Connect Online
Share
Contact Me
Download Media Kit
pankaj ghemawat > articles
Academic Journals
Can China's Companies Conquer the World?
Foreign Affairs
February 18, 2016

Despite China’s recent economic struggles, many economists and analysts argue that the country remains on course to overtake the United States and become the world’s leading economic power someday soon. Indeed, this has become a mainstream view—if not quite a consensus belief—on both sides of the Pacific. But proponents of this position often neglect to take into account an important truth: economic power is closely related to business power, an area in which China still lags far behind the United States.

To understand how that might affect China’s future prospects, it’s important to first grasp the reasons why many remain bullish on China—to review the evidence that supports the case for future Chinese dominance. At first glance, the numbers are impressive. China’s GDP is likely to surpass that of the United States—although probably not until at least 2028, which is five to ten years later than most analysts were predicting before China’s current slowdown began in 2014. After all, China is already the world’s largest market for hundreds of products, from cars to power stations to diapers.

> Read more     > Share this
Academic Journals
How Global Is Your C-Suite?
MIT Sloan Management Review
June 16, 2015

Despite globalization, the vast majority of the world’s largest corporations are run by CEOs native to the country in which the company is headquartered. But more executive diversity at the top is sorely needed — and will require sweeping changes in how companies are organized.


The globalization of companies can be — and frequently has been — looked at in different ways: in terms of the internationalization of sales or assets, cross-border supply chains or shared services, organizational structures, functional policies (marketing standardization versus customization) and so on. In this article, we look at much less studied individual measures of globalization: the extent to which the managers who head the world’s largest corporations — at the CEO level and at the level of the managers listed as reporting directly to him or her (henceforth, the top management team) — are native or not to the country where the corporation is headquartered.






> Read more     > Share this
Academic Journals
Global Problem Solving Without the Globaloney
Stanford Social Innovation Review
September 22, 2014

Believing that the world is "flat," many organizations attempt to solve pressing social and environmental problems on a global scale. All too often, these efforts flounder because the problems that seemed global in scope could have been more effectively solved at the regional, national, or even local level.


There is widespread belief not just that globalization is on the rise, but that it is already (close to) complete. Fed by books such as Thomas Friedman´s The World is Flat, and by heightened awareness of truly global problems such as climate change, large numbers of people believe that many, if not most, of today´s social and enviromental problems are the result of global trends and that their solutions must also be global in nature. I refer to such overstatements about the extent of globalization as "globaloney".  

> Read more     > Share this
Academic Journals
Globalization and Global Problem Solving
Global Solutions Network
October 2013

This white paper focuses on the implications of research on globalization for Global Solution Networks (GSNs). It presents five principles for designing or guiding the evolution of global solution networks and processes that are anchored in stylized facts about globalization or responses to it.

> Read more     > Share this
Academic Journals
Internacionalización Española: Problemas comerciales y perspectivas
Pankaj Ghemawat y Tamara de la Mata López

Apéndice de Revista Economía Industrial

> Read more     > Share this
Academic Journals

Developing global leaders
McKinsey Quarterly
June 25, 2012

Companies must cultivate leaders for global markets. Dispelling five common myths about globalization is a good place to start.
As firms reach across

 borders, global-leadership capacity is surfacing more and more often as a binding constraint. According to one survey of senior executives, 76 percent believe their organizations need to develop global-leadership capabilities, but only 7 percent think they are currently doing so very effectively.1 And some 30 percent of US companies admit that they have failed to exploit fully their international business opportunities because of insufficient internationally competent personnel.

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj, Carlos LLano and Francisco Requena
Competitiveness and Interregional as well as International Trade: The Case of Catalonia
International Journal of Industrial Organization, July 2010

 

Recent years have seen a surge of interest among industrial organization economists in using data on international trade flows as windows into competitiveness. For countries that are at least mid-sized (e.g., Spain), interregional trade tends to be as large as or significantly larger than international trade. The case of Catalonia, a Spanish region, illustrates how ignoring interregional flows can lead to erroneous inferences about a region's external competitiveness. Accounting for Catalonia's interregional as well as international flows shifts what is generally assessed to be a chronic trade deficit in goods into a surplus and changes diagnoses of which Catalan sectors generate external surpluses and who its key trading partners are. We also use a gravity model approach to estimate international border effects for Catalonia. 

> Read more     > Share this
Academic Journals

  Pankaj Ghemawat
"The Risk of Not Investing in a Recession"
  MIT Sloan
  April 1, 2009

The challenge for managers during a downturn is to find the balance between pursuing too many unprofitable investment opportunities and passing up too many potentially profitable ones.

Two very different ways of thinking about investment and risk are headed for a showdown. One emphasizes the financial risk of investing; the other concerns the competitive risk of not investing. In normal times, the bearishness of the former tends to (or is supposed to) complement the bullishness of the latter. But the balance between the two seems to break down at business-cycle extremes. Specifically, at the bottom of the business cycle, companies seem to overemphasize the financial risk of investing at the expense of the competitive risk of not investing. Once-in-a-cycle errors of this sort can create a lasting competitive disadvantage, which is reason enough to write (and read) an article on the risk of not investing while the economy is still weak.

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj, and Catherine Thomas.
"Strategic Interaction Across Countries and Multinational Agglomeration"

Management Science, December 2008

Agglomeration in foreign direct investment (FDI) is typically attributed to location-specific characteristics such as natural resource advantages or production-related spillovers between multinational firms. The increasing collocation of the largest global firms in the cement industry since the 1980s is not easily attributed to either of these explanations. This paper draws on theorie...

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj, and Daniel Levinthal.
"
Choice Interactions and Business Strategy"
Management Science Vol. 54, Nº. 9, September 2008, pp. 1638-1651
Choice settings are strategic to the extent that they entail cross-sectional or intertemporal linkages. These same factors may impose daunting demands on decision makers. We develop a graph-theoretic generalization of the NK model of fitness landscapes to model the way in which policy choices may be more or less strategic. We use this structure to examine, through simulation, how fully articulated a strategy or set of policy choices must be achieve a high level of performance and how feasible it is to offset past strategic mistakes through tactical adjustments (instead of alignment). Our analysis highlights the role of asymmetry in the interaction of strategic choices and in particular the degree to which choices vary in terms of being influential, dependent, or autonomous from other choices.

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj
The Thought Leader Interview from strategy+business issue 50, February 2008

If you are a corporate decision maker, the clearest and simplest strategy is often remarkably appealing. Like Alexander the Great at the Gordian knot, you need only apply the right analysis, and ambiguous problems will swiftly cleave, the solution falling at your feet. When the problem is "globalization" - or, in business, how best to enter emerging markets - the most popular simple solution is summed up by the title of the bestseller by New York Times columnist Thomas L...

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj.
"The Globalization of Business Education: Through the Lens of Semiglobalization."
Journal of Management Development, 2008, No. 4.

Business schools have, in recent years, made significant commitments to globalizing what they teach. There is nonetheless a general sense that rhetoric in this regard has outpaced reality. For instance, of more than 150 deans and directors-general of business schools assembled by the European Foundation for Management Development, less than 5 percent thought that business schools were doing an adequate job in this regard[1]...

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj.
"Reconceptualizing International Strategy and Organization"
Strategic Organization, 2008, No. 2.

Relatively little gets written about international strategy. According to one survey, 6 percent of the articles published in the top 20 academic management journals in 1996-2000 had specifically international content and, of that subset, 6 percent focused on the strategies and policies of multinationals (MNCs). The author of the survey concluded that: 'Other than strategic alliances ...

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj.
"Globalization Is an Option Not an Imperative."
Ivey Business Journal, January-February 2008.

Pankaj Ghemawat is the Jaime and Josefina Chua Tiampo Professor of Business Administration, Harvard Business School. He is the author of Redefining Global Strategy: Crossing Borders in a World Where Differences Still Matter, Harvard Business School Press (November, 2007). Contrary to popular opinion, the world is not flat. In fact, as this author writes, a company must understand that there are differences ...

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj.
"Why the World Isn't Flat."
Foreign Policy, no. 159 (March/April 2007): 54-60.

The article discusses what the author sees as a misperception that globalization has made national boundaries nearly obsolete. Statistics are cited that over 90% of phone calls, Internet traffic, and investment is local. The author contends global interconnectedness and integration have barely occurred, and globalization's future is fragile. Cross-border mergers are running up against protectionism, and local economic stagnation may lead to a reversal of globalization that may persist for decades.

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj, and Cassiman, Bruno.
Introduction to the Special Issue on Strategic Dynamics 
Management Science 53, no. 4, Special Issue on Strategic Dynamics (2007): 529-536.

This introductory essay connects the various contributions included in the special issue on strategic dynamics and contrasts them with the static analyses that predominate in the strategy field. In addition to highlighting a variety of methodological approaches, the contributions shed substantive light on strategic dynamics at the value system and industry and firm levels. Taken together, they also suggest some broad directions for further work aimed at making dynamics a more important part of the future of the field of strategy.

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj.
Business, Society, and the 'Wal-Mart Effect.'
Academy of Management Perspectives 20, no. 3 (2006): 41-43.
 


The author reflects on Charles Fishman's book "The Wal-Mart Effect" and its assessment of Wal-Mart's effect on society. He argues that scepticism should be applied to other statistics that have been thrown around regarding Wal-Mart's alleged negative externalities. He acknowledges that Wal-Mart expands the size of the economic pie available to society. He points out the limitation of efficiency and distributional arguments against Wal-Mart.

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj, and Fariborz Ghadar.
"Global Integration? Global Concentration."
Industrial and Corporate Change
15 (August 2006): 595-623.
There is a widespread belief that increases in the cross-border integration of markets are associated with increases in global concentration along various dimensions. This article reviews the available evidence and presents new data, indicating that increasing global integration has not been accompanied by general increases in four types of global concentration measures: industry seller concentration, cross-industry superconcentration, national/regional hegemony, and geographic concentration. The article also uses the automobile industry to illustrate a bias toward believing concentration is increasing even when it is not and to discuss possible reasons.

> Read more     > Share this
Academic Journals

Casadesus-Masanell, Ramon, and Pankaj Ghemawat.
"Dynamic Mixed Duopoly: A Model Motivated by Linux vs. Windows."
Management Science 52, no. 7 (July 2006): 1072-1084.
This paper analyzes a dynamic mixed duopoly in which a profit-maximizing competitor interacts with a competitor that prices at zero (or marginal cost), with the cumulation of output affecting their relative positions over time. The modeling effort is motivated by interactions between Linux, an open source operating system, and Microsoft's Windows and consequently emphasizes demand-side learning effects that generate dynamic scale economies (or network externalities). Analytical characterizations of the equilibrium under such conditions are offered, and some comparative static and welfare effects are examined.

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj, and Catherine Mary Thomas.
"Strategic Interaction across Countries and Multinational Agglomeration: An Application to the Cement Industry."
Paper Submitted to
Management Science, 2006
Agglomeration in FDI is typically attributed to location-specific characteristics such as natural resources advantages or production related spillovers between multinational firms. The increasing collocation of the largest global firms in the cement industry since the 1980s is not easily attributed to either of these explanations. Theories of multimarket contact is used to test whether strategic interaction across national markets has influenced the successive market entry decisions generating the observed agglomeration. We establish that there is non-random agglomeration of the six largest cement firms and show that pre-existing cross-market interaction with current incumbents in a market helps predict the identity of the next firm to enter, at all levels of multimarket contact. The association is not due to strategic convergence or mimicry of recent entry events and cannot be explained by production-side effects. The findings are consistent with multimarket contact models where collocation allows firms to sustain higher prices in all markets and is also supported by evidence of an association between global firm market share and local cement price. The paper suggests that pricing spillovers can serve as an alternative motivation for FDI agglomeration.

> Read more     > Share this
Academic Journals

Ricart, Joan Enric, Michael J. Enright, Pankaj Ghemawat, Stuart Hart, and Tarun Khanna.
"New Frontiers in International Strategy."
Journal of International Business Studies
35, no. 3 (May 2004).
This paper studies a new frontier in the understanding of International Strategy (IS). We propose the analogy of the ecology of firms and places as a way to emphasize that the real problem is the colocation of different places with different types of firms. We offer four different perspectives. First, differences across countries must be addressed with integrative frameworks able to represent the multidimensionality of 'semiglobalization', or intermediate states between total localization and total integration. Second, differences in the development of intermediary markets in a particular place influence firm positioning and industry structure in that place, but their impact also crosses different places, and it is endogenous to the ecology of places and firms in a systemic, integrative way that makes simplifications extremely risky in the design of competitive strategy in an international context. Third, places, firms, and strategies form a complex ecology that can be studied with a framework focused in understanding the geography-strategy link that incorporates different levels of analysis, new economic actors, and a set of primitives. Finally, firms around the ecology of places face the challenge of developing strategies and business models to serve the majority of humanity today excluded from world trade. It is a fundamentally different way to think about the ecology of places and firms.

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj.
"Semiglobalization and International Business Strategy."
Journal of International Business Studies
34, no. 2 (March 2003): 138-152.
If markets were either completely isolated by or integrated across borders, there would be little room for international business strategy to have content distinctive from 'mainstream' strategy. But a review of the economic evidence about the international integration of markets indicates that we fall in between these extremes, into a state of incomplete cross-border integration that I refer to as semiglobalization. Semiglobalization calls attention to the critical role of location-specificity in the prospects of distinctive content for international business strategy relative to mainstream business and corporate strategy. In addition, it flags factors/products subject to location-specificity as being salient from the perspective of international business. Finally, it highlights the scope for strategies that strive to capitalize on the (large) residual barriers to cross-border integration, as well as those that simply try to cope with them.

> Read more     > Share this
Academic Journals

Esty, Benjamin C., and Pankaj Ghemawat.
"Airbus vs. Boeing in Superjumbos: A Case of Failed Preemption."
Harvard Business School Working Paper, No. 02-061, 2002.
This paper looks at competitive interactions between Airbus and Boeing in very large aircraft. It concludes that Boeing attempted to pre-empt Airbus in introducing a new product in this space but failed to do so because of the incredibility, given the assumption of value maximization, of self-cannibalization. A theoretical model is used to illustrate this credibility constraint, and an assortment of evidence - involving pro forma financial valuations, product market data (on prices and quantities), capital market reactions to key events, and qualitative information on Boeing's organizational structure and recent changes to it - is assembled to support the hypothesis that the constraint on self-cannibalization ultimately proved decisive.

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj.
"Competition Among Management Paradigms: An Economic Analysis."
Harvard Business School Working Paper, No. 01-011, 2000.
This is a lively debate about essentiality vs. excess in the proposal and development of new ideas. This paper addresses this issue analytically: it uses a stylized theoretical model to show that even if choices concerning the development or use of new management paradigms are privately efficient, the social efficiency of the resultant equilibrium is far from assured. On the supply side, private incentives to invest in developing new paradigms exceed expected social gains. An on the demand side, decentralized choices by very many users will fail to internalize the intertemporal externality associated with cumulative knowledge development. Even worse, the two mechanisms, while distinct, can feed on each other.

> Read more     > Share this
Academic Journals

Ghemawat, P., and Murali Patibandla.
"India's Exports Since the Reforms: Three Analytic Industry Studies."
In
India's Economic Reforms, edited by Jeffrey Sachs and Ashustosh Varshney
Oxford University Press, 1999.

Our analysis of markets, competitors and suppliers in three key Indian export industries - diamonds, garments, and software - sheds light on the effects of India's recent economic reforms on export competitiveness. It also calls attention to the imperative to upgrade in international competition. And finally, it affords some insight into the process of such upgrading in the context of a relatively poor country. Our somewhat unexpected inferences about demand conditions and related and supporting industries suggest the following testable hypothesis: internationally competitive industries from poor countries will tend to have a standalone character, at least intially. That is, they will be relatively detached from both domestic demand and domestic related and supporting industries.

> Read more     > Share this
Academic Journals

del Sol, Patricio, and Pankaj Ghemawat.
"Strategic Valuation of Investment and Disinvestment under Competition."
Interfaces
29, no. 6 (November/December 1999): 42-56.
The most serious problem with the widely used discounted-cash-flow (DCF) methods of investment valuations is that they are commonly applied without explicit regard to the competition. As a result, the prescriptions they afford are often inconsistent with those given by competitive strategy frameworks. To remedy this, we show how such frameworks can be integrated with DCF methods to value investments (and disinvestments) in competitive and uncertain contexts. We recommend that the DCF analysis be carried out within a framework that includes the following three analytical steps: positioning, which focuses on competitive dynamics; sustainability, which focuses on competitive dynamics; and flexibility, which focuses on options to revise the initial investment plan in the face of uncertainty. Valuators using this framework will reduce the likelihood that the DCF analysis misses relevant competitive-strategy considerations. Firms that have used this framework for positioning, sustainability, and flexibility have shaped and clarified their choices, solving apparent inconsistencies between DCF results and the competitive-strategy argument.

> Read more     > Share this
Academic Journals

Ghemawat, P., and R. E. Kennedy.
"Competitive Shocks and Industrial Structure: The Case of Polish Manufacturing."
International Journal of Industrial Organization
17 (August 1999): 847-867.
A large number of countries have recently experienced competitive shocks: sudden increases in the role that market forces play in determining the evolution of various industries. In this paper, we study the implications of Poland's competitive shock for three elements of the structure of that country's manufacturing sector: entry, concentration, and foreign presence. Our analysis underlines the importance of explicitly identifying the specific distortions built into initial (pre-shock) industrial structure and lags in their adjustments to more competitive conditions.

> Read more     > Share this
Academic Journals

Ghemawat, P., and Tarun Khanna.
"The Nature of Diversified Business Groups: A Research Design and Two Case Studies."
Journal of Industrial Economics
46, no. 1 (March 1998): 35-61.
Diversified business groups dominate the private sectors of most of the world's economies. Several of these economies have undergone sudden policy changes that significantly increase domestic competitive intensity. We demonstrate how the changes in corporate scope that accompany such "competitive shocks" can be used to weigh the importance of different explanations for the existence of diversified business groups. We illustrate our reasoning by studying the restructuring of two of India's largest business groups following a comprehensive post-1991 package of policy reforms. The case studies also elucidate aspects of the restructuring process that should inform larger-sample empirical analyses.

> Read more     > Share this
Academic Journals

Ghemawat, P., and A. M. McGahan.
"Order Backlogs and Strategic Pricing: The Case of the U.S. Large Turbine Generator Industry."
Strategic Management Journal 19, no. 3 (March 1998): 255-268.
Illustrates the usefulness of game theory for strategic management through theoretical and empirical analysis of price competition in the presence of production backlogs. Game-theoretic analysis predicts a different relationship between relative prices and backlog levels than does analysis that ignores the sorts of interactive considerations emphasized by game theory. Empirical analysis based on data for the US market for large turbine generators between 1951 and 1963 corroborates the game-theoretic prediction.

> Read more     > Share this
Academic Journals

Ghemawat, P., and Patricio del Sol.
"Commitment vs. Flexibility."
California Management Review
40, no. 4 (summer 1998): 26-42.


This article unbundles the relation between commitment and flexibility by distinguishing between firm-specific and usage-specific resources. This distinction turns out to be valuable because firm-specificity does not always imply (nor is it always implied by) usage-specificity. Firm-specific resources are more strategic than usage-specific resources. More broadly, the distinction between these two kinds of specificity helps explain why the tension between commitment and flexibility can easily be overdone: the two aren't always negative measures of each other.

> Read more     > Share this
Academic Journals

Ghemawat, P., R. E. Kennedy, and Tarun Khanna.
"Competitive Policy Shocks and Strategic Management."
In
Managing Strategically in an Interconnected World, edited by Michael A. Hitt, Joan E. Ricart i Costa and Robert D. Nixon. Chichester: John Wiley & Sons, 1998.
This article puts forth ten geopolitical developments since the 1970s to show that they have in common issues such as: competitive forces, internal and external, and have become more important in determining patterns of wealth creation and distribution. In fact, we are living through an unprecedented experiment in social reengineering - an experiment that involves harnessing the power of competition through sudden, significant policy changes that we refer to as competitive policy shocks. We define competitive policy shocks as policy changes that significantly increase the magnitude of competitive forces' influence on economic outcomes - or the speed with which the influence is exerted. This article highlights the need for additional micro-analytical work on the topic of competitive shocks by arguing that a better understanding of important macrophenomena - such as the new global competitive map, new ideas for the new world order, and the European Monetary Union - requires reconsideration of the fundamentals of strategic management.

> Read more     > Share this
Academic Journals

Ghemawat, P.
"Competitive Advantage and Internal Organization: Nucor Revisited."
Journal of Economics & Management Strategy
3, no. 4 (winter 1995).
Why does the cost of organizing particular activities differ across competitors? This article explores in detail the organization of Nucor, a steel minimill that has sustained a significant cost advantage over its competitors. Nucor's past success highlights the complementarities among organizational policies and competitive advantage as well as barriers to the imitation of apparently superior organizational arrangements. The case study also suggests avenues for additional empirical and theoretical research.

> Read more     > Share this
Academic Journals

McGahan, A. M., and P. Ghemawat.
"Competition to Retain Customers."
Marketing Science
13 (spring 1994): 165-176.
This paper contains theoretical and empirical analysis of competition to retain customers. A formal game-theoretic model suggests that large firms are likely to exhibit greater customer retention rates than their smaller rivals in equilibrium even when their (common) customer retention technology does not exhibit increasing returns to scale. This hypothesis is corroborated by an empirical analysis of competition in ordinary life insurance.

> Read more     > Share this
Academic Journals

Ghemawat, P.
"The Short Run versus the Long Run in Cross-sectional IO."
In
Strategic Groups, Strategic Moves, and Performance, edited by H. Daems and H. Thomas. Pergamon Press PLC, 1994.
Can cross-sectional research in industrial organization (IO) produce anything useful? Researchers' revealed preferences suggest that the pendulum of opinion on this point was close to "YES" around 1970, but has since swung much closer to "NO". The first argument in this chapter is that much of the swing can be explained by cross-sectional researchers' tenacity in interpreting inter-industry differences at one point in time as differences in industries' long-run equilibrium positions: most of the objections that have recently been stressed to cross-sectional work can be defused by shifting form this long-run interpretation to a short-run one. The chapter's second argument is that the short-run perspective yields something that the long-run perspective has so far been unable to: a simple game-theoretic reason for expecting to observe a positive association, in cross-section, between concentration and margins at the industry level and share and margins in the intra-industry level. The final point of this chapter is that the short-run interpretation has several distinct implications for future inter-industry research.

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj.
"The Risk of Not Investing in a Recession."
Sloan Management Review
34 (winter 1993): 51-58.
At the bottom of the business cycle, companies seem to overemphasize the financial risk of investing at the expense of the competitive risk of not investing. The financial risk of investing is the failure to achieve satisfactory financial returns from an investment, while competitive risk is the failure to retain a satisfactory competitive position for lack of investment. A balance must be struck between the types of errors implicit in these 2 types of risk: the error of pursuing too many unprofitable investment opportunities as opposed to the error of passing up too many potentially profitable ones. Capital budgeting is an arrangement which companies have developed to help them deal with financial risk. To address competitive risk, managers have turned to strategic planning. An examination of the US' loss of leadership in the semiconductor industry lead to several recommendations, including: 1. Think long term. 2. Focus on competitive position. 3. Recognize the moving baseline. Investing to create and sustain a competitive advantage is the single best recipe for dealing with recessions and other challenges if the advantage can be achieved cost effectively.

> Read more     > Share this
Academic Journals

Ghemawat, P., and J. E. Ricart i Costa.
"The Organizational Tension between Static and Dynamic Efficiency."
Strategic Management Journal
14 (winter 1993).
Efficiency has been defined in at least 2 different ways: in terms of the refinement of existing products, processes or capabilities (static efficiency) or the development of new ones (dynamic efficiency). A study analyzes the tradeoff between these 2 forms of efficiency. It is shown that there is a tendency toward extremes and that the irreversibility of efficiency orientations tends to tip the balance to be struck between static and dynamic efficiency toward the latter. The analysis also advances hypotheses about the industry, business, and corporate factors that mediate between the choice of a particular efficiency orientation and organizational performance.

> Read more     > Share this
Academic Journals

Ghemawat, P.
"Commitment to a Process Innovation: Nucor, USX, and Thin-slab Casting."
Journal of Economics & Management Strategy
2, no. 1 (spring 1993): 135-161.
This paper studies the order of adoption of a process innovation, thin-slab casting, by U.S. steelmakers. A game-theoretic model of technology adoption with capacity constraints indicates that incumbents are likely to trail entrants in adopting process technologies that reduce the minimal scale required to compete. Evidence from the case study also indicates, however, that the sorts of interactive effects emphasized by game-theoretic models may be dominated by the effects of competitors' heterogeneous precommitments.

> Read more     > Share this
Academic Journals

Ghemawat, P.
"Commitment."
The McKinsey Quarterly
(1992): 121-137.
An interview with Pankaj Ghemawat of Havard Business School on new directions in strategic thinking. By Partha P. Bose, with commentary by Richard Foster, Wilhelm Rall, and John Stuckey.

Companies often make strategic decisions without really looking at the difficulty of reversing them or at the constraints they impose on future options. It is this tendency for the effects of some strategic choices to persist over time that Pankaj Ghemawat refers to as commitment. In this interview, Ghemawat talks about how commitment manifests itself and how it needs to be reckoned with in critical decisions about, for example, market entry or exit, horizontal or vertical integration, and capacity expansion.

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj.
"Market Incumbency and Technological Inertia."
Marketing Science
10 (spring 1991): 161-171.
This paper uses a case study and a simple mathematical model to study the link between the incumbency and incentives to innovate and introduce drastically new products. It identifies the conditions under which fears of self-cannibalization are particularly likely to lead incumbents to soft-pedal such innovations.

> Read more     > Share this
Academic Journals

Ghemawat, P.
"The Snowball Effect."
International Journal of Industrial Organization
8 (September 1990): 335-351.
Many economists think that dominant positions unprotected by strategic or operating advantages will tend to decay. I demonstrate that the intuition is flawed by devising a model of noncooperative duopoly in which the initially larger competitor monopolizes all investment opportunities--even though it is no more efficient than its smaller rival--as part of an effort to push up output prices. I also present an apparent example of this mechanism at work and discuss the implications for public policy.

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj, and B. Nalebuff.
"The Devolution of Declining Industries."
Quarterly Journal of Economics
105 (February 1990): 168-186.
In declining industries, capacity must be reduced in order to restore profitability. Who bears this burden? Where production is all or nothing, there is a unique subgame-perfect equilibrium: the largest firms exit first (P. Ghemawat and B. Nalebuff [1985]). In this paper, firms continuously adjust capacity. Again, there is a unique subgame-perfect equilibrium. All else equal, large firms reduce capacity first and continue to do so until they shrink to the size of their formerly smaller rivals. Intuitively, bigger firms have lower marginal revenue and correspondingly greater incentives to reduce capacity. This prediction is supported by empirical findings.

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj.
"Investment in Lumpy Capacity."
Journal of Economic Behavior and Organization
8, no. 2 (June 1987): 265-277.
Investment in lumpy capacity is usually fraught with uncertainty. Divergent opinions about the future can then lead to adverse selection: optimistic competitions tend to be the ones that expand. Few firms correct this bias formally. They rely, instead, on payback criteria, portfolio planning, risk-sharing and self-restraint.

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj, and A. Michael Spence.
"Learning Curve Spillovers and Market Performance."
Supplement.
Quarterly Journal of Economics 100, no. 5 (January 1985): 839-852.
This paper examines the effect of learning curve spillovers on market structure and performance. We derive a simple characterization of the "true" marginal cost for a broad class of learning curves, and use calculated examples to show that spillovers substantially undercut the barriers to entry erected by proprietary learning. Unlike the case of cost-reducing research and development, spillovers also tend to improve market performance; the increased efficiency of the industry-wide reduction process typically outweighs the decrease in firms' incentives to reduce costs by expanding output.

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj.
"Capacity Expansion in the Titanium Dioxide Industry."
The Journal of Industrial Economics
33, no. 2 (December 1984): 145-163.
(Reprinted in
The Economics of Business Strategy, edited by John Kay. The International Library of Critical Writings in Economics. Cheltenham: Edward Elgar Publishing Limited, 2003.)
The article focuses on the hybrid approach used by the article author to study the capacity expansion process in the capital-intensive titaniumdioxide industry in the U.S. Titaniumdioxide is a commodity chemical used in paints, paper and plastics. The author developed a theoretical model that leads to the conclusion that where costs differ significantly across firms, the lowest cost producer will tend to preempt the others in adding new capacity. Another prediction of the model is that licensing is unlikely to be profitable if preemption occurs. In context of these theoretical predictions, the author also examined capacity expansion in the U.S. titaniumdioxide industry. Capacity is added in increments of one unit. The author assumes that capacity expansion has to be entirely self-financed. The financial constraints may retard capacity expansion, but they never accelerate it. Second, the leader will not always be able to preempt. The author also highlighted E. I. du Pont de Nemours & Co. Du Pont's strategy in titaniumdioxide about the risks concerning preemption.

> Read more     > Share this
Academic Journals

Caves, Richard E., Michael Fortunato, and Pankaj Ghemawat.
"The Decline of Dominant Firms, 1905-1929."
Quarterly Journal of Economics
99, no. 3 (August 1984): 523-546.
The theory of dynamic limit pricing implies that a firm maximizes its wealth by gradually sacrificing this dominant market share. We extend the theory by simulation methods to show that higher structural entry barriers generally result in both higher profits and a slower sacrifice of market share. The model is applied to 42 once-dominant firms in U.S. manufacturing to explain jointly the declines of their market shares and the profit rates earned during 1905-1929. The statistical results agree substantially with the hypothesis that these firms behaved consistently with maximizing their wealth through dynamic limit pricing.

> Read more     > Share this
Academic Journals

"Competition and Business Strategy in Historical Perspective."
Business History Review, 76, no.1, 2002.

A review of theories of competition and business strategy over the last half-century reveals a fairly linear development of early work by academics and consultants into efforts to understand the determinants of industry profitability and competitive position and, more recently, to add a time or historical dimension to the analysis. The possible implications of the emergence of a market for such ideas are also discussed.
The author has drawn upon an earlier draft prepared by Dr. Peter Botticelli under his supervision and has also benefited from helpful comments by Walter A. Friedman, Thomas K. McCraw, and three referees.

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj and Richard E. Caves
"Identifying Mobility Barriers."

Strategic Management Journal, no.13 (January 1992):1-12.
This paper uses a new (PIMS) research data base to identify the mobility barriers–the factors associated with sustained intraindustry profit differentials–in a cross-section of industries. The exercise suggests that differentiation-related factors play more of a role in generating intraindustry profit differentials than do cost-related ones. It also indicates that differentiation-related advantages tend to be absorbed into fatter margins and (in some instances) larger maket shares, while cost-related advantages are taken primarily in the form of increases in market share.

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj and Richard E. Caves
"Capital Commitment and Profitability: An Empirical Investigation"

Oxford Economic Papers, Supplement (1986):94-110.
One novel element of the 'new industrial economics' is its emphasis on the dynamic aspects of competition. Dynamization has forced a clear distinction between ongoing costs and sunk costs; concurrently, there has been a upsurge of theoretical interest in how the opportunity to sink costs might affect market conduct. Relatively few researchers, however, have attempted to trace the impact of sunk costs all the way through to market performance. We aim to accomplish part of that task here by examining how sunkenness influences profitability.

> Read more     > Share this
Academic Journals

Ghemawat, Pankaj and Barry Nalebuff
"Exit."
Rand Journal of Economics, no. 2 (1985): 184-194.
In a declining industry, shrinking demand creates pressure for capacity to be reduced. Who exits first? There´s a unique perfect equilibrium for firms with asymmetric market shares and identical unique costs in which survivability is inversely related to size: the largest firm is the first to leave and the smallest firm the last. The intuitive reason is that the small firm can profitably “hang on” longer than a larger firm. Sufficiently strong scale economics can, by conferring costs advantages on larger firms, reverse this outcome. Numerical examples, however, suggest that the required cost advantage for larger firms to outlast smaller ones may be surprisingly substantial.

> Read more     > Share this