Research Interests: competitive strategy, evolution of fit, firms as systems of interconnected choices
Nicolaj Siggelkow is the David M. Knott Professor at the Wharton School, University of Pennsylvania. He is a Co-Director of the Mack Institute for Innovation Management at Wharton. He studied Economics at Stanford University and earned an M.A. in Economics from Harvard University. He received a Ph.D. in Business Economics from Harvard University and the Harvard Business School. Professor Siggelkow has been the recipient of multiple MBA and Undergraduate Excellence in Teaching Awards, including the Class of 1984 Award presented to the faculty member with the highest teaching rating in the MBA classroom, the Helen Kardon Moss Anvil Teaching Award, the Wharton Award, and the Wharton Graduate Association Student Choice Award. His research has been published in the leading management journals, including Academy of Management Journal, Administrative Science Quarterly, Journal of Industrial Economics, Management Science, Organization Science, and Strategic Organization. In 2008, he received the Administrative Science Quarterly Scholarly Contribution Award for the most significant paper published in ASQ five years earlier. Nicolaj is a member of the Editorial Review Boards of Administrative Science Quarterly, Organization Science, Strategic Management Journal, Strategic Organization, and Academy of Management Perspectives.
His current research focuses on the strategic and organizational implications of interactions among a firm’s choices of activities and resources. In particular, his research has focused on three broad questions: How do firms develop, grow and adjust their set of activities over time? How does organizational design affect a firm’s ability to find high-performing sets of activities? What role do interactions among a firm’s activities play in creating and sustaining competitive advantage? To address these questions, he has employed a range of methodological approaches, including in-depth field studies of individual firms, econometric methods for large-scale data sets, formal modeling, and simulation models.
Abstract: Using a simulation model, we explore how agents may use experience for first order (updating their beliefs) and second order learning (updating their representation or mental model). We demonstrate how second order learning may allow agents with simpler mental models to outperform agents with more complex and accurate mental models. This beneficial effect of simplicity becomes amplified under conditions of high complexity. These findings have important implications for our understanding of cognitive complexity and simple rules.
Ashish Arora, Michelle Gittelman, John Lynch, Will Mitchell, Nicolaj Siggelkow (2016), Question-Based Innovations in Strategy Research, Strategic Management Journal, 37, pp. 3-9.
Dirk Martignoni, Anoop Menon, Nicolaj Siggelkow (2016), Consequences of Misspecified Mental Models: Contrasting Effects and the Role of Cognitive Fit, Strategic Management Journal, 37 (13), pp. 2545-2568.
Abstract: Mental models, reflecting interdependencies among managerial choice variables, are not always correctly specified. Mental models can be underspecified, missing interdependencies, or overspecified, containing non-existent interdependencies. Using a simulation model, we find that under- and overspecification have opposite effects on exploration, and thereby performance. The effects are also opposite depending on whether the manager controls all choice variables. The mechanism underlying our results is a feedback loop: misspecificed mental models influence managerial learning about the effectiveness of choices; this learning guides how the environment is explored, which in turn affects which information will be generated for future learning. We explore implications of these results for strategic management and introduce the notion of “cognitive fit” between the mental model of the decision maker and the strategic environment.
Phebo Wibbens and Nicolaj Siggelkow (Under Revision), Introducing LIVA to measure long-term firm performance.
Abstract: In this paper we introduce lifetime (or long-term) investor value appropriation (LIVA) to measure firm performance, defined as the ex post value of discounted cash flows over a firm’s lifetime. Unlike other commonly used measures of firm performance, such as return on assets, Tobin’s q, economic profit, or total shareholder return, LIVA captures long-term returns vis-à-vis the cost of capital, profitable growth, as well as the size of the economic impact in a single metric. Moreover, we show that LIVA can be equivalently operationalized using cash flow data, accounting profits, or shareholder return data. Finally, two exploratory empirical studies illustrate how LIVA can be operationalized and provide new strategic insights beyond currently used measures.
Description: For this paper, we make available a database with the LIVA by year for all publicly listed US firms from 1980 to 2015, based on the CRSP database. It is in CSV format, which can be opened in R, Stata, Excel, etc. The LIVA is calculated in billion (000,000,000) US dollars, and is indexed by the CRSP identifiers permno and permco. For any given company, its LIVA can be calculated by adding the annual LIVA in the database over all years in the time period of interest. The LIVA in each year has been calculated using monthly total shareholder return and market capitalization data, using the market return as the cost of equity [see equation (2) in the AoM Best Paper proceedings version of the paper]. Please refer to the paper for further details on calculating and interpreting LIVA. A short version of the paper has been published in the AoM Best Paper proceedings 2017, and a full version is available from the authors. Please cite the paper when using these data, and reach out to the authors for any questions. The database can be downloaded under Related.
Abstract: Competitive advantage, a central construct in the strategy field, has been defined in two distinct ways in the contemporary literature: based on superior performance, or based on superior value creation. These two definitions are, however, neither necessary nor sufficient for each other. Instead of trying to find a universal, single definition of competitive advantage, we propose the notion of a ladder of competitive advantage that describes three different kinds of advantages that differ in terms of scope and time horizon: at the single-transaction level, at the business unit-year level, and at the firm-lifetime level. The ladder can help resolve existing confusions in the literature, as well as provide a deeper insight in how managers can create and appropriate long-term value.
Oliver Baumann and Nicolaj Siggelkow (2013), Dealing with Complexity: Integrated vs. Chunky Search Processes, Organization Science, 24, pp. 116-132.
Abstract: Organizations are frequently faced with high levels of complexity. While the importance of search for dealing with complex systems is widely acknowledged, how organizations should structure their search processes remains rather unexplored. This paper starts to address a basic question: how much of the entire system, and thus complexity, should be taken into consideration at any given time of a search process? Should a problem solver pursue an integrated search and be concerned with the whole system right from the start, or should a problem solver incrementally expand the “search domain” – the subset of system elements and interdependencies that are included in the search efforts, and if yes, how “chunky” should these steps be? Our analysis of a simulation model yields four insights: (1) expanding the search domain in smaller steps can yield a distinct advantage in final system performance; (2) following a completely incremental expansion pattern is not necessary as long as larger chunks are added early on in the process; (3) the value of chunky search is particular high if highly influential system elements are considered first, while highly dependent elements are added later; (4) under time pressure, chunky search can lose its performance advantage over more integrated search processes. We discuss the implications of our findings for managing organizational search and complex systems, more broadly.
Nicolaj Siggelkow (2011), Firms as Systems of Interdependent Choices, Journal of Management Studies, 48: 1126-1140.
Dirk Martignoni and Nicolaj Siggelkow (Working), When it Pays to be Neurotic or to Have Blind Spots: The Value of Understanding External and Internal Contingencies.
Felipe Csaszar and Nicolaj Siggelkow (2010), How much to copy? Determinants of Effective Imitation Breadth, Organization Science, 21: 661-676.
Abstract: It is a common and frequently implicit assumption in the literature on knowledge transfer and organizational learning that imitating practices from high-performing firms has a positive impact on the imitating firm. Although a large body of research has identified obstacles to successful imitation, not much is known about what breadth of imitation is most effective. In this paper, we use a simulation model to explore how context and firm similarity, interdependence among practices, context and firm similarity, and time horizon interact in nontrivial ways to determine the payoffs that arise from different breadths of imitation. The results of the model allow us to qualify and refine predictions of the extant literature on imitation. In particular, the results shed light on the conditions under which increases in imitation breadth, and hence investments that facilitate the faithful copying of more practices, are valuable. In addition, the results of the model highlight that imitation can serve two different functions—mimicking high performers, and generating search by dislodging a firm from its current set of practices—each requiring different organizational routines for its successful implementation.
This course encourages students to analyze the problems of managing the total enterprise in the domestic and international setting. The focus is on the competitive strategy of the firm, examining issues central to its long- and short-term competitive position. Students act in the roles of key decision-makers or their advisors and solve problems related to the development or maintenance of the competitive advantage of the firm in a given market. The first module of the course develops an understanding of key strategic frameworks using theoretical readings and case-based discussions. Students will learn concepts and tools for analyzing the competitive environment, strategic position and firm-specific capabilities in order to understand the sources of a firm's competitive advantage. In addition, students will address corporate strategy issues such as the economic logic and administrative challenges associated with diversification choices about horizontal and vertical integration. The second module will be conducted as a multi-session, computer-based simulation in which students will have the opportunity to apply the concepts and tools from module 1 to make strategic decisions. The goal of the course is for students to develop an analytical tool kit for understanding strategic issues and to enrich their appreciation for the thought processes essential to incisive strategic analysis. This course offers students the opportunity to develop a general management perspective by combining their knowledge of specific functional areas with an appreciation for the requirements posed by the need to integrate all functions into a coherent whole. Students will develop skills in structuring and solving complex business problems.
The management of large, established enterprises creates a range of multi-facet challenges for the general manager. A general manager needs to understand the internal workings of a firm, how to assess and create a strategy, and how to take into account increasing, globalization. While these issues are distinct, they are very much intertwined. As a result, this course will provide you with an integrated view of these challenges and show you that effective of an established enterprise requires a combination of insights drawn from economics, sociology, psychology and political economy.
This course is concerned with strategy issues at the business unit level. Its focus is on the question of how firms can create and sustain a competitive advantage. A central part of the course deals with concepts that have been developed around the notions of complementarities and fit. Other topics covered in the course include the creation of competitive advantage through commitment, competitor analysis, different organizational responses to environmental changes, modularity, and increasing returns. An important feature of the course is a term-length project in which groups of students work on firm analyses that require the application of the course concepts.
Mass-market driverless cars are farther off in the future than media hype would suggest, and big automakers will maintain major strategic advantages.Knowledge @ Wharton - 2017/07/28