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Firm-Specific, Industry-Specific, and Occupational Human Capital and the Sourcing of Knowledge Work by Mayer, K.J., Somaya, D., and Williamson, I.O. (2012) in Organization Science. . Presented by Bradley Skousen. About the Authors.

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presented by bradley skousen
Firm-Specific, Industry-Specific, and OccupationalHuman Capital and the Sourcing of Knowledge Workby Mayer, K.J., Somaya, D., and Williamson, I.O. (2012) in Organization Science.

Presented by Bradley Skousen

about the authors
About the Authors
  • Kyle J. Mayer: PhD at Berkeley (1999) and chaired by Oliver Williamson
  • Deepak Somaya: PhD at Berkeley (2002) and chaired by David Mowery
  • Ian O. Williamson: PhD at UNC (2000) in Organization Behavior.
purpose and key definitions
Purpose and Key Definitions

Purpose: To explore the relationship between knowledge based capabilities with prior make or buy decisions and buyer-supplier differences in the management of skilled employees.

Knowledge Work: Consists of activities, tasks, or projects that require the application of knowledge to solve business problems.

Firm-specific Human Capital (HC): Knowledge and skills that are unique to a firm.

Industry Specific HC: Knowledge about the industry setting or domain in which a project is situated, and thus it is re-deployable across the (limited) set of firms with projects in the same industry domain.

Occupational HC: Knowledge and skills required to perform work within a professional or functional area.

  • 1989 Survey of Fortune 500 Firms
    • Sample includes all 129 Publicly listed Firms
    • All firms are in technology-based industries
    • 5 industries included:
      • Chemicals (39 firms)
      • Computer Manufacturing (22 firms)
      • Electronics (40 firms)
      • Pharmaceuticals (12 firms)
      • Scientific and Photographic Equipment (16 firms)
    • Patents from 1990-1995
    • Sample size included 59,590 patents
model specification
Model Specification


Patent-Level Controls

Industry Level Controls

Fixed Effects Logit Model for Outsourcing of Patent Legal Work

DV: Probability of Outsourcing

hypothesis 1
Hypothesis 1

H1: Firms are less likely to outsource knowledge projects the greater their relevant firm-specific human capital developed by performing prior related projects.

Theory: Governance Inseparabilites (Argyres and Liebeskind,1999); Time Compression Diseconomies (Dierickx and Cool, 1989); among others.

Operationalization: Firm-specific HC was measured as the number of backward citations to patents of the same company that were also processed in-house during the previous five years.

Findings: H1 Supported.

hypothesis 2
Hypothesis 2

H2: Firms are less likely to outsource knowledge projects the greater the relevant industry-specific human capital developed by previously internalizing knowledge projects in the same domain.

Theory: Mixture of KBV and TCE logic (e.g., Argote & Ingram, 2000; Hatch & Dyer, 2004; Parmigiani & Mitchell, 2009).

Operationalization: Industry-specific HC was measured as the company’s previous in-house experience in the technical domain. Specifically, it was the logged number of prior patents processed internally by the firm in the same primary seven-digit International Patent Classification.

Findings: H2 Supported.

hypothesis 3
Hypothesis 3

H3: The marginal impact of higher firm-specific or industry-specific human capital on the tendency of firms to internalize knowledge work is highest when the other type of human capital (firm specific or industry specific is low ).

Theory: KBV. Focus on advantages of coordinating knowledge tasks(e.g., Kogut & Zander, 1992; Conner & Prahalad, 1996; Nickerson & Zenger, 2004).

Operationalization: Interaction Term

Findings: H3 Supported.

hypothesis 4
Hypothesis 4

H4: Firms are more likely to outsource knowledge projects situated in areas that are highly contested (and thus rely heavily on occupational human capital).

Theory: Focuses on TCE logic (e.g., Williamson’s 1985 concept of selective intervention) to explain why firms develop in-house occupational human capital but the authors main question is not on why but when occupational human capital is outsourced.

Operationalization: Dummy variable coded as 1 if the focal patent cited a patent that was litigated in the past (referred to as a high contested area).

Findings: H4 Supported.

hypothesis 5
Hypothesis 5

H5: The larger the firm’s internal staff (in the focal occupational area), the weaker the (positive) effect of a project being in a highly contested area on the probability of outsourcing.

Theory: KBV. The logic is that firms with more patent attorneys may use knowledge hierarchies to leverage skills and learning (e.g., Garicano, 2000).

Operationalization: Interaction of highly contested area (see H4) with internal staff size, which measures the number of patent attorneys employed by the focal firm.

Findings: H5 Supported.

  • Theoretical Contribution?

- Provides strong links between KBV and TCE.

  • Sample Issues?

- Limited to big Fortune 500 firms.

  • Measurement Issues?

-Research design included interviews with managers to verify important measurement issues. Measurements are consistent with patent literature.

  • Model Specification/Identification Issues?

- Model does not include variables on firm capabilities other than patenting experience. Is the main-case causality that greater outsourcing leads to lower firm capabilities, or that lower firm capabilities lead to outsourcing?