FormalApproachestoManagementTheory

RonAdner(Dartmouth)
LszlPlos(Durham)
MichaelRyall(Melbourne)
OlavSorenson(Toronto)

AperusalofthepagesoftheAcademyofManagementReview(AMR)overthepast
decademightleadonetoconcludethatformalmethodshavenoplaceinthe
developmentofmanagementtheory.From1998to2007,forexample,wecould
onlyfindonearticleinthisjournalthatactuallyusedaformalapproacheither
analyticmethods,asimulationorformallogictobuilditspropositions.One
thereforemightnaturallywonderwhyformalapproacheshavenotbeenmore
prevalentinmanagementresearch.
Onepossibilityisthatformalmethodshavelittletocontributetomanagement
theory.Thatexplanationseemsunlikelytous(andnotjustbecausethearticlesin
thisissueserveasexamplesthatstronglycontradictit).Considerthedisciplineson
whichmanagementtheorymostcommonlydraws:economicsandsociology.Nearly
everytheoreticalarticleoverthelastdecadethatappearedintheAmerican
EconomicReviewusedformalmethods(almostexclusivelyanalyticmodels).Evenin
sociology,thelasttenyearsoftheAmericanJournalofSociology(AJS)featuredat
leasttenarticlesthatbuilttheoryusingformalapproaches(dividedfairlyevenly
acrossthemethodsfeaturedinthisspecialtopicforum).GiventhatAJSpublishesfar
fewerarticlesperyearthanAMRandthatmorethanhalfofthosearticlesare
empirical,theratiooftentoonewouldactuallyappeartounderstatetheextentto
whichsociologyrelativetomanagementfavorstheuseofformalmethods.Seeingas
closelyrelatedsocialscienceshavegainedgreatlyfromformalapproaches,one
mightexpectthatmanagementtheorycouldbenefitsimilarly.

Asecondpossibilityisthatmanagementscholarshavenotinvestedinacquiringthe
skillsrequiredtouseformalmethods.Thatexplanationtooappearstofallshort,
especiallywhenoneconsiderstheresponsetothecallforthisspecialtopicforum.
Wereceivedatotalof75submissions,awealthofriches.Almosteveryoneofthese
submissionsmoreovercamefromsomeonesittinginabusinessschoolandmore
than90%oftheauthorsofthesemanuscriptsholddoctoraldegreesfrombusiness
schools(ratherthan,say,fromeconomicsdepartments).Wealsobenefitedfromthe
adviceofanextremelyhighqualitypoolofreviewers,manyofwhomhadnever
beforebeeninvolvedwithAMR.Thisoverwhelmingresponsesurprisedevenus,the
SpecialTopicForumguesteditors.Butitnonethelessrevealsthatalargesegmentof
managementscholarshavethetrainingtopursueformalapproachestobuilding
theory,andthusascarcityofskillscannotaccountfortheinfrequentusageofthese
toolsinmanagementresearch.
Thoughitfallsbeyondthescopeofthisintroductoryessaytodetermineprecisely
thereasonsforthepaucityofformaltheorybuildinginmanagementresearch,we
speculatethatatleasttwofactorscomeintoplay.First,wesuspectthatreaders,
reviewersandeditorsmaynotfullyappreciatetherelativeadvantagesofformal
versusinformalapproaches.Theymaythereforefeelthattheinvestmentinvolved
inreadingandunderstandingtheseformalapproachesistoodear.Second,those
thatdouseformalmethodsmaynotconsiderAMRasapotentialoutletsimply
becauseithaspublishedsofewarticlesusingthesemethodsinthepast.Atleast
partlyinsupportofthissecondpoint,wewouldnotethatManagementScienceand
OrganizationScienceregularlypublishpapersthatuseanalyticmethods,
simulationsandformallogictobuildmanagementtheory.
Withthisspecialtopicforum,wehopetostimulateboththedemandforandthe
supplyofmanagementresearchusingformalapproaches.Bydescribingtheir
advantagesandbydemonstratingthemthroughexample,wehopethatreadersand
reviewerswillbecomemoreattunedtothevalueofresearchthatadoptsaformal
approachtotheorybuilding.And,bydemonstratingthatAMRhasaninterestin

publishingthesepapers,wehopetoencouragemanagementresearcherstouse
themmoreoften.
Thebenefitsofbuildingtheoryformally
Formalapproachestotheorybuildingcomeinthreemainflavors,definedprimarily
bythemethodsusedforarticulatingassumptionsandthenmovingfromthose
assumptionstopropositions.Inmathematicalmodels,theresearcherbeginsby
outliningasetofmathematicalconditionsthatdescribethephenomenonofinterest
andthenusesmathematicalproofstodemonstratepropositionsthatfollowfrom
them.Insimulations(alsoknownascomputationalmodels),onesimilarlywritesa
setofconditionsthatrepresenttheassumptionsofthemodel,butinsteadof
validatingtheirimplicationsviaanalyticalproofs,onegeneratesoutcomes
computationallyacrossrangesofvaluesfortheparametersthatdeterminethose
outcomes.Formallogic,meanwhile,translatesnaturallanguageassumptionsinto
statementsinsymboliclogicandthenusesitsownmethodsforprovingthe
propositionsimpliedbythosestatements.Althoughtheseapproachesvary
somewhatintheirstrengthsandweaknessesforaddressingparticulartheoretical
questions,theynonethelessshareatleastthreestrengthsrelativetoverbal
theorizing(thenaturallanguageapproachmostcommonlypursuedinmanagement
research):(1)Precisionandtransparency;(2)Logicalconsistency;and(3)An
abilitytoidentifyunanticipatedimplications.
Precisionandtransparency:Debatesoverthemeaningofcertaintermsinthe
managementliteraturehavebecomenotorious.Whatconstitutesaresourceinthe
resourcebasedview?Whatisadynamiccapability?Whatdoesitmeantolearn,
ortobeboundedlyrational?Althoughthesedisputesoccasionallyconverge
towardoneaccepteddefinition,theycanjustaseasilycontinuewithoutany
apparentresolutiondespitedecadesofdebate.Management,moreover,isnotalone
inthissituation;allofthesocialscienceshavehadvigorous(andfrequently
unresolved)argumentsoverthemeaningsofkeyconcepts.

Inlargepart,thesedebatesovertermsandtheapplicabilityoftheoriesreflectthe
imprecisionofnaturallanguages,suchasEnglish.Naturallanguageshaveevolved
overtimeandcontinuetochange.Foravarietyofreasons,many,ifnotmost,words
innaturallanguagesthereforehavemultiplemeanings.Thelistenerorreader
attemptstoinferwhichoneofthesemeaningsthecommunicatorintendedby
consideringthecontextinwhichtheyfindit.Butthisprocessleavesampleroomfor
ambiguityandsubjectiveinterpretation.Onelistenerorreadermightdecidethata
phrasemeanssomethingverydifferentfromwhatanotheronedoes.
Althoughonecanattempttocommunicateideasclearlythroughnaturallanguages,
theveryflexibilityandinstabilityoftheselanguagesmakesdoingsoanuphillbattle.
Bycontrast,mathematicsandformallogichavebeendesignedwithprecisionin
mind.Becauseofthisprecision,translatinganaturallanguageideaintoaformal,
symbolicrepresentationcanbechallenging.Whereasonecanstateanassumption
orapropositioninnaturallanguagewithoutevenfullyunderstandingoneselfthe
meaningofthestatement,formallanguagesrequirethatthecommunicator
understandstheconceptdeeply.Infact,wewouldassertthatmuchofthevalueof
usingformalmethodsstemsfromthefactthatitforcestheresearchersusingthem
tothinkthoroughlythroughtheconceptsthattheyinvoke.Oncethetheoryhasbeen
translatedintoaformallanguage,everyonewhoseesitknowsexactlywhatit
means.Thoughtheinformalinterpretationofthetermsoftheformaltheorymight
varyfromreadertoreader,theformalcharacterizationensuresthatallofthese
interpretationshaveacommoncore.
Thatprecisionhasatleasttwoadvantagesinmanagementresearch.First,it
facilitatestheaccretionofknowledge.Ifdifferentresearchersusethesametermto
refertoseveraldifferentconceptswhentheydeveloptheoreticalpropositions,then
itbecomesexceedinglydifficulttounderstandwhetherandhowtheirarguments
interact.Sometimes,researchersduplicateeffortbyforwardingfundamentally
equivalentideasundernewnames.Atothertimes,progresscomestoahaltwhen
researchersappeartoarriveatcontradictoryconclusions(perhapsbecausethey
usethesamenaturallanguagetermsbutimbuethemwithdifferentmeanings).

Second,empiricalresearcherscanmoreeasilyandaccuratelytesttheoretical
propositionswhenlittleambiguitysurroundsthemeaningofandhencethe
appropriatemeasurementofthecentralconcepts.Progressinempiricalresearch
comesprimarilyfromtheabilitytofalsifytheories.Butwithoutprecise
propositions,oneoftencannotsaywhetheranempiricaltestrefutesatheoryor
whetheritsimplyfailedtooperationalizeitadequately.
Logicalconsistency:Nooneintentionallyforwardsalogicallyinconsistentargument,
butitisnonethelesssurprisinglyeasytodo.Forexample,onemightnotrecognize
animplicitassumptionandthereforefailtoidentifysomecriticalcondition
necessaryforthetheorytohold.Or,onemightmissthefactthattwo(ormore)
assumptionsactinoppositedirections.Or,lesscrucially,onemightsimplyimpose
anunnecessary,possiblyredundant,assumption.Astheoriesbecomeincreasingly
involvedandincorporatemoreandmorefactors,theopportunitiesforerrorsof
omissionandcommissioninevitablyincrease.
Buteveniftheassumptionshavebeencorrectlyspecifiedandstated,peoplestill
regularlycometothewrongconclusionsabouttheimplicationsofthose
assumptions.Theproblemisthatwhenrelyingonverbaltheorizing,peoplerarely
thinklogicallythrougheachstageofthechainofanargument;rather,theyrelyon
theirintuitionstoidentifytheimplications.Ourintuitions,however,oftenprove
wrong.ConsidertheMontyHallproblem(Selvin,1975).Acontestantonagame
showcanchoosefromcurtainsA,BandC.Twoofthesecurtainshavegoatsbehind
themandonehasacar;ifhepickstheonewiththecar,hewinsit.Letsassumethat
heinitiallychoosescurtainA.ThehostthenopenscurtainB,whichhasagoat
behindit,andasksthecontestantwhetherhewouldliketochooseadifferent
curtain.Shouldheswitch?Mostpeoplebelievethateachoftheremainingtwo
curtainshasa50%chanceofhavingthecarand,therefore,thatthecontestant
shouldbeindifferentbetweenstayingwithhisoriginalchoiceandshiftingtocurtain
C(GranbergandBrown,1999).Butmathematicsdemonstratesclearlythatthe
contestantshouldswitch.Infact,hisoriginalchoice,curtainA,hasonlyaonethird
chanceofhavingthecarbehindit,whilecurtainChasatwothirdsprobabilityof

beingthewinningcurtain(becausethehostintentionallychoosesacurtainthat
doesnothavethecarbehindit,therebyrevealinginformationabouttheother
option).Onecouldthereforeeasilyimaginethatsomeonedevelopinganatural
languagetheoryoftheMontyHallproblemmightpositanintuitivelyappealingbut
incorrectproposition.Moregenerally,researchersthatrelyentirelyonverbal
theorizinghavelittletopreventthemfromarrivingaterrantconclusions.
Allformalapproachessharetheadvantageofhavingtoolsavailableforensuring
logicalconsistency.Analyticmodelsandformallogicuseproofs.Simulations
meanwhilecalculatetheimplicationsofavarietyofscenariosnumerically.Inanyof
theseapproaches,researchersmustexplicateallofthenecessaryassumptions
because,withoutthem,onecouldnotderivetheresults.Redundantandsuperfluous
assumptionsmoreoverbecomerelativelyobviouswhenwritingproofs(though
thoseusingsimulationscannotspotthemsoeasily).Proofsandcomputational
methods,moreover,ensurethattheresultsdofollowfromtheassumptions.Inthe
MontyHallexample,onecouldhaveusedanyoftheseapproachestoarriveatthe
correctanswer.Theresearchermightmakeanerrorintheapplicationofthese
methods,but,becausetherulesareclearlydefined,readersandreviewersalikecan
easilyaudittheassumptionsandthechainsoflogicleadingtothepropositions.
Unanticipatedimplications:Theavailabilityofthesetoolshasanotheraddedbenefit:
onecanusethemtoderiveunanticipatedimplicationsoftheassumptions.Most
exercisesinverbaltheorizinginvolverecognizingarelationshipbetweentwo
factors,sayresourcesandprofitability,andthentryingtodetermineasetof
assumptionsthatwouldleadtosucharelationship.Inessence,onemoves
backwardsfrompropositionstoassumptions.Acleardisadvantageofthisapproach
isthatonecannotfindtheunexpected(thoughitmaylaterrearitsheadinempirical
researchtestingthesepropositions).Bycontrast,formalapproachescanhelpthe
researchertoidentifyeventhemostsurprisingandcounterintuitiveimplications
thatmightfollowfromasetofassumptions.

Consumersofresearchusingformalapproachesoftencannotfullyappreciatethis
abilitytoidentifyunanticipatedimplicationsfortworeasons.Insomecases,when
theseimplicationsclearlyruncountertoreality,theymayforcethetheoristto
revisittheinitialpremisesofthemodelandthereforetheymayappearonlyasan
intermediate(andunpublished)stageoftheresearch.Inothercases,bythetime
theyappearinprint,notonlyhavetheseimplicationsbeenderived,butalsothe
intuitionunderlyingthemhasbeenexplicatedandthereforetheresultsthough
originallysurprisingmayevenseemsomewhatobvious(thoughonlyin
retrospect).
Butthevalueofthisabilitytoexplicatemorecompletelytheimplicationsofasetof
assumptionscanbeseeninthebreadthofpropositionsderivedfromrelatively
simplemodels.Readersnewtoformalapproachesareoftensurprisedbythe
complexityofthebehaviorsthatemergefromrelativelyfewassumptions.
Simulationsofthebehaviorofflocksofbirds,herdsofanimalsandschoolsoffish,
forexample,havedemonstratedthataverysmallnumberofrules(asfewasthree)
cangeneraterealisticsimulationsofgroupsofanimalsinmotion(Reynolds,1987).
Inmanagementresearch,Postrel(thisissue)alsoillustratesthewiderangeof
implicationsthatonecanderivefromasmallsetofassumptions.
Beyondsimplygeneratingadditionalinterestingpropositions,thisabilitytoidentify
unintendedimplicationsalsoacceleratesprogressinunderstandingaphenomenon.
Additionalpropositionsofferempiricalresearchersmoretargets,more
opportunitiestofalsifythetheory.Ifthepropositionsfollowfromtheassumptions
andempiricalanalysisfalsifiesoneormoreofthesepropositions,thenitsuggests
thanoneormoreoftheassumptionsmustnotholdaswell.Researchersmustthen
revisittheirtheories.
Analyticalmodels,simulationsandformallogic
Despitetheseadvantages,eachapproachtoformaltheorybuildingisnotwithoutits
limitations.Theuseofmathematicalmethods,forexample,sometimesrequires
unappealingassumptions.Simulationshavethedisadvantageofonlybeingableto

provetheexistenceofarelationshipbetweenasetofinputsandanoutcome;they
cannotdeterminethenecessityofasetofconditions.Formallogic,meanwhile,does
notasreadilyaccommodatefunctionalformsofrelationshipsandthereforecannot
alwaysadjudicatebetweentheexpectedeffectsofcountervailingforces.
Eachoftheselimitationsneverthelessappliesonlytoaparticularformalapproach.
Thesetradeoffsthereforemightconstituteareasonforchoosingoneformalmethod
overanother,butnoneofthemsuggeststhatonewouldwanttoeschewformal
methodsaltogether.Althoughitisbeyondthescopeofthisintroductiontoreview
eachapproachindetail,letusexpandalittleontherelativestrengthsofeach.1
Analyticmodels:Someseeanalyticmodelsasthegoldstandardofformal
approaches.Thetranslationofassumptionsanddefinitionsintomathematical
statementsandthentheuseofproofstovalidatepropositionsmeanthatthese
methodsimposeastrictdisciplineonclarityandlogicalconsistency.Theuseof
mathematics,moreover,allowsonetomodeltheinteractionsofmany,many
movingpartspiecesofthemodelthatinfluenceitsbehaviorwiththe
confidencethatonesconclusionsdoindeedfollowfromonespremises.
Boththegreateststrengthandthegreatestlimitationofanalyticmethodsstemfrom
theneedtoproduceamodelwithanalyticallytractablesolutions.Onthepositive
side,mathematicalmethodsencouragethetheoristtodistillasituationtoits
essence.Consider,forexample,thePrisonersDilemma.Thisscenarioelegantly
capturestheproblemofshirkinginteamcooperation.Itdoesnotdescribeallofthe
complexityofareallifeencounter,butitdoescapturetheproblemsessential
features.Byabstractingawayfromthedetailsofaparticularcase,itprovidesdeep
insightintoanentireclassofsituations.Indeed,theartofanalyticanalysisappears
intheabilitytoidentify,toabstractandtomatchtoamathematicalapproachthe

1Forthosewhowishtodelvemoredeeplyintooneormoreoftheseapproaches,we

wouldrecommendHarrisonetal(2007)forsimulationandHannan,Plosand
Carroll(2007)forformallogic.Mathematicsincludessuchavastarrayof
approachesandtoolsthatwecannotrecommendanysinglesurvey.

essentialelementsofthesituationbeingmodeled.Butsometimesthedepictionofa
situationdoesnotfitwellwithanyanalyticalframework.Attemptstoforceitinto
onemaythereforeresultinatheorywithlittlefacevalidity.
Simulation:Insituationsthateludemathematicalmethods,simulationmayprovide
anattractivealternative.Beforemovingforward,weshouldnotethatalthough
simulationresearchsometimesreferstoparticularsetsofinputsasexperiments
andtheresultsoftheseexperimentsasdata,simulationisalmostalwaysan
exerciseintheorybuilding;itisnotempiricalresearch.
Simulationsrunthegamutfromthesimpletothecomplex.Theprimaryadvantage
ofthesecomputationalmodelsrelativetoanalyticmethodsisthattheyallowmuch
greaterflexibilityincertainsortsofassumptionsmadebythetheorist.Forexample,
simulationscanaccommodateanyfunctionalformthatonemightimaginelinking
two(ormore)variables.Butsimulationsalsofacetheirownconstraints.The
investigationofsomeclassesofproblemssuchasgameswithaninfinitenumber
ofperiodsremaincomputationallyintractableevenwithaccesstocolossal
computerpower.Whethermathematicalmethodsorsimulationoffersthe
preferableapproach,therefore,dependsontheproblem.
Relativetoanalyticmodels,simulationshaveatleasttwodisadvantages.First,
becausethemethoditselfimposesrelativelylessdisciplineonthetheorist,these
modelscanbecomesocomplexthattheirinnerworkingsendupbeingopaque.One
canstillobservehowoutcomesvarywithchangesintheinputs,buttheinteractions
becomesoconvolutedastopreventtheresearcherfrombeingabletodetermine
whytheserelationshipsexist.Whentheindividualcomponentsofthesimulationare
wellunderstood,however,evensuchhighlydetailedandcomplexsimulationscan
beuseful.Forexample,physicistsoftenbuildincrediblycomplicatedsimulationsto
determinetheexpectedbehavioroflargescalesystems.Theyunderstandthe
behaviorofeachcomponentforexample,amoleculeoranelementaryparticle
extremelywell,andtheyalsohavedetailedknowledgeofhowsmallnumbersof

thesecomponentsinteract,buttheymustnonethelessrelyonsimulationstopredict
thebehaviorofhundreds,thousands,millionsorevenbillionsofthesecomponents.
Second,simulationdoesnotconstituteaproof.Simulationssampleafinitethough
potentiallyverylargenumberofcasesfromaninfinitesetofpossibilities(atleast
whenthemodelincludescontinuousparameters).Onethereforecansaythatsome
specificsetofassumptionsleadstoaparticularoutcome,butonedoesnotknow
whetheranyofthoseassumptionsarenecessary,orwhethersomeunanalyzedset
ofassumptionsmightalsoprovesufficienttoyieldtheresults.Samplingthe
parameterspaceaswidelyandwithasfinearesolutionaspossiblecanhelptoallay
theseconcerns,butitdoesnotalleviatethem.
Inmanycases,theoristscancombinesimulationmethodswithanalytictechniques,
capturingalittlebitofthebestofbothapproaches.Onemight,forexample,builda
simplifiedmodelthatdoesnotincorporatealloftheinterestingfeaturesofa
phenomenonbutthatdoesfitwithintherestrictionsofsomemathematical
framework.Aftercharacterizingthatmodel,onemightthenexploitcomputational
methodstorelaxsomeoftheassumptionsortoextendthefeaturesofthemodel.
Suchanapproachnicelyexploitstheabilityofanalyticmethodstoidentifyboth
necessaryandsufficientconditions,whilestillallowingtheconsiderationofthose
casesthatstymieanalyticalanalysis(butthatremainamenabletosimulation).
Formallogic:Inmanyways,formallogicissimilartomathematicalmethods.Indeed,
mathematicsusesfirstorderlogic.Sincemanyoftheapplicationsofformallogicto
managementandorganizationsalsorelyonafirstorderlogic,suchasPli(this
issue),thesepapersdifferlittleintheirrelativestrengthsandlimitationsfrom
mathematicalmethods.
Thebiggestdifferencebetweenformallogicandbothanalyticandsimulation
methodsariseswhenresearchersselectordefinealternativelogics(i.e.otherthan
firstorderlogic).Inmanagementresearch,forexample,Hannan,PlosandCarroll
(2007)havedevelopedanonmonotoniclogic,aformallanguage,fortheory
building(foranexampleoftheapplicationofthislogic,seeKuilman,Vermuelenand

Li,thisissue).Thislogicincludesanumberofmodifiersandrelationshipsthatallow
theresearchertorepresentmoreaccuratelytheincompletenessofourempirical
understandingofaphenomenon.Forexample,itallowsquantifierslikenormally
andpresumablythatfirstorderlogiccannotaccommodate(anddefinesa
consistentsetofrulesfordealingwiththesequantifiers).Itthereforecanprovidea
morerealisticbasisfordevelopingandcombiningtheoryfragmentsthatdescribe
phenomenathatstillrequireagreatdealofempiricalexploration.
Althoughtheabilitytodevelopthelanguageusedtobuildtheorymightseemto
reducedramaticallythedisciplineimposedbyformalizationontheorists,logicians
havedevelopedastrictsetofrulesthatallformallanguagesshouldmeettoensure
theirprecisionandcompleteness.Allformallogicsthereforehavealltherigorof
mathematicalmethods,requiringpreciseassumptionsanddefinitionsandallowing
onetoprovepropositionsandtoidentifynecessaryandsufficientconditions.
Thoughformalmethodsprovidepowerfultoolsfordevelopingtheory,wewouldnot
claimthatverbaltheorizingthatis,theuseofnaturallanguagestobuildtheory
hasnoplaceinmanagementresearch.Whereasformalmethodsoperate
deductively,naturallanguagesmorereadilyaccommodateinductionandintuition.
Hence,whenaninterestingphenomenonisfirstidentified,conjectures,expressedin
naturallanguages,canprovideausefulstartingpoint.Theseconjecturescanhelpto
guideempiricalresearchersintermsofwhatdatatheyshouldcollectandwhat
questionstheyshouldattempttoanswer.Asthephenomenonbecomesbetter
understood,researcherscanthenrevisitthetheorywithformaltoolstodevelopa
moreprecise,transparentandlogicallyconsistentdescriptionofit.
Thepapersinthisissue
Asnotedabove,wehadanembarrassmentofrichesfromwhichtochoose.We
selectedpapersforthisspecialtopicforumnotjustfortheirhighqualityandthe
importanceoftheirmanagerialimplications,butalsofortheirabilitytohighlightthe
varietyandvalueofformalapproaches.

Becauseofthebreadthofpapersinthespecialissue,onecouldchoosetoorder
theminmultipleways.Wehavechosenaroughgroupingbysubject,butthepapers
havemanyotherpointsofcontact.
Thefirstthreepapersdealbroadlywiththeissueofentrepreneurialentry,buteach
approachesitusingadifferentformalmethod.ParkerandAlvarez(thisissue)
modelthedecisionproblemofhowapairofentrepreneursshouldallocatethe
rightstocontrolanewventure.Althoughperfectlyrationalactorswouldgive
controltothehigherabilitymemberoftheteam,theyinterestinglydemonstrate
that,underconditionsofsubjectiverationality,theteamwillallocatecontrolrights
tothemoreoptimisticofthetwo.2Thismisallocationofcontrolrightscanlead
startupstoperformpoorly.Giventhewellknownpropensityofentrepreneurstobe
overoptimistic,thisresultstrikesusaparticularlyinteresting.
GancoandAggrawal(thisissue)meanwhiledevelopasimulationtodevelopabetter
understandingoftheperformancedifferentialsbetweenstartupsanddiversifying
entrants,andhowthosedifferentialsdependontheenvironment.Theybuildtheir
simulationonavariantoftheNKmodelthathasbeenwidelyusedinmanagement
research(e.g.,Rivkin,2000).Theirmodel,extendingthecounterintuitiveideathat
adaptationactuallyhurtsorganizationsinturbulentenvironments,canbothaccount
foralloftheexistingempiricalregularitiesthathavebeenfoundandsuggests
severalnewpropositionsthatresearchersshouldexplore.
Finally,Kuilman,VermuelenandLi(thisissue)considerhowthenatureofthe
environmentatthetimeoffoundinginfluencesthelifechancesofentrants.
Empiricalresearchhasusuallyfoundthatfirmsthatenterduringperiodsofintense
competitivecrowdingsufferhighermortalityrates.Butsomestudieshavealso
foundtheoppositepatternlowermortalityratesamongthosethatenterduring
timesofhigherdensity.Thearticlesreportingthesefindingsappeartoarriveat

2Subjectiverationalityreferstotheideathatactorsmustbehaveinawaythat

appearsoptimalgiventheirbeliefsandobservationsoftheenvironment,butthat
maynotberationalfortheomniscientactor(Ryall,2003).

contradictoryconclusions,butKuilmanetal.demonstratethatonecanincorporate
themintoasingletheorybyintroducingthestageofthepopulationshistoryasan
additionfactor.Whetherdensityatthetimeoffoundingconstitutesanadvantageor
adisadvantagedependsonwhetherthepopulationremainsinthelegitimating
phaseorwhetherithasachievedlegitimacyandinteractionshavebecomeprimarily
competitive.Inessence,theyintroduceascopecondition.
Weshouldnotethattheapplicationofthenonmonotoniclogicinthispaperis
particularlyinstructive.WhereasthelogicthatKuilmanetal.usewouldhave
allowedthemtoresolvetheseconflictingfindingssimplybyassumingthat
legitimacytakesprecedenceovercompetition(orviceversa),theyavoidthiseasy
solution.Theyavoiditbecausetheyhavenogoodsubstantivereasontointroducea
precedenceorderingbetweencompetitionandlegitimacy.Theythereforewisely
avoidsuchanadhocassumption.
Thenexttwopapersinvestigate,againbroadly,theproblemofcoordinationand
incentives.Postrel(thisissue)introducesthenovelideaofgoalambiguityintothe
wellunderstoodeffectsofsubstitutionversuscomplementarityinjointproduction.
Heshowsthatgoalambiguitycanleadtoafailureintheallocationofefforteven
whenbothactorshaveincentivesonlyintermsoftheirjointoutput.Althoughthis
failurelookslikeacoordinationproblem,standardsolutionstocoordination
failuressuchassequencingactorsdecisionsmaynotsolvethisproblemand
mayevenexacerbateit.Themanagerialimplicationsareclear:coordinationand
goalclarificationhavesynergisticeffectsonteamperformance.
CoffandMakadok(thisissue)similarlyexploreanissueofclearmanagerial
importance:Howcanaprincipal(anowner)ensurethatagents(employees)donot
freeride?Indevelopingtheirtheory,theypointoutthatthemanageractuallyhasat
leastthreeleversunderhercontrolinachievingthisoutcome:authority,incentives
andownership.Allofthesevaryfrombeingmorefirmliketobeingmoremarket
like.Managersthereforehaveeightdifferentformsofhybridorganizationattheir

disposal,andCoffandMakadokdemonstratethatatleastoneofthemshould
generatetheoptimalallocationofeffortacrosstheagentsforanytypeoftask.
Finally,weendwithtwopiecesthatprovidenewinsightintomacroorganizational
behavior.CowanandJonard(thisissue)developamodelofallianceformationin
whichsuccessfulpartnershiprequiresthattwofirmshavemoderatelysimilar
characteristics.Theydemonstratethatthissingleassumptioncangeneratea
surprisinglywidevarietyofnetworkstructures,includingatendencyforrepeated
interactionandsmallworldstructures.Theirresultsthereforeraisethepossibility
thattheneedforsomewhatsimilarpartners,ratherthansocialfactors,mayexplain
anumberofinterorganizationalstructures.Sinceonecouldimaginethe
developmentofaparallelmodelattheleveloftheindividual,theirresultsmayalso
provideinsightintointerpersonalnetworks.
Pli(thisissue)meanwhileattemptstoreconciletheideathatinertiaand
imprintingimplythatpopulationlevelchangeshouldoccurthroughtheselection
(failure)oforganizationswiththeintuitionthatpopulationssometimesshift
throughtheadaptationoftheirindividualmembers.Toresolvethisapparent
inconsistency,hesuggeststhatenvironmentalchangemayeitherbequantitativeor
qualitativeinnature.Thefirst,aquantitativechange,mightforcefirmstoadjust
theirintensityofvariousactivities,butthelatterrequiresthemtodoentirely
differentthingstosurvive.Theformerthereforeallowsadaptation,whileselection
reignssupremeinthelatterregime.Hisapproachtoresolvingthisconundrum
thereforerecallsasimilarsolutionthathepositedtowhenbroadversusnarrow
scopewouldbenefitorganizations(Pli,1997).
WeapplaudtheauthorsincludedinthisSpecialTopicForumfortheircreativeand
compellingcontributionstomanagementtheoryandfortheirableapplicationsof
formalmethods.Wealsoappreciatetheeffortsofallofthosethattookaninterestin
ourcall.Wehopethatthepapersthatappearherebecomebutthebeginningina
longlineofinterestingandinsightfulinvestigationsthatuseformalapproachesto
developmanagementtheory.

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