Xun (Brian) Wu
2007 – Present Ross School of Business, University of Michigan
Assistant Professor of Strategy
2012 – Present Center for Chinese Studies, University of Michigan
Management, Wharton School of the University of Pennsylvania, 2007
Industry Evolution, Corporate Scope, Technological Innovation, Entrepreneurship
Institutional barriers and industry dynamics. (with Sea-Jin Chang). 2013. Conditional acceptance. Strategic Management Journal.
Abstract: This study demonstrates new entrants exhibit higher productivity but also higher exit hazard than incumbents in post-liberalization China. We argue this seemingly paradoxical relationship is attributable to institutional barriers, defined as the hindrance in the institutional environment that prevents market selection forces to function. New entrants require higher productivity to compensate for those institutional barriers, which in turn implies a higher exit hazard after controlling for productivity. Our empirical findings support this argument and further show that the differences in productivity and exit hazard between new entrants and incumbents become smaller where and when institutional barriers recede. By integrating economic and institutional perspectives, we highlight the importance of institutional factors in shaping industry evolution.
Complementary assets as pipes and prisms: Innovation incentives and trajectory choices. (with Zhixi Wan and Daniel Levinthal). 2013. Forthcoming. Strategic Management Journal.
Abstract: Under-investment in radical innovation is often pointed to as the basis for incumbent failure in the face of radical change. However, it is also commonly observed that incumbents make substantial investments in radical innovations. To address the paradox of incumbent failure despite heavy investments, we develop an analytical model that considers firm heterogeneity with respect to both technical trajectories and complementary capabilities. In this model, complementary assets play a dual role in incumbents’ investment behavior toward radical technological change: complementary assets are not only resources [pipes] that can buffer firms from technology change, but are also prisms through which they view those changes, in terms of both the magnitude of resources that should be invested and the trajectory to which these resources should be directed.
Opportunity costs, industry dynamics, and corporate diversification: Evidence from the cardiovascular medical device industry, 1976-2004. 2012. Forthcoming. Strategic Management Journal.
Abstract: This paper examines how demand conditions across alternative markets impact diversification decisions and firm performance by influencing the opportunity costs of deploying non-scale free capabilities. Using data within the cardiovascular medical device industry, this study shows that: (1) firms with a larger stock of pre-entry innovation experience are more likely to diversify; (2) firms in a current market with greater relative demand maturity are more likely to diversify; (3) diversification is associated with a performance decrease in the current market; and (4) diversification is associated with a performance increase at the corporate level. These findings shed new light on the self-selection process of corporate scope, the conceptualization of firm capabilities, and the connection between industry dynamics and resource deployment.
Opportunity costs and non-scale free capabilities: Profit maximization, corporate scope, and profit margins. (with Daniel Levinthal). 2010. Strategic Management Journal, 31(7): 780-801.
Abstract: The resource-based view on firm diversification, subsequent to Penrose (1959), has focused primarily on the fungibility of resources across domains. We make a clear analytical distinction between scale free capabilities and those that are subject to opportunity costs and must be allocated to one use or another, thereby shifting the discourse back to Penrose’s (1959) original argument regarding the stock of organizational capabilities. The existence of resources and capabilities that must be allocated across alternative uses implies that profit-maximizing diversification decisions should be based upon the opportunity cost of their use in one domain or another. This opportunity cost logic provides a rational explanation for the divergence between total profits and profit margins. Firms make profit-maximizing decisions to increase total profit via diversification when the industries in which they are currently competing become relatively mature. Due to the spreading of these capabilities across more segments, we may observe that firms’ profit-maximizing diversification actions lead to total profit growth but lower average returns. The model provides an alternative explanation for empirical observations regarding the diversification discount. The self-selection effect noted in recent work in corporate finance may not be indicative of inferior capabilities of diversifying firms but of the limited opportunity contexts in which these firms are operating.
Spillover asymmetry and why it matters. (with Anne-Marie Knott and Hart Posen). 2009. Management Science, 55(3): 373-388.
Abstract: Although spillovers are a crucial factor in determining the optimal environment for innovation, there is no consensus regarding their impact on firm behavior. One reason for this may be that models differ in their assumptions for the functional form of the spillover pool. In industrial organization and economic geography, for example, the predominant convention is that all innovation within an industry/region contributes to a spillover pool that has a common value for all firms. An alternative convention prevalent in endogenous growth and evolutionary economics is that spillovers have directionality—the size of the relevant pool differs across firms. Knowing the correct functional form may facilitate theoretical consensus, either analytically (by modifying models’ assumptions) or empirically (by supporting a critical test of competing theories). We characterize and test the functional form of spillover pools for efficiency-enhancing innovation across 50 markets in the banking industry. Our results in that setting are consistent with expectations for asymmetric spillovers but inconsistent with expectations for pooled spillovers.
Entrepreneurial risk and market entry. (with Anne-Marie Knott). 2006. Management Science, 52(9): 1315-1330.
Winner of the 2005 Annual Best Student
Paper Award from the Office of Advocacy of the US Small Business
Abstract: This paper attempts to reconcile the risk-bearing characterization of entrepreneurs with the stylized fact that entrepreneurs exhibit conventional risk-aversion profiles. We propose that the disparity arises from confounding two distinct dimensions of uncertainty: demand uncertainty and ability uncertainty. We further propose that entrepreneurs will be risk averse with respect to demand uncertainty, yet “apparent risk seeking” (or overconfident) with respect to ability uncertainty. To examine this view, we construct a reduced-form model of the entrepreneur’s entry decision, which we aggregate to the market level, then test empirically. We find that entrepreneurs in aggregate behave as we predict. Accordingly, risk-averse entrepreneurs are willing to bear market risk when the degree of ability uncertainty is comparable to the degree of demand uncertainty. Potential market failures exist in instances where there is a high demand uncertainty but low performance dispersion (insufficient entry), or low demand uncertainty but high performance dispersion (excess entry).
Lessons from Alibaba.com: Government’s role in electronic contracting. (with Qin Hu and Clement Wang). 2003. INFO – The Journal of Policy, Regulation and Strategy for Telecommunications, Information and Media, 6(5): 298-307.
Product market competition and financial conservatism: A theoretical model and the case of Yanjing Brewing Corporation. (with Hanmei Chen and Wuxiang Zhu). 2002. Journal of Economic Research (a leading economics journal in China), 52(8): 28-36.
"Organizational Constraints to Adaptation: Intra-Firm Asymmetry in the Locus of Coordination" (with Vikas Aggarwal)
"Schumpeterian Competition, Inter-Organizational Learning, and the Dynamics of Spillover Pools" (with Gianluigi Giustiziero)
Doctoral dissertation advisor: Gianluigi Giustiziero (Ph.D. in Strategy), Sara Ryoo (Ph.D. in Strategy)
Doctoral dissertation committee: Thunyarat (Bam) Amornpetchkul (Ph.D. in Operations Management), David Knapp (Ph.D. in Economics), Anyan Qi (Ph.D. in Operations Management), Dadi Wang (Ph.D. in Operations Management), Yan Yin (Ph.D. in Operations Management), Bo Zhao (Ph.D. in Business Economics)
Doctoral Seminar in Strategy: Boundaries of the Firm
Fall, 2012 evaluation 5/5
Nominated for the PhD Teaching Excellence Award for 2013
Mergers, Acquisitions, and Corporate Development (Ross School of Business MBA elective)
Winter, 2012, 2013 evaluation 4.16/5.0 across 5 sections
Increased enrollment to three sections for 2013
Corporate Strategy (Ross School of Business Weekend MBA core course)
Fall, 2010 evaluation 4.52/5.0
Corporate Strategy (Ross School of Business BBA core course)
Fall, 2007-2010 average evaluation 4.4/5.0 across 11 sections
Nominated by the Ross BBA Class of 2011 for the Ross Teaching Excellence Award
Lectures (corporate strategy, China, etc.)
American Society of Mechanical Engineers, University of Michigan
Theta Tau Professional engineering fraternity, University of Michigan
The Asia Law Society, University of Michigan
Ad hoc reviewer for Academy of Management Journal, Academy of Management Review, Management and Organization Review, Management Science, Organization Science, Strategic Management Journal, Academy of Management annual conference, and INFORMS Organization Science Dissertation Proposal Competition
Slow, avid runner. Dexter Ann Arbor Half Marathon 2012. 2:14:12.