Methods and data and Theory

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Methods and data
We obtained data for the case study from several primary and secondary sources. Over a period of two years (September 2002 – September 2004), we conducted more than 20 personal interviews, ranging from one to several hours with members of the Geox management team, including the President (founder and owner), the CEO, the CFO, the HR Director, and several other functional directors. (http://www.ghd-hairs-online.com)

Two graduate students gathered other data from secondary sources (approximately 100 articles about Geox in trade journals and magazines, in addition to market and financial analysts’ reports, which flourished as the company applied to be listed on the Milan stock exchange) and company documents (annual reports and documents provided by company management). Early drafts of the case study were circulated among members of Geox’s management. They provided additions and corrections on factual data in the case.

We augmented this case study with other studies on the footwear industry and used subsequent discussion with industry experts to create an independent assessment of Geox’s strategic positioning. We conducted the interviews with the aim of identifying the complementarities among Geox’s choices and activities. For this purpose, elaborating on the research results of previous similar studies (Milgrom and Roberts, 1995; Brynjolfsson, Renshaw, Van Alstyne, 1997; Raff, 2000; Siggelkow, 2001, 2002a), we developed a research protocol defining the criteria and circumstances under which complementarities can be said to exist.

Theory
In order to understand the reasons of Geox’s success, we draw upon the stream of strategy research that studies the relationship between sustainable competitive advantages and the existence of complementarities within activity systems (Porter, 1996; Porter and Siggelkow, 2000). The theoretical framework underlying this approach uses two related notions:“complementarities” and “performance landscape”. Milgrom and Roberts (1990a, 1990b) define complementarities as the relationship between two or more activities implying that “doing more of any one of them increases the returns to doing more of the others”2. Overall, complementarity theory suggests that high performing firms are likely to combine a consistent set of activities and that the returns to such full configuration of activities are greater than the sum of the individual returns (Whittington and Others, 1999).

Interestingly, Milgrom and Roberts (1995) show how complementarities impact on profitability, while Milgrom, Qian and Roberts (1991) demonstrate that complementarities among activities cn account for business growth without any of the usual assumptions in the growth literature about economies of scale (Momentum Theorem). The notion of performance landscape, originally developed in evolutionary biology, was refined and formalized by Kauffman (1993) and then applied to business studies in the field of strategic management and organizational design and evolution (Levinthal, 1997, Levinthal and Warglien,(http://www.fad77.com)

In a production or profit function two or more variables are complements (substitutes) if the cross-partial second derivatives are positive (negative). For functions defined in non convex domains (more general case, of interest in this application), lattice theory (Topkis, 1978, 1998) defines two or more variables as complements (substitutes) if the function is supermodular (submodular).
Intuitively, this happens when raising one of the variables increases(reduces) the return to raising the others. More formally, if f(x,y,z) is a payoff function, x and y are decision variables and z a vector of variables, the payoff to increasing simultaneously the variables must be no less than the sum of the payoffs from increasing each of them individually. Analytically, the concept of supermodularity can be formulated as follows (Porter and Siggelkow, 2000).

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In order to understand the reasons GHD of Geox’s success, we draw upon the stream of strategy research that studies the relationship between sustainable competitive advantages and the existence of replica handbags complementarities within activity systems

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