Knowledge that Transforms

Using the five factor model ( FFM ) of personality, we delineate two distinct roles of CEO personality in managing strategic change: initiating strategic change and determining the performance effects of strategic change implementation. Based on data from 120 small‐ and medium‐sized enterprises ( SMEs ) in Ecuador, we found that some FFM traits of CEOs influenced initiation only (extraversion and openness), others similarly influenced initiation and performance effects of implementation (emotional stability and agreeableness), and still others had opposing effects on initiation and effective implementation (conscientiousness). These results point to a dual role of CEO FFM of personality in managing strategic change, and they indicate the differences in CEO FFM traits needed to initiate strategic change and those needed to improve the performance effects of strategic change implementation . Copyright © 2013 John Wiley & Sons, Ltd.

We explore the circumstances under which expatriates can help their host‐subsidiary capture headquarters' attention. Our central contention is that expatriates will be particularly helpful in situations where a subsidiary or its market is showing signs of growth, allowing headquarters to recognize information signaling opportunities for the firm that could otherwise go unnoticed. We test this contention using a robust instrumental variable approach in a single multinational enterprise. Our results show that subsidiaries hosting expatriates and experiencing growth at the subsidiary or market level have a higher probability of capturing headquarters' attention . Copyright © 2013 John Wiley & Sons, Ltd.

We propose that the behavioral theory of the firm perspective on R & D search requires modification when applied to “communitarian” cultures such as Japan because reciprocity and embeddedness can influence the search decision. When performance exceeds aspirations, communitarian‐oriented firms are more inclined to use their privileged position to help their less fortunate stakeholders by engaging in additional R & D search that should yield greater payoffs for these stakeholders in the future. Our results indicate that while Japanese firms engage in “problemistic” search in a manner similar to what has been found in other contexts, they respond differently when performance exceeds expectations. We find that as performance rises above aspirations, communitarian‐oriented firms raise R & D search to a greater extent than do firms that lack a communitarian orientation . Copyright © 2013 John Wiley & Sons, Ltd.

The literature on organizational learning asserts that external learning is often limited geographically and technologically. We scrutinize to what extent organizations acquire external knowledge by accessing external knowledge repositories. We argue that professional service firms ( PSF s) grant access to nonlocalized knowledge repositories and thereby not only facilitate external learning but also help to overcome localization. Focusing on patent law firms, we test our predictions using a unique dataset of 544,820 pairs of European patent applications. Analyzing patterns of knowledge flows captured in patent citations, we find that accessing a PSF 's repository facilitates the acquisition of external knowledge. As the effect is more pronounced for knowledge that is distant to a focal organization, we conclude that having access to a knowledge repository compensates for localization disadvantages . Copyright © 2013 John Wiley & Sons, Ltd.

This paper contributes to the corporate governance literature by developing and testing theory regarding positive and negative synergies between the CEO 's and the board's human and social capital. Using a sample of 360 biotechnology firms that went public between 1995 and 2010, we demonstrate that accumulated public company board experiences of the CEO and the board have positive synergistic effects on IPO performance whereas the current board appointments have negative effects. While scientific educational backgrounds have positive synergies, industry‐specific experiences produce either positive or counterproductive effects depending on the age and profitability of the firm. Thus, our paper contributes to the corporate governance and human and social capital literatures by describing the costs and benefits of specific types and combinations of CEO and board capital . Copyright © 2013 John Wiley & Sons, Ltd.

We develop new theory and hypotheses on how a firm's top management team learns from acquisition experience, why, in consequence, the composition of the team is crucial, and how this affects acquisition frequency and success. We focus on the diversity of the top team and argue that heterogeneous teams, as compared to homogenous ones, acquire less but benefit more from their acquisition experience and are more successful with their acquisitions because they avoid mis‐transferring their experiences. We tested our hypotheses on acquisition frequency and success using longitudinal data on more than 2,000 acquisitions by 25 Dutch companies over four decades (1966 to 2006) . Copyright © 2013 John Wiley & Sons, Ltd.

Whether holding resources in excess of what is needed to sustain routine operations (i.e., having slack) increases or decreases firm performance is a question of ongoing interest to management scholars. We contribute to existing theory by arguing that human resource slack generally decreases a firm's performance but that holding excess numbers of employees who possess important tacit knowledge that is specific to firms may benefit the firm. We find that the value of these excess resources increases as firms face competitive pressures and decreases when firms' operational choices facilitate the standardization of workflows. We obtain initial empirical evidence for our predictions by testing them on a novel dataset comprising six years of data for 4,070 manufacturing plants in Mexico . Copyright © 2013 John Wiley & Sons, Ltd.

In exploring the downsides of partnering with large firms, extant literature has typically focused on the external perspective and the alliance characteristics of small firms. We argue that jointly considering the internal dimension of firm capability together with the external perspective promises to yield a fuller understanding of the nature and consequences of a small firm's relationships with large partners. We analyze a longitudinal dataset on the alliance activities and growth of small, independent studios in the U.S. motion picture industry during 1990–2010. Our findings indicate that small firms that engage in higher levels of alliance activity with large partners, i.e., the major studios, realize lower growth benefits from their internal capability . Copyright © 2013 John Wiley & Sons, Ltd.

Outsourcing in many industries has advanced beyond simple component supply to encompass manufacturing of entire products, often by suppliers in emerging economies. Understanding the evolving role and capabilities of suppliers in global supply chains is thus a pressing strategic issue for suppliers and customers alike. We analyze a novel panel dataset of supply relationships in the mobile telecommunications industry to answer the following questions: What factors contribute to a supplier's ability to build technological and market capabilities? Does it matter to whom the firm supplies? Is involvement in product design important, or is manufacturing the key to learning? Do the same types of relationships that support technological innovation also facilitate successful introduction of own‐brand products, or does this require a different “locus” of learning? Copyright © 2013 John Wiley & Sons, Ltd.

Ideas from employees are a major source of value creation in firms, yet the merits of rewards for incentivizing the generation of ideas are highly contested. Using a computational model, we show that firms can improve performance by offering low‐powered rewards for the selection and implementation of employee ideas. Low‐powered incentives provide a sufficient stream of good ideas, but few exceptional ones. Higher‐powered incentives, in contrast, do not systematically translate into exceptional ideas either, but generate an excessive number of good ideas. Performance‐based rewards thus appear to be a blunt tool to harness the long tail of innovation. We develop propositions to guide empirical research and discuss their implications for strategy and organizational design . Copyright © 2013 John Wiley & Sons, Ltd.