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Long Range Planning

36/4 August 2003

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Charles Baden-Fuller  Editorial

    Entrepreneurship and Risk
    Earlier this year we published a special issue that dealt with the interface of finance and strategy.  Here we look at how risk and entrepreneurship interface.  In developing countries entrepreneurial behaviour by governments and international firms has led to a great increase in foreign involvement for infrastructure investments.  There have been successes as well as disappointments.  Governments in developing countries are both a source of opportunity and of risk.  Jonathan Doh and Ravi Ramamurti assesses the risks that outside investors and private sector partners face in these projects and provide frameworks to assess and manage the way forward.

    Currently major corporations in Japan face a considerable squeeze resulting from a decade of economic stagnation.  This squeeze is partly financial but it is also a squeeze on entrepreneurship.  Mike Wright, Motoya Kitamura and Robert Hoskisson look at the role of Management Buyouts among Japanese corporations.  MBOs have increased many-fold over the last few years.  Our authors suggest that MBOs could be used even more widely to assist the revival of entrepreneurship among both the parent companies and the spin-offs, with additional financial benefits to both sides.

    Creativity
    Professional service firms face a great tension; short-term profits are maximised by turning out repeated solutions, yet the reputations of the firms and the lifeblood of the clients rely on an injection of creativity.  In the face of commercial pressures for profits, how is the fragility of creativity to be preserved?  Based on the study of a select number of firms, Constantine Andriopoulos identifies six tensions or paradoxes and he shows how they can be managed to achieve the required balance.

    In the Internet environment, creative industries face a serious threat that their products will disseminate freely over the web and that suppliers will see no rewards for their efforts.  Luca Molteni and Andrea Ordanini look at the (free) web-based music downloading phenomena.  They show how the users can be segmented into different categories and use this information to suggest ways in which providers can capture value from customers from sales of complementary products. 

Entrepreneurship and Risk

Jonathan Doh and Ravi Ramamurti 
Reassessing Risk in Developing Country Infrastructure 
jonathan.doh@villanova.edu

    Private investment in developing country infrastructure has grown rapidly throughout the 1990s.  Driven by privatisation of state-owned enterprises and broader market liberalisation, multinational corporations, local firms and their financial sponsors have aggressively pursued large-scale investments in power, telecommunications, water, gas and transport projects.  Yet companies involved in developing, financing or managing infrastructure projects in emerging markets continue to face special hazards.  Although outright expropriations have declined, political and regulatory changes that undermine the stability of investment projects are frequent and recurring.  In this article the authors review data and survey recent cases that underscore the emergent threats faced by companies seeking to develop and manage infrastructure projects.  Using a framework to classify the multiple roles of government in both facilitating and impeding investment, they propose strategies for investors and developers to assess and mitigate these continuing risks. These recommended approaches include leveraging international agreements, drawing on multilateral project finance, pursuing first mover positions, partnering with local firms, structuring contracts to match upstream and downstream obligations, bidding fairly and engaging all relevant stakeholders.  Strategic use of these approaches can help reduce the exposure faced by investors and generate a climate for long-term project stability. The authors draw implications for management research and practice, including the strategies of developing countries seeking to attract investment.

Mike Wright, Motoya Kitamura and Robert E. Hoskisson 
Management Buyouts and Restructuring Japanese Corporations
Mike.Wright@nottingham.ac.uk

    After decades of remarkable economic growth, the early 1990s saw Japanese companies faced with the need to restructure. One method that has gained popularity in the west is the buyout, and this has been adapted as a tool for restructuring in Japan. This article presents the first examination of this tool, using archival research, a survey of private equity firms and management buyouts and case study evidence. It argues that pressures in Japan are more likely to give rise to revitalising or entrepreneurial buyouts than ones focused solely on achieving efficiencies.

Creativity

Constantine Andriopoulos
Six Paradoxes in Managing Creativity: An Embracing Act
andriopoulos@abdn.ac.uk

    Companies are increasingly recognizing that ideas are their most precious commodity. However, initiating and sustaining creativity in the workplace is a delicate and difficult process. The author of this article searched for the tensions that are part of the everyday reality of managing organizational creativity and with the aid of case studies, emerged with six key paradoxes that must be addressed. 

Luca Molteni and Andrea Ordanini
Consumption Patterns, Digital Technology and Music Downloading
andrea.ordanini@uni-bocconi.it

    Cultural goods are subject to uncertainty about quality, fashion and peer pressure and even demands reversal. The new digital technologies (such as MP3 compression) and the availability of the Internet as a communications system are creating new challenges for promoters in the music field, as the Napster saga has dramatically illustrated. Reaching the audience whose consumption has shifted to the digital platform is becoming one of the main purposes of strategy for the immediate future, and analysis of consumption patterns and information on consumers' behaviour is becoming a strategic resource with which to anticipate competitors and improve the fit between supply and demand.

    This article offers an empirical analysis of the music downloading phenomenon, with data from an on-line survey, covering both the motivations and the end-uses, and yielding a range of user-profiles from explorer/pioneers at one end to the duplicators at the other. The authors show how this wide range will require deep segmentation strategies, covering a spectrum from artist selection to pricing policies to deal with this segmentation. Trading successfully in a cultural market place without physical artefacts will demand the ability to predict emerging consumption profiles in advance as well as the use of mixed strategies to handle the period of transition.

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