Knowledge that Transforms

Abstract Research Summary Oppositional categories emerge in direct ideological opposition to incumbent mass producers. In doing so, these oppositional categories, especially craft‐based ones, emphasize their size (small), ownership (independence), and production methods (traditional) as important identity codes—critical for maintaining their distinctiveness from the incumbent category. However, we lack theoretical insights into how oppositional category members respond as (former) members defect by joining the incumbent category they challenge and ideologically oppose. Therefore, taking an identity lens, our study explores the following research question: As members sell to incumbents , how do the remaining members of the oppositional category attempt to maintain the distinctiveness of the collective identity? Our findings reveal incumbents' acquisitions of oppositional members open the opportunity to elevate the importance of ownership (independence) as a distinctive identity code. Managerial Summary Craft categories often emerge by opposing large, dominant corporations. This David versus Goliath mentality helps establish distinct differences between the two groups of firms. However, as owners of the craft organizations grow and sell (to the opposition), this can erode the core attributes that originally made the craft category distinct. We find that as craft brewers sold their breweries to mass producers it did just that—led to considerable confusion in what constitutes a “craft brewery.” However, the craft brewing collective rallied together to identify “independence” as the core feature of craft brewers—one that cannot be bought or copied by the opposition—in hopes they can maintain their distinctiveness from mass producers.

Abstract Research summary We examine the correlations between financial resource allocation flow between business segments and two measures of overall firm financial performance using a sample of Compustat firms. Our analysis finds a consistent inverted U‐shape (or alternatively, V‐shape) relationship between those measures and firm profitability. Interestingly, nearly all the data lie on the upward sloping part of the curve. Taken together, these results support the notion that flows of financial capital are most often positively correlated with financial performance. Managerial summary A key question for any organization is how reallocating capital across business units is related to overall firm performance. We examine the correlations of firm profitability with a measure of change in year‐to‐year allocations across business units in a data set of several thousand firms spanning 18 years. Except in cases of the most extreme reallocations, our measure of firm reallocation is positively correlated with firm performance. Because we cannot prove causality, we cautiously conclude that our findings are consistent with a story that, in most cases, firms would benefit from greater internal reallocation of capital. The managerial question then becomes “what dynamic capabilities are necessary to increase the flow of resources across business segments?” Policies aimed at increasing allocation flow are likely to be beneficial.