Report 2003: Department of Industrial Economics and Strategy (IVS)
Department of Industrial Economics and Strategy: Research Report 2003
The Department of Industrial Economics and Strategy is a strategy-oriented department based on modern organisational economics. The Department research field is the ”organisation of economic activities”. By way of example, the Department examines why much biotech research takes place in small dedicated enterprises and more rarely in large pharmaceutical enterprises, and why some enterprises are strongly diversified while others concentrate on one product. Department staff mainly teach MSc students and the Department has an active PhD environment. The Department has hosted a number of substantial, externally funded projects such as DRUID, CISTEMA and COMBI and participates in a number of centres. The Department has a total staff of about 40.
Highlights 2003
- The Department received two major funding allocations in December: DKK 5.6 mill. from the Center for Management, Organisation and Competence Development (the LOK Research Center) for biotech research, and DKK 800,000 from SSF to build an international IP researchers’ network.
- In June, the Department hosted the DRUID conference entitled ”Creating, sharing and transferring knowledge: The role of Geography, Institutions, Organizations”.
- Department researchers published the book, ”The industrial dynamics of the new digital economy”, based on contributions from the DRUID summer conference 2002.
- A staff member received the Tietgen Prize for research in business economics, and a PhD student received the Business Economics Prize of the Tuborg Foundation for the purpose of studies at the Sloan School of Management, MIT.
Academic profile
The Department conducts strategy-oriented research with its academic basis in modern economics theories, including, among others, transaction cost economics theory, principal-agent theory, contract economics and information economics, all covered by the broad term of ”organisational economics”. It is also strongly inspired by insights from sociology, psychology and geography. The Department research field may be described as the ”organisation of economic activities”. The primary purpose of the Department is to contribute to an understanding of the economic organisation of society and in particular how and why activities are organised in markets, enterprises, business sectors and other ”institutions”.
Ultimately, the purpose is to describe the suitability of a given organisation from both a social and a business point of view. The Department’s contribution to CBS’ profile therefore lies in the strategic area: How are enterprises organised and what are their limits to obtain maximum competitiveness? It is implemented by way of competition strategy, technology strategy, human resource management, knowledge management or – with a new term – organisation strategy.
Research at IVS is characterised by an interest in understanding the reason for the organisation of economic activities in various forms of organisation with special structures of knowledge and incentives. Therefore, the traditional distinction between the internal and external relations of an enterprise are not very meaningful to Department research seeing that an important amount of research interest is aimed at the division of labour between enterprises and the market. Department research is characterised by an interest in the broad spectrum of various forms of organisation between the two reference points of hierarchy (traditional enterprises) and the market. Thus, a substantial part of our research involves attempts to define the limits of an enterprise by studying the possibilities of appropriating the results of research and development activities or the possibilities of outsourcing activities without risking hold-ups. Other parts look into more general questions of the allocation of decision rights. Among enterprises, such rights are governed by contracts, which are often explicit but may also frequently be implicit and the result of repeated interaction, creating environments of non-adversary behaviour. Cases in point are certain regional clusters of enterprises.
In other words, this part of Department research studies the driving forces and limits of specialisation (or vertical division of labour) which defines the scope of the market. Similarly, competition is shaped by industry structure, and analyses of the ”horizontal” division of labour are therefore an integral part of the research activities. For example, the existence of economies of scale is one of the driving forces behind increased specialisation (and thus the possibility of e.g. outsourcing), but it is also important to local and global industry structures. However, Department research activities also cover internal business issues, e.g. analyses of the potential management role of a head office in diversified enterprises, or how to efficiently coordinate knowledge across divisions.
Such driving forces can rarely be understood in a historical vacuum, and researchers therefore recognise the dynamic nature of all forms of organisations. What is optimal at one point in time will not necessarily be optimal at another. Thus, Department research has an important dynamic dimension and definitely belongs to the growing field of research called ”industrial dynamics”.
Department research is therefore often conducted against a highly concrete empirical background where the primary goal is not model development but to understand real-world phenomena. The Department has a long-standing tradition of research in industry, innovation and technology-related topics, and these areas remain a major element of its research field. So far, a large part of Department research (especially its technology-oriented research) has had a strong empirical foundation and been inductively oriented. One of the strengths of the Department is that it has deep and detailed empirical knowledge of the research fields addressed based on combinations of interviews, surveys, register data and many types of secondary sources.
Research strategy
The Department regards research activity relevance as the ultimate criterion
for good research. Its research results should benefit society in one way or another. In a university department this should be achieved primarily through teaching. However, the Department is increasingly presenting research results directly to players in the business community and the wider society – a fact which may serve as a source of inspiration and stimulation to research activities.
for good research. Its research results should benefit society in one way or another. In a university department this should be achieved primarily through teaching. However, the Department is increasingly presenting research results directly to players in the business community and the wider society – a fact which may serve as a source of inspiration and stimulation to research activities.
Before research results can be presented and applied, as a general rule they must be subjected to quality control in the research environment. In light of the increasing specialisation of research, this will often be an international environment. To present research results in international research forums and to publish them internationally is therefore a crucial prerequisite of documenting research quality. International publication is therefore a necessary part of the Department’s research obligation.
Hence, the overall, long-term research objective of the Department is to obtain a position as an internationally recognised department in the fields of organisational economics and strategy. Publication in recognised international journals is the most important means of achieving this objective. The Department considers journals such as Research Policy and Industrial and Corporate Change academically highly suitable, but it also wishes to contribute to broad-spectred top journals in the business economics field such as Academy of Management Journal and Strategic Management Journal. The Department objective is to keep publication at a level of at least one article published in an international journal per year for permanently employed researchers.
Department research is organised as a combination of individual projects, joint authorships
and major projects, typically with external funding.
and major projects, typically with external funding.
Figure 1
External funds finance projects with independent research plans adapted to and supporting the Department research profile. The Department aims to pursue a high degree of external funding, not least in order to be able to retain a fair number of PhD students.
In 2003, the Department portfolio of externally funded projects included the following: DRUID (Danish Research Unit for Industrial Dynamics), LINK (Learning, Incentives and Knowledge), CISTEMA (Center for Interdisciplinary Studies in Management of Technology), the ”Biotechnology innovation in the Öresund Region” programme, the LOK project entitled ”The building of international relations by small and medium-sized Danish sub-contractors” as well as an agreement with the Danish Agency for Development of Trade and Industry on the funding of four scholarships.
At the end of 2003, the Danish Social Science Research Council (SSF) injected substantial funds in the Department (so-called LOK-funds). DKK 5.6 mill. over a 3-year period was allocated on the basis of project manager Finn Valentin’s application for the ”Competence, Organisation and Management in Biotech Industries (COMBI)” project. Combined with internal and external co-funding this results in a total budget in excess of DKK 15 mill.
At the same time, SSF supported research activities in the field of Intellectual Property Rights (IPR) through a 3-year funding allocation of DKK 800,000 to Markus Reitzig for the purpose of establishing a network of young, international IPR researchers with a view to making CBS known as a centre of IPR research.
In general, the Danish Social Science Research Council is the Department’s key source of external funding.
Research results
For many years, IVS has been among the most published departments of the Faculty, and this was also the case in 2003. The Department publication profile is highly international. While the total number of Faculty publications (excluding proceedings, working papers and ”other publications”) is distributed fairly evenly on Nordic-language (Danish) and foreign-language (English) publications, almost 90 per cent of the Department’s research is published in English. This is the result of a deliberate effort to be a part of the international research environment.
Over the last five years, the total number of publications has been fairly constant, and the same applies to the proportion of Danish and English publications. In 2003, however, the number of publications declined slightly due to Nicolai Foss’ transfer to another department at CBS.
In 2003, the Department conducted an informal survey of its research impact by way of a so-called citation analysis. It indicated that three members of the Department research staff (Abell, Sanchez and Maskell) were among the Faculty’s most frequently cited international researchers.
In order to illustrate another aspect of research activities, the number of reviews conducted by Department researchers for international journals were counted. 50 such reviews were conducted in 2003, which is evidence of a major – and hitherto concealed – effort contributing to the development of international research communities. Add to this the extensive review work performed in connection with the organisation of major international conferences (the DRUID conferences in particular).
Figure 2
Research relations to practice
As mentioned under the academic profile, to a wide extent Department research is aimed at real-world, practical issues of organising activities in the business community and the wider society. Department research is thus inspired by research itself and by its surroundings. Department researchers therefore have a long-standing tradition of collaborating with external players, primarily to identify relevant issues and to retrieve data. This type of activity often leads to invitations to participate in the strategic considerations of such players. Examples from 2003:
The Department staff:
- entered into working relationships with enterprises such as Danfoss, Bang & Olufsen, Texas Instruments, ICEpower, Glunz & Jensen et al. with a view to sparring and retrieval of empirical data;
- cooperated with the Danish Association of Consulting Engineers on knowledge creation and utilisation in engineering enterprises
- cooperated with CA, Unemployment Fund and Job Center on an analysis of employment patterns for business economics graduates.
- made a presentation to the Danish Patent and Trademark Office on the use of IPR in business strategy
- acted as the prime mover of Reklamekartellet – an association that brings about contact between research environments and the advertising business
- cooperated with the Danish Maritime Authority with a view to sparring, retrieval of empirical data and preparing a background report for the purpose of the Government’s growth strategy.
In addition, many members of the Department staff commented on subjects such as local business development, the effect of punishment, government aid and socio-political issues in the media. The staff also published feature articles in Danish dailies Politiken and Jyllandsposten.
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