Olav Sorenson is the Joseph Jacobs Chair in Entrepreneurial Studies, professor of strategy, and faculty director of the Price Center for Entrepreneurship & Innovation at the Anderson Graduate School of Management at UCLA. Professor Sorenson’s research on economic geography focuses on how entrepreneurship influences the growth and competitiveness of regions within countries and on why some regions appear more supportive to entrepreneurs than others.
|The U.S. Federal Trade Commission’s proposed ban on noncompete agreements will impact innovation and entrepreneurship outside of existing technology hubs. Strongly agree||“The research consistently finds that noncompete agreements suppress innovation by preventing the recombination of ideas and by increasing the difficulty of hiring employees for startups. Much of that research supporting that conclusion has been on places that are not technology hubs, such as Florida and Michigan. I’m not even sure that we would expect existing technology hubs to benefit more from the ban. For example, for Silicon Valley, the ban would not even represent a large departure from the current legal regime.”|
|The diametric experiences of Disney and UEFA illustrate that firms should refrain from making political statements in support of particular stakeholders. Disagree||
“I am not sure that there’s any lesson to be learned here. Refraining from making political statements is often itself tacit support for particular stakeholders.
Many of the operational choices of firms are also effectively political statements. Think of the firms that continue to operate in Russia or that tolerate supply chains employing children.
When owners and leaders are open and transparent about these values, it at least makes it easier for consumers, employees, and other stakeholders to choose to engage with firms aligned with their own values.”
|BP’s decision to dial back plans for cutting oil and gas production shows that short-term financial performance pressure will make it difficult for many firms to transition their strategies toward more sustainable business models. Agree||
“All businesses, and especially those that trade on public markets, face strong pressures to maximize short-run profits, even if they come at the expense of longer-term earnings and other goals.
Given these pressures, it seems like wishful thinking to expect that BP and other petroleum giants would lead the way to a more sustainable energy future.”
|Digital platform companies like Uber and Netflix have lost their first-mover advantage. Disagree||
“Did they ever have them?
First-mover advantages typically come from some form of lock-in, such as switching costs. But most of these digital platform companies do not require any sort of exclusivity. You can use Lyft, Uber, or a taxi.
They also do not offer much in the way of benefits for being loyal to one provider. You can have Disney+, Netflix, and Apple TV+. In fact, unlike an airline or hotel loyalty program, where you might get rewarded by concentrating your purchases, these entertainment platforms have different pools of content available, so you actually get rewarded for switching from time to time (in the sense of having more novel content available).”
|The use of generative AI will restore competition in search. Agree||“Generative AI potentially allows for differentiation in search. It restores competition in the sense that it might reduce the extent to which search ends up being a winner-takes-all market. But it might be hard to monetize (at least through advertising). Generative AI could easily produce results or summaries inconsistent with the interests of potential advertisers. But maybe customers would be willing to pay small subscription fees for unmanipulated search results.”|
|New salary transparency laws will cause companies to increase bonus pay and other nonreportable perks as a share of total compensation. Neither agree nor disagree||“Although these disclosures may help employees to have a better sense of what they earn relative to their peers, in most cases employees have limited bargaining power unless they have an outside offer. So for most firms, I suspect that these disclosures might have only minor effects in terms of increasing pressure on them to pay their employees more. If the disclosures do not matter that much to pay-setting, then I do not see firms expending time and effort on gaming them.”|
|Artificial intelligence is reducing wasteful holiday giving (i.e., deadweight loss) by helping online retailers to better match people to presents. Disagree||
“Could it? Maybe. Does it? Probably not.
Although I think that AI-based recommendation systems could provide gift ideas more closely matched to what the recipient might want, I suspect that human nature will prevent it from doing so for at least two reasons.
The first has to do with the nature of a gift: “It’s the thought that counts.” But if the giver has not done the thinking, should they get the credit? I suspect that many would not adopt these systems because they feel inconsistent with the norms of gift giving.
The second is projection: People usually believe that others want the same things that they do. Even if they try these systems, givers therefore might dismiss the recommendations as being wrong (because they do not predict what the giver would want to receive).”
|Charging for user verification will lead to increased user engagement and trust on Twitter. Neither agree nor disagree||“Having a fee increases the cost of spamming people with advertising in the guise of tweets or misinformation, so it might improve the user experience. But depending on how Twitter handles these accounts and tweets, it could just crowd out the content that people want with noise. A verified account could potentially send thousands of automated tweets per day. If those tweets receive priority in people’s timelines, then users could just end up mired in information that they do not want.”|
|Corporate investments in diversity, equity, and inclusion should be expected to generate a monetary return on investment. Disagree||“They might. Employees, for example, might become more productive or might be less likely to quit their jobs. Customers might prefer to buy from firms that invest more in these programs. But connecting improvements in performance to these programs will be extremely difficult, since most firms will have only before and after information. Assessing their total cost may also be hard, since much of the investment comes in the form of personnel time rather than the purchase of goods and services.”|
|The era of dominance for Tesla in the EV market is coming to an end. Agree||“Tesla will probably remain the largest single manufacturer of EVs in the U.S. for several more years. It has advantages in infrastructure and vertical integration into battery manufacturing. But everyone else now understands that the future will be electric, and they have been spending accordingly, developing many new compelling EVs that will appeal to different types of consumers. In the face of all of this innovation and variety, Tesla feels a bit like the modern Model T.”|
|Online education and specialized degrees will supplant the traditional two-year full-time MBA. Strongly disagree||“Both online education and specialized degrees will probably reduce the demand for the traditional MBA, but I do not expect them to supplant it. Online education seems more a threat to part-time programs than to the traditional MBA. In its current form, online programs simply do not offer effective substitutes for either the certification or community roles of in-person programs. Specialized degrees are interesting for some, but they do not train general managers. They also potentially face problems in terms of being able to operate at a minimum efficient scale. Most of these niche programs do not attract enough students to support a rich body of complementary electives. But larger business schools might find ways to do more customization.”|
|Starbucks’s plans to increase wages for nonunionized workers is a shortsighted strategy. Neither agree nor disagree||
“Strategy for what? Higher wages and better benefits will almost certainly help Starbucks to attract employees to deal with labor shortages.
It’s less clear whether doing so will discourage unionization. Presumably, a union could negotiate for similar terms. Plus, employees might want to bargain on dimensions other than pay, such as having more stable and predictable work schedules.”
|Sanctions against Russia will cause multinational companies to consider human rights protections in supply chains more broadly. Disagree||“"Outside of extraordinary events, not that many stakeholders pay attention to what happens in companies’ supply chains. Those who care most sort themselves into working for, buying from, and investing in the companies that already manage their supply chains more ethically. So most companies do not face much pressure to consider human rights in their operations. But there’s also an information gap. Customers, investors, and all but the most senior employees usually have little insight into firms’ supply chains to inform their choices and when they might lobby managers. Progress on human rights and other ESG issues in the supply chain will probably depend on improvements in the availability of information about these activities."”|
|Blockchain is more likely to be a sustaining innovation than a disruptive innovation in the financial sector. Agree||“Banks and other financial institutions have enormous pools of capital, social capital, and complementary resources. They also have the systems necessary to operate within a highly regulated sector. Blockchain should allow them to become more efficient at a variety of types of transactions, but I do not see it as eliminating the value of their complementary assets.”|
|The field of strategic management has overlooked the role of corporate purpose in driving business performance. Disagree||“I believe that purpose does (or can) have a role in business performance. However, I do not believe that it has been overlooked. A number of people have studied the relationship between organizational culture and performance, and I would see purpose as one aspect of culture. Strong organizational cultures have often been seen as a source of competitive advantage, through either better coordination among employees or through exerting more effort. Some of the recent studies in corporate social responsibility similarly suggest that companies might benefit from having a social mission both by attracting better employees and by getting them to work harder.”|
|Socially responsible mutual funds are more of a marketing tool than a solution to environmental and social problems. Agree||
“Socially responsible VC or PE funds could certainly help to solve these problems. But mutual funds buy and sell existing shares. They do not provide additional capital to firms.
Most mutual funds also do not get involved in active management, such as putting someone on the board. So, they do not directly influence the behavior of the companies in which they invest. These mutual funds can help investors to express and signal their preferences, which might influence executives to place greater weight on the environmental and social consequences of their company’s actions. Any effect though would be indirect and therefore probably weak.”
|When hackers take data hostage, companies should pay the ransom. Disagree||“If hackers get paid ransoms, it would seem to encourage them to invest even more effort in building tools and developing strategies to blackmail companies. Even though it's still a disruption, ideally companies would have strong enough backup procedures that they could recover with minimal losses from these attacks.”|
|Relaxing the rules around physical presence in the office will improve employee productivity and firm performance. Disagree||“For many types of independent jobs, being able to spend time outside the office might benefit employee productivity. But it depends a lot on the type of job and on the space available outside the office. Work-from-anywhere is not a panacea. People employed in jobs that require creativity or intensive coordination still benefit from the unplanned and frequent interactions of being at work in person. Although people in those jobs might benefit from a mix of in-person (interactive) and remote (isolated) time, trying to implement that mix could prove costly and difficult. Many people also do not have good workspaces outside the office where they can concentrate on work without distractions. Productivity and firm performance could easily go down.”|
|The COVID-19 pandemic has permanently changed how companies should think about business strategy. Agree||“In many ways, business will eventually return to normal. But the disruptions caused by the pandemic should highlight for firms the costs of inflexibility. Companies will probably move toward creating more redundancy in their supply chains. They may also generally adopt strategies that shift the balance of their costs away from fixed costs toward variable costs.”|
|The COVID-19 pandemic will lead companies to relocate infrastructure and employees away from dense urban locations. Agree||“I would expect companies to create more redundancy across locations in their operations. But global cities remain attractive in terms of the amenities that they offer and may become relatively more attractive in terms of transportation centrality. So, companies will probably continue to keep many employees in those places.”|