Knowledge that Transforms

Research Summary Board human capital theory posits that directors' skills shape firm behavior. Most studies, however, examine one skill type at a time, assuming that each director contributes independently of the other skills represented on the board. We introduce the concept of director skill interdependence , theorizing that a director's influence depends on the skills of fellow directors and their committee assignments. Focusing on entrepreneurial directors in technology‐intensive firms, we find that they increase resource allocation toward corporate entrepreneurship (CE); however, this effect diminishes as the number of finance‐skilled directors increases, whether on the board or on its corporate development committee. These findings challenge the view of directors' skills as isolated inputs. Instead, the effects of directors' skills are contingent on the board's skill composition and committee structure. Managerial Summary In technology‐intensive firms, directors with entrepreneurial skills are often expected to stimulate corporate entrepreneurship (CE). Our findings suggest this relationship is less straightforward. While entrepreneurial directors do increase investment in CE, their impact weakens when directors with finance skills are prevalent on the board or its corporate development committee. These results underscore the importance of director skill interdependence —the idea that a director's influence depends on the skills and roles of fellow directors. Boards should therefore consider not only who is appointed, but also how directors' skills align with one another and how those skills are deployed through committee assignments. Preventing the dominance of conflicting skill sets may enhance the board's ability to support innovation, venturing, and long‐term strategic renewal.

Research Summary How do new ventures strategically position their products to accelerate regulatory clearance? We investigate this question in the medical device industry, where regulatory clearance is a prerequisite for market entry. We examine 239 new firms' 510(k) device clearances by the FDA between 2001 and 2019. Our approach combines quantitative analysis of firms' claims of similarity with extensive field research. We find that strategic positioning significantly impacts time to clearance, and that effective strategies evolve over time. For first products, firms accelerate clearance by citing fewer reference products while strategically positioning relative to same‐category products and to category exemplars; for second products, firms accelerate clearance by referencing their own products. These findings extend positioning theory into regulatory contexts and reveal how a firm's optimal strategic positioning changes across successive products. Managerial Summary We study how new medical device startups can speed up regulatory approval by strategically positioning their products for the FDA. Analyzing 239 firms' 510(k) clearances from 2001 to 2019, we find that the way companies frame their products for regulators plays a key role in how quickly they are cleared. For their first products, firms benefit from referencing fewer existing devices and aligning with well‐known or similar products. For their second product, referencing their own previously cleared device helps accelerate the process. Our findings show that positioning is a powerful tool for navigating regulatory hurdles. We highlight how the most effective strategy changes as a company grows, offering practical guidance for leaders bringing new medical technologies to market.

Research Summary As organizations increasingly adopt generative AI (GenAI), they face a strategic challenge: not only deciding which tasks AI should perform, but also how to organize the integration of human and AI efforts to produce viable solutions. We propose that a cognitive asymmetry between human's tacit, embodied knowledge and AI's codified knowledge creates a representational gap that complicates human–GenAI collaboration. Through a qualitative study of professional perfume creation, we identify representational integration as an organizing process through which humans and GenAI coordinate to bridge this gap. This process unfolds across three practices: allocating tasks based on cognitive advantages, converting knowledge across tacit and codified forms, and steering GenAI outputs as problem solving evolves. This study advances a novel organizing perspective on human–GenAI collaboration under conditions of cognitive asymmetry. Managerial Summary Organizations increasingly deploy GenAI in knowledge‐intensive work, yet many struggle to convert human and AI contributions into strategic value. This study takes a cognitive lens, showing that humans and GenAI rely on different forms of cognition—and that value emerges when organizations can coordinate and combine them. Successful human–GenAI collaboration therefore requires more than adopting powerful models. It depends on organizing practices that help employees translate across representational formats, relate GenAI outputs to embodied expertise, and iteratively steer GenAI as their interpretations evolve. Investing in these practices and skills allows organizations to harness GenAI's generativity while recognizing that human sensemaking, tacit knowledge, and contextual understanding remain indispensable for producing coherent, high‐quality outcomes.

Research Summary While changes in intellectual property rights (IPR) protection significantly shape firm innovation, the mechanisms driving firms' responses remain poorly understood. Leveraging the Second Amendment to China's Patent Law, which strengthens appropriability particularly for state‐owned enterprises (SOEs), as a natural experiment, we show that stronger IPR has mixed effects on SOEs' innovation. While SOEs increase the rate of innovation subsequent to the Amendment, they shift the direction of innovation toward more familiar areas in which they face a lesser need to adjust existing routines. This directional change suggests a quality decline in SOEs' innovation that may be attributed to path dependence. We further show that this change varies systematically depending on different firm‐ and industry‐level characteristics that loosen or tighten the historical grip of path dependence. Managerial Summary This study offers valuable insights for corporate leaders navigating intellectual property rights (IPR) reforms and shaping their firms' innovation strategies, particularly in emerging economies. While stronger IPR protection can increase innovation output, it may also lead firms to concentrate on familiar technologies rather than pursue more novel ideas. Thus, corporate leaders should look beyond patent volume as a performance metric and instead foster creative thinking and engage in external collaborations to access new, cutting‐edge knowledge. Such efforts can help firms move beyond established routines and strengthen their long‐term competitiveness. To promote innovation of greater novelty, policymakers must complement stronger IPR protection with broader institutional support, including enhancing economic freedom, encouraging market competition, and cultivating a culture that values breakthrough innovation.

Research Summary Firms' and executives' stances on controversial issues affect consumer behavior. This “political consumerism” might be motivated by ideology and a desire to signal to peers, and thus vary for private and public purchases. We conduct an experiment with 1198 consumers to study how purchase visibility affects responses to CEO activism. Participants are randomly shown either generic product information or that plus a CEO statement supporting gun rights. They then choose between receiving the product or receiving cash, with half assigned to a condition where their choice is visible to someone they know. We find that CEO activism reduces demand among people who disagree with the CEO regardless of purchase visibility, indicating minimal signaling motives. Our results have implications for firms using politics to differentiate products. Managerial Summary Business leaders who speak out on controversial social and political issues may attract or repel consumers who agree or disagree with their stance. Consumers may react more intensely when others can observe their purchases or boycotts, allowing them to “signal” their beliefs. We experimentally manipulate whether the decision to purchase a product from a firm whose CEO vocally supports gun rights is observable and whether consumers are aware of the CEO's stance. We find that consumers change their behavior in response to CEO political activism regardless of whether their choices are visible to others. This suggests that CEO activism can impel boycotts and that firms can differentiate themselves by taking political positions even when their products are less known or consumed privately.

Research Summary Prior research has examined whether individuals earn greater returns in entrepreneurship than in wage work but has paid little attention to gender differences in these returns. Using Swedish employee–employer data from 1990 to 2020, we compare individuals' earnings before and after they transitioned to entrepreneurship. We find that women founders earn less than men, yet this gap is smaller than in wage employment. Additionally, entrepreneurship yields disproportionately greater returns for (a) high‐ability women facing glass ceilings in salaried positions, and (b) women in male‐typed industries who encounter greater barriers to advancement in wage work. Together, these findings show that entrepreneurship can enable women to realize greater returns to their human capital, particularly when they face stronger constraints in paid employment. Managerial Summary This study examines whether entrepreneurship widens or narrows the gender earnings gap compared to wage work. Using comprehensive Swedish data that track individuals before and after founding new businesses, we show that, although women founders earn less than men in absolute terms, they experience substantially larger earnings gains than men when moving from wage work to entrepreneurship. This advantage is most pronounced for high‐ability women and for women in male‐dominated industries, who face stronger barriers to advancement in salaried work. Our findings indicate that entrepreneurship offers women a pathway to realize greater returns to their skills and experience, yielding disproportionately higher earnings compared to remaining in salaried jobs. For organizations, these results highlight how structural constraints in wage employment can push talented women toward entrepreneurship.

Research Summary How do analysts react to communication about firms' strategies? Research has shown that executive communication influences markets, but we know little about reactions to the deeper strategy content communicated. Drawing from research on how evaluative frames and expectation violations shape cognition, we show that when executives focus on growth strategies, analysts react by becoming more curious and analytically intensive. These changes in cognition partially mediate a positive effect on analysts' evaluations. Further, we consider two situations that reveal how analysts react to information that reinforces or violates their expectations, demonstrating different analyst reactions to similar strategies among S&P 500 firms. In doing so, we contribute new theory about how the evaluative assumptions of these influential market actors change and can be influenced by managerial framing. Managerial Summary This paper focuses on how securities analysts react to executive communications about their business' strategies. We know that top executive communications influence markets, but this paper probes further to understand reactions to the specific strategies that are communicated. We show that when executives focus on new growth strategies, this piques analyst interest. Specifically, we find that this makes analysts more curious and analytically intensive, thereby shaping their forecasts and evaluations. However, we find that analyst reactions also depend on how well the strategies that executives talk about fit with what is expected from the company. When the strategy articulated aligns with expectations, firms are rewarded with yet stronger evaluations. In contrast, when a strategy does not align with expectations, firms are punished with lower evaluations.

While prior research on the strategic framing of innovation highlights the cognitive mechanisms underlying novelty evaluation, we know little about the corresponding emotional mechanisms. Drawing on appraisal theory, construal level theory, and the literature on emotions, we theorize two distinct appraisal‐emotion pathways through which the framing of novel ideas evokes hope and awe among investors with different motives. We argue that high‐construal framing supplements economically motivated investors' low‐level feasibility orientation, which evokes hope and increases their willingness to invest. By contrast, low‐construal framing supplements non‐economically motivated investors' high‐level desirability orientation, which evokes awe and increases their willingness to invest. We test and find some support for these within‐motive pathways across three studies. Our study offers new theoretical and practical insights on the strategic framing of novel ideas.

Reserch Summary We propose that founding partner relationships can leave distinct imprints on organizations that differ in durability and in how they respond to subsequent changes involving the founding partner. Examining South American airlines founded between 1919 and 1984, we argue and find that such relationships simultaneously create an internal capability imprint, enhancing operational performance and facilitating international expansion, and an external identity imprint, constraining expansion by triggering national security concerns among foreign regulators. Internal capabilities persist longer because they are embedded in organizational structures and tacit knowledge, while external identity resides in more malleable stakeholder perceptions. Post‐founding changes to the imprinter reshape these effects asymmetrically: the transition to civilian air traffic control erodes the competitive advantage of military‐derived capabilities by diffusing previously scarce expertise, while military coups intensify the negative consequences of a military‐associated identity. These findings advance a dual imprinting perspective and contribute to strategy research by explaining persistent organizational heterogeneity through founding‐era capabilities and identities. Managerial Summary When launching a venture, founders instinctively seek to collaborate with powerful partners such as celebrated investors and high‐profile board members. Those relationships leave two distinct legacies. The first is operational: the knowledge and systems a powerful partner brings embed themselves deeply, sharpening capabilities that sustain competitive advantage for years. The second is reputational: the outside world immediately begins to categorize your organization through that association, and that categorization can be hard to escape. Our research on South American airlines shows how military‐era founding partners produced operational excellence that fueled international growth, while simultaneously creating a security‐sensitive identity that blocked market access in politically sensitive contexts. The lesson for founders: think several moves ahead. The question is not solely what this partner can give us today, but how will we be seen if his or her reputation shifts tomorrow.

Reserch Summary Breakthrough inventions are central to firms' competitive advantage, yet what constitutes a breakthrough remains unclear. We examine the relationship between technological quality (measured by forward citations) and economic value (measured by grant‐day abnormal stock‐returns) of patents. Using U.S. patents assigned to publicly listed firms, we find that among the most exceptional inventions—that is, breakthroughs—the correlation between these two measures disappears: technologically outstanding patents are not necessarily the most economically valuable. We attribute this divergence to a structural tension between value creation and value capture in patenting, driven by novelty, the availability of complementary assets, and competitive dynamics. Firms that successfully manage both dimensions earn a disproportionate market premium. This outcome is often associated with firms that diversify their technological portfolios asynchronously across technology S‐curves. Managerial Summary Breakthrough innovations are widely viewed as the lifeblood of corporate success. Yet what truly defines a breakthrough—and how its value should be assessed—remains unclear. Companies typically rely on two indicators: technological quality (measured by forward citations) and economic value (captured by stock market reactions at patent grant). Conventional wisdom assumes these move together. Our analysis of U.S. patents challenges this view. For the most exceptional inventions, technological quality and economic value diverge. We identify the drivers of this tension and show that firms able to manage it earn disproportionate market returns.