Knowledge that Transforms

We explore the overlooked issue of how certain strategic-level, interindustry diversification options might increase consumer utility. Discussions of inter-industry diversification typically focus on producer synergies obtainable from economies of scope or from skill transfer across business units. Discussions of intra-industry product diversification—generally, the province of marketing—typically focus on synergies obtainable from product bundling, which lowers producer costs or provides convenience for consumers. We take a different tack by linking interindustry diversification and consumer utility. We first separately examine two possible consumer benefits of interindustry diversification: (1) facilitating consumers' accomplishment of two tasks simultaneously or (2) attracting diverse consumer groups to a common platform when intergroup externalities exist. We then assess a simple empirical context that shows potential for simultaneous consumer utilities and two-sided market utility together. We analyze this context and concurrently develop a mathematical model showing how these demand-side synergies can create unique business value. We next introduce asymmetric preferences among consumer subgroups, and we refine our arguments by comparing their conclusions with the empirical data. We learn that combinations of otherwise mundane (i.e., commonplace) assets can create consumer value—“superior” assets are not necessary. Moreover, common ownership is necessary for the pricing flexibility required to deliver (and capture) maximum value through interindustry diversification, especially when consumer groups' preferences may change; the negotiations and settling up required for cooperation through alliances will, without common ownership, increase costs and reduce responsiveness. We discuss the sustainability of demand-side advantages and the implications of these ideas for future research and practice.

In this paper we present a model of the interplay among learning, managerial intervention, and the allocation of decision rights in the context of a generalized agency problem. Within this context, actors face not only conflicting interests but also diverging cognitive “visions” of the right course of action. We assume that a principal may obtain the implementation of desired organizational policies by means of appropriate design of the allocation of decisions or by means of costly intervention through authority or incentives, and we analyze their consequences for organizational control and learning. We show that the structure of allocation of decision rights is very powerful in terms of control, but when the principal is uncertain about the course of action, organizational structure and managerial intervention complement each other in nontrivial ways and must be carefully tuned. We also show that there is a general advantage in maximizing the partitioning decision rights, because it allows both higher control and higher levels of learning.

This paper extends existing understandings of how actors' constructions of ambiguity shape the emergent process of strategic action. We theoretically elaborate the role of rhetoric in exploiting strategic ambiguity, based on analysis of a longitudinal case study of an internationalization strategy within a business school. Our data show that actors use rhetoric to construct three types of strategic ambiguity: protective ambiguity that appeals to common values in order to protect particular interests, invitational ambiguity that appeals to common values in order to invite participation in particular actions, and adaptive ambiguity that enables the temporary adoption of specific values in order to appeal to a particular audience at one point in time. These rhetorical constructions of ambiguity follow a processual pattern that shapes the emergent process of strategic action. Our findings show that (1) the strategic actions that emerge are shaped by the way actors construct and exploit ambiguity, (2) the ambiguity intrinsic to the action is analytically distinct from ambiguity that is constructed and exploited by actors, and (3) ambiguity construction shifts over time to accommodate the emerging pattern of actions.

For decades, the literatures on firm capabilities and organizational economics have been at odds with each other, specifically relative to explaining organizational boundaries and heterogeneity. We briefly trace the history of the relationship between the capabilities literature and organizational economics, and we point to the dominance of a “capabilities first” logic in this relationship. We argue that capabilities considerations are inherently intertwined with questions about organizational boundaries and internal organization, and we use this point to respond to the prevalent capabilities first logic. We offer an integrative research agenda that focuses first on the governance of capabilities and then on the capability of governance.

Scholars are increasingly interested in understanding the content and process of employee identification. In this paper, I contribute to this discussion by performing a qualitative case study investigating the accounts employees provide as they make sense of their identification with their workgroup, organization, and profession. Analyses of accounts from 31 members of an architecture firm reveal nine explanations individuals use to make sense of their identifications, which can be categorized using four sensemaking logics: similarity, familiarity, benefits, and investment. The explanations that informants provided differed markedly across targets. Whereas individuals relied heavily on personal relationships, and that their work actually happens in their workgroup in their accounts of workgroup identification, organizational identification was often explained based on the ideology of the organization, the support provided by the organization, the prestige of the organization, and the input the individual had into the organization. In further contrast, accounts of professional identification rested on explanations based in professional archetypes, the enjoyment informants found in their work, and professional norms about the work/life interface. These findings suggest that individuals may construct their identifications differently across targets. I theorize that these patterns are a function of target proximity and the characteristics that distinguish between targets. These findings open up the black box of identification by providing insight into how individuals interpret information about workplace targets. In doing so, the findings illustrate how sensemaking about identification is the result of firsthand experiences with a target in addition to sensegiving.

Organizations mediate societal cultural belief systems and group-level encounters by filtering, and sometimes transforming, social information regarding which status characteristics are salient during group encounters embedded within organizations. This study uses status characteristics theory to add to our understanding of social status within organizations by explaining why organizations matter in determining which status characteristics will be activated within task groups. By analyzing status rankings within an organization of open source software programmers, we find that the organization develops its own unique shared belief system, which inculcates actors with beliefs about status characteristics that are potentially unique within the boundaries of the organization. Specifically, in this study we find that through a process of status generalization, organizational members create new status markers (location) that are potentially only meaningful for the given social situation, and they selectively nullify others (education and age). To the best of our knowledge, the current study is the first work in the expectation states tradition to demonstrate an outcome for an organization-level selection process for status characteristics. This paper adds to status characteristics theory by empirically analyzing how organizational contexts create boundaries around groups in which new and extant status characteristics are activated and in which predefined characteristics inherited from more global, society-level contexts are deactivated.

Historical accounts of human achievement suggest that accidents can play an important role in innovation. In this paper, we seek to contribute to an understanding of how digital systems might support valuable unpredictability in innovation processes by examining how innovators who obtain value from accidents integrate unpredictability into their work. We describe an inductive, grounded theory project, based on 20 case studies, that looks into the conditions under which people who make things keep their work open to accident, the degree to which they rely on accidents in their work, and how they incorporate accidents into their deliberate processes and arranged surroundings. By comparing makers working in varied conditions, we identify specific factors (e.g., technologies, characteristics of technologies) that appear to support accidental innovation. We show that makers in certain specified conditions not only remain open to accident but also intentionally design their processes and surroundings to invite and exploit valuable accidents. Based on these findings, we offer advice for the design of digital systems to support innovation processes that can access valuable unpredictability.

What explains organizational search and choice when multiple opportunities are available to the decision makers? Drawing on the behavioral view of the firm, and on the attention-based view, this study proposes a theoretical model centered on the opportunity prospects rule to explain market expansion, defined as the extent (how many) and the selection (which) of multiple available opportunities that are actually pursued by competing firms. We test our model using longitudinal, fine-grained data on commercial banks undertaking more than 1,300 opportunity choices. The findings show that firms do use the opportunity prospects rule when exercising market expansion choices and that slack and performance feedback moderate the effects of opportunity prospects. This paper contributes to organizational decision-making research and to the behavioral view of the firm by showing the importance of considering an opportunity-driven approach, by demonstrating the relevance of simplifying rules to explain the search for the consequences of alternatives, by extending recent efforts to provide a more forward-looking perspective to model organization behavior, and by showing when slack and performance feedback moderate the effects on market expansion of the opportunity prospects rule.

Most category studies have focused on established categories with discrete boundaries. These studies not only beg the question of how a de novo category arises, but also upon what institutional material actors draw to create a de novo category. We examine the formation and theorization of the de novo category “modern architecture” between 1870 and 1975. Our study shows that the process of new category formation was driven by groups of architects with distinct clientele associated with institutional logics of commerce, state, religion, and family. These architects enacted different artifact codes for a building based on institutional logics associated with their specific mix of clients. “Modern architects” fought over what logics and artifact codes should guide “modern architecture.” Modern functional architects espoused a logic of commerce enacted through a restricted artifact code of new materials in a building, whereas modern organic architects advocated transforming the profession's logic enacted through a flexible artifact code of mixing new and traditional materials in buildings. The conflict became a source of creative tension for modern architects that followed, who integrated aspects of both logics and materials in buildings, expanding the category boundary. Plural logics and category expansion resulted in multiple conflicting exemplars within “modern architecture” and enabled its adaptation to changing social forces and architectural interpretations for over 70 years.

This study explores whether, to what extent, and under which conditions modular products are associated with modular organizations (the “mirroring” hypothesis). We analyze the product and organizational architectures of three firms in the air conditioning industry through an original data set of 100 components and supply relationships. Applying a variety of regression methods, we show that, under the condition of product architecture stability at the component level, supplier relations for loosely coupled components are characterized by less information sharing, which implies that the degree of coupling of product components varies directly with the degree of coupling of organizations (the “mirroring” hypothesis). Also, the performance of supply relationships depends on the amount of buyer–supplier information sharing but not on the degree of component modularity, which supports the relational view and confirms that product modularity does not have unambiguous effects on organizational performance. Moreover, the degree of component modularity negatively moderates the impact of buyer–supplier information sharing on supplier-relationship performance, which confirms that component modularity works as an ex ante, embedded substitute for high-powered interorganizational integration mechanisms. Finally, contingent on firms' strategies, organizational structures, and capabilities, we argue that at the firm level, higher product modularity may be associated either with less information sharing with suppliers, which implies that the mirroring effect might hold also at the firm level, or with more information sharing with suppliers, which implies that there may be increasing returns to modularity in design efforts because of interorganizational integration (the “complementarity” hypothesis).