Ghemawat, Pankaj. " The Risk of Not Investing in a Recession"  Strategic Investment, Spring 2009
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...

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...

Ghemawat, Pankaj, and  Hout, Thomas. " Tomorrow’s Global Giants"  Harvard Business Review, November 2008
WESTERN COMPANIES’ INTEREST in emerging markets, especially China and India, is reaching a new level of intensity. Usual suspects such as IBM and Unilever, of course, are aggressively expanding their presence there, but so are nippy newcomers like Orbea, a $100 million Spanish manufacturer of ultralight carbon fi ber bikes. At the same time, developing countries are pulsating with companies that think of themselves as the next multinationals, pushing outward from their home bases to establish global presence if not dominance...

Globalization Note Series

• Semiglobalization and Country Context
• Economic Evidence on the Globalization of Markets
• Semiglobalization and Competitive Strategy

Ghemawat, Pankaj. The Thought Leader Interview from strategy+business issue50, Spring 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...

Ghemawat, Pankaj. “The Globalisation of Business Education: Through the Lens of Semiglobalisation,” 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]...

Ghemawat, Pankaj. “Reconceptualizing International Strategy and Organization,” Strategic Organization, 2008, No. 2.
Relatively little gets written about international strategy.1 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 ...

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 ...

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.

Ghemawat, Pankaj. "Managing Differences: The Central Challenge of Global Strategy." Harvard Business Review 85, no. 3 (March 2007).
The main goal of any international strategy should be to manage the large differences that arise at the borders of markets. Yet executives often fail to exploit market and production discrepancies, focusing instead on the tensions between standardization and localization. The AAA Triangle stand for the three distinct types of international strategy. Through Adaptation, companies seek to boost revenues and market share by maximizing their local relevance. Through Aggregation, they attempt to deliver economies of scale by creating regional, or sometimes global, operations. And through Arbitrage, they exploit disparities between national or regional markets, often by locating different parts of the supply chain in different places--for instance, call centers in India, factories in China, and retail shops in Western Europe. Examples illustrate how organizations use and balance these strategies as well as the trade-offs they make as they do so. Because most enterprises should draw from all three As to some extent, the framework can be used to develop a summary scorecard indicating how well the company is globalizing. Given the tensions among the strategies, the strategic choice requires some degree of prioritization--and the framework can help with that as well. While it is possible to make progress on all three strategies, companies usually must focus on one or two when trying to build competitive advantage.

Introduction to the Special Issue on Strategic Dynamics, with Bruno Cassiman, 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.

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.

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.

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 dynamicmixedduopoly 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.

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.

Ghemawat, Pankaj. "Regional Strategies for Global Leadership." Harvard Business Review 83, no. 12 (December 2005): 98-108.
The leaders of such global powerhouses as GE, Wal-Mart, and Toyota seem to have grasped two crucial truths: First, far from becoming submerged by the rising tide of globalization, geographic and other regional distinctions may in fact be increasing in importance. Second, regionally focused strategies, used in conjunction with local and global initiatives, can significantly boost a company’s performance. Regionalization is apparent in trade within regions, in foreign direct investment, companies’ international sales, and competition among the world’s largest multinationals. Ghemawat says that the most successful companies employ five types of regional strategies in addition to--or even instead of--global ones: home base, portfolio, hub, platform, and mandate. Some companies adopt the strategies in sequence, but the most nimble switch from one to another and combine approaches as their markets and businesses evolve. Toyota’s exports from the home base continue to be substantial even as the company builds up an international manufacturing presence. Toyota achieves economies of scale and scope with a strong network of hubs, where the company also pursues economies of specialization through interregional mandates. Regional strategies requires flexibility and creativity where a company must decide what constitutes a region, choose the most appropriate strategies, and mesh those strategies with the organization’s existing structures.

Ghemawat, Pankaj. "Global Standardization vs. Localization: A Case Study and a Model." In The Global Market: Developing a Strategy to Manage Across Borders, edited by John A. Quelch and Rohit Deshpandé. San Francisco, Calif.: Jossey-Bass, 2004.
Pankaj Ghemawat uses a case study of STAR in Asian satellite TV. His historical overview describes STAR’s initial targeting of the top 5 percent of Asian TV consumers, which allowed for a standardizable product of largely Western programming in English. Very quickly, however, STAR was forced to abandon this approach and move toward localizing programming content with local regional languages. STAR’s miscues are revealing, all the more so because of the key lessons learned. Ghemawat builds an economic model based on the START TV case example and then elaborates on why the anticipated convergence of consumer tastes did not occur. He point to three specific antistandardization factors: cultural (especially linguistic) differences between countries (the “home bias”), administrative and political differences between countries, and infrastructural differences (such as differences in the sophistication of TV ratings systems in the STAR TV case).

Ghemawat, Pankaj. "The Growth Boosters." Harvard Business Review 82, nos. 7-8 (July-August 2004): 35-40.
Hundreds of books on business growth are published each year, but which ones are really worth reading? Harvard Business School professor Pankaj Ghemawat takes a close look at three recent offerings: Chris Zook's Beyond the Core, Ram Charan's Profitable Growth Is Everyone's Business, and Adrian Slywotzky and Richard Wise's How to Grow When Markets Don't. He finds that all three are likely to succeed at prompting readers to take action. Zook defines the various adjacencies along which a business might extend its scope. Charan presents 10 tools that can be put to use immediately. And Slywotzky and Wise advise executives to inventory their companies' "hidden assets" and conduct an analysis of ways to solve customer problems. But Ghemawat wonders if the current crop of books harbors a subtle pro-growth bias. Ghemawat makes a sobering case for the dangers of setting growth targets too high. Ryanair and Coca-Cola, for instance, stumbled badly when they set unreachable growth targets. Even companies that are considered efficient growth machines run into constraints related to their size. Wal-Mart, for example, has had to accept declining growth rates as it has grown ever larger. Yet none of the three books discusses this dynamic. According to Ghemawat, readers interested in growth would be well advised to revisit a classic: Alfred Chandler's The Visible Hand. Chandler's propositions about growth and the managerial enterprise have withstood years of scrutiny, and his central idea--that technological changes, broadly defined, can affect the relative efficiency of different modes of organizing economic activity--still provides a frame for rich debate.

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.

Ghemawat, Pankaj, Africa Ariño, and Joan Enric Ricart. "Introduction: International Strategy and Location Specificity" In Creating Value through Global Strategy, edited by Africa Ariño, Pankaj Ghemawat and Joan Enric Ricart. London: Palgrave Macmillan, 2004.
This introduction is organized to give a description on the articles in the book, their contribution and their connection to the field of international strategy and location specificity. All this is tied together by first using a simple table on strategy domains to make clear that location specificity is essential if international strategy is to have a distinctive content for companies with multiple businesses operating in multiple countries. Areas for improving research in this area as well as new avenues of research are provided. The attributes of location specificity put forth by Williamson (1985) are elaborated to include elements such as geographic distance (transportation costs), cultural (language, etc.), preferences for proximity (home bias) and legal (administrative, contractual) differences. Similarly, a case for using spatial interactions in an integrated way is recommended for looking at bilateral and multilateral relationships. New avenues for research are separated into three levels: international business strategy focusing on spatial/locational differences, on spatial interactions over very short distances (one location) and variable distances (across locations).

Ghemawat, Pankaj. "The Forgotten Strategy." Harvard Business Review 81, no. 11 (November 2003): 76-84.
Most multinationals see globalization as a matter of replication--spreading a single business model as widely as possible to maximize economies of scale. From this perspective, the key strategic challenge is choosing how much of the model to keep standard and how much to grudgingly adapt to local tastes. This choice blinds companies to the very real opportunities they can still gain from arbitrage--from exploiting differences as opposed to similarities. Indeed, the scope for arbitrage is as wide as the differences that remain among countries, and those differences continue to be broad and deep. They can be divided into four main categories: cultural, administrative, economic, and geographic. Consider the continued cachet of French culture in its wines and haute couture or how swiftly the Finns have become known for their expertise in wireless communications. Clearly, legal and other administrative differences, particularly in tax laws and the cost of capital, remain large. So do purely economic wage differentials. Both the differences that make arbitrage valuable and the similarities that make replication important will remain with us for the foreseeable future, and combining the two, while necessary, is tricky.

Ghemawat, Pankaj. "Semiglobalization and Competitive Strategy." Working Paper, 2003 (March.) 

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.

Ghemawat, Pankaj, and Rajiv Mallick. "The Industry-Level Structure of International Trade Networks: A Gravity-Based Approach." Working Paper, 2003 (February.)
This paper examines the determinants of bilateral trade flows at the level of individual industries by applying gravity models previously employed for this purpose at an aggregated (cross-industry) level in international economics. The principal conclusions from the exercise are that (1) one can explain significantly more of the variation in bilateral trade flows by attending to the differences among industries instead of ignoring them; and (2) it is advisable to distinguish among different dimensions of distance—cultural, administrative, geographic, economic--than to collapse them into some composite measure.

Ghemawat, Pankaj. "Building Strategy on the Experience Curve." Harvard Business Review 63, no. 2 (March/April 1985): 143-149. (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.)
Many managers see the experience curve as out of date, but experience curve strategies can improve competitive performance in some clearly defined situations. Successful use of the curve requires understanding why and how it works and when to apply it. Industry examples explain how products have different experience curve slopes, experience bases, and cost reduction sources. Managers should study three critical variables to discover both the opportunities and traps in putting the experience curve to work for their companies: industry structure, the relative position of key competitors, and government impact.

Ghemawat, Pankaj, and Daniel E. Levinthal. “Choice Interactions and Business Strategy”. (Former title: “Choice Structures, Business Strategy and Performance: A Generalized NK-Simulation Approach”), Harvard Business School Working Paper 01-012, revised October 2002.
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 Kaufman (1993) in order to model the way in which policy choices may be more or less strategic. We use this structure to examine, thorugh simulation, how fully articulated a strategy or set of policy choices must be to achieve a high level of performnce, and how feasible it is to offset past strategic mistakes through tactical adjustments (instead of alighment). Our analysis highlights the role of asymmetry in the interaction of strategic  hoices and in particular the degree to which choices vary in terms of being influential, dependent, or autonomous from other choices.

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.

Ghemawat, Pankaj. "Distance Still Matters: The Hard Reality of Global Expansion." Harvard Business Review 79, no. 8 (September 2001): 137-147.
Companies routinely overestimate the attractiveness of foreign markets. Dazzled by the sheer size of untapped markets, they lose sight of the difficulties of pioneering new, often very different territories. The problem lies in the use of analytic tools such as country portfolio analysis (CPA) that focus on national wealth, consumer income, and people's propensity to consume. CPA emphasizes potential sales and ignores the costs and risks of doing business in a new market that result from the barriers created by distance which does not refer only to geography. The CAGE framework of distance presented here considers four attributes: cultural distance (religious beliefs, race, social norms, and language); administrative or political distance (colony-colonizer links, common currency, and trade arrangements); geographic distance (the physical distance between the two countries, the size of the target country, access to waterways and the ocean, internal topography, and transportation and communications infrastructures); and economic distance (disparities in the two countries' wealth and variations in the cost and quality of financial and other resources). The article explores how (and by how much) various types of distance can affect different types of industries and shows how dramatically an explicit consideration of distance can change a company's picture of its strategic options.

Ghemawat, P., D. Collis. “Mapping the Business Landscape.” In The Portable MBA in Strategy, edited by Liam Fahey and Robert Randall, pg. 171-188. John Wiley & Sons, 2001.
This chapter illustrates the wisdom of probably the oldest precept in strategy analysis. Because opportunities and threats can only emerge from change, strategists must identify and evaluate the forces shaping and driving change in and around their competitive domain or industry. They show how to analyze any competitive domain or industry using two distinct but related analysis frameworks—the “five-forces” industry analysis framework and the value net framework. Such industry assessment is an essential constituent of the core environmental analysis for most firms.

Ghemawat, Pankaj. "Competition Among Management Paradigms: An Economic Analysis." Harvard Business School Working Paper, No. 01-011, 2000.
This is a lively debate about essentially 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.

Ghemawat, Pankaj, and Fariborz Ghadar. "The Dubious Logic of Global Megamergers." Harvard Business Review 78, no. 4 (July-August 2000): 64-72.
The almost universal belief among executives today is that bigger is better: companies are entering into huge, pricey cross-border mergers at an unprecedented rate. Common wisdom is that industries will become more concentrated as they become more global. In this article, the authors debunk the myth of increased concentration; the perceived links between the globalization of an industry and the concentration of that industry are weak. Empirical research shows that global--or globalizing--industries have actually been marked by steady decreases in concentration since World War II. The authors present the biases that managers often have about consolidation and offer alternative strategies to pursuing the big M&A deal. Those strategies include buying up cast-off assets from merging rivals; focusing more on domestic or regional growth rather than on global expansion; taking advantage of merging rivals’ weakened market position during integration and launching an aggressive marketing campaign; and building alliances with other companies rather than buying them up.

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.

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 a 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.

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 an lags in their adjustments to more competitive conditions.

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.

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.

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.

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.

Brandenburger, Adam, and Pankaj Ghemawat. "Entry and Deterrence in the British Satellite Broadcasting Industry." In Games Businesses Play: Cases and Theory, edited by Pankaj Ghemawat, 177-204. Cambridge: MIT Press, 1997.
This is a detailed case study that fixes on very fluid situation: competition to monopolize a new product market made possible by a process innovation in broadcasting technology. This chapter is motivated by a war of attrition between British Satellite Broadcasting (BSB) and Sky Television over the market for satellite TV in the United Kingdom. This case probes into two foundational questions about game theory: Can firms be treated, as per usual practice, as unitary players out to maximize their own payoffs, and if so, should their interactions be expected to lead to Nash equilibria. The implications for game theory turn out not to be innocuous; for researcher in strategic management, there are also nontrivial implications concerning the content of effective competitor analysis.

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.

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.

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 n 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-urn interpretation has several distinct implications for future inter-industry research.

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.

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.

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.

Caves, R. E., and P. Ghemawat. "Identifying Mobility Barriers." Strategic Management Journal 13 (January 1992): 1-12.  also published in Strategic Management edited by Julian Birkinshaw, Northampton, MA: Edward Elgar Publishing, 2005.
The Profit Impact Market Strategy (PIMS) New Research Database is used to identify the mobility barriers (the factors associated with sustained intra-industry profit differentials) in a cross-section of industries. Data were available for all 5 years in the 1979-1983 period on 59 respondent businesses. The analysis suggests that differentiation-related factors play more of a role in generating sustained intra-industry profit differentials than do cost-related ones. It is also shown that differentiation-related advantages tend to be absorbed into bigger margins and, in some instances, larger market shares, while cost-related advantages are taken primarily in the form of increases in market share.

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.

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.

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.

Ghemawat, P., and B. Nalebuff. "Excess Capacity, Efficiency, and Industrial Policy." In The Management of Excess Capacity in the European Environment, edited by C. B. Fuller. Oxford: Basil Blackwell Publishers, 1990.
In industries with excess capacity competitors often have very different costs When producers’ costs differe there are four interesting features of the oligopoly equilibrium. The free-market solution is technically inefficient: in genral, output is not produced at minimal cost. Tariffs reduce technical efficiency (and also allocative efficiency as they result in lower equilibrium consumption). Untargeted subsidies reduce technical efficiency, while subsidies targeted at the more efficient competitor improve it. Mergers improve technical efficiency even I the absence of economies of scale; they do, however, hurt allocative efficiency.

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.

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.

Ghemawat, Pankaj, and A. Michael Spence. "Modelling Global Competition." In Competition in Global Industries, edited by M. E. Porter, 61-79. Boston, Mass.: Harvard Business School Press, 1986.
This article assembles evidence about the extent of international coalition activity, its distribution across industries, countries, and types of firms, and its purposes. Coalitions represent a taxonomically novel category as well a strategically meaningful one. Therefore we should expect to learn a substantial amount through an integrated, rather than piecemeal, examination of them. We employ a new dataset to do so, which is more current and comprehensive than those available to previous researchers.
The principal goal of this article is to prove a factual picture of international coalition activity and partial tests of its variation across countries, industries, and firms. Easily testable hypotheses about the incidence of the coalitions are difficult to come by, and hence our study stops short of full-blown verification or falsification of theories of coalition incidence.

Ghemawat, Pankaj. "Sustainable Advantage." Harvard Business Review 64, no. 5 (September-October 1986): 53-58.
The success of a business depends on its ability to sustain its competitive advantage over time. Product innovation, production processes, and marketing are areas in which intense competitive pressure has multiplied with the increase in domestic and international competition. Analyses of companies identified as outstanding performers in their industries are sought to understand the sources of their competitive advantage, to determine why the advantages proved sustainable, and to assess their future security.

Ghemawat, Pankaj. "Capital Commitment and Profitability: An Empirical Investigation." Supplement. Oxford Economic Papers 38 (November 1986): 94-110.
Opportunities to precommit costs can either increase the rents of incumbent firms (by deterring entry), or decrease them (through commitment races and lapses into noncooperation). Authors seek to discriminate statistically between these predictions in the determinants of profits of businesses in a cross-section of concentrated markets for producer nondurables. Overall, a business's profitability declines with its industry's scope for precommitting production capacity (sunk costs). However, variables interacted with the scope for commitment do not point clearly toward one or the other mechanism. Therefore, commitment opportunities seem likely to lead to deterrence and noncooperative rivalry in proportions that differ idiosyncratically among markets.

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.

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 capacityexpansion process in the capital-intensive titaniumdioxideindustry 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 capacityexpansion in the U.S. titaniumdioxideindustry. Capacity is added in increments of one unit. The author assumes that capacityexpansion has to be entirely self-financed. The financial constraints may retard capacityexpansion, 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.

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.