Knowledge that Transforms

Existing studies on subunit power largely rely on the premise that a firm’s subunits are connected through resource exchanges. In this study, we introduce two novel constructs—market periphery and market overlap—to capture the power of subunits that do not directly involve resource exchanges. Drawing on resource dependence theory, we advance a subunit power approach to argue that the dependence of the firm on its subunits for sales can help predict headquarters’ decision on subunit exits in the form of divestiture, dissolution, or spin-off. Using subunit data of a population of U.S. insurance groups in a longitudinal setting, we find that market periphery and overlap increase the hazard of subunit exit. However, a subunit’s relative sales growth reduces the positive effect of overlap on its hazard of exit, whereas external linkage lessens the positive effect of periphery on its hazard of exit.

Resource allocation in firms is often done in relative terms. Allocations to each project or, in the case of multibusiness firms, business segments are not made independently but through comparisons among the options. In that context, it becomes particularly important to identify the organizational factors that might influence those processes, as well as the mechanisms that create that influence. In this article, we investigate one of those potential factors—the size of a business segment relative to the rest of the organization—and two possible accounts. One is a naive tendency to spread out allocations evenly over the firm’s segments that would cause managers to relatively ignore differences in size and favor smaller segments over larger ones, holding other variables constant. The second is a tendency to direct larger allocation to the segments with the most political power and clout within the organization, which would normally favor larger segments, as those generally possess more influence. We investigate these competing hypotheses in a cross-section of firms to conclude that both mechanisms are partially at play. We find that both the smallest and the largest of segments are favored in the capital allocation process. Moreover, we find that the segment’s growth and profitability as well as corporate management ownership of the company moderate those effects.

This article examines the relationships between professionals’ early career developmental networks and their knowledge creation. An empirical study of 167 novice professionals finds that novices’ knowledge creation benefits from both closed and open structures in developmental networks, but the effects depend on whether they work with a prominent mentor. Traditional developmental networks, characterized by dense structures, relate positively to novices’ future knowledge creation, except when there is a prominent mentor in the network, suggesting that density and prominence are substitutable forms of social capital. Entrepreneurial developmental networks, where novices are positioned between disconnected mentors within the developmental network, relate negatively to future knowledge creation for all novices, including those with prominent mentors. Finally, the extent to which the developmental network reaches collaborators in the broader professional network relates positively to novices’ future knowledge creation, and this effect is strongest for those novices with prominent supervisors in the developmental network. Overall, these findings suggest important implications for understanding novices’ developmental networks and their knowledge creation.

The dominant model of behavioral learning may not apply to organizations because it assumes that the people involved agree in their outcome assessments of actions and have relatively equal power to engage in joint learning. We relax these assumptions of consensus and power balance in order to apply the model to organizational (as opposed to individual) learning. We examine what happens when parties from different organizational units and levels engage jointly in learning from recurrent events. We examine behavioral learning as recurrent cycles of action–outcome assessment–response on similar tasks (i.e., recurrent events) over time. We observe different patterns of organizational learning (adaptive and dialectical) and nonlearning (persistent and compulsory behavior) in our 8-year real-time field study of the recurrent events while integrating a large health-care system. These four processes are interdependent and explained by just two contingencies: (1) agreement on outcome assessments and (2) power balance among the parties engaged in actions. These findings expand our repertoire to include processes that heretofore have not been considered in the organizational learning literature and explore how they change with different degrees of agreement and power among parties; that is, how an imposition of power by more powerful parties leads to nonlearning, while an openness to conflict and an empowerment approach enables organizational learning.

Sexual behavior represents relatively common and mundane home-life behavior, with demonstrated impact on both mood and general physical and psychological well-being. Integrating emergent research on sex and mood with theory on work-life enrichment, we propose a novel model demonstrating the effects of sexual behavior at home on next-day job satisfaction and job engagement as a function of positive affect. Using a 2-week daily diary study of married, employed adults, we found that (a) when employees engaged in sex at home, they reported increased positive affect at work the following day, independent of the effects of marital satisfaction; (b) sex at home increased both daily job satisfaction and daily job engagement as a function of increased positive affect; and (c) daily work-to-family strain-based conflict significantly reduced the likelihood of engaging in sex at home that evening. Accordingly, we extend theory on work-life enrichment by demonstrating the import of seemingly banal behavior on daily work life, with implications for work-life impingement.

Although it is well established that top management team (TMT) experience is highly valued in new ventures, research has largely focused on the value of experience depth. However, founding teams often bring a myriad of different types of experience to their business. Less is understood about how these experiences are perceived by key stakeholders, and prior theory suggests that TMT breadth could be viewed as either an asset or a liability. Drawing from theory on cognitive categorization, we hypothesize that the perceived value of executive breadth depends on the context in which a venture is situated. We argue that the characteristics of the environment shape the degree to which experience breadth is valued, and we show that investors assess breadth positively in opportunistic environments but negatively in threatening environments. Contrary to previous research, we show that breadth can, at times, be viewed as a distinct liability for a new venture. In supplementary analyses, we also show that these effects are not contingent upon the depth of the founding team’s experience. Further, we find that founding team breadth does have significant influences on firm strategy, including the structural positioning of the firm in an industry’s value chain and the cultivation of diverse revenue streams, but that the effect of breadth on investor perceptions is not mediated through these differences in strategy.

Much of organizational justice research has tended to take a static approach, linking employees’ contemporaneous justice levels to outcomes of interest. In the present study, we tested a dynamic model emphasizing the interactive influences of both justice levels and trajectories for predicting behavioral social exchange outcomes. Specifically, our model posited both main effects and interactions between present justice levels and past justice changes over time in predicting helping behavior and voluntary turnover behavior. Data over four yearly measurement periods from 4,348 employees of a banking organization generally supported the notion that justice trajectories interact with absolute levels to predict both outcomes. Together, the findings highlight how employees invoke present fairness evaluations within the context of past fairness trends—rather than either in isolation—to inform decisions about behaviorally reciprocating at work.

How do analysts make decisions about which firms to cover? Previous research has not considered how such decisions can be influenced by cultural understandings about appropriate forms of corporate governance. Drawing upon the institutional logics perspective, we propose that analyst firms’ home-country institutional logics of corporate governance can shape analyst perception of coverage risks for family firms. Specifically, we argue that given the negative view towards family governance in shareholder-based logic, family firms are less likely to be covered by analyst firms from shareholder-based countries than by those from stakeholder-based countries. Furthermore, the coverage divergence between shareholder- and stakeholder-based analyst firms will be greater for family firms featuring higher risks of value assessment and expropriation. We test our framework in the context of global analysts’ coverage of publicly listed firms in Taiwan between 1996 and 2005 and find empirical support. Our study contributes to the institutional logics perspective by establishing the implications of corporate governance logics for analyst coverage and providing a boundary condition for agency theory. We also uncover a less-noted source of institutional variation among the analyst community.

Stock options have been advocated to encourage managers to make long-run investments like R&D and capital expenditures (CAPX) that entail upfront costs with the potential to generate favorable long-term returns. However, the effect of options on managerial decisions depends on managerial beliefs about how the stock market reacts to firm behavior. If, consistent with empirical evidence, managers believe that stock prices increase in the short term from increased R&D, but not CAPX, then stock option exercisability—which dictates when managers can receive option payouts—should influence resource allocation. We also consider the effect of changes in the value of options over time. Results from a study of more than 6,500 observations from about 1,000 manufacturing firms over 18 years show that unexercisable stock options positively influence CAPX but not R&D, while exercisable stock options positively influence R&D but not CAPX. Both patterns are consistent with behavior that increases managerial payoffs but not necessarily firm performance. In addition, we find an expected negative association between underwater options and CAPX but no evidence of a corresponding positive relation with R&D. Finally, we find partial evidence of a house money effect that makes allocations to CAPX and R&D sensitive to recent changes in option values.

This study investigates what leads managers to allocate constrained cognitive effort toward new versus familiar aspects of a business. Specifically, we explore advice giving by venture capital firms (VCs) to their portfolio companies, distinguishing between business topics on which a VC has advised other ventures in the past and topics new to the VC that may be outside its areas of expertise. We use both demand-side (venture-driven) and supply-side (VC-driven) perspectives to offer a novel theory about the antecedents of cognitive effort underlying advice giving. Empirical tests in a unique data set of French VCs show that both perspectives explain important aspects of advice-giving dynamics for VCs. VCs facing dynamic environments and capacity constraints strongly respond to stimuli from ventures, but VCs also adjust their behavior as they accumulate experience in ways that reflect both expanding confidence in their ability to add value and concerns about overextension of their efforts, depending on the valence of VC experience. Our findings provide important insights to the antecedents of cognitive effort and to research on the VC–venture relationship by exploring the dynamics of how advice-giving relationships evolve over time as VCs gain experience.