John Wiley & Sons, Ltd. INTRODUCTION Corporate diversification decisions and the associated performance effects are a central concern of the strategy field. Building on Penrose's (1959) seminal work, the resource-based perspective recognizes that firms diversify in order to leverage firm-specific resources for which factor markets are imperfect (Penrose, 1959; Teece, 1982). 1 This literature highlights the role that market relatedness and the fungibility of resources play

Adaptation on Multiple Landscapes: Relatedness, Complexity, and Inter-Temporal Coordination Costs

SSRN Electronic Journal, 2017

We introduce and examine the concept of inter-temporal coordination costs, i.e., the reduction in... more We introduce and examine the concept of inter-temporal coordination costs, i.e., the reduction in a firm’s ability to adapt within businesses as a result of its attempts to capture synergies across businesses. Using a modified NK model of search across two landscapes, we show that these costs have an inverted-U relationship with the relatedness between landscapes, and this relationship is moderated by complexity. We further extend the model to examine entry into new markets, and use it to define conditions under which diversifying entrants may be at an advantage relative to either de novo start-ups or entrepreneurial spin-outs. Our study complements and extends recent work on inter-temporal economies of scope, while offering new insights for the literature on diversification, new market entry, and firm adaptation.

Managerial hierarchy in AI-driven organizations

Journal of organization design, Jun 1, 2023

The performance effects of creative imitation on original products: Evidence from lab and field experiments

Strategic Management Journal, Nov 15, 2019

Capability Interactions and Adaptation to Demand-Side Change

Social Science Research Network, 2019

U.S.–China Collaboration is Vital to Global Plans for a Healthy Environment and Sustainable Development

Environmental Science & Technology, 2021

A Resource-Based Theory of Hyperspecialization and Hyperscaling

Social Science Research Network, 2020

Compared to enterprises of the past, digital firms tend to be simultaneously narrower in their ve... more Compared to enterprises of the past, digital firms tend to be simultaneously narrower in their vertical scope and larger in their scale. We explain this phenomenon through a theory about how attributes of a firm’s resource bundle impact its scale and specialization. In particular, we highlight that the high scalability of digital firms’ resource bundles may drive “hyperspecialization” and “hyperscaling” due to the opportunity costs of not intensively deploying these resources. We use descriptive theory and a formal model to develop a number of propositions that are consistent with observed features of digital businesses. Our research provides a parsimonious modeling framework for future resource-based theorizing about digital firms, and sheds light on the far-reaching ways that technology-enabled resources are reshaping firms in the digital economy.

Hyperspecialization and hyperscaling: A resource‐based theory of the digital firm

Strategic Management Journal, 2021

Digital firms tend to be both narrow in their vertical scope and large in their scale. We explain... more Digital firms tend to be both narrow in their vertical scope and large in their scale. We explain this phenomenon through a theory about how attributes of firms’ resource bundles impact their scale and specialization. We posit that highly scalable resource bundles entail significant opportunity costs of integration (versus outsourcing), which simultaneously drive “hyperspecialization” and “hyperscaling” in digital firms. Using descriptive theory and a formal model, we develop several propositions that align with observed features of digital businesses. We offer a parsimonious modeling framework for resource-based theorizing about highly scalable digital firms, shed light on the phenomenon of digital scaling, and provide insights into the far-reaching ways that technology-enabled resources are reshaping firms in the digital economy.

AI and Emerging Technologies Track: The Digital Firm and New Forms of Economic Organizing

Proceedings - Academy of Management, Aug 1, 2022

Hyperspecialization and hyperscaling: A resource-based theory of the digital firm

by Brian Wu and D. Somaya

Strategic Management Journal, 2023

Digital firms tend to be both narrow in their vertical scope and large in their scale. We explain... more Digital firms tend to be both narrow in their vertical scope and large in their scale. We explain this phenomenon through a theory about how attributes of firms' resource bundles impact their scale and specialization. We posit that highly scalable resource bundles entail significant opportunity costs of integration (vs. outsourcing), which simultaneously drive "hyp

The many dimensions of research on designing flat firms

Journal of Organization Design

Editorial Vol. 10

Journal of Organization Design, 2021

The publication of the Journal of Organization Design's (JOD's) first issue in 2021 gives occasio... more

Entrepreneurship in Emerging Economies

SSRN Electronic Journal, 2020

Research Summary: The economic center of gravity is shifting from mature markets to emerging regi... more

An Exploration of the Micro-Level Impacts of Shanzhai (Copycat) Products on the Originals in China

SSRN Electronic Journal, 2018

Incumbent Repositioning with Decision Biases

SSRN Electronic Journal, 2018

Incumbent firms often reposition themselves in response to competitive entrants, but when doing s... more Incumbent firms often reposition themselves in response to competitive entrants, but when doing so the firm incurs repositioning costs. To model strategic interactions between incumbents and entrants this article proposes an approach that incorporates both repositioning costs and associated decision biases, which have been identified in the economics and strategy literatures as critical aspects of strategic change, but have been largely ignored in game-theoretic treatments at the strategy level. Using formal models, we analytically characterize the impacts of repositioning costs and biases on firms' equilibrium strategies and profits. Including these costs and biases changes the nature of strategic dynamics as well as introduces new implications for strategic choice.

Resource Redeployment and Corporate Strategy

Advances in Strategic Management, 2016

Organizational Constraints to Adaptation: Intrafirm Asymmetry in the Locus of Coordination

Organization Science, 2015

We assemble a panel data set of firms in the U.S. defense industry between 1996 and 2006 to exami... more We assemble a panel data set of firms in the U.S. defense industry between 1996 and 2006 to examine the drivers of heterogeneous incumbent firm adaptation following the industry-wide demand shock of September 11, 2001. This shock entailed not only an increase in aggregate demand but, more importantly, a shift in the relative attractiveness of individual product areas, resulting in the need for firms to reshuffle their product portfolios in response to changing demand conditions. The exogenous nature of the shock allows us to empirically identify the effect of preshock interdependence structures on postshock adaptation outcomes. We find that the locus of coordination inside a firm can explain differential postshock adaptation performance: because interdependencies spanning organizational boundaries are more difficult to manage than those contained within such boundaries, coordination across product areas creates greater adaptation challenges compared with coordination within product ...

When Suppliers Climb the Value Chain: A Theory of Value Distribution in Vertical Relationships

SSRN Electronic Journal, 2014

A lthough offshore outsourcing has become an important strategy to lower production costs among W... more A lthough offshore outsourcing has become an important strategy to lower production costs among Western firms, it gives rise to the phenomenon of value chain climbing-suppliers in emerging markets can develop capabilities by supplying, with aspirations to compete with the buyers in the product market. We build an analytical model to study the impact of value chain climbing on value distribution in vertical relationships. The analysis identifies a set of dominant relationships, characterizes how the buyer's optimal choice among these relationships depends on firms' relative competitiveness in the product market and the supplier's speed of capability development, and shows how the optimal choice evolves with the dynamics of the supplier's capability development. The results provide new insights into our understanding of value distribution in vertical relationships across different contexts and over time. By endogenizing the supplier's entry into the product market, our study enriches the literatures on vertical relationships, market entry, and the management of global value chains.

Institutional barriers and industry dynamics

Strategic Management Journal, 2013

This study demonstrates that new entrants exhibit higher productivity but also higher exit hazard... more This study demonstrates that new entrants exhibit higher productivity but also higher exit hazard than incumbents in post-liberalization China. We argue this seemingly paradoxical relationship is attributable to institutional barriers, defined as the hindrance in the institutional environment that prevents market selection forces to function. New entrants require higher productivity to compensate for those institutional barriers, which in turn implies a higher exit hazard after controlling for productivity. Our empirical findings support this argument and further show that the differences in productivity and exit hazard between new entrants and incumbents become smaller where and when institutional barriers recede. By integrating economic and institutional perspectives, we highlight the importance of institutional factors in shaping industry evolution.

Lessons from Alibaba.com: government's role in electronic contracting

info, 2004

Although electronic commerce (e‐commerce) can be a source of competitive advantage, will e‐commer... more Although electronic commerce (e‐commerce) can be a source of competitive advantage, will e‐commerce businesses in countries like China flourish when governments still take a “wait‐and‐see attitude” as to prompting, protecting, and regulating e‐commerce? The paper employs transaction cost economics in analyzing the role of government in regulating electronic contracting. Due to the transaction costs arising from e‐commerce, explicit contracts between parties are usually incomplete. The paper argues that these contracts should always be backed by implicit contracts, which are determined by default rules in various governments. Therefore, it behoves governments urgently to fill gaps in incomplete contracts in e‐commerce in order to foster a predictable legal environment for e‐businesses, minimize legal risks and transaction costs, and maximize economic and social benefits. The authors believe that governments must also act in concert with one another at the international level to creat...

Opportunity costs, industry dynamics, and corporate diversification: Evidence from the cardiovascular medical device industry, 1976-2004

Strategic Management Journal, 2013

This paper examines how demand conditions across alternative markets impact diversification decis... more This paper examines how demand conditions across alternative markets impact diversification decisions and firm performance by influencing the opportunity costs of deploying non-scale free capabilities. Using data within the cardiovascular medical device industry, this study shows that: (1) firms with a larger stock of pre-entry innovation experience are more likely to diversify; (2) firms in a current market with greater relative demand maturity are more likely to diversify; (3) diversification is associated with a performance decrease in the current market; and (4) diversification is associated with a performance increase at the corporate level. These findings shed new light on the self-selection process of corporate scope, the conceptualization of firm capabilities, and the connection between industry dynamics and resource deployment. Copyright  2013 John Wiley & Sons, Ltd. INTRODUCTION Corporate diversification decisions and the associated performance effects are a central concern of the strategy field. Building on Penrose's (1959) seminal work, the resource-based perspective recognizes that firms diversify in order to leverage firm-specific resources for which factor markets are imperfect (Penrose, 1959; Teece, 1982). 1 This literature highlights the role that market relatedness and the fungibility of resources play

Adaptation on Multiple Landscapes: Relatedness, Complexity, and Inter-Temporal Coordination Costs

SSRN Electronic Journal, 2017

We introduce and examine the concept of inter-temporal coordination costs, i.e., the reduction in... more We introduce and examine the concept of inter-temporal coordination costs, i.e., the reduction in a firm’s ability to adapt within businesses as a result of its attempts to capture synergies across businesses. Using a modified NK model of search across two landscapes, we show that these costs have an inverted-U relationship with the relatedness between landscapes, and this relationship is moderated by complexity. We further extend the model to examine entry into new markets, and use it to define conditions under which diversifying entrants may be at an advantage relative to either de novo start-ups or entrepreneurial spin-outs. Our study complements and extends recent work on inter-temporal economies of scope, while offering new insights for the literature on diversification, new market entry, and firm adaptation.