Do You Have What it Takes?: Defining Ownership Competence

By Justin Walker

There are many factors that play into how well a company will perform, from industry positioning to relative rivals. The organization’s capabilities also play a role in success, but prior research on this has primarily focused on management. But what about owners?

Peter Klein, professor of Entrepreneurship and chair of the Department of Entrepreneurship and Corporate Innovation, was curious as to what extent owners play in the company’s performance. Along with Nicolai J. Foss of the Copenhagen Business School, Lasse B. Lien of the Norwegian School of Economics, Thomas Zellweger of the University of St. Gallen and Todd Zenger of the University of Utah, Klein investigated this in the article “Ownership Competence,” published in Strategic Management Journal.

“Ownership competence is a skill,” Klein said. “Think of it as the ability with which the ownership function is performed.”

In the article, the team defined ownership function as making tough decisions to progress the company along. Problems cannot be delegated past the owner, so the position truly represents the saying, “The buck stops here,” Klein said.

Ownership competence is divided into three distinct aspects: governance, matching and timing. Governance represents the management side of ownership, knowing when to step in and when to let people make decisions for themselves. Matching competence reflects the owner’s ability to figure out where their skills and know-how best fit in specific industries. Lastly, timing signifies knowing when is the best time to own.

“A lot of this is understanding yourself and your abilities, preferences and experiences,” Klein said.

While the study did not measure these aspects, it did start conversations on the topic. After reading the article, researchers in Brazil wrote a formal response published in Strategic Management Journal. Klein and his fellow researchers were then able to reply to the response paper, creating a dialogue that is not common in many academic journals, Klein said.

Klein’s research group has a few studies in the works related to ownership competence, both to extend the theoretical framework and to collect empirical data, he said.

“I would love to see ownership competence as one of the standard theories or frameworks that is in all of the textbooks,” Klein said. “It hasn’t happened yet, but there is still a lot of time.”