Knowledge that Transforms

This study examines the adoption of new products and processes in the Australian retail banking industry over the 1981 to 1995 period. Our analysis demonstrates that the vast majority of observed innovative activity was based on ideas sourced from outside the focal firm, and that innovations diffused very quickly across competing banks. As such, there were no periods during which any bank had proprietary possession of a major product or process innovation. We therefore ask how the banks' innovative activity could affect their relative financial performance positions. We answer this question by developing a set of hypotheses that relate specific features of their histories of innovative activity to their current financial performance. These hypotheses are tested using a detailed data set describing 1,297 modifications made to products and services, distribution technologies, and back-office processes within a sample of Australian retail banks over the sample period. Our results provide support for the general position that establishing an attractive competitive position depends on the specific history of a firm's innovative activity. Banks that undertook more innovative activity, that were more consistent in that activity, and whose composition of activity was somewhat differentiated from the industry norm tended to display superior financial performance. Rather than looking solely for internally generated, inimitable innovations to deliver competitive advantage, these results suggest that active and consistent innovative activity that is somewhat differentiated from competitors can also deliver superior financial performance.

This paper examines the link between organizational culture and effectiveness for foreign-owned firms operating in Russia. Beginning with a model of organizational culture developed in the United States, the paper presents a multimethod analysis of culture and effectiveness in a transition economy. We argue that effectiveness in Russia relies more on adaptability and flexibility than it does in the United States. Furthermore, the legacy of the Communist era forces firms in Russia to deal with a workforce with a unique time perspective and a unique set of subcultures that often undermine attempts at coordination and integration. We first explore these ideas using survey data on 179 foreign-owned firms operating in Russia and compare the results to those obtained for firms in the United States. We then present four case studies designed to ground the results in the Russian context, and to document cultural dynamics not captured by the model.

Mainstream organizational research is based on science and the humanities. Science helps us to understand organized systems, from an outsider position, as empirical objects. The humanities contribute to understanding, and critically reflecting on, the human experience of actors inside organized practices. This paper argues that, in view of the persistent relevance gap between theory and practice, organization studies should be broadened to include design as one of its primary modes of engaging in research. Design is characterized by its emphasis on solution finding, guided by broader purposes and ideal target systems. Moreover, design develops, and draws on, design propositions that are tested in pragmatic experiments and grounded in organization science. This study first explores the main differences and synergies between science and design, and explores how and why the design discipline has largely moved away from academia to other sites in the economy. The argument then turns to the genealogy of design methodologies in organization and management studies. Subsequently, this paper explores the circular design methodology that serves to illustrate the nature of design research, that is, the pragmatic focus on actionable knowledge as well as the key role of ideal target systems in design processes. Finally, the author proposes a framework for communication and collaboration between the science and design modes, and argues that scholars in organization studies can guide human beings in the process of designing and developing their organizations toward more humane, participative, and productive futures. In this respect, the organization discipline can make a difference.

This study examined the formation and persistence of homophilous, or same-race, friendship ties among racial minorities and whites in a “newcomer” setting. Homophilous ties provide valuable sources of mutual support but may limit racial minorities' access to resources and information in organizations. Study participants were first-year MBA students who entered a program at the same time. We measured network ties at two times: six weeks after the beginning of the students' first semester in the program, and at the beginning of the following semester 3 1/2 months after the second survey. We also administered a separate survey measuring social identity salience prior to the first network survey. Despite the fact that there were fewer same-race ties for racial minorities to choose from, their friendship networks demonstrated greater homophily than those of whites early in the formation of the network and over time. Also, African-Americans were more likely than whites to seek out homophilous friendship ties in other class sections. Race as a salient social identity group membership was positively related to homophily for African-Americans, Hispanics, and whites. Over the time period studied there was no significant change in homophily among the racial groups' networks, despite the explicit promotion of diversity in recruitment of students, formation of heterogeneous classes and teams, and active support by the MBA program administrators. We discuss the practical implications of our findings for organizations that are attempting to increase cultural diversity and promote active interaction among individuals from different racial and ethnic backgrounds.

This study investigates whether the performance of organizational citizenship behavior and three indicators of social status—hierarchical position, gender, and race—predict employees' vulnerability to being victimized by the harmful actions of others. We hypothesize that interpersonally directed organizational citizenship deflects mistreatment by others because it enhances social attractiveness and creates bonds of mutual obligation and reciprocity. However, drawing from prior research that shows that people with high social status are perceived more favorably than people with low status, we also hypothesize that benefits of organizational citizenship are more likely to accrue to employees in high, as compared to low, status groups. Data were from 448 employees of a U.S. manufacturing firm. As expected, citizenship was more strongly and negatively related to perceived victimization for whites as compared to African-Americans. However, contrary to our prediction, citizenship was more strongly related to perceived victimization among employees with low, as compared to high, hierarchical status. No moderating effect of gender was found. Implications for organizations are discussed and future research directions are offered.

We present a mathematical model that predicts and explains the circumstances under which a management-defined communication structure can add value to an organization. This model provides a game-theoretical basis for contingent organizational design by relating empirical observations of real organizations to the solution of a rational choice model based on game theory. We constructed a multiple-player, noncooperative game in which players have full knowledge of, and universal communication access to, each other. These players allocate the scarce resource of their attention among potential interaction partners. It struck us that this game sometimes did and sometimes did not have a “core,” i.e., a confluence of individual optima (Nash equilibrium) that was also optimal for the whole group. Some circumstances allow the best structure to emerge from many individual decisions, whereas other circumstances require the imposition of structured communication channels by a central decision maker. Strong management control of communication structure adds no value in business environments where the game has a “core” i.e., where a centrally imposed optimum would dictate the same communications patterns as those defined by the Nash equilibrium that emerges spontaneously when each participant optimizes locally. Trade in an ideal market is the iconic example of such environments. In our model, other combinations of conditions fail to yield a core, even though a single stable Nash equilibrium always exists. The difference between aggregate effectiveness at the Nash equilibrium and the maximal feasible aggregate effectiveness that could be centrally dictated is the value that management can provide through enforcing the globally optimum communication regime. The predictions of this simple model about the conditions that favor more- or less-structured communications agree surprisingly well with accepted organizational contingency theory. Our simple model thus provides a sound theoretical foundation for many aspects of contingent organizational design.

A growing body of literature suggests that populations of organizations are not homogeneous, but instead comprise distinct subentities. Firms are highly dependent on their immediate institutional and competitive environments. The present paper further explores this issue by focusing on the spatial and temporal sources of industry heterogeneity. Our goal is threefold. First, we explore founding rates as a function of spatial density, arguing that density-dependent processes occur along a geographic gradient ranging from proximate, to neighboring, to more distant contexts. Second, we show how multiple, local evolutionary clocks shape such entrepreneurial activity. Third, we provide evidence on how diffusion processes are directly affected by social contagion, with new organizational forms spreading through movements of individuals. Results from data on the Dutch accounting industry corroborate these patterns of heterogeneity.

The World Wide Web (WWW) has been touted as providing great opportunities for small businesses to compete and thrive. Concerns about trust have been identified as a barrier to such businesses' success. This research explores how consumers' initial trust judgments about organizations they encounter on the Web may be influenced by hypertext links from trusted websites and associations with the more trust-inducing traditional retail channel. This paper develops and tests a cognitive model of the trust transfer process, arguing that trust is transferred across hypertext links based on the perceived interaction and similarity of the linked organizations, and that institution-based trust is transferred from the traditional shopping channel to a Web-based organization based on evidence that the Web-based organization has a physical store. An experimental study shows that a hypertext link from one website to another increased the extent to which the linked organizations were perceived to have a business relationship and be similar, and these perceptions had a positive influence on trusting beliefs regarding the linked site. Associating with the physical shopping channel by showing a picture of a building on a website increased the extent to which subjects reported intention to buy from the site. The study provided empirical evidence that trusting beliefs regarding the website had a significant positive effect on intention to buy from it. This paper discusses further development of the trust transfer model based on the social perception literature and explores implications for future research.

It is generally assumed that improved outcomes accompany the use of trust as a governance mechanism in an interfirm relationship. Briefly, trust is a social lubricant that reduces the friction costs of existing trade and/or serves to increase the scope of trade. In contrast to this universalistic view, we posit that the performance of trust-based governance is contingent on the ability of trading partners to “read” each other and learn about counterpart behavior. These information-processing abilities allow firms to assess partner trustworthiness better, which reduces the risk of misplaced trust. The increased efficacy of communication and learning from one another also enables them to better capitalize from the adaptation and revision possibilities uncovered through trust-based governance during the task-execution phase. Given the central role of these cognitive requirements, we assess these contingent effects with data from a knowledge-intensive task setting. Using a sample of 129 firms that have engaged outside contractors on client-sponsored R&D projects, we find strong support for our thesis. Specifically, we find that trust-based governance has a larger positive impact on task performance when the client is more skilled at understanding the outsourced tasks at hand, the task itself requires skills that are relatively more readily taught (less tacit), and the task itself is organized in parallel with work being done at the contractor as well as the client. As a corollary, we also find that firms adopt trust-based governance to a greater extent as these information-processing abilities increase, as well as with the colocation of the contractor and client. Suggestions for engineering trust-based governance are offered.

We present a view of trust in boundary spanners as explained by the extent of role autonomy, a multidimensional concept that reflects the discretion that agents have in interpreting and enacting their roles. We argue that, in a buyer-supplier context, purchasing managers will be trusted to a greater extent by supplier representatives when they are free from constraints that limit their ability to interpret their boundary-spanning roles. We conceptualize and measure three key components of role autonomy: Functional influence, tenure, and clan culture. Taken together, these components of role autonomy shape and define the purchasing manager's willingness and capacity to make and uphold commitments to supplier representatives. Role autonomy permits purchasing managers to engage in discretionary behaviors that allow supplier representatives to learn about their underlying motives and intentions. We test hypotheses linking the components of role autonomy to trust on a sample of 119 buyer-supplier relationships. We use a dyadic research design that combines data from purchasing managers and supplier representatives. The results suggest that granting purchasing managers greater autonomy enhances supplier representative trust in purchasing managers. By drawing attention to role autonomy as a feature of organizations that influences trust we highlight the importance of organizational context in contributing to a deeper understanding of trust.