Knowledge that Transforms

Strong ownership of the product development process, while facilitating the generation of new products, can exacerbate escalating commitment and impede timely termination. We examine how managers, with foresight, use buy vs. make decisions to create psychological and organizational distance from a product and preempt escalating commitment. Using detailed product-level data from the fashion industry and its unique features, we show that managers contract manufacture risky products even when they can be readily manufactured in-house, especially core products that are central to a firm’s identity and hence more prone to escalating commitment. Our findings highlight cognitive bias as a source of internal transaction cost and bring its preemption to the forefront of buy vs. make decisions. Our study develops a cognitive foundation for transaction cost theory that does not depend on opportunism or asset specificity and highlights the psychological designing of firm boundaries as a strategy for improving the decision environment.

Due to structural sexism, women frequently encounter barriers that result in lower rankings on performance indicators such as productivity data and appraisals by others. The fairness literature offers unclear predictions about the extent to which observers would judge allocations that fail (vs. attempt) to account for such structural barriers as fair. We suggest that past conceptual discussions and empirical designs did not factor in the causal ambiguity embedded in information about structural barriers and the variance in how individuals interpret such information. Hence, we propose that beliefs in the causes of success, anchored in the endorsement of meritocratic ideals, shape fairness judgments by determining the weight given to performance indicators and structural barriers. Such effects emerge in the presence of information about structural barriers in the context of the decision, a feature that is absent from past studies. We discuss our theory and findings in the context of calls for bridging organizational fairness and social justice research and for a nuanced understanding of people’s responses to violations of the meritocratic ideal within organizations.

We develop and test theory regarding the effect of CEO paranoia, defined as stable tendencies toward suspicion, feelings of ill will or resentment, mistrust, and belief in external control or influence, on firm stakeholder engagement. We theorize that because CEOs higher in paranoia have tendencies toward hypervigilance and the biases of self-as-target and sinister attributions they typically avoid engagement with external stakeholders. Further, we argue that CEOs higher in paranoia are subject to paranoid activation when confronted with trait-relevant cues that confirm suspicions of being targeted by a malevolent external entity (here, regulatory rulings or rival attacks), thus eliciting a shift away from avoidance to a more aggressive engagement with those stakeholders. To do so, we develop a content-analytic measure of CEO paranoia following both theory and evidence in psychology and methodological best practices, finding evidence that broadly supports our premise. In total, our study draws attention to how the manifestation of CEO paranoia changes the way CEOs engage stakeholders over time, contributing to understanding in multiple ways.

The tournament literature has typically traced employees’ competitive actions to characteristics of individual-level career tournaments. Yet, such individual-level tournaments usually transcend firms that themselves compete in a firm-level tournament. We study the cross-level implications of a firm-level tournament for the competitive actions that constituent employees undertake against other individuals internal and external to their firm. We propose a theory of individual reputational incentives, which predicts that a firm’s competitive threats decrease its employees’ internal competitive actions yet increase their external competitive actions, while a firm’s competitive opportunities increase employees’ internal and external competitive actions. The theory also predicts that these effects are largest when a firm faces potential unexpected losses or gains in its standing, such as when the firm experiences competitive threats from resource-disadvantaged firms, or competitive opportunities against resource-advantaged firms. In panel data on the population of motorcycle riders competing in MotoGP from 2004 to 2020, we examine these hypotheses using overtakes to measure riders’ internal and external competitive actions. Our findings reveal how riders adjust their internal and external overtakes based on their team’s competitive threats and opportunities, and on the relative resource endowments of the teams supplying such threats or opportunities.

Many new ventures enter relationships with intermediaries, thereby ceding control to an organization that becomes a make-or-break audience for them. These settings foster intense experiences, suggesting that participating founders are likely to face a distinct set of challenges as they seek to build their venture’s legitimacy. Yet we lack a systematic analysis of new venture legitimation processes in the context of this critical audience type. To build new understanding of these important dynamics, we conducted an ethnographic study of three ventures in an Australian accelerator. Our study reveals three distinct legitimation pathways that ventures may follow when seeking legitimacy from a make-or-break audience—the obedient, pragmatic, and rebellious paths. We find that these pathways are jointly shaped by the expectations of the audience, the emotional experiences of founders, and founders’ reactions to these emotions in the context of perceived venture performance. We contribute to organizational scholarship by identifying a novel set of new venture legitimation pathways that incorporate emotion, conceptualizing “venture work” as a distinct type of social-symbolic work designed to legitimate startups and shedding new light on the role of new venture support organizations in entrepreneurial ecosystems.

Prominent leaders regularly communicate with multiple markets around the world, but we know little about the challenges that can arise when trying to effectively convey one’s message in a global setting. In this paper, we develop a theory about how language abstraction—a dominant strategy used to create common ground among diverse audiences—can become problematic when used in a global environment where market actors have divergent interests. Employing a multicountry event study, we analyze how the stock markets in 11 eurozone countries react to the abstract language in public speeches delivered by the European Central Bank president. We find that abstract language, rather than creating common ground, produces divergent market reactions across core and peripheral countries, such that market actors in core countries react more favorably to abstract communication, while those in peripheral countries prefer concrete communication. We also show that this divergent reaction is stronger when the economic interests of the core and the periphery are made more salient. This study contributes new insights to research on strategic communication in market settings, expands our understanding of audience heterogeneity and market power, and highlights the growing challenges of communicating in a globalized society.

Organizations increasingly operate in diverse languages to serve external stakeholders, yet often adopt monolingual practices for internal work processes. As language is both a skill and a source of identity, low-status language speakers may experience identity-based exclusion in such organizations, regardless of their common corporate language skills. We thus explore how linguistic inclusiveness can emerge among tensions between the demands for multilingual services and the need for a lingua franca in organizations. Grounded in a qualitative study of a Russophone bank in Kazakhstan, we theorize how actors with different linguistic and sociocultural backgrounds engage in sociolinguistic work—that is, everyday actions that shape practices surrounding the use of a particular tongue within an organization—in the context of changing linguistic dynamics in society. Through sociolinguistic work, members of marginalized, in-between, and dominant groups respond to societal changes and influence others’ perceptions of languages and behaviors, ultimately reshaping internal linguistic dynamics over time. By conceptualizing language as an important dimension of diversity, theorizing the emergence of linguistic inclusiveness through sociolinguistic work, and highlighting the critical role of an in-between group in this process, we advance research at the intersection of languages and inclusiveness in organizations.

Entrepreneurial ventures strategically communicate information about themselves to convey their distinctiveness and attract favorable audience attention. This study explores how the possession of quality-signaling resources, such as patents, influences the degree to which entrepreneurial ventures convey distinctiveness in their entrepreneurial narratives. Cultural entrepreneurship research spotlights such resources as the ingredients around which entrepreneurs construct distinctive narratives and proposes that resource-rich ventures will present themselves as particularly distinctive. Challenging this, we argue that ventures rich in quality-signaling resources—while ideally positioned to convey their distinctiveness—will likely forgo this symbolic differentiation opportunity under certain industry conditions due to a lack of external incentives. Our analysis of 31,270 UK-based ventures launched between 2010 and 2021 finds that, compared to patent-poor ventures, patent-rich ventures exhibit higher levels of narrative distinctiveness when situated in industries that receive little attention, but substantially lower levels of narrative distinctiveness when situated in hot industries that attract a lot of attention. In doing so, our study challenges the assumption that entrepreneurial ventures always aim to present themselves as distinctive as legitimately possible, delineates conditions under which this assumption is likely violated, and lays the groundwork for a broader research agenda on organizations’ substantive and symbolic differentiation.

To examine board members’ influence in strategic decision-making, we consider the role of emotion displays during board meetings. We build a grounded model of how board members influence strategic decisions, which can occur directly from one director to a top manager or indirectly from one board member through the rest of the board. Drawing from the literature on nonverbal communication, we theorize that displays of anger and happiness by board members increase their focused or diffuse influence, respectively, over strategic decisions proposed by top management. We further hypothesize that the duration of the discussion moderates these main effects. Analyses on 366 agenda items from 68 board meetings of four Dutch water management organizations support our predictions that board member emotional displays indeed impact strategic decision outcomes via focused and diffuse influence processes. Our results also suggest that the duration of an agenda item’s discussion attenuates the association between board members’ displayed anger and their focused influence. These findings offer insights and new avenues for research in corporate governance, emotions, and communications, and have implications for our scholarly and practical understanding of how board members influence strategic decisions.

Building on a longitudinal ethnography of a firm whose leaders attempted to organize collaboratively to remedy a drop in performance, this paper develops a theory of defensive organizing—a process that diffuses, deflects, and displaces overwhelming anxiety, and bolsters the power of established leaders. A systems psychodynamic approach helped us theorize how leaders’ conscious intent to collaborate served as a cover for an unconscious effort to stave off anxiety that they could not share and process. We document the arc of defensive organizing across four cycles that begin between leaders and move across groups until the whole organization becomes mobilized to unconsciously mitigate anxiety. We theorize that a common defense mechanism informs sensemaking and motivates enactments in each cycle, coopting organizing to produce a social defense for psychological and social protection. Defensive organizing consolidates, we argue, when it can shield leaders and members of an organization from anxiety while letting them perform their roles. When it cannot, it collapses, taking the leaders with it. This study extends theory by showing how anxiety can make organizing appear sensible yet fail to be adaptive, and how social defenses evolve over time, keeping leaders’ anxiety in check and anxious leaders in charge.