What's my research about?

My research focuses on understanding the mechanisms through which firms are able to maintain high levels of corporate coherence and enhance their capacity to adjust to a shifting environment. Extensive research has shown that, over time, firms tend to become less plastic in terms of their ability to make and implement decisions that keep their capabilities and resources focused and thus, their coherence high. Therefore, in the long run, differential ability to elevate corporate coherence or to refocus resources may well be a source of heterogeneous firm performance. In my paper, I identify a thus-far unexplored refocusing mechanism, the spinoff process, and I develop a theoretical framework which explains under what conditions, and in particular, which types of spinoffs are expected to have such a refocusing impact on their parents. I propose that spinoffs elevate corporate coherence by removing cognitive or capabilities-based impediments to organizational learning – an integral part of coherence – or by imposing managerial discipline on the number of projects undertaken at the parent firm.

In the second part of my paper, I test this framework empirically by using a unique dataset I hand-collected for the US automobile industry for the period 1890 to 1986. I find that spinoffs that locate further from their parents in terms of technological/capabilities distance are more likely to have a beneficial impact, confirming that such opportunities exist too far from the parent organization’s optimal learning region. I also find that resolution of a conflict at the top executive level through a spinoff raises the parent’s survival chances, and that a reduction in the number of projects during the spinoff period leads to a reduction in mortality rate, for those parents that are most likely to have overreached due to managerial incentives misalignment. Lastly, the empirical analysis reveals that a strategic management of the spinoff process should also account for the timing and the frequency of spinoffs. Despite the fact that in the US automobile industry, the longer the elapsed time since the last spinoff event, the lower the survival chances of the parent, a larger number of spinoffs prior to the focal spinoff event had a negative impact on survival.

My research offers a complementary viewpoint to the Penrosian tradition, arguing that sometimes the establishment of a sustainable competitive advantage does not depend only on building the right complementary assets or acquiring the capabilities that best match existing resources, but rather suggests that it is beneficial for the organization to remove such capabilities via a semi-automatic process, such as spinoff activity. My work is also relevant to research in entrepreneurship that seeks to understand not only the origins but also the impact of entrepreneurial activity on the existing social structure of the industry. In my work, I find that in addition to fostering innovation, as has been shown by prior research, spinoff entities may potentially benefit the firms from which they originate. This implies that strategic management of spinoff activity by incumbent firms directly affects the rate and perhaps the quality and heterogeneity of new enterprise formation.

My dissertation consists of two additional papers, written in the empirical Industrial Organization tradition, and which reflect earlier stages of my graduate career, before my complete turn to the strategy field. In the first paper, which has already been published in Economic Letters, my co-authors and I explore the pricing behavior of firms in the books industry across three countries, US, the UK and Canada. We find strong evidence of international price discrimination, especially for textbooks; prices in the US are more than double compared to other countries. We argue that supply-side factors, like cost and market structure, cannot really explain this phenomenon and we subsequently discuss several demand-side explanations; our preferred theory is that higher US textbook prices reflect the unique status of the textbook as a centerpiece of US college instruction.

In the second paper, we provide an empirical analysis of the effect of capacity decisions on realized sales under alternative supply contracts in the U.S. video rental industry. Retailer capacity decisions can greatly impact sales for a product by affecting, among other things, availability (stock-outs) and visibility in the store. In this paper we provide empirical estimates of the effect of capacity on sales under alternative supply contracts that sell capacity at very different per-unit average up-front costs. We use data from the U.S. video rental industry, in which per-unit capacity costs range from $7 to $45 depending on contract type. We find that titles taken on the contracts with the highest up-front cost ($45 per tape) typically have the strongest impact on sales from increased capacity. One additional unit of capacity is estimated to produce 10.4 to 18.0 additional rentals over the life of the movie (an elasticity of rentals with respect to of 0.44 to 0.66). In contrast, titles distributed on the contract with the lowest per-unit up-front cost ($7 per tape) tend to have the weakest impact on sales from increased capacity, with an additional unit of capacity producing 0 to 4.9 additional rentals (an elasticity of 0 to 0.26).

My Research

I am a strategy scholar whose research focuses on Sustainability and Corporate Social Responsibility (CSR). More specifically, I seek to understand whether, how, and the extent to which the modern business organization contributes towards building a sustainable future. My academic work evolves around two main themes: a) understanding how investment analysts, and the public equity markets, perceive, evaluate and react to corporate engagement with, and integration of, environmental and social issues into strategy and b) understanding the multiple factors (e.g. institutional, regulatory, behavioural) that may affect, drive or hinder, the corporate decision to adopt environmentally and socially responsible strategies.

Upcoming Events

February 27, 2018

Prof. Ioannou will be speaking at LBS HR Strategy Forum

April 27, 2018

Prof. Ioannou will be speaking at ESMT's Sustainable Business RoundTable

May 24, 2018

Prof. Ioannou will be speaking at LBS's Private Equity Symposium