Knowledge that Transforms

A pressing but understudied issue is the high incidence of new venture failure. We propose a model of how motivation-enhancing human resource (MHR) practices mediate the effects of initial human and financial resources of a founding team on firms’ decisions to remain in operation. In this model, we also propose that MHR practices have effects on firm survival that change over time. We test our model with a sample of 1,100 firms tracked for 7 years. We found support for a model where MHR practices partially mediate the effects of initial firm resources and human capital on firm survival. We also found that the effects of MHR practices change over time such that their positive effects on survival become stronger. We conclude with a research agenda and recommendations for how nascent firms can promote survival.

Agency theory foments the expectation that corporate criminal prosecutions mitigate crime by inducing firms to self-regulate. Whether this bears out in reality remains a topic of contentious debate. Although the U.S. government began prosecuting firms over a century ago, insufficient empirical evidence exists to determine how the costs of prosecutions actually affect firms. Moreover, the limited empirical record tells a surprising and somewhat confusing story. Scholars of management and related disciplines have consistently found that criminal convictions have negligible impacts on shareholder wealth despite theoretical expectations to the contrary. To explain these surprising findings and better understand how firms experience the costs of prosecutions, I apply agency theory to the criminal prosecution process and propose that each legally defined action in that process communicates unique information regarding potential and actual agency costs (i.e., sanctions). I also propose that formal convictions appear to elicit no reaction from principals because firm responses to early events in the prosecution process, what I call “conviction harbingers,” foretell unfavorable verdicts and sanctions well before courts make them official. Findings derived from a sample of 177 cases largely confirm my expectations by showing that prosecutions cause firm value to decline nearly 11%. In addition to exceeding previous estimates by a factor of three, this amount exceeds direct fines by a factor of five (i.e., shareholders lost more than $5 of wealth for each dollar of sanctions). I conclude by outlining implications of these findings for agency theory, corporate governance, policy, and practice.

Research on multimarket contact and firm performance has produced mixed results. To reconcile this discrepancy, we theorize how varying levels of multimarket contact may generate mutual forbearance that influences firm performance. We also examine how strategic alliances moderate the relationship between levels of multimarket contact and firm performance. Our analysis of 233 semiconductor firms across 52 markets reveals that multimarket contact has an inverted U-shaped relationship with a multimarket firm’s market share. The number of strategic alliances that a firm has helps to further extend the positive effect of multimarket contact and mitigate its negative effect on the firm’s market share. Accordingly, our study contributes to the literature on multimarket competition by shedding light on the conditions under which multimarket contact may increase/decrease firm performance.

Across cultures, the idea of money has dual positive and negative connotations. Consistent with this notion of duality, money-priming theory posits that the salience of money makes individuals work harder for themselves while also reducing the concern they have for others. Although research has tended to support these expectations, it has almost exclusively done so using between-persons designs in controlled lab settings. To address these limitations in the literature, we used a within-persons design in two work settings to test individual behavior change as a function of the salience of money. We did so using two samples of professional athletes and tested the extent to which priming individual pay affected both self-serving and cooperative behaviors. We operationalized the money prime in these samples as the final year of individuals’ employment contracts—a time when money is made particularly salient relative to surrounding years. Consistent with money-priming theory, within-persons analyses using a sample of basketball players from the National Basketball Association revealed that self-serving behaviors significantly increased in the final contract year relative to surrounding years. However, we did not find that cooperative behaviors decreased during the final contract year. This pattern of results was replicated using a sample of professional hockey players in the National Hockey League. These findings cumulatively suggest that although the salience of money is associated with increases in self-serving behaviors, it is not adversely associated with cooperation or team success.

Team turnover can be harmful to a team in many ways. This study examined whether a team’s collective experience (team organizational tenure) attenuates the association between team turnover and task conflict changes. Differing from prior research, our study used a longitudinal design to assess the effects of team turnover, accounting for the competence of those leaving the team. We built on context-emergent turnover theory and tested a random coefficient growth model by utilizing data from 74 health-care teams. We found support for the hypothesized interaction: The more collective experience the team had, the less likely it was that team turnover associated with increases in task conflict. We discuss implications for theory and practice.

Product innovation is conventionally treated as a mechanism for organizations to renew their product portfolios. In this paper, we suggest that product innovation not only enables organizations to introduce new products to the market but also challenges organizations to renew their technological capabilities. Capability stretching is the degree to which an organization extends its technological capabilities to bridge the gap between what it has already known and what the development of a new product requires it to know. Capability stretching can be challenging because it involves the acquisition and assimilation of new and distant knowledge. Drawing on a longitudinal study of product introductions in the workstation industry, we find that capability stretching reduces the chance of new product survival. Furthermore, we also find that organizational boundaries moderate the negative relationship between capability stretching and product survival: Vertical integration exacerbates this negative relationship, whereas horizontal boundary mitigates this negative relationship. However, capability stretching can also be rewarding, as it renews technological capabilities and therefore facilitates adaptation to technological changes. We draw implications for the linkages between product innovation and capability development.

We introduce the racial diversity congruence concept to examine how matching levels of racial diversity between store-unit employees and community members relate to store-unit sales performance. In a field study of 220 retail store units, we found evidence supporting social identity theory and information-based perspectives on the racial diversity congruence–sales performance relationship. Specifically, results show that a match between store-unit racial diversity and community racial diversity positively related to store-unit sales performance. In addition, superior store-unit performance emerged when store units and communities had congruent levels of diversity at high (i.e., high-high racial diversity congruence) rather than low (i.e., low-low racial diversity congruence) levels. Moreover, we found asymmetrical incongruence effects whereby racially diverse store units in less-diverse communities outperformed store units with lower levels of racial diversity operating in diverse communities. The implications of our results are discussed in light of study limitations and future research needs.

Perhaps because self-estrangement is inherently dysfunctional, empirical research has primarily sought to understand its antecedents but not its consequences. As a result, despite its ubiquity in the workplace, self-estrangement’s insidious effects are not well understood. In this paper, because coworkers frequently bear the brunt of interactions with self-estranged workers, we sought to understand how the behavior of self-estranged workers corrodes their social exchange relationships with coworkers. In particular, we focus on how increasing self-estrangement, through its dysfunctional influence on the quality of social exchange relationships with coworkers, can exact a toll on estranged workers’ job performance. To provide greater insight into their relationships, we extend social exchange theory by specifying three behavioral outcomes that underlie the quality of ongoing, reciprocal exchanges, including the level of trustworthiness, accessibility, and peer citizenship behavior. To test our model, we gathered matching survey data in a large corporation from three sources, including 346 professional employees, a knowledgeable coworker, and their supervisor. Results show that self-estrangement indirectly impacts job performance and damages relationships with coworkers by reducing the estranged workers’ level of trustworthiness, accessibility, and peer citizen behavior. We also found that each of these behavioral outcomes served as a significant intervening mechanism separately, as well as when they were combined as a set, suggesting that coworker social exchange quality should be viewed as multidimensional.

We examine the resource mobilization efforts undertaken by a social venture to organize the 2003 Special Olympics World Summer Games and bring about a change in social attitudes towards the cause of learning and intellectual disabilities. In contrast to previously advanced views of social ventures as powerless actors, we find instead that they are able to leverage the visibility afforded by large-scale events to create positions of mutual dependence, which allow them to access broad support bases and assert themselves in relationships with external parties. Specifically, we find that resource mobilization involves six distinct tactics rooted in the softer forms of power, namely, attraction and inducement. The use of these soft-power tactics depends upon the social venture’s goal at different moments of the relationship with its partners and the level of support available from each external party. Our elaborated theory highlights both the role and limitations of soft power in mobilizing resources and managing relationships.