Knowledge that Transforms

Research Summary Organizations often hire employees hoping to acquire new knowledge. While the literature has paid considerable attention to the role of the characteristics of the source of knowledge, the recipient firm, and the knowledge being transferred, it has largely overlooked those of the knowledge being replaced. Using a computational model, we examine how the pre‐existing knowledge of the hiring firm—specifically its degrees of internal and external fit—influences its ability to learn. Our findings suggest that firms with lower internal fit absorb new knowledge more quickly, even when controlling for initial external fit. We identify several mechanisms driving this dynamic, demonstrating how persistent resistance to new knowledge and sudden shifts can emerge solely through mutual learning dynamics between individuals and organizations, independent of social or cognitive constraints. Managerial Summary Companies frequently hire employees from competitors to gain new knowledge and improve performance. We show that success in learning by hiring depends not only on who firms hire but also on the characteristics of their existing knowledge. Our findings reveal two counterintuitive dynamics. First, firms whose practices exhibit a high degree of fit face greater difficulty in absorbing new knowledge. Such extant knowledge is stickier, as incumbent employees find it harder to abandon their old approaches and keep pulling the organization back to the status quo. Second, in complex environments, struggling firms that hire aggressively may learn less effectively, as multiple hires provide conflicting advice. Thus, while such firms stand to learn more from hiring, the internal dynamics of learning within the organization frustrate the firm's effort to absorb the knowledge. We subsequently present and analyze the mechanisms responsible for these outcomes.

Research Summary Firms asserting their patents globally face a dilemma: a legal verdict is binding only in the country of litigation, and yet litigating country by country is prohibitively expensive. Thus, firms have to be strategic in deciding where to sue. In this paper, we argue that global patent litigation is not only about winning a case, but also about making a case, that is, leveraging litigation in one country to shape expectations on litigation outcomes elsewhere. Our analyses on patent litigation in 50 countries over 13 years show that firms tend to concentrate litigation in few countries when the relevant markets historically share similar litigation outcomes, so litigation in one country can effectively inform the litigants of future trajectories, reducing the need for repetitive litigation across countries. Managerial Summary While legal enforcement of intellectual property (IP) rights remains national, the battleground for IP has become increasingly global, especially for firms competing across countries. In this paper, we argue that the location choice for global patent litigation depends not only on country characteristics, such as market size and competition intensity, but also on the relationships across countries, that is, how similar or different the IP regimes are. When the relevant countries historically share similar litigation outcomes, firms can use litigation in one country to influence the expectations of litigants and potential infringers in other markets, which reduces the need for repetitive litigation. Thus, examining the global landscape of patent litigation as a whole can provide insight beyond the sum of IP strategies in individual countries.

Research Summary Using administrative data from the US Census Bureau, we introduce a new public‐use dataset (“Business Dynamics Statistics—High Growth” [BDS‐HG]) that captures the full distribution of firm growth in the United States between 1978 and 2021. BDS‐HG enables researchers to analyze not only high‐growth firms but also stagnant and shrinking firms, disaggregated by firm maturity, size, industry, region, and year. We begin by documenting two key trends: (1) a significant decline in the share of high‐growth firms—especially among young and small firms and (2) a marked rise in stagnant firms. To help illustrate the dataset's usefulness, we provide three empirical applications and highlight research opportunities across major areas of strategic management. In addition to supporting new analyses, BDS‐HG can be used to benchmark research samples and assess their generalizability. Managerial Summary The US economy has seen two major shifts in firm growth dynamics: a steady decline in the share of high‐growth firms—especially among startups—and a notable rise in firms that exhibit no growth. We document these patterns using BDS‐HG, a new public‐use dataset from the US Census Bureau that tracks employment growth across all US employer businesses from 1978 to 2021. The data are disaggregated by firm age, size, industry, geography, and year, enabling users to examine growth trends across sectors and regions. BDS‐HG offers a valuable resource for researchers, policymakers, and analysts seeking to understand long‐term business dynamism. It can also be used to benchmark research samples against national patterns, helping users assess how representative their data or findings are.

Research Summary While startup accelerators often benefit founders and their ventures, these gains may not be uniform. We examine how founders' pre‐entry knowledge—the cumulative education, industry experience, and entrepreneurial exposure that teams acquire prior to launching their startups—shapes the heterogeneous returns to accelerator participation. We propose two potential mechanisms driving these returns: knowledge compensation , whereby accelerators fill gaps in basic knowledge and competencies, and knowledge complementarity , whereby accelerators amplify the absorption and deployment of expert knowledge. Using data from 6723 startups and their founding teams, we find evidence in support of the complementarity mechanism. Our findings also suggest that the returns to accelerator participation are contingent on the alignment between founders' pre‐entry knowledge and program design. Managerial Summary While startup accelerators aim to level the entrepreneurial playing field, we find that founders with substantial pre‐entry knowledge and experience tend to gain more from participation in these programs than novice entrepreneurs, potentially widening startup performance gaps. Program design also appears to play a key role. While specialized and unstructured programs offer value for seasoned entrepreneurs by building complementary knowledge, structured and generalist programs offer some, albeit limited, opportunities for less‐experienced teams to build foundational skills. These findings underscore the need for tailored programming that aligns with participants' learning needs. For program designers and policymakers, these findings suggest investing in diverse formats to support varied founder profiles. For entrepreneurs, they highlight the importance of selecting programs that complement and build upon their team's prior knowledge.

Research Summary This study examines how multi‐business firms redeploy resources following an industry shock. Using the case of oil and gas firms diversified into wind power, I show that firms reduced expenditure in oil and gas—particularly on complex offshore projects—while increasing investment in wind after the 2014 oil price crash. These investments tended to involve newer, more powerful technologies (turbines) when co‐located with existing offshore oil and gas assets. The study provides detailed empirical evidence of resource redeployment and documents conditions under which firms shifted away from one industry and pursued more demanding projects in another. The findings underscore the role of asset colocation in shaping redeployment patterns. They also highlight that market‐based inducements may not be sufficient in driving the energy transition. Managerial Summary How should firms respond when a core industry experiences a downturn? This study shows that multi‐business firms—specifically oil and gas companies diversified into wind power—responded to the 2014 oil price crash by cutting investment in oil and gas, especially in offshore projects, and increasing investment in wind power. Importantly, firms were more likely to invest in newer, higher‐capacity wind technologies when they could co‐locate these with existing offshore oil and gas assets. These findings suggest that firms facing industry shocks can redeploy resources into more promising sectors, but their propensity to do so may depend on the possibility of leveraging existing assets across domains.

Research Summary How can organizations establish collaboration between their established members and a newly hired member? We address this question by studying firms undergoing scaling using a multiple‐case study. We find that widely involving the new hire into the established managers' activities backfires. Such extensive involvement is intended to build the same kind of strong, personal relationships with the new hire that the established managers share amongst themselves and, in doing so, establish collaboration. But the established managers' relationships turn out to be irreplicable . Being extensively involved without possessing the same kind of relationships, the new hire becomes perceived as an intruder . In contrast, involving the new hire more selectively led to the new hire becoming respected as a relationally distant but professionally appreciated “ stranger ,” which engendered effective collaboration. Managerial Summary Collaboration between a company's newly hired and established managers is necessary for it to scale but difficult to establish. Many firms mistakenly attempt to involve a new hire in the established managers' activities as much as possible, hoping to build strong personal bonds quickly. We show that this strategy often backfires. The kind of relationships that the established managers have is not easy to replicate, and widely involving the new hire in the absence of such relationships can spur the established managers to perceive the new hire as an intruder. Instead, limiting the new hire's involvement to only the activities directly linked to his or her job may result in the new hire becoming respected as a professional “stranger.” Doing so avoids the discomfort of forced closeness and facilitates effective collaboration.

Research Summary I examine the understudied effects of perceived non‐transferable knowledge on labor market choices after firm‐initiated turnover. Using a large, nationally representative dataset, I assess how workers' perceptions of knowledge transferability, expectations to remain at a firm, and type of turnover experienced correlate with the decision to engage in entrepreneurship. I find that the release of workers with perceived non‐transferable knowledge into the external environment through firm‐initiated turnover reliably foreshadows entrepreneurship, especially as workers' prior expectations to continue wage employment at a source firm increases. This finding indicates that beyond necessity, opportunity and financial resources, workers' self‐perceptions of their human capital and unfulfilled career expectations matter to the choice of entrepreneurship. It also suggests that firm‐initiated turnover may be a form of knowledge divestiture with important ex‐post implications when workers' perceptions of transferability align with reality. Managerial Summary Managers often overlook the role of employees' self‐perceptions in shaping post‐turnover career decisions. This study highlights that workers who perceive their knowledge as non‐transferable—skills and expertise they believe cannot easily be applied to other employers—are more likely to pursue entrepreneurship following firm‐initiated turnover. This trend is particularly pronounced among workers who expected to remain in wage employment but were unexpectedly terminated. Firm‐initiated turnover, while serving to shed human capital, can inadvertently encourage the creation of entrepreneurial ventures that may compete with the firm. To mitigate unintended outcomes, firms should (a) recognize the strategic implications of firm‐initiated turnover as a form of knowledge divestiture, with implications for both the firm and the broader market, (b) reevaluate how they manage exits for employees with the firm's specialized knowledge, to reduce the risk of competitive ventures, and (c) engage in open dialogue to align employee expectations with organizational strategies, considering retention or redeployment options for those at risk of a forced exit. By understanding how workers' perceptions and unmet expectations influence their career paths, firms can make more informed decisions about human capital management and turnover strategies, potentially reducing unintended competitive risks while fostering long‐term relationships with former employees.

Research Summary Entrepreneurs operating in a public interactional domain face a unique communicative challenge: they must leverage conversations with a small subset of vocal discursive partners to mobilize support from a broader base of silent audiences observing these exchanges. I propose that entrepreneurs who engage with these vocal discursive partners using what I refer to as discourse broadening are more likely to successfully gain support from the broader silent audience. Using a computational linguistics model to analyze discourses on an online platform featuring entrepreneurial innovations, this study finds an inverted U‐shaped relationship between discourse broadening and support from silent audience members. This relationship is moderated by the similarity between the interpretative lenses of discursive partners and silent audience members, which influences the trade‐off between the benefits and costs of discourse broadening. Managerial Summary Entrepreneurs often face the critical challenge of persuading broader audiences to support their novel ideas despite having limited opportunities to interact with them directly. This article examines how entrepreneurs can strategically engage with their immediate conversational partners on online platforms to gain support from a wider base of silent observers. The findings show that entrepreneurs must carefully balance the extent to which they broaden the discourse with their conversational partners to maximize support from the broader audience. They also need to tailor the level of discourse broadening based on how much their conversational partners represent the views of silent observers. These insights reveal a discursive strategy that entrepreneurs can leverage on online platforms to increase the likelihood of success in commercializing their innovations.

Research Summary This study introduces category interaction codes—knowledge regarding the expected interactions around entities in a given category—as a critical dimension of category strategy. Through historical analysis of Wang Laboratories in the early computer industry, we demonstrate how these codes shape strategic categorization and competitive dynamics. We show that firms can exploit ambiguous interaction codes to access advantageous decision makers and organizational routines, circumventing entrenched competitors. Further, firms can institutionalize preferred interaction codes through product design, reshaping category prototypes and market dynamics. However, overcommitment to specific interaction codes creates competitive vulnerabilities when market conditions shift. By developing an “inhabited” view of categories that emphasizes socially embedded practices, this study reveals how market categories are enacted through interactions and offers new insights into category‐based competition. Managerial Summary This study introduces category interaction codes —expectations about where, when, how and by whom products are evaluated, used, and purchased within a market. Using the case of Wang Laboratories in the early computer industry, we show that companies can gain a competitive advantage by leveraging and reconfiguring category interaction codes . For example, Wang Laboratories sidestepped direct competition with IBM by categorizing its products for engineers and department managers rather than MIS executives, and outperformed IBM in word processing by innovating how actors interact with the new category. For managers, the key insight is that success depends not only on product features but also on how your product fits into the daily decisions, roles, and behaviors that define a category.

Research Summary While the influence of CEO characteristics on M&A decisions has long spurred researchers’ interest, little attention has been devoted to the ramifications of CEO integrity—the adherence to generally accepted norms and standards. We investigate how CEO integrity influences different stages of the M&A decision process. Specifically, we argue that while CEO integrity reduces self‐serving behavior, it may also become a golden cage that constrains CEOs’ latitude of action. Accordingly, we find that CEO integrity decreases the probability of Type I errors (errors of commission) but increases the probability of Type II errors (errors of omission) in M&A decision‐making. We contribute to theory development by putting forward CEO integrity as an important personality construct for upper echelons research to build on and extend further. Managerial Summary This paper examines how CEO integrity influences M&A decision‐making, providing key insights for corporate strategy. Analyzing data from S&P 1500 firms (2006‐2021), we find that CEOs with higher integrity are less likely to engage in frequent or large‐scale M&As, particularly avoiding cross‐border deals due to higher uncertainty and potential risks. High‐integrity CEOs also tend to pay lower acquisition premiums and take longer to complete deals, reflecting a cautious and thorough approach. While CEO integrity helps protect firms from costly mistakes it may also lead to missed growth opportunities, indicating a trade‐off between stakeholder considerations and strategic risk‐taking. Boards may need to tailor governance frameworks to optimize the balance between the benefits and constraints of CEO integrity.