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Capability building and learning: An emergent behavior approach

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Author Info

  • Andreu, Rafael

    (IESE Business School)

  • Riverola, Josep

    (IESE Business School)

  • Rosanas, Josep M.

    ()
    (IESE Business School)

  • de Santiago, Rafael

    (IESE Business School)

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    Abstract

    Economics-based models typically overlook management decisions and firms' capabilities. We develop a model that puts firms at center stage by simulating the aggregate behavior of a population of firms resulting from specific management decisions. The model features a learning process that produces changes in companies' capabilities. Decisions are made under imperfect information and bounded rationality, and managers may sacrifice short-term performance in exchange for qualitative variables that affect their firm's future potential. The model provides a structured setting in which these issues-often discussed only in an informal way-can be more rigorously analyzed. The simulations produce a variety of hard-to-anticipate emergent behaviors. Economic performance appears to be quite sensitive to managers' estimates of the true capabilities of their own firms. Also, companies that are willing to accept sacrifices in the short run in order to increase future potential appear to be more stable than the rest.

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    Bibliographic Info

    Paper provided by IESE Business School in its series IESE Research Papers with number D/952.

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    Length: 31 pages
    Date of creation: 05 Mar 2012
    Date of revision:
    Handle: RePEc:ebg:iesewp:d-0952

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    Postal: IESE Business School, Av Pearson 21, 08034 Barcelona, SPAIN
    Web page: http://www.iese.edu/
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    Related research

    Keywords: Capability building vs. economic performance; imperfect information; learning: bounded rationality;

    This paper has been announced in the following NEP Reports:

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    1. Lindenberg, Siegwart, 2001. "Intrinsic Motivation in a New Light," Kyklos, Wiley Blackwell, vol. 54(2-3), pages 317-42.
    2. Ingemar Dierickx & Karel Cool, 1989. "Asset Stock Accumulation and Sustainability of Competitive Advantage," Management Science, INFORMS, vol. 35(12), pages 1504-1511, December.
    3. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    4. Ingemar Dierickx & Karel Cool, 1989. "Asset Stock Accumulation and the Sustainability of Competitive Advantage: Reply," Management Science, INFORMS, vol. 35(12), pages 1514-1514, December.
    5. Josep Rosanas, 2008. "Beyond Economic Criteria: A Humanistic Approach to Organizational Survival," Journal of Business Ethics, Springer, vol. 78(3), pages 447-462, March.
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