Knowledge that Transforms

In this paper, I elaborate a theoretical model of how individuals come to make or create sense through their language while being accountable to others. Using accounts of corporate communication professionals who made sense of anomalous circumstances, I analyze how they used metaphorical words and expressions to organize their accounts and to negotiate between their own individual commitments and perceived social expectations. Based on the analysis, I induce that professionals (a) use individual metaphors to align themselves with the expectations of others and to mark particular roles for themselves that strictly meet those expectations (“strategic shifting”) when they perceive the social approval motive as strong; (b) engage in the extended use of a single metaphor to compress a situation into a frame that mediates between individual convictions and others' expectations (“framing”) when they know the views of others but are also strongly motivated to think through a circumstance as part of their professional role or previous commitments; and (c) systematically use a combination of metaphors that are blended and elaborated into a plausible narrative that attributes responsibility and prescribes a course of action (“narration”) when they are in a position (as part of their role) to define a circumstance, are unconstrained by past experiences, and do not directly know the views of others. This model integrates findings from prior research and combines the influence of role-related commitments and social accountability pressures on sensemaking.

In research and development (R&D) alliances, the partner firms must balance the tension between knowledge sharing and knowledge leakages because knowledge sharing, designed to support the alliance's technology development goals, can often lead to unintended and potentially damaging knowledge leakages. Governance structure is a well-understood knowledge protection strategy designed to reduce knowledge leakage concerns and thereby encourage desired knowledge transfers in two-party R&D alliances. Whether governance structure can be an important balancing mechanism for R&D alliances with multiple partner firms, or multilateral R&D alliances, however, requires further study. Because increasing the number of alliance partners introduces additional complexities to managing an alliance, the appropriate governance mechanism for a multilateral R&D alliance is likely to differ from that for a bilateral alliance. Drawing insights from social exchange theory, we explore governance decisions in multilateral R&D alliances. First, we examine the potential for variance between multilateral and bilateral R&D alliances in governance decisions as a means of knowledge sharing and knowledge protection. Results based on our analysis of 2,423 R&D alliances, 1,690 bilateral and 733 multilateral, are consistent with predictions drawn from social exchange theory. We next focus on three-partner R&D alliances, or trilateral R&D alliances, and compare governance mechanisms between two types of trilateral R&D alliances: chain and net. We find that equity governance structures are more likely to be used in net-based than in chain-based trilateral R&D alliances; we also find that alliance scope moderates the relationship between the type of alliance and governance structure. Finally, we find that multilateral R&D alliances with predicted (aligned) governance structures perform better, in terms of alliance longevity, than those with misaligned structures.

Excess entry—or the high failure rate of market entry decisions—is often attributed to overconfidence exhibited by entrepreneurs. Assuming that these decisions depend on assessments of business opportunities, we model boundedly rational entrepreneurs and show analytically that, whereas excess entry is an inevitable consequence of imperfect judgment, it does not necessarily imply overconfidence. Indeed, judgmental fallibility can lead to excess entry even when all potential entrepreneurs are underconfident. We further demonstrate that, as a group, individuals who decide to start a new business exhibit more confidence than those who do not and that successful entrants are less confident than failures. Our results therefore question general claims that overconfidence leads to excess entry. We conclude by emphasizing the need to understand the role of judgmental fallibility in producing economic outcomes and implications for both venture capitalists and the training of entrepreneurs.

In this paper, we propose an approach to show how the capability-based perspective of the resource-based view of the firm can be integrated with the comparative-governance approach of transaction cost economics to shed light on governance issues in interfirm relationships. We argue that transacting parties create value not only through the employment of partner-specific investment and coordination activities but also through the employment of heterogeneous, firm-specific resources that each firm brings to the relationship and that, in turn, governance structures reflect a discriminating alignment with these two distinct forms of value-creating activities and resources. Our thesis is empirically tested in the context of industrial original equipment manufacturers employing branded component contracts with independent component vendors. Specifically, we investigate the conditions under which the price terms for branded components are agreed upon (more fixed) ex ante versus negotiated (more flexible) ex post. Our results offer two insights. First, the chosen governance form reflects a trade-off between safeguarding and adaptation motives even among parties engaged in cooperative relationships. Second, valuable, firm-specific resources that preexist outside of the exchange relationship are at stake in these cooperative yet contractually incomplete relationships. They, together with relationship-specific investments and activities, have a significant impact on governance design.

This paper explores the interplay between social structure and economic action by examining some of the evolutionary dynamics of an emergent network that coalesces into a small-world system. The study highlights the small-world system's evolutionary dynamics at both the macro level of the network and the micro level of an individual actor. This dual analytical lens helps establish that, in competitive and information-intensive settings, a small-world system could be a highly dynamic structure that follows an inverted U-shaped evolutionary pattern, wherein an increase in the small-worldliness of the system is followed by its later decline as a result of three factors: (1) the recursive relationship between the evolving social structure and individual actors' formation of bridging ties, which eventually homogenizes the information space and decreases actors' propensity to form bridging ties, creating a globally separated network; (2) self-containment of the small-world network, or increasing homogenization of the social system, which makes the small world less accepting of and less attractive to new actors, thereby limiting formation of bridging ties to outside clusters; and (3) fragmentation of the small-world network, or the small-world system's inability to retain current clusters. The study uses data on interorganizational tie formation in the global computer industry in the period from 1996 to 2005 to test the hypothesized relationships.

In this paper, I study the effect of adding large numbers of producers of application software programs (“apps”) to leading handheld computer platforms, from 1999 to 2004. To isolate causal effects, I exploit changes in the software labor market. Consistent with past theory, I find a tight link between the number of producers on platform and the number of software varieties that were generated. The patterns indicate the link is closely related to the diversity and distinct specializations of producers. Also highlighting the role of heterogeneity and nonrandom entry and sorting, later cohorts generated less compelling software than earlier cohorts. Adding producers to a platform also shaped investment incentives in ways that were consistent with a tension between network effects and competitive crowding, alternately increasing or decreasing innovation incentives depending on whether apps were differentiated or close substitutes. The crowding of similar apps dominated in this case; the average effect of adding producers on innovation incentives was negative. Overall, adding large numbers of producers led innovation to become more dependent on population-level diversity, variation, and experimentation—while drawing less on the heroic efforts of any one individual innovator.

This paper extends information economics in corporate strategy and organizational governance research by using signaling theory to explain firms' market entry modes. We exploit features of the initial public offering (IPO) context to investigate how signals on newly public firms shape other companies' governance choices to form joint ventures with them versus acquiring them. We also develop theoretical arguments on how the value of these signals will vary across exchange partners. The results reveal that companies are more apt to acquire, versus partner with, IPO firms taken public by reputable investment banks compared with IPO firms associated with less prominent underwriters. Venture capitalist backing also appears to be a valuable signal for prospective acquirers, particularly when the acquirer and target reside in different industries and possess dissimilar knowledge bases. We also present evidence that signals affect target selection and the emergence of market segmentation for joint venture partners and acquisition candidates.

Research has recognized the transformative dimension of resistance in the workplace. Yet resistance is still seen as an adversarial and antagonistic process that management can accept or reject; thus, understanding how resistance can actually influence workplace change remains a challenge for research. In this paper, we offer an analysis of two situations of resistance wherein resisters, organized in temporary enclaves, are able to influence top management's decisions and produce eventual change. Whether or not resistance becomes productive depends on the skillful work of resisters and the creation of powerful “objects of resistance” that enable resisters to modify temporarily the power configuration of a situation and oblige top management to listen to their claims and accommodate to the new configuration. This paper shows that resistance can be better explained by what resisters do to achieve their ends rather than by seeing resistance as a fixed opposition between irreconcilable adversaries.

We outline a theoretical model of organizational learning curves to account for the empirical regularities observed in the literature. The learning mechanism in our model is the gradual recognition of important stepping stones to achieving the goal. As organizations gain experience, they discover the appropriate actions to take at each stage and reduce the number of the steps it takes to reach the final outcome. Using both simulation and human subject experiments, we show that this model accounts for existing empirical regularities related to the learning curves, variations in learning rates, and organizational adaptation to new environments.

This paper investigates whether and how going public affects firm innovation. I propose that initial public offerings (IPOs) fundamentally reshape core organizational structures and processes, and I consider implications for firms' overall innovative productivity and their exploratory search strategies. Using longitudinal data on U.S. medical device firms funded by venture capital and inverse probability of treatment weights to account for self-selection into IPOs and the presence of time-dependent confounders, I find that a firm's overall innovative productivity increases after the firm goes public. Going public also decreases the proportion of innovation search that explores new and recently developed knowledge and increases the proportion of exploratory search building on scientific knowledge. Estimates represent population average treatment effects.