Institutional differences lead to different expectations and different returns

Institutional differences lead to different

This preview shows page 8 - 10 out of 15 pages.

market activity, including business, labor and social agencies. Institutional differences lead to different expectations and different returns to activity. How firms achieve advantage is complex, but there are broadly two explanations. One relates to industrial organization economics and the other to the resource based view of the firm. While sometimes these two approaches of how a firm can reach superior performance are explained in opposition to each other, they actually describe different aspects of the same words and hence it may be more appropriate to consider the perspectives as complementing each other. The basic argument of industrial organization economics (IO) is that competitive advantage derives from privileged market positions. The emphasis of this theory is on the external environment. It argues that the prime determinant of an organization’s performance is its external environment, the structure of the competition and industry it belongs to. Hence the goal of the firm is to achieve optimal positioning in the most attractive markets. The basic argument of the resource-based view of the firm (RBV) is that competitive advantage is generated from within the firm. The firm’s resources are its main source of advantage, in particular those resources that are simultaneously valuable, rare, imperfectly imitable and imperfectly substitutable. The emphasis is here on internal resources, how unique and different they are in comparison to those of the competitors. Improving the climate and conditions for business in Europe creates a corresponding need for more self-discipline on the part of the business community. In this context, CSR is increasingly important for the smooth functioning of the market economy. No social program can rival the business sector when it comes to creating the jobs, wealth, and innovation that improve standards of living and social conditions over time. The ability to recruit appropriate human resources, for example, may depend on a number of social factors that companies can influence, such as the local educational system, the availability of housing, and the adequacy of the public health infrastructure. Every company will need to sort social issues into these categories for each of its business units and primary locations, and then rank them in terms of potential impact. In the auto industry, for example, Volvo has chosen to make safety a central element of its competitive positioning, while Toyota has built a competitive advantage from the environmental benefits of its hybrid technology. Relationship between integrity and innovation . Integrity in an organization is defined as acting on a personal commitment to honesty, openness , and fairness – living by and for our standards. Effective leaders will foster a social environment of integrity and trust in which participants feel comfortable seeking clarifications, and testing and proposing innovative ideas
Image of page 8
Gheorghe Militaru, Sorin Ionescu 112 In a trusting organization, potential innovation related initiatives are likely to be welcome. Innovation is an important corporate image association that affects
Image of page 9
Image of page 10

You've reached the end of your free preview.

Want to read all 15 pages?

  • Spring '20
  • Dr. ASRAVOR
  • Corporate social responsibility, Gheorghe Militaru

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture