2000, Doctor Honoris Causa, St. Petersburg State University, Russia (Teece remarks)
2004, Honorary Doctorate, Copenhagen Business School, Denmark (remarks by Prof. Kreiner) (announcement pdf)
2004, Honorary Doctorate, Lappeenranta University of Technology, Finland (remarks by Prof. Kyläheiko on the Viipuri prize)
2007, University of Canterbury, New Zealand
Professional and Academic Awards
1973-1974, Penfield Traveling Fellowship in Diplomacy, International Affairs, and Belles-Lettres
1978, Mellon Foundation Junior Faculty Fellowship
1982, Esmee Fairbairn Senior Research Fellow, University of Reading, England
1989, Enterprise Oil Fellowship in Energy Economics, St. Catherine’s College, Oxford University
1992, Distinguished Visitor, Policy Studies Group, Tokyo
1995, Elected Fellow, International Academy of Management
1998, Clarendon Lectures in Management Studies, University of Oxford
1999, Andersen Consulting Award for Best Paper in California Management Review
2002, Top 50 Living Business Intellectuals (Accenture Institute for Strategic Change)
2003, Viipuri International Prize in Strategic Management and Business Economics, Lappeenranta University of Technology, Finland (Prof. Kyläheiko remarks)
2003, Strategic Management Journal Best Paper Award
2003, Listed in ISI Highly Cited Researchers, Economics/Business
2005, Science Watch Top 10 Author Worldwide in Economics and Business for the decade 1995-2005 based on citation counts (Thomson Scientific Essential Science Indicators)
2005, Most cited paper (Dynamic Capabilities and Strategic Management, 1997) in the Science Watch index of Scientific Research in Economics and Business, 1995-2005 (Thomson Scientific Essential Science Indicators)
2007, Thomson in-cites May 2007. Ranked No. 8 in Most-Cited Researchers in Economics and Business (from Essential Science Indicators, covering a ten-year plus two-month period. January 1997-February 28, 2007)
2007, Honorable Professor at Zhongnan University of Law and Economics, China
2008, Honorary Member, Law and Economics Society of Australia and New Zealand (LEANZ)
2009, Strategy and Business Award for Dynamic Capabilities as one of Best Business Books for 2009
2009, Citation of Excellence (for one of the top 50 management articles of 2009) awarded by Emerald Literati Network (“Dynamic Capabilities and the Role of Managers in Business Strategy and Economic Performance”), Organization Science, Vol. 20, No. 2, 2009
2010, Fellow, Strategic Management Society
2011, Tore Browaldh Lecture, University of Gothenburg, Sweden
2011, A-List of Management Academic, BusinessEducators.com
2012, Herbert Simon Award, Corvinus University of Budapest
2012, Best Article Award for “Multi-invention Contexts: Mapping Solutions to Technological and Intellectual Property Complexity,” California Management Review (for 2011 volumes)
2012, Top 10 Most Influential Scholar in Management Based on Citations, Academy of Management Perspectives, May 2012
2012, Top Cited Article Award 2007–2011 for “Business Models, business strategy and innovation,” Long Range Planning, Volume 43, Issues 2–3
2013, Distinguished Speaker, Kravis Leadership Institute, Claremont McKenna College, March 3, 2013
2013, Sumantra Ghoshal Award for Rigour and Relevance in the Study of Management , London Business School
2013, Eminent Scholar Award, Academy of International Business
Remarks by David Teece delivered upon acceptance of Doctor Honoris Causa, St. Petersburg State University, July 1, 2002.
I am most honored to receive a doctorate from this great university. You have so many extraordinary recognized graduates – Mendeleev, Leontief, Pavlov, Kondratiev, and Putin — that I am deeply humbled to be recognized in this way. Thank you Rector Verbitskaya, Dean Katkalo, and university faculty who have honored me. I will endeavor to continue to live up to the scholarly traditions that your great university has established and maintained through the centuries.
My scholarly career has in fact always had a subtle connection to this place – one that I have not revealed to my colleagues. The world knows Wassily Leontief primarily for his input-output models; but keen students will also recognize Leontief’s seminal writings critical of neoclassical economics. I studied Leontief’s work as an undergraduate student in New Zealand, and my lifelong battle with mainstream economics was much inspired by Leontief’s critique. He gave me courage to take on the conventional wisdom and not to accept standard answers when they did not square with the world around me. It certainly helped me tackle the received theory of the firm that I encountered as an economics student. To characterize the modern corporation as a production function as some textbooks still do, appears farcical to anyone with a modicum of knowledge about the modern corporation. For business education and serious understanding of the modern corporation, one needs a theory of the firm that is robust and intuitive. This has been my life-long quest.
My academic research has been oriented toward understanding the business firm. There are deep questions still to be answered in economics about the role of firms in the economy. Amongst the most fundamental are: (1) Why do firms exist. (2) Why are they hierarchical. (3) Why don’t firms outsource everything, if markets are as efficient as the economics textbooks claim they are. (4) Why are firms diversified if there are gains to specialization. (5) Why should economies of scale and scope lead to large diversified firms rather than strategic partnering. (6) If firms have know-how, where does that know-how reside. If it is merely in the minds of the employees, how can the firm prevent the employee from extracting all the value. (7) How can firms profit from innovation if they don’t have strong IP.
These questions might sound banal to the layperson, but I can assure you they are deep questions, and we don’t yet have answers as good as we would like. My research over the past 20 years has been directed to helping find answers to some of these questions. I have done so by combining an understanding of economic theory, organization theory, business history, and the economics of innovation. I will briefly summarize some of the answers I have provided to the puzzles identified earlier.
First, in a series of papers beginning with “Economies of Scope and the Scope of the Enterprise” (1980), and “Towards an Economic Theory of the Multiproduct Firm” (1982), I have developed a theory of why one would expect to find diversified rather than specialized firms. In the frictionless market paradigm it would seem that if for some reasons firms had excess capacity, they would simply rent that capacity to other specialized firms who would be able to make better use of it. I spotlighted in my 1980 paper what at that time was a rather novel concept – imperfections in the market for know-how. I developed theory as to why firms simply cannot transact in markets for know-how in a way that would enable them to transfer and capture full value from their knowledge assets.
This was a satisfactory answer, but it raised a deeper question: Where does the firm’s know-how come from? I attempted an answer in “Towards an Economic Theory of the Multiproduct Firm.” I appealed to the writings of Edith Penrose (1959) and to some extent also to Cyert and March (1963). Their scholarship portrayed the firm as somehow having excess resources (Penrose) or slack (Cyert & March). This was sufficient when coupled with an articulation of market imperfections, to explain why firms might internalize transactions that otherwise could conceivably take place in the market for know-how. Note that the market imperfections I described were not of the traditional Williamsonian type. Rather, there were simply problems associated with identifying trading opportunities and measuring and monitoring performance under technology transfer agreements.
Were I to rewrite these papers today, I would differentiate between problems associated with transacting for intellectual property and problems associated with transacting for know-how. With respect to the former, it is the fuzzy boundary problem (Teece, 2000) stemming from the lack of clarity of property rights, which is most compelling. With respect to know-how, it is uncertainty around how the know-how will be used that confounds the market.
The main limitation of these early articles was the failure to explore how firms develop knowledge. With hindsight, my treatment of learning and capability augmentation was indeed quite skimpy. Firms built capability through involvement in industrial research, and through learning by doing. Also, in a dynamic context where markets and technologies are rapidly changing, the firm’s ability to orchestrate the use of its core and complementary assets is surely key to success. These skills come in part from the firm’s managerial competence, and from leadership and vision at the top.
My work on dynamic capabilities (Teece, Pisano, & Shuen, 1996) has endeavored to identify the decision making process that supports this orchestration capability. However, the dynamic capabilities approach is still very much in its infancy and has yet to yield a testable theory. But the dynamic capabilities approach recognizes the fungiblity of many of the firms knowledge assets. Core competences can be shaped and directed. The firm’s current products are merely a temporal expression of the firm’s basic competences. Firms develop dynamic capabilities by engaging in learning activities – market research, collection of competitive intelligence, development of deep customer knowledge, research and development activities, strategic alliances, benchmarking, and test marketing. Competition itself contributes to organizational learning. Firms find out in the marketplace how well they are doing, and what their competitors are up to. As Hayek (1945) stressed over half a century ago, competition is a knowledge discovery process. However, such knowledge discovery is by no means complete. Causal ambiguity — what Richard Rumelt refers to as uncertain imitability – can retard learning and enable competitive advantage to be sustained indefinitely. Because competences are causally ambiguous, tacit, and interconnected, they are likely to be quite heterogeneous and constitute the core of a firm’s organizational capital, and the source of its competitive advantage. This of course is quite consistent with Rumelt’s (1991) findings that firm effects on profitability dominate industry effects six to one.
My recent work on innovation management builds on some of these core ideas. In “Profiting from Innovation” (Teece, 1986), I developed a conceptual model which took into account the asset base of the firm (in particular, the firm’s ownership of complementary assets), the character of the intellectual property regime, and the strategic choices made to help explain who wins and who loses in innovation. The framework I developed has yet to be bettered, and the paper is the most cited article in the field of technology strategy. But there is still much to do on this problem. For instance, the ownership of intellectual property needs to be disaggregated from the ownership of complementary assets in order to better explain developments and strategies in biotechnology and semiconductors. Thus is the subject of my ongoing research.
Given that my career has not been one devoted entirely to scholarship, perhaps it is of interest to report on a few of my extracurricular activities. In my capacity as vice chairman and director of Canterbury, I have overseen the reorganization of a sports apparel company in an endeavor to make it competitive globally. In many parts of the world the name Canterbury is synonymous with rugby. It has on-field authenticity wherever rugby is played. Canterbury is now a recognized brand in the UK, as well as in Australia and New Zealand.
Perhaps the more significant and most interesting (from the perspective of the theory of the firm) of my business activities are my involvement with LECG as Chairman and Co-founder. LECG is an expert services firm. It is arguably the only “pure play” expert services firm in the world. It is a “new economy” firm with a very distinct business model, which I will explain in a moment. Its success is demonstrated by the fact that it has over 750 employees worldwide, many of them with Ph.D.s, and revenues well over $100 million per year.
Let me explain why it may be the case that with LECG we have invented an entirely new organizational model. I’ll explain LECG’s business structure and the compensation system used to reward “experts.” To provide context, I will begin with a brief discussion of the role of “experts” in modern society.
In post-industrial society, specialty/professional occupations – what Peter Drucker calls knowledge workers – are amongst the faster growing occupations. These include accountants, bankers, engineers, management consultants, lawyers, doctors, computer programmers, and health care professionals of many kinds. Some of these workers have very high levels of expertise – indeed, they are “experts.” Experts have special knowledge and the ability to manipulate and deploy it. The growing importance of knowledge to competitive advantage has undoubtedly raised the importance of experts. There is high demand for their services to help shape decisions and resolve disputes. Meeting the needs of experts requires atypical employment contracts and nontraditional organizations. Experts are aware of their market value, want and need discretion over their work, and don’t need close supervision. They want discretion because it has high lifestyle utility to them; moreover, today the Internet allows them to work anywhere anytime. They may also require flexibility because they may have responsibilities elsewhere – to a professional society, a university, or to a prior employer.
These developments in the labor force have been responded to in many ways. Some companies – like AT&T, Sun Microsystems, and Deloitte & Touche – have crafted arrangements to give their talented “workers” special flexibility. While many firms have modified their human resource policies, few if any have attempted bottom-up redesign of the organization.
With LECG, we have basically redesigned the business organization to accommodate the special needs of especially talented “knowledge workers” or “experts.” We have created an organization that accommodates multiple career paths simultaneously, and sequentially. Traditional organizations simply cannot tolerate or accept their members having significant discretion over work, personal life, and colleagues.
Alchian and Demsetz (1972) recognized some time ago that workers who use “brains and not brawn” are harder to monitor. They conclude that “artistic or professional inputs will be given a relatively freer reign with regard to individual behavior” (p. 786). Their observations are quite correct. However, they did not trace their argument to its logical conclusions and realize that a new and different kind of organization was needed to tap the full power and potential of experts.
Experts require, or perhaps one should say create, the opportunity for a different kind of organization, which treats experts not like employees, but like clients. Put differently, both input supply and market demand considerations have worked together to place unusual requirements on any organization that wants to provide expert services. LECG has responded to this situation with an organization that simultaneously meets experts while also satisfying paying clients.
Key elements of the business model are:
Incentives. As Alchian and Demsetz observe, it is very difficult to monitor talented individuals. For example, universities and research labs do not really try to monitor the professional work of their employees, except occasionally, and only then quite loosely. Efforts to closely monitor performance might well be viewed as insulting or manipulative to the expert. LECG’s solution is to let the client monitor. Compensation is set for our experts at a certain percentage (ranging from 30% to 80%) of the expert’s bill-out rate. If the client is disappointed and doesn’t pay, the expert doesn’t get paid either. This creates the ultimate pay-for-performance model and enables management to sidestop continuous review.
Limited Hierarchy. The model is as “self organizing” as possible. Experts manage themselves. The traditional superior subordinate relationship is exploded, at least amongst experts, where a peer structure (Williamson, 1975) is put in place.
Integration. There are no divisions or other forms of organizational submits in LECG. All staff are fungible and are on “at will” contracts. Accordingly, staff and experts can be used in any project anywhere in the world. This openness enables experts to readily access talent, a key attraction to many.
Learning. The company encourages learning and promotes research. It provides significant internal mentoring. It is quite valuable for experts to discover, through observation inside the organization, the styles and strategies of individual work performances that are effective. An important role that I, as Chairman, play is to guide, and to provide an overarching strategy for the firm.
Let me review how this type of organization we have created, and the employment relations inside, end up creating a rather different business model. In Ronald Coase’s (1937) conception of the firm, a principal hallmark was that employees “agree to obey the directions of an entrepreneur within certain limits.” The employee lets the entrepreneur/manager direct his activities within that zone because the entrepreneur is assumed to be better at providing direction than the worker. If the entrepreneur does this better than the price system, then this provides the rationale for internal organization. The entrepreneur/manager is placed at the apex of a hierarchy so as to properly exercise control and resource allocation skills. Inside the zone of indifference the worker doesn’t care about the tasks to which he or she is assigned.
Unfortunately, the Coasian conception, while interesting, is not able to handle with ease the expert employee. In the Coasian firm the boss must know as much as the expert if the boss is to provide direction inside the employee’s zone of discretion. This is clearly difficult if not impossible. Moreover, the expert’s “zone of discretion” is likely to be quite narrow. Accordingly, Coase’s view of the employment relation does not appear to fit a firm endeavoring to provide expert services.
Alchian and Demsetz’s answer was different from that of Ronald Coase and more relevant to an expert services firm. Their claim is that the raison d’être of the firm is team production. According to them, managers don’t have any power of fiat or authority that the marketplace doesn’t have. It’s no different for the employer to deal with employees each day than for the consumer to deal each day with the neighborhood baker. There is no need in their model for the employee to surrender control, as is necessary in the Coasian firm.
Rather, the firm is a place where productivity enhancing team behavior takes place. The existence of the firm flows from its ability to provide for cooperative activity superior to that available in a market setting. Managers monitor team behavior (as in Alchian and Demsetz’s manual freight loading example), detect shirking, and align rewards to performance.
The Alchian and Demsetz’s model does not apply perfectly to expert services either, but elements are recognizable. First, to the extent that there are hierarchical elements amongst the experts, it is the experts that hire “bosses” rather than the other way around. This is not unlike a decentralized university structure, where the faculty arguably hires their Dean.
Second, the problem of close monitoring is handled by delegating it – with oversight – to the client. If the client doesn’t buy the services of a particular expert, or doesn’t pay, or seeks a discount, reprimand is effectively delivered because the expert does not get paid by the firm if the firm doesn’t collect. The at-will contract also helps. If there is a longer-term concern about the expert’s performance, he or she can be terminated at any time. There is also an immediate adjustment to compensation if workload falls. Clearly, the at-will contract disciplines both employer and employee, forcing compensation to be set at market levels at all times.
Third, the problem of monitoring and rewarding team players is left to the experts themselves through a “finder’s fee” mechanism process that tracks the identity of the expert who secured the project from the client. The attribution of effort and success is left to the teams themselves, with a lump sum to be divided based on the size and profitability of the project. Leaving attribution to the expert economizes on management and reduces the need for hierarchy.
Clearly, individuals with special skills are not part of a perfectly elastic supply curve of labor, as Karl Marx once believed. Rather, they provide a quite differentiated service based on the particularities of their knowledge and experience. The job of the entrepreneur is to somehow match work to expert, and to identify new experts, because there is frequently an element of team production.
I trust that you will recognize from this brief discussion that in building LECG, I have been putting organization theory and my understanding of the business firm to practice. Had I not studied the theory of the firm, I perhaps might have adopted a more traditional business model for the company we founded almost 15 years ago. Without a deep understanding of microeconomics, and the inspiration I took from Leontief’s essays, I doubt I would have had the courage to be so different. Today, it is the unique business model that is the basis of the firm’s competitive advantage. It has enabled LECG to grow at twice the rate of the industry average.
St. Petersburg Program
A professor’s job is not limited to teaching and research. There is also a soft mandate at UC Berkeley to do more.
One of my most rewarding challenges as a university professor has been my work with Deans Pashkus and Katkalo and Rectors Mercuriev and Verbitskaya to help build a world-class business school right here, inside one of Russia’s great universities. I will always remember the day that Valery stopped by my office, and after outlining his vision for a world-class business school in Russia, asked me if I would help. After thinking about it for about a minute, I said “yes” and I have committed time and energy for over a decade to deliver on my promise. Some might wonder why I agreed. After all, there’s plenty to do as a faculty member at the University of California and helping build a great business school in Russia isn’t going to lead to a promotion or a pay increase or any other regular benefit. The reason I replied to Valery in the affirmative included the following:
1. Russia was embracing its own form of capitalism, and management education was needed if the Russian economy was to achieve its full potential.
2. I was completely persuaded by Valery Katkalo’s logic of building a business school inside the university, and pursuing the academic model. This might not put the greatest number of graduates on the street in the shortest period of time, but it was the best way to build for the long run.
3. Valery Katkalo himself was committed. Valery was clearly a visionary and could be the engine to make it all happen.
4. As an American citizen – or should I say citizen of the world – it was critical for the West to provide tangible assistance to Russia, and to do what we could for democracy in Russia.
Needless to say, there were significant challenges associated with building an institutional link between UC Berkeley and St. Petersburg State University:
1. Funds. First, there wasn’t any money immediately available! Certainly, UC didn’t have a budget to support such a program. There was only one way to get it – to go out and raise it. I was extremely worried that I would not be able to fulfill the expectations of our Russian colleagues in that regard. Fortunately, through the great generosity of many – in particular Claire Goedinghaus, Arthur Schultz, and George Soros — and through monies obtained from the American people through USAID, USIA, The Eurasia Foundation, the Open Society Institute, and the Lucile and David Packard Foundation, we have done reasonably well in providing both steady annual support for the academic program, and a significant contribution to the capital campaign.
2. Faculty Support. Nothing is possible at UC without faculty support; most things can be achieved with it. Early on, we called a meeting of our faculty to see if we could win faculty support, and we did. In particular, Dwight Jaffee was willing to step up and play the critical role of academic director. His guidance and support has been invaluable. He has gone way beyond the call of duty. A long list of other faculty has made significant contributions including David Aaker, Ed Epstein, Godwin Wong, John Myers, Fred Balderston, Oliver Williamson, and Greg Grossman to name just a few.
3. Programmatic Support. Susanne Campbell and Pat Murphy have really provided the energy and the toil to make our relationship work. In Susanne, we were fortunate to have available to us someone fluent in the language and with a great passion for Russia and her people. This is not just perfunctory praise. Susanne has fought for our joint program, and has helped guide and accommodate our many visitors for almost a decade. Meanwhile, Pat Murphy has anchored our program at IMIO, written the grant applications, written the reports to the granting agencies, transferred the funds, and simply made things happen. Susanne and Pat, may I salute you both.
CENTER FOR MANAGEMENT AND INSTITUTIONAL STUDIES Finally, let me renew my commitment to this great enterprise. While much has been accomplished, we are still at the beginning. In particular, I understand that Dean Katkalo and his faculty have launched CMIS. I am enthused about this development, and I give it my full support. I am confident that in the years ahead it will grow to be one of the great centers of learning on business and business institutions.
Alchian, A.A. and H. Demsetz. “Production, Information Costs, and Economic Organization,” American Economic Review 62:2 (Dec 1972), 777-795.
Coase, Ronald A. “The Nature of the Firm,” Economicia (Nov. 1937), 386-405.
Cyert, R. and J. March. A Behavioral Theory of the Firm. London: Blackwell, 1963.
Hayek, F. “The Use of Knowledge in Society,” American Economic Review, 35 (1945), 2514-2530.
Penrose, E. The Theory of the Growth of the Firm. London: Blackwell, 1959.
Rumelt, R.R. “How Much Does Industry Matter,” Strategic Management Journal, 12 (1991), 167-185.
Teece, D. J. “Economies of Scope and the Scope of the Enterprise,” Journal of Economic Behavior and Organization, 1:3 (1980), 223-247.
__________. “Towards an Economic Theory of the Multiproduct Firm,” Journal of Economic Behavior and Organizations, 3 (1982), 39-63.
_________. “Profiting from Technological Innovation,” Research Policy, 15:6 (1986), 285-305.
__________. “The Dynamics of Industrial Capitalism: Perspectives on Alfred Chandler’s Scale and Scope (1990),” Journal of Economic Literature, 31 (March 1993).
__________, G. Pisano, and A. Shuen. “Dynamic Capabilities of Firms,” Strategic Management Journal (1996).
__________. Managing Intellectual Capital: Organizational, Strategic, and Policy Dimensions. Oxford: Oxford University Press, 2000.
Williamson, O.E. Markets and Hierarchies. New York: Free Press, 1975.
Remarks on scholarship, excerpted and adapted from the Announcement of the Honorary Doctorate by the University of Copenhagen Business School, by Professor Kristian Kreiner, Department of Organization. (announcement pdf)
David J. Teece received his Ph.D. in economics from the University of Pennsylvania and was on the faculty at Stanford University before going to University of California, Berkeley, where he is currently a chaired Professor at the Haas School of Business and the director of the Institute of Management, Innovation and Organization (IMIO). Teece has made key contributions to the theory of the firm and strategic management, the economics of technological change, knowledge management, technology transfer, antitrust economics and several other areas.
Professor Teece’s early work focused on issues relating to the internal organization of business firms and their boundaries and diversification. He pioneered and elaborated the statistical testing within the transaction cost economics framework originally developed by Ronald Coase and Oliver Williamson. He imported to transaction cost theory ideas from evolutionary economics and from Edith Penrose’s work. Later work introduced the ideas of complementary assets and appropriability regimes in building a conceptual framework for understanding the factors which influence the distribution of profits from innovation (on innovating firms, the followers, or owners of related assets). Professor Teece is one of the founding fathers of strategic management as we know it today; he pioneered research on both the resource based approach and especially dynamic capabilities. In this way he helped establishing the competence based perspective on economic organization. He also contributed to related areas, such as technology transfer, organization theory, intellectual property rights, and general management.
At the core, professor Teece’s work (in particularly within the theory of the firm and strategic management) is characterized by a persistent effort to enhance, test, and synthesize different intellectual traditions, in particular transaction cost economics, evolutionary economics, and the so-called capability approach. The overarching ambition in his work is to build a coherent and robust understanding of the central issues in economic organization and wealth creation, particularly at the level of the firm. Many of Teece’s contributions stand out because they embrace ideas from several disciplines; and his research covers various aspects and levels of the modern organization. For instance, in his important contributions to the theory of corporate diversification professor Teece used transaction cost economics to understand diversification, building a theory of diversification around the problem oftechnologytransfer; and he contributed to the transaction cost theory of the firm by introducing evolutionary insights. In addition, his paper, “Organizational Structure and Economic Performance”, was (remarkably) the first empirical study to demonstrate a statistically significant link between organizational structure and performance. His paper with Monteverde (1982) was the first to establish a statistically significant link between asset specificity and organizational structure, thereby helping to transform transaction cost economics into an empirically relevant paradigm.
Remarks by Kalevi Kyläheiko, Professor of Economics, for the award of the Viipuri International Prize in Strategic (Technology) Management and Business Economics, Lappeenranta University of Technology School of Business, Finland, 2003.
Honorable professor Teece, honorable members of the Society for Viipuri School of Economics, ladies and gentleman. It’s a great pleasure and an honor to substantiate the awarding of the first Viipuri Prize to Professor David J. Teece from the University of California, Berkeley for his outstanding record in the field of strategic technology management and business economics.
Before going on to the merits for this particular award, I would like to say few words about the Society for the Viipuri School of Economics, which is the founder of the Viipuri prize.
The society has been a decisive supporter of the Department of Business Administration at LUT. Ever since 191 9, the goal of the Society was to establish a Finnish School of Economics in Viipuri, which was, at the time, the second largest and most international city in Finland. After the Second World War, Viipuri ceased to be a part of Finland, and the Society aimed at establishing a business school somewhere near Finland’s Eastern border – fortunately, the society chose Lappeenranta as the location for the business department.
The generous financial support of the Society has enabled us to resource our department well, despite its rapid growth. The focus of the society’s support has now shifted more and more from the Masters Degree Program in Business to research. The establishment of the Viipuri Prize clearly manifests this tendency.
On behalf of the University, in general, and the Department of Business Administration, in particular, I’d like to express my great gratitude to the Society for the many valuable things they have made possible.
We are here to honor Professor David Teece for several reasons out of which the following four are highlighted:
1. for his outstanding analysis of the most crucial management problems faced by knowledge-based society, especially, of how to profit from innovation, and, even more importantly, how to sustain the profits over time in radically changing environment. In this endeavor he has combined ideas from transaction cost economics, evolutionary economics and resource-based view with his own capability-based view.
2. for his pioneering contributions to the toolbox of strategic technology and innovation management. In particular, he has extended and dynamized the fundamentally static transaction cost theory by introducing such useful concepts as the role of autonomous vs. systemic innovations, complementary assets, the appropriability regime and dynamic capabilities.
3.for showing that clear economics-based ideas can be expressed in non-technical language as well. This has clearly facilitated necessary dialogue between the two originally not-so-friendly camps based either on economics of organization or organization theory and management.
4. for establishing the eclectic, but at the same time, original dynamic capability view of the firm which makes it possible to grasp the importance of concepts, such as learning, strategic options and entrepreneurship, when trying to understand how firms really co-operate and create wealth in globalized world markets.
Professor Teece’s biographical record also reflects his outstanding career and valuable contribution to science. David J. Teece received the degree of Master in Commerce at the University of Canterbury, New Zealand 1971 and Ph.D. in economics from the University of Pennsylvania, USA.
Professor Teece has been Professor of Business Administration at Walter A. Haas Schools of Business, University of California Berkeley since 1982. From 1989 he is the Holder of the Mitsubishi Bank Chair in International Business and Finance at Berkeley. Since 1994, he has been the Director of the famous Institute of Management, Innovation and Organization (IMIO) at Berkeley.
Professor Teece has also been awarded several grants, of which I’ll mention only a few:
Professor Teece has lectured the famous Clarendon Lectures in management studies at the University of Oxford in I998. He was awarded the Andersen Consulting Award in 1999 and was conferred an honorary doctorate at St. Petersburg State University, Russia in 2000.
In 2002, Accenture chose him as one of the “World’s Top 50 living Business Intellectuals”.
Professor Teece has also been active and successful in his private business endeavors. At present, he is the chairman of the boards of directors in, at least, four companies and a member of the boards of many others.
Professor Teece has published more than 80 articles in refereed academic journals, 60 articles in book collections, and 15 books. His publications cover various fields of business economics, innovation management, strategic management, organization theory, energy policy and law and economics issues, to mention only few of his almost countless fields of interest.
Lord Keynes once pointed out that:
“The study of economics does not seem to require any specialised gifts of an unusually high order. Is it not, intellectually regarded, a very easy subject compared with the higher branches of philosophy and pure science? Yet good, or even competent, economists are the rarest of birds. An easy subject at very few excel! The paradox finds its explanation perhaps, in that the master-economist must possess a rare combination of gifts. He must be mathematician, historian, statesman, philosopher- in some degree. He must understand symbols and speak in words. He must contemplate the particular in terms of the general, and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past purposes of the future. No part of man’s nature or his institutions must lie entirely outside his regard.”
(J. M. Keynes “Alfred Marshall, 1842-1 924” The Economic Journal, Vol. 34, No. 135. (Sep., 1924), pp. 321-322. )
I dare to say that Professor Teece belongs to the tiny group of living economists who really meet all these demanding standards put forward by John Maynard Keynes.
I would like to conclude my address by pointing out that professor Teece also meets all the standards put forward by the Society for the Viipuri School of Economics. When they decided upon the Prize, they instructed us that the candidate has to have worked in a field that effectively supports the research activities of the Department of Business Administration.
I am quite sure that Professor Teece’s many research activities cover the core of the research carried out at our department. For instance, most of the doctoral theses written in the Department of Business Administration are based on insightful ideas that professor Teece has put forward in his articles and books. In particular, his dynamic capability view of the firm has been and will be largely utilized by students and researchers at the department.