The effects of strategy and institutions on value creation and appropriation in firms: A longitudinal study of three telecom companies

Philipp Kern and Howard Gospel

Strategic Management Journal, 2023, vol. 44, issue 1, 343-366

Abstract: Research Summary Strategic management has come to pay more attention to value creation and appropriation (VCA) among the firm's stakeholders, including customers, capital owners, and employees. Existing research has conceptualized this as a strategic choice bounded by the bargaining power of each stakeholder group, which, we argue, risks misattributing outcomes by neglecting structural constraints. Instead, these dynamics need to be understood within the wider institutional context shaping the behavior of managers and stakeholders. Using a question‐driven mixed‐methods approach, we investigate the evolution of VCA in three telecom companies located in different institutional systems—British Telecom, Deutsche Telekom, and Telecom Italia. Our findings suggest that national institutional and firm strategic effects must be considered together to understand patterns of VCA among stakeholders. Managerial Summary Using an emerging methodology, we quantify how three telecom firms (British Telecom, Deutsche Telecom, and Telecom Italia) have created and distributed economic value since privatization. Our focus is on explaining the extent to which various stakeholders—employees, customers, capital owners, and government—were able to appropriate the value created by the firms. Some similarities are found across the three companies, but we also found major differences. To explain patterns, we bring together (a) strategic decision making by managers within the firm and (b) constraints imposed by institutions outside the firm. We find both to be important, interlinked drivers of distributional patterns. The article gives managers and stakeholders a means to understand major changes and determinants of value creation and distribution.

Date: 2023
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