Strategy, complexity and economic rent
Management Science
Adaptation on rugged landscapes
Management Science
Reproducing Knowledge: Replication Without Imitation at Moderate Complexity
Organization Science
Imitation of Complex Strategies
Management Science
Causal Ambiguity, Complexity, and Capability-Based Advantage
Management Science
Hoping for A to Z While Rewarding Only A: Complex Organizations and Multiple Goals
Organization Science
Modularity and incremental innovation: the roles of design rules and organizational communication
Computational & Mathematical Organization Theory
Microfoundations of Internal and External Absorptive Capacity Routines
Organization Science
Dealing with Complexity: Integrated vs. Chunky Search Processes
Organization Science
Designing for Complexity: Using Divisions and Hierarchy to Manage Complex Tasks
Organization Science
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Coordination of interdependencies among firms productive activities has been advanced as a promising explanation for sustained heterogeneity in capabilities among firms. In this paper, we extend this line of research to determine the industry structures and patterns of expected firm profits for the case when difficulty optimizing interdependent activities does, in fact, generate and sustain capability heterogeneity among firms. We combine a widely used agent-based model where firms search to discover sets of activities that complement one another (reducing overall costs or raising product quality) with traditional economic models of competition among profit-maximizing firms. The agent-based model produces a distribution of performance (interpreted as variable cost or product quality) among firms and the competition models determine resulting industry outcomes including patterns of entry, exit, and profits. The integration of economic models of competition among firms with an agent-based model of search for improvement by firms reveals a rich relationship between interdependencies in production functions and industry structure, firm profits, and industry average profitability.