To secure the participation essential to move an organization from an inferior state to a superio... more To secure the participation essential to move an organization from an inferior state to a superior state requires that workers be offered two incentives: (1) security that they will be excused if coordination breaks down, and (2) encouragement to make an effort to change rather than free-ride on the efforts of others. If offering both incentives is too costly, the organization continues to languish in the inferior state. Organizational inertia will not be overcome by merely increasing the attractiveness of the desired state or attempting to coerce workers to abandon established routines. Organizational change can be induced by actively managing the change process, as by shuffling parts of the work force and nominating change agents from among the workers. Moreover, the change process can be designed to make an organization more amenable to change: for example, starting with a "kick-off" event and making the process a vigorously disequilibrating phenomenon. Whether the chan...
In 1991, defense contractor General Dynamics (GD) adopted an objective of creating shareholder va... more In 1991, defense contractor General Dynamics (GD) adopted an objective of creating shareholder value through downsizing, restructuring, and exit. Facilitating GD's strategy were a new management team and compensation plans that tied executive pay to shareholder wealth creation. The plans became highly controversial as GD's executives reaped rewards amid announcements of layoffs and plant closings. By December 1993, shareholders had realized gains approaching $5 billion, representing a three-year return of 440%. The lessons from the study are applicable not only in firms in the defense industry, but also in firms in a growing number of declining industries saddled with excess capacity.
To secure the participation essential to move an organization from an inferior state to a superio... more To secure the participation essential to move an organization from an inferior state to a superior state requires that workers be offered two incentives: (1) security that they will be excused if coordination breaks down, and (2) encouragement to make an effort to change rather than free-ride on the efforts of others. If offering both incentives is too costly, the organization continues to languish in the inferior state. Organizational inertia will not be overcome by merely increasing the attractiveness of the desired state or attempting to coerce workers to abandon established routines. Organizational change can be induced by actively managing the change process, as by shuffling parts of the work force and nominating change agents from among the workers. Moreover, the change process can be designed to make an organization more amenable to change: for example, starting with a "kick-off" event and making the process a vigorously disequilibrating phenomenon. Whether the change process is implemented incrementally or radically depends on how the manager trades off the cost of instituting wrenching change against the cost of having the organization partially misaligned with strategic necessity.
We examine the upside potential of privatization of both publicly traded firms and state-owned en... more We examine the upside potential of privatization of both publicly traded firms and state-owned enterprises through the lens of agency and entrepreneurial cognition theory. In addition to managerial incentives, we argue that significant entrepreneurial progress is made through a cognitive shift from a managerial to an entrepreneurial mindset. The two perspectives provide a framework for understanding buyouts and how managerial incentives and individual cognition, considered in tandem, effectively expand managerial discretion and thereby stimulate upside growth.
Agency theory, the predominant theoretical lens employed to examine leveraged buyouts, focuses on... more Agency theory, the predominant theoretical lens employed to examine leveraged buyouts, focuses on buyouts principally as a governance and control device. This view is especially useful in evaluating mature firms where discipline, incentives and limits to managerial discretion serve to mitigate the destruction or the downside of firm value. In contrast, an entrepreneurial view of buyouts is introduced, which incorporates upside incentives for growth and improvements not associated with pure efficiency gains or more effective monitoring to curtail opportunism. Investors such as venture capitalists in the UK and LBO associations in the US are increasingly investing in buyouts to realize entrepreneurial opportunities. Understanding how entrepreneurs make decisions with greater reliance on cognitive biases and heuristics provides an insightful lens for understanding why different types of buyouts occur. These perspectives provide a view of buyouts as a vehicle for strategic innovation and renewal that fosters upside growth opportunities in a variety of buyout types which heretofore have not been incorporated into buyout theory. Finally, research issues are discussed to facilitate future conceptual development and empirical testing of the upside as well as the downside of buyouts.
Buyouts, especially leveraged buyouts, have been perceived historically as an organizational effi... more Buyouts, especially leveraged buyouts, have been perceived historically as an organizational efficiency tool to streamline organizational processes, reduce workforces, and decrease unit costs. This efficiency approach has been especially useful with mature firms, where the structure of debt and limits to managerial spending decrease the downside risk and possible failure of the firm. This article illustrates how buyouts can also create entrepreneurial opportunities and allow upside grovrth. In particular, it focuses on understanding the aspects and circumstances of the entrepreneurial mindsets of managers who seek upside growth through buyouts. These entrepreneurial mindsets provide a wider viow of buyouts as a vehicle for renewal that frequently leads to reviializuiiun and s>irategic innovation. The article provides incightn for ontroprGnr^urr., managers, and financiers by articulating four categories of buyout opportunity-efficiency, revitalization, entrepreneurial, and failure buyouts. We specify the conditions under which each may be appropriate, including the governance and financial incentives, and give company examples for each category.
To secure the participation essential to move an organization from an inferior state to a superio... more To secure the participation essential to move an organization from an inferior state to a superior state requires that workers be offered two incentives: (1) security that they will be excused if coordination breaks down, and (2) encouragement to make an effort to change rather than free-ride on the efforts of others. If offering both incentives is too costly, the organization continues to languish in the inferior state. Organizational inertia will not be overcome by merely increasing the attractiveness of the desired state or attempting to coerce workers to abandon established routines. Organizational change can be induced by actively managing the change process, as by shuffling parts of the work force and nominating change agents from among the workers. Moreover, the change process can be designed to make an organization more amenable to change: for example, starting with a "kick-off" event and making the process a vigorously disequilibrating phenomenon. Whether the change process is implemented incrementally or radically depends on how the manager trades off the cost of instituting wrenching change against the cost of having the organization partially misaligned with strategic necessity.
Incentive and governance systems influence the competitive actions of managers. Yet, with competi... more Incentive and governance systems influence the competitive actions of managers. Yet, with competitive interdependence, incentives can commit managers to actions that strategically influence competitors and achieve beneficial competitive outcomes. For that purpose, strong incentives based on economic performance are not always competitively effective. A strategic delegation perspective of incentives is presented that integrates insights from agency and oligopoly theory. Propositions are drawn about the competitive effects of three forms of managerial incentives, and broader implications for strategy research are discussed.
Agency theory, the predominant theoretical lens employed to examine leveraged buyouts, focuses on... more Agency theory, the predominant theoretical lens employed to examine leveraged buyouts, focuses on buyouts principally as a governance and control device. This view is especially useful in evaluating mature firms where discipline, incentives and limits to managerial discretion serve to mitigate the destruction or the downside of firm value. In contrast, an entrepreneurial view of buyouts is introduced, which incorporates upside incentives for growth and improvements not associated with pure efficiency gains or more effective monitoring to curtail opportunism. Investors such as venture capitalists in the UK and LBO associations in the US are increasingly investing in buyouts to realize entrepreneurial opportunities. Understanding how entrepreneurs make decisions with greater reliance on cognitive biases and heuristics provides an insightful lens for understanding why different types of buyouts occur. These perspectives provide a view of buyouts as a vehicle for strategic innovation and renewal that fosters upside growth opportunities in a variety of buyout types which heretofore have not been incorporated into buyout theory. Finally, research issues are discussed to facilitate future conceptual development and empirical testing of the upside as well as the downside of buyouts.
This article reviews the strategic delegation literature and provides a theoretical framework tha... more This article reviews the strategic delegation literature and provides a theoretical framework that integrates this perspective into management research. The strategic delegation literature is built on the observation that, under strategic interdependence, delegation of decision making and accompanying actions can serve as commitments that influence competitive interactions with rivals and lead to beneficial outcomes. In this article, the authors first integrate diverse models and streams of research on strategic delegation in an organizing framework and highlight points of agreement and departure. This is the first comprehensive review of formal game-theoretical research purporting to show the strategic effects of delegation. The authors then integrate strategic delegation into strategic management and organization theory research in three main ways: They propose a common set of assumptions that would attune the strategic delegation perspective with other views and make it more relevant for management research, they outline ways in which the strategic delegation perspective can be linked to a set of theories of management, and finally they point out additional empirical research avenues that can exploit interindustry heterogeneity, intraindustry heterogeneity, and international differences in delegation instruments.
We examine the upside potential of privatization of both publicly traded firms and state-owned en... more We examine the upside potential of privatization of both publicly traded firms and state-owned enterprises through the lens of agency and entrepreneurial cognition theory. In addition to managerial incentives, we argue that significant entrepreneurial progress is made through a cognitive shift from a managerial to an entrepreneurial mindset. The two perspectives provide a framework for understanding buyouts and how managerial incentives and individual cognition, considered in tandem, effectively expand managerial discretion and thereby stimulate upside growth.
Agency theory, the predominant theoretical lens employed to examine leveraged buyouts, focuses on... more Agency theory, the predominant theoretical lens employed to examine leveraged buyouts, focuses on buyouts principally as a governance and control device. This view is especially useful in evaluating mature firms where discipline, incentives and limits to managerial discretion serve to mitigate the destruction or the downside of firm value. In contrast, an entrepreneurial view of buyouts is introduced, which incorporates upside incentives for growth and improvements not associated with pure efficiency gains or more effective monitoring to curtail opportunism. Investors such as venture capitalists in the UK and LBO associations in the US are increasingly investing in buyouts to realize entrepreneurial opportunities. Understanding how entrepreneurs make decisions with greater reliance on cognitive biases and heuristics provides an insightful lens for understanding why different types of buyouts occur. These perspectives provide a view of buyouts as a vehicle for strategic innovation and renewal that fosters upside growth opportunities in a variety of buyout types which heretofore have not been incorporated into buyout theory. Finally, research issues are discussed to facilitate future conceptual development and empirical testing of the upside as well as the downside of buyouts.
Agency theory, the predominant theoretical lens employed to examine leveraged buyouts, focuses on... more Agency theory, the predominant theoretical lens employed to examine leveraged buyouts, focuses on buyouts principally as a governance and control device. This view is especially useful in evaluating mature firms where discipline, incentives and limits to managerial discretion serve to mitigate the destruction or the downside of firm value. In contrast, an entrepreneurial view of buyouts is introduced, which incorporates upside incentives for growth and improvements not associated with pure efficiency gains or more effective monitoring to curtail opportunism. Investors such as venture capitalists in the UK and LBO associations in the US are increasingly investing in buyouts to realize entrepreneurial opportunities. Understanding how entrepreneurs make decisions with greater reliance on cognitive biases and heuristics provides an insightful lens for understanding why different types of buyouts occur. These perspectives provide a view of buyouts as a vehicle for strategic innovation and renewal that fosters upside growth opportunities in a variety of buyout types which heretofore have not been incorporated into buyout theory. Finally, research issues are discussed to facilitate future conceptual development and empirical testing of the upside as well as the downside of buyouts.
We examine the upside potential of privatization of both publicly traded firms and state-owned en... more We examine the upside potential of privatization of both publicly traded firms and state-owned enterprises through the lens of agency and entrepreneurial cognition theory. In addition to managerial incentives, we argue that significant entrepreneurial progress is made through a cognitive shift from a managerial to an entrepreneurial mindset. The two perspectives provide a framework for understanding buyouts and how managerial incentives and individual cognition, considered in tandem, effectively expand managerial discretion and thereby stimulate upside growth.
Agency theory, the predominant theoretical lens employed to examine leveraged buyouts, focuses on... more Agency theory, the predominant theoretical lens employed to examine leveraged buyouts, focuses on buyouts principally as a governance and control device. This view is especially useful in evaluating mature firms where discipline, incentives and limits to managerial discretion serve to mitigate the destruction or the downside of firm value. In contrast, an entrepreneurial view of buyouts is introduced, which incorporates upside incentives for growth and improvements not associated with pure efficiency gains or more effective monitoring to curtail opportunism. Investors such as venture capitalists in the UK and LBO associations in the US are increasingly investing in buyouts to realize entrepreneurial opportunities. Understanding how entrepreneurs make decisions with greater reliance on cognitive biases and heuristics provides an insightful lens for understanding why different types of buyouts occur. These perspectives provide a view of buyouts as a vehicle for strategic innovation and renewal that fosters upside growth opportunities in a variety of buyout types which heretofore have not been incorporated into buyout theory. Finally, research issues are discussed to facilitate future conceptual development and empirical testing of the upside as well as the downside of buyouts.
To secure the participation essential to move an organization from an inferior state to a superio... more To secure the participation essential to move an organization from an inferior state to a superior state requires that workers be offered two incentives: (1) security that they will be excused if coordination breaks down, and (2) encouragement to make an effort to change rather than free-ride on the efforts of others. If offering both incentives is too costly, the organization continues to languish in the inferior state. Organizational inertia will not be overcome by merely increasing the attractiveness of the desired state or attempting to coerce workers to abandon established routines. Organizational change can be induced by actively managing the change process, as by shuffling parts of the work force and nominating change agents from among the workers. Moreover, the change process can be designed to make an organization more amenable to change: for example, starting with a "kick-off" event and making the process a vigorously disequilibrating phenomenon. Whether the chan...
In 1991, defense contractor General Dynamics (GD) adopted an objective of creating shareholder va... more In 1991, defense contractor General Dynamics (GD) adopted an objective of creating shareholder value through downsizing, restructuring, and exit. Facilitating GD's strategy were a new management team and compensation plans that tied executive pay to shareholder wealth creation. The plans became highly controversial as GD's executives reaped rewards amid announcements of layoffs and plant closings. By December 1993, shareholders had realized gains approaching $5 billion, representing a three-year return of 440%. The lessons from the study are applicable not only in firms in the defense industry, but also in firms in a growing number of declining industries saddled with excess capacity.
To secure the participation essential to move an organization from an inferior state to a superio... more To secure the participation essential to move an organization from an inferior state to a superior state requires that workers be offered two incentives: (1) security that they will be excused if coordination breaks down, and (2) encouragement to make an effort to change rather than free-ride on the efforts of others. If offering both incentives is too costly, the organization continues to languish in the inferior state. Organizational inertia will not be overcome by merely increasing the attractiveness of the desired state or attempting to coerce workers to abandon established routines. Organizational change can be induced by actively managing the change process, as by shuffling parts of the work force and nominating change agents from among the workers. Moreover, the change process can be designed to make an organization more amenable to change: for example, starting with a "kick-off" event and making the process a vigorously disequilibrating phenomenon. Whether the change process is implemented incrementally or radically depends on how the manager trades off the cost of instituting wrenching change against the cost of having the organization partially misaligned with strategic necessity.
We examine the upside potential of privatization of both publicly traded firms and state-owned en... more We examine the upside potential of privatization of both publicly traded firms and state-owned enterprises through the lens of agency and entrepreneurial cognition theory. In addition to managerial incentives, we argue that significant entrepreneurial progress is made through a cognitive shift from a managerial to an entrepreneurial mindset. The two perspectives provide a framework for understanding buyouts and how managerial incentives and individual cognition, considered in tandem, effectively expand managerial discretion and thereby stimulate upside growth.
Agency theory, the predominant theoretical lens employed to examine leveraged buyouts, focuses on... more Agency theory, the predominant theoretical lens employed to examine leveraged buyouts, focuses on buyouts principally as a governance and control device. This view is especially useful in evaluating mature firms where discipline, incentives and limits to managerial discretion serve to mitigate the destruction or the downside of firm value. In contrast, an entrepreneurial view of buyouts is introduced, which incorporates upside incentives for growth and improvements not associated with pure efficiency gains or more effective monitoring to curtail opportunism. Investors such as venture capitalists in the UK and LBO associations in the US are increasingly investing in buyouts to realize entrepreneurial opportunities. Understanding how entrepreneurs make decisions with greater reliance on cognitive biases and heuristics provides an insightful lens for understanding why different types of buyouts occur. These perspectives provide a view of buyouts as a vehicle for strategic innovation and renewal that fosters upside growth opportunities in a variety of buyout types which heretofore have not been incorporated into buyout theory. Finally, research issues are discussed to facilitate future conceptual development and empirical testing of the upside as well as the downside of buyouts.
Buyouts, especially leveraged buyouts, have been perceived historically as an organizational effi... more Buyouts, especially leveraged buyouts, have been perceived historically as an organizational efficiency tool to streamline organizational processes, reduce workforces, and decrease unit costs. This efficiency approach has been especially useful with mature firms, where the structure of debt and limits to managerial spending decrease the downside risk and possible failure of the firm. This article illustrates how buyouts can also create entrepreneurial opportunities and allow upside grovrth. In particular, it focuses on understanding the aspects and circumstances of the entrepreneurial mindsets of managers who seek upside growth through buyouts. These entrepreneurial mindsets provide a wider viow of buyouts as a vehicle for renewal that frequently leads to reviializuiiun and s>irategic innovation. The article provides incightn for ontroprGnr^urr., managers, and financiers by articulating four categories of buyout opportunity-efficiency, revitalization, entrepreneurial, and failure buyouts. We specify the conditions under which each may be appropriate, including the governance and financial incentives, and give company examples for each category.
To secure the participation essential to move an organization from an inferior state to a superio... more To secure the participation essential to move an organization from an inferior state to a superior state requires that workers be offered two incentives: (1) security that they will be excused if coordination breaks down, and (2) encouragement to make an effort to change rather than free-ride on the efforts of others. If offering both incentives is too costly, the organization continues to languish in the inferior state. Organizational inertia will not be overcome by merely increasing the attractiveness of the desired state or attempting to coerce workers to abandon established routines. Organizational change can be induced by actively managing the change process, as by shuffling parts of the work force and nominating change agents from among the workers. Moreover, the change process can be designed to make an organization more amenable to change: for example, starting with a "kick-off" event and making the process a vigorously disequilibrating phenomenon. Whether the change process is implemented incrementally or radically depends on how the manager trades off the cost of instituting wrenching change against the cost of having the organization partially misaligned with strategic necessity.
Incentive and governance systems influence the competitive actions of managers. Yet, with competi... more Incentive and governance systems influence the competitive actions of managers. Yet, with competitive interdependence, incentives can commit managers to actions that strategically influence competitors and achieve beneficial competitive outcomes. For that purpose, strong incentives based on economic performance are not always competitively effective. A strategic delegation perspective of incentives is presented that integrates insights from agency and oligopoly theory. Propositions are drawn about the competitive effects of three forms of managerial incentives, and broader implications for strategy research are discussed.
Agency theory, the predominant theoretical lens employed to examine leveraged buyouts, focuses on... more Agency theory, the predominant theoretical lens employed to examine leveraged buyouts, focuses on buyouts principally as a governance and control device. This view is especially useful in evaluating mature firms where discipline, incentives and limits to managerial discretion serve to mitigate the destruction or the downside of firm value. In contrast, an entrepreneurial view of buyouts is introduced, which incorporates upside incentives for growth and improvements not associated with pure efficiency gains or more effective monitoring to curtail opportunism. Investors such as venture capitalists in the UK and LBO associations in the US are increasingly investing in buyouts to realize entrepreneurial opportunities. Understanding how entrepreneurs make decisions with greater reliance on cognitive biases and heuristics provides an insightful lens for understanding why different types of buyouts occur. These perspectives provide a view of buyouts as a vehicle for strategic innovation and renewal that fosters upside growth opportunities in a variety of buyout types which heretofore have not been incorporated into buyout theory. Finally, research issues are discussed to facilitate future conceptual development and empirical testing of the upside as well as the downside of buyouts.
This article reviews the strategic delegation literature and provides a theoretical framework tha... more This article reviews the strategic delegation literature and provides a theoretical framework that integrates this perspective into management research. The strategic delegation literature is built on the observation that, under strategic interdependence, delegation of decision making and accompanying actions can serve as commitments that influence competitive interactions with rivals and lead to beneficial outcomes. In this article, the authors first integrate diverse models and streams of research on strategic delegation in an organizing framework and highlight points of agreement and departure. This is the first comprehensive review of formal game-theoretical research purporting to show the strategic effects of delegation. The authors then integrate strategic delegation into strategic management and organization theory research in three main ways: They propose a common set of assumptions that would attune the strategic delegation perspective with other views and make it more relevant for management research, they outline ways in which the strategic delegation perspective can be linked to a set of theories of management, and finally they point out additional empirical research avenues that can exploit interindustry heterogeneity, intraindustry heterogeneity, and international differences in delegation instruments.
We examine the upside potential of privatization of both publicly traded firms and state-owned en... more We examine the upside potential of privatization of both publicly traded firms and state-owned enterprises through the lens of agency and entrepreneurial cognition theory. In addition to managerial incentives, we argue that significant entrepreneurial progress is made through a cognitive shift from a managerial to an entrepreneurial mindset. The two perspectives provide a framework for understanding buyouts and how managerial incentives and individual cognition, considered in tandem, effectively expand managerial discretion and thereby stimulate upside growth.
Agency theory, the predominant theoretical lens employed to examine leveraged buyouts, focuses on... more Agency theory, the predominant theoretical lens employed to examine leveraged buyouts, focuses on buyouts principally as a governance and control device. This view is especially useful in evaluating mature firms where discipline, incentives and limits to managerial discretion serve to mitigate the destruction or the downside of firm value. In contrast, an entrepreneurial view of buyouts is introduced, which incorporates upside incentives for growth and improvements not associated with pure efficiency gains or more effective monitoring to curtail opportunism. Investors such as venture capitalists in the UK and LBO associations in the US are increasingly investing in buyouts to realize entrepreneurial opportunities. Understanding how entrepreneurs make decisions with greater reliance on cognitive biases and heuristics provides an insightful lens for understanding why different types of buyouts occur. These perspectives provide a view of buyouts as a vehicle for strategic innovation and renewal that fosters upside growth opportunities in a variety of buyout types which heretofore have not been incorporated into buyout theory. Finally, research issues are discussed to facilitate future conceptual development and empirical testing of the upside as well as the downside of buyouts.
Agency theory, the predominant theoretical lens employed to examine leveraged buyouts, focuses on... more Agency theory, the predominant theoretical lens employed to examine leveraged buyouts, focuses on buyouts principally as a governance and control device. This view is especially useful in evaluating mature firms where discipline, incentives and limits to managerial discretion serve to mitigate the destruction or the downside of firm value. In contrast, an entrepreneurial view of buyouts is introduced, which incorporates upside incentives for growth and improvements not associated with pure efficiency gains or more effective monitoring to curtail opportunism. Investors such as venture capitalists in the UK and LBO associations in the US are increasingly investing in buyouts to realize entrepreneurial opportunities. Understanding how entrepreneurs make decisions with greater reliance on cognitive biases and heuristics provides an insightful lens for understanding why different types of buyouts occur. These perspectives provide a view of buyouts as a vehicle for strategic innovation and renewal that fosters upside growth opportunities in a variety of buyout types which heretofore have not been incorporated into buyout theory. Finally, research issues are discussed to facilitate future conceptual development and empirical testing of the upside as well as the downside of buyouts.
We examine the upside potential of privatization of both publicly traded firms and state-owned en... more We examine the upside potential of privatization of both publicly traded firms and state-owned enterprises through the lens of agency and entrepreneurial cognition theory. In addition to managerial incentives, we argue that significant entrepreneurial progress is made through a cognitive shift from a managerial to an entrepreneurial mindset. The two perspectives provide a framework for understanding buyouts and how managerial incentives and individual cognition, considered in tandem, effectively expand managerial discretion and thereby stimulate upside growth.
Agency theory, the predominant theoretical lens employed to examine leveraged buyouts, focuses on... more Agency theory, the predominant theoretical lens employed to examine leveraged buyouts, focuses on buyouts principally as a governance and control device. This view is especially useful in evaluating mature firms where discipline, incentives and limits to managerial discretion serve to mitigate the destruction or the downside of firm value. In contrast, an entrepreneurial view of buyouts is introduced, which incorporates upside incentives for growth and improvements not associated with pure efficiency gains or more effective monitoring to curtail opportunism. Investors such as venture capitalists in the UK and LBO associations in the US are increasingly investing in buyouts to realize entrepreneurial opportunities. Understanding how entrepreneurs make decisions with greater reliance on cognitive biases and heuristics provides an insightful lens for understanding why different types of buyouts occur. These perspectives provide a view of buyouts as a vehicle for strategic innovation and renewal that fosters upside growth opportunities in a variety of buyout types which heretofore have not been incorporated into buyout theory. Finally, research issues are discussed to facilitate future conceptual development and empirical testing of the upside as well as the downside of buyouts.
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Papers by Jay Dial