The publisher would like to apologize for the exclusion of color in the printed publication of the above article. The following five figures have been reproduced in color as follows: Page 882, figure 3: Page 883, figure 4: Page 884, figure 5: Page 885, figure 6: Page 888, figure 7:
Research summary: This article focuses on organizational naming as a strategic choice organizations make to overcome liabilities of atypicality. We argue that, in markets presenting an “illegitimacy discount,” atypical organizations may use deliberate names—names that communicate the market categories to which organizations claim membership—to offset the consequences of atypicality. Using data from the global hedge fund industry, we show that atypical hedge funds are more likely than typical funds to have deliberate names. Importantly, the selection of a deliberate name is economically significant. First, funds with deliberate names grow faster than funds without deliberate names, especially among atypical funds. Second, while atypicality heightened the likelihood of failure during the recent financial crisis—even after controlling for fund performance—having a deliberate name mitigated this effect . Managerial summary: Differentiation is a core element of many organizations' competitive advantage. Nevertheless, as differentiation implies being atypical among one's competitors, differentiation strategies can also lead to an “illegitimacy discount” whereby differentiators are at risk of being misunderstood, miscategorized, and ignored by consumers. Here we investigate how atypical hedge funds—funds that differentiate themselves from their competitors by investing in notably unique ways—use names to offset the potential consequences associated with the “illegitimacy discount.” Our analysis of more than 12,000 hedge funds over 12 years highlighted a trend whereby atypical hedge funds were more likely to choose names that unambiguously associated them with a known investment strategy—for instance, choosing the name “Apex Global Macro Capital” over simply “Apex Capital.” Importantly, name selection proved to be economically significant. For example, among atypical hedge funds, those with unambiguous names grew faster than those without. Furthermore, while being atypical increased the level of disinvestment during the recent financial crisis, having an unambiguous name reversed this effect. Organizational names play an important communication role with consumers, which, while highly symbolic, may also help resolve the dual organizational need to both conform to consumer expectations and differentiate from market competitors .
Research summary : Innovation requires inventors to have both new knowledge and the ability to combine and configure knowledge (i.e., combinatory knowledge), and such knowledge may flow through networks. We argue that both combinatory knowledge and new knowledge are accessed through collaboration networks, but that inventors' abilities to access such knowledge depends on its location in the network. Combinatory knowledge transfers from direct contacts, but not easily from indirect contacts. In contrast, new knowledge transfers from both direct and indirect contacts, but is far more likely to be new and useful when it comes from indirect contacts. Exploring knowledge flows in 69,476 patents and 89,930 unique inventors reveals evidence that combinatory knowledge from direct contacts and new knowledge from indirect contacts significantly affects innovative performance . Managerial summary : Inventors often combine ideas to create innovations. To do this, they need ideas to combine and they need the ability to combine those ideas. Inventors can get ideas to combine as well as the ability to combine ideas through prior co‐workers. Prior co‐workers can share ideas that may be relevant for the inventor's project and can tell the inventor about other things that other people are working on, especially people the inventor may not know. This can help inventors easily learn about ideas from friends‐of‐friends. The ability to combine ideas, however, is much harder to pass on. Prior co‐workers must carefully work with the inventor to teach him or her the complex processes of combining ideas. This means that it is very hard to learn how to combine knowledge from a friend‐of‐a‐friend, but it may be possible to learn from prior co‐workers. We explore this phenomenon in the social relationships of software inventors .
We analyze performance and emotions as antecedents and consequences of team strategic decisions to explore a new routine versus exploiting an existing one. In a laboratory study, we examine team decision making over time and draw causal inferences about the relationships among team emotions, team performance, and explore–exploit decisions. We use self‐report data to measure team emotions, and validate results with psychophysiological data. We find that declines in performance increase the likelihood that teams decide to explore new routines rather than exploit existing ones. We also find a marginal positive effect of positive emotions, as measured by both self‐report and psychophysiological data, on team decisions to explore a new routine. Further, teams successful at implementing new routines report increased positive emotions, as measured by the self‐report data. This relationship is fully mediated by performance change.
Research summary: This study examines the abandonment of organizational practices. We argue that firm choices in implementing practices affect how firms experience a practice and their subsequent likelihood of abandonment. We focus on utilization of the practice and staffing (i.e. career backgrounds of managers), as two important implementation choices that firms make. The findings demonstrate that practice utilization and staffing choices not only affect abandonment likelihood directly but also condition firms' susceptibility to pressures to abandon when social referents do. Our study contributes to diffusion research by examining practice abandonment—a relatively unexplored area in diffusion research—and by incorporating specific aspects of firms' post‐adoption choices into diffusion theory. Managerial summary: When do firms shut down practices? Prior research has shown that firms learn from the actions of other firms, both adopting and abandoning practices when their peers do. But unlike adoption decisions, abandonment decisions need to account for firms' own experiences with the practice. We study the abandonment of corporate venture capital ( CVC ) practices in the U.S. IT industry, which has experienced waves of adoption and abandonment. We find that firms that make more CVC investments are less likely to abandon the practice, and are less likely to learn vicariously from other firms' abandonment decisions, such that they are less likely to exit CVC when other firms do. Staffing choices also matter: hiring former venture capitalists makes firms less likely to abandon CVC practices, while hiring internally makes abandonment more likely. Plus, staffing choices affect how firms learn from the environment, as CVC managers pay attention to and learn more from the actions of firms that match their work backgrounds; i.e., firms that staff CVC units with former venture capitalists are more likely to follow exit decisions of VC firms, while those that staff with internal hires are more likely to follow their industry peers. Our results suggest that firms wanting to retain CVC practices should think carefully about the implementation choices they make, as they may be inadvertently sowing seeds of abandonment.
Research summary: The efforts of multinational corporations to be socially responsible do not always engender positive evaluations from overseas stakeholders. Drawing on attribution theory, we argue that two heuristics guide stakeholders in evaluating firms' social performance: foreignness and the valence of firms' social responsibility. We provide evidence from a field study of secondary stakeholders and an experimental study involving 129 non‐governmental organizations. Consistent with attribution theory, the liability of foreignness is minimized when firms engage in “do‐good” social responsibility (focused on proactive engagement creating positive externalities) but is substantial when firms engage in “do‐no‐harm” social responsibility (focused on attenuating negative externalities). In online supporting information, Appendix S1, we demonstrate that these evaluations have consequences for whether stakeholders subsequently cooperate, or sow conflict, with firms. Managerial summary: There is no guarantee that efforts to be socially responsible will improve multinational corporations' relations with overseas stakeholders, such as customers, governments, and activists. In a field study and an experiment, we unpack when foreign firms suffer from harsh stakeholder evaluations. Foreign firms especially suffer from harsh evaluations when they conduct “do‐no‐harm” CSR rather than “do‐good” CSR . Stakeholders attribute the motive for foreign firms' do‐no‐harm CSR to managerial interests and shareholder pressures, perceiving a wedge between managers and owners (who may be unmotivated to reduce the negative impacts of their business activities) and local stakeholders (who bear the social costs). A practical implication is that foreign firms gain more from highlighting do‐good rather than do‐(no)‐harm CSR initiatives.
Instrumental stakeholder theory has largely emphasized the positive effects of investing in stakeholder cooperative relationships in an additive, linear fashion in the sense that the more investments the better. Yet investing in stakeholders can be very costly and the effects of these investments in firm performance are subject to complex internal complementarities and external contingencies. In this article we rely on set‐theoretic methods and a large international dataset of 1,060 multinational companies to explore theoretically and empirically some of the complementarities, costs and contingencies likely to arise in stakeholder management .
Research summary : This article applies data from LinkedIn to advance strategy research into the effect of human capital on mobility of engineers and scientists. Through an inventor survey, we show that LinkedIn provides more accurate career histories than patents. Compared to LinkedIn , patent measures of mobility generate 12 percent false positives and 83 percent false negatives. Using LinkedIn , we review findings from previous research using patents to track the effect of human capital on mobility. One previous finding is robust: that mobility is higher in Silicon Valley than elsewhere. Other findings are possibly sensitive to the measure of mobility or sample selection. We interpret our results as the outcome of targeted retention of human capital. Data for this study may be accessed at FIVE, five.dartmouth.edu . Managerial summary : How does the mobility of engineers and scientists depend on their human capital? Previous research used patents to track inventor mobility and concluded that employers targeted inventors for recruitment by their human capital. Here, we introduce data from LinkedIn to review the previous research. Through an inventor survey, we show that LinkedIn provides more accurate career histories than patents. Compared to LinkedIn, patent measures of mobility generate 12 percent false positives and 82 percent false negatives. Among the previous findings, we show that one is robust: mobility is higher among inventors in Silicon Valley than elsewhere. Other findings are possibly sensitive to the measure of mobility or sample selection. Our results suggest that current employers target engineers and scientists for retention according to their human capital .