Knowledge that Transforms

Why might start-ups not change even when doing so may enhance firm performance? It seems reasonable to point to founder presence as a potential culprit given founders’ cognitive myopia and/or commitment to the status quo. However, founder presence may instead be a facilitator of change in response to environmental uncertainty because founders can uniquely coordinate resources needed for organizational change. We empirically address these two opposing views on the impact of founder presence (versus loss) on organizational change by using a comprehensive administrative data set of start-ups in the United States. Correlational analysis shows that start-ups generally become less likely to change following founder turnover. Given the potentially endogenous nature of founder turnover, we exploit premature deaths as a natural experiment that suddenly removes some founders from their start-ups while leaving others intact. We find that start-ups are less likely to change after losing a founder, especially if the founder loss happens during an economic recession. At the same time, the effect is attenuated when losing a founder with more experience in the same industry, suggesting that founder presence can also contribute to reinforcing the status quo under some conditions. Broadly, these results not only show that founders tend to facilitate change in their organizations but also identify when founders are merely subject to organizations’ bureaucratic forces that they themselves may have imprinted originally. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2023.1668 .

Why do some homogeneous groups face backlash for lacking diversity, whereas others escape censure? We show that a homogeneous group’s size changes how it is perceived and whether decision makers pursue greater diversity in its ranks. We theorize that people make different inferences about larger groups than smaller ones—with consequences for diversity management—due to Bayesian reasoning. This can produce sensitivity to a lack of diversity in large groups and limited sensitivity to a lack of diversity in small groups. Because each group member represents the outcome of a hiring decision, larger homogeneous groups signal a diversity problem more strongly than smaller homogeneous groups. Across three preregistered experiments (n = 4,283), we show that decision makers are more likely to diversify larger homogeneous groups than smaller ones and view larger homogeneous groups as (i) more likely to have resulted from an unfair selection process; (ii) less diverse; (iii) more likely to face diversity-related impression management concerns; and (iv) less open to the influence of newly added underrepresented members. Further, (i)–(iii) mediate the relationship between homogeneous group size and decisions to diversify. We extend our findings to S&P 1500 corporate boards, showing that larger homogeneous boards are more likely to add women or racial minorities as directors. Larger homogeneous boards are also rarer than expected, whereas smaller homogeneous boards are surprisingly abundant. This suggests that decision makers neglect homogeneity in smaller groups, while investing extra effort toward diversifying larger homogeneous groups. Our findings highlight how group size shapes diversity-related perceptions and decisions and identify mechanisms that kickstart diversification efforts. Supplemental Material: The online supplement is available at https://doi.org/10.1287/orsc.2020.14705 .

This study adopts a temporal perspective to investigate how boundary spanners can increase the inflow of external knowledge by engaging with both external and internal parties. We add to prior work on knowledge transfer by shifting the focus from engagement levels to investigating engagement dynamics, especially the degree of switching between external and internal engagement across consecutive time periods. Drawing from a cognitive perspective, we argue that switching strongly between engagement types is associated with a segmented knowledge structure that enables quick and efficient categorical processing when knowledge can simply be “channeled” from source to recipient units. In contrast, weak or no switching is associated with a blended knowledge structure and more reflective processing, which is particularly helpful when knowledge transfer requires more translation and transformation. Correspondingly, we adopt a contingency perspective and theorize that the cognitive advantages associated with stronger versus weaker switching weigh differently, contingent on the stickiness of knowledge to be transferred and the nature of boundary-spanning activities that vary in importance over time. Fixed effects models of eight waves of original survey data reveal that, in line with our theorizing, the association between switching and knowledge transfer becomes increasingly negative (1) the more boundary spanners access knowledge that is transspecialist in nature, (2) the greater the organizational distance between source and recipient units, and (3) in later phases of the boundary-spanning process. Funding: This work was supported by the Swiss Competence Center for Energy Research–Competence Center for Research in Energy, Society and Transition (SCCER CREST) [Grant 1155000154]. The work was also financially supported by a seed grant from the Bits and Watts Initiative within the Precourt Institute for Energy at Stanford University. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2023.1677 .

Leaders play a pivotal role in establishing ethical norms and behaviors within organizations. Across seven studies (three in the Supplementary Information), we explore how subordinates infer their leader’s moral character outside the domain of ethical conduct and document this process’s downstream consequences. Specifically, we focus on the dual-strategies theory, which posits that leaders exert influence and obtain deference via two broad orientations of behaviors and cognitions: dominance and prestige. In a field setting of employees and their managers, we find that leader dominance orientation positively relates to subordinate self-reported unethical behavior, whereas leader prestige is negatively related to the same. In a second sample of working adults, we use a time-lagged study design to show that leader dominance (prestige) positively (negatively) relates to subordinate-reported unethical behavior at work partly because of a belief that the leaders engage in more (less) unethical behaviors, which contributes to a belief that norm-violating behaviors are more (less) acceptable within teams under dominance- (prestige-) oriented leaders. Finally, across four experimental studies, we observe that participants assigned to a dominance-oriented (versus prestige-oriented) leader perceived their leader as having lower moral character and expressed a greater likelihood of engaging in unethical behavior. We also document actual unethical behavior for monetary gain. This effect was mediated by the belief that unethical behavior was normative within the team. Our results highlight the importance of moral (mis)perception by demonstrating the consequences of a leader’s hierarchical orientation on subordinate ethical perceptions and behaviors at work. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2021.15640 .

Organizations and their members not only respond to paradoxes, but also can be shaped by paradoxes in potentially profound yet highly heterogeneous ways. In our study, we adopt an identity threat perspective to explicate how paradox dynamics can affect members’ sense of self as professionals and their organizational identification as a key facet of the member–organization relationship. The transformational change of a leading public university launching a for-profit business school in Europe in 2017 provides a particularly fertile setting for this purpose. Our in-depth, longitudinal case study spanning 75 months from January 2016 to March 2022 serves as the empirical basis for a novel process model that helps to explain why the same set of paradoxes may have vastly different identity and identification effects not only among members of the same organization, but also within individual members over time. We can trace some of these differences back to boundary conditions related to members’ identity and paradox perception, which jointly shape how members recognize, attribute, and respond to paradoxes as threats to their identity. Overall, our study provides a new lens into the multifaceted process through which paradoxes can shape members and member–organization relationships as exemplified by members’ organizational identification. Supplemental Material: The online supplement is available at https://doi.org/10.1287/orsc.2020.14630 .

The need to resolve work–family conflict has long been considered a central motive for women’s pursuit of entrepreneurship. In this paper, we propose and empirically uncover a novel mechanism driving female entrepreneurship: reduced earnings opportunities in wage employment due to motherhood status. Combining insights from career mobility research and the motherhood penalty literature, we propose that women who become mothers will disproportionately launch a new business to reduce the motherhood penalty they would otherwise incur in wage work due to employer discrimination. We further predict that this tendency to launch a new venture will be more pronounced for women who occupy high-paying or managerial positions, given the higher opportunity cost of staying in wage work and the higher potential payoffs from entrepreneurship that accrue mothers occupying such positions. Using matched employer–employee data from Sweden that distinguish new-venture founding from self-employment, we find support for our arguments. Overall, this study sheds light on the two antecedents of female entrepreneurship and contributes to a more thorough understanding of what motivates women to pursue irregular and atypical careers, such as entrepreneurship. Funding: This work was supported by the Ewing Marion Kauffman Foundation (Ewing Marion Kauffman Junior Faculty Fellowship) and the Wharton Dean’s Research Fund. Supplemental Material: The e-companion is available at https://doi.org/10.1287/orsc.2023.1657 .

We examine how groups differ from individuals in how they tackle two fundamental trade-offs in learning from experience—namely, between exploration and exploitation and between over- and undergeneralization from noisy data (which is also known as the “bias-variance” trade-off in the machine learning literature). Using data from an online contest platform (Kaggle) featuring groups and individuals competing on the same learning task, we found that groups, as expected, not only generate a larger aggregate of alternatives but also explore a more diverse range of these alternatives compared with individuals, even when accounting for the greater number of alternatives. However, we also discovered that this abundance of alternatives may make groups struggle more than individuals at generalizing the feedback they receive into a valid understanding of their task environment. Building on these findings, we theorize about the conditions under which groups may achieve better learning outcomes than individuals. Specifically, we propose a self-limiting nature to the group advantage in learning from experience; the group advantage in generating alternatives may result in potential disadvantages in the evaluation and selection of these alternatives. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2021.15239 .

Research suggests that multibusiness firms often misallocate financial resources. However, research also suggests that firms differ in how effectively they allocate a range of resources. We argue that some firms have a resource allocation capability that enables them to more effectively determine the allocation of resources than often portrayed in the literature. We identify key search and selection routines that form the building blocks of a resource allocation capability and explain how these routines facilitate critical activities at different levels of the management hierarchy that are involved in the determination of resource allocations, including for related and vertically linked businesses. We further explain how a resource allocation capability, and the routines that make up the capability, help firms allocate resources effectively to meet their strategic and financial objectives. Part of the improved effectiveness of resource allocation arises because the routines help to mitigate the factors that prior research has identified as leading to resource misallocation, namely information asymmetry and distortion, internal politics, and cognitive biases and backward-looking aspirations. Finally, we move beyond research on whether firms effectively allocate resources to explain why resource allocation capabilities are likely be heterogeneous among firms due to differences in their routines and the ways that firms structure their use of routines. This heterogeneity stems in part from tradeoffs that firms face when choosing among resource allocation routines. As a result, firms are likely to vary in how effectively they allocate resources, leading to heterogeneity in firm adaptation and change and ultimately in firm performance.

Increasingly, teams consist of members from widely distinct knowledge domains. This article studies the extent to which research and development (R&D) teams can transform their members’ different technological knowledge into impactful inventions. Although teams composed of members with distinct expertise can create impactful new technologies, in order to realize this potential, team members must have the ability and motivation to integrate each other’s knowledge. This article argues that the ability to do so is shaped by the patterns of intrateam ties, measured in terms of coauthorships on patents. Our results suggest that teams’ ability to reap the advantages of members’ distinct expertise is shaped by the patterns of members’ prior collaboration ties. Prior experience working together (i.e., density) and the presence of factions of team members with common history (i.e., subgroups) improve teams’ ability to leverage differences in members’ knowledge. In contrast, when prior collaborations center on one focal person (i.e., centralization), teams are less able to take advantage of the knowledge differences on the team. An analysis of 32,612 nanotechnology R&D teams provides support for the hypotheses. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2023.1665 .

The phenomenon of chief executive officers (CEOs) speaking out on contested social issues is a recent one, as CEO sociopolitical activism was seen as overly risky, and even taboo, for most of American business history. Yet, CEOs are increasingly choosing sides in societal debates despite the inherent risk of alienating stakeholders who disagree with the CEO’s stance. Even more puzzlingly, conservative CEOs sometimes espouse liberal stances in such debates, which runs counter to the otherwise consistent evidence in the upper echelons literature that CEOs are guided by their own values in their actions. Our study addresses this paradox by examining the antecedents of CEO liberal activism, with an emphasis on the interplay between the CEO’s ideology and the prevailing ideological tilt of the employee population in driving CEOs’ activism decisions. Drawing on the concept of managerial discretion, or latitude of action, we theorize that a pronounced organizational ideology constrains a CEO’s ability to act in accordance with their own values—particularly in the highly symbolic domain of activism. We also argue that conservative CEOs are relatively more focused on instrumental rationales for activism, whereas liberal CEOs tend to prioritize more intrinsic rationales, a consequence of which is that conservative CEOs more heavily weight organizational ideology in their activism decisions. We test our theory in the context of a highly publicized letter signed by nearly 100 CEOs of public companies in opposition to North Carolina’s controversial 2016 “bathroom bill.” Relying on a variety of novel data sources, we find robust support for our theory. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2022.17160 .