Knowledge that Transforms

Research Summary How CEO cognitive complexity influences firm outcomes raises an intriguing theoretical tension. While more cognitively complex CEOs can potentially bolster firm performance through their more elaborate and multifaceted information processing, those tendencies can also hurt performance because they require more time and energy, delaying decision making. We posit and show a nuanced effect of CEO cognitive complexity on firm performance, contingent on industry conditions. CEO cognitive complexity benefits performance under more complex, stable, and munificent industry conditions, but hurts performance under simpler, more dynamic, and more constrained conditions. Post‐hoc analyses further show that these effects are similar when considering firm‐level factors reflecting munificent and dynamic internal conditions. Our study highlights the boundary conditions under which CEO cognitive complexity may be beneficial or detrimental for firms. Managerial Summary CEOs have different cognitive styles that can impact how they approach decision making. Whereas some exhibit greater cognitive complexity, that is, by engaging in broader and deeper information search and considering more differentiated and nuanced perspectives and alternatives, others engage in simpler and less comprehensive information processing when making decisions. While it seems intuitive to assume that CEOs' cognitive complexity should be beneficial for firms, collecting and processing a large amount of complex information can also complicate and delay decision‐making. Our results show that S&P 1500 CEOs who are more cognitively complex improve firm performance when their firms operate in more complex, stable, and resource‐rich environments but hurt firm performance when their firms operate in simpler, more dynamic, and resource‐constrained environments.

Research Summary We theorize the strategies that entrepreneurial actors employ to instill their endeavors with culturally resonant meanings and rally the support of key audiences (investors, analysts, or customers). In extant cultural entrepreneurship research, endeavors are assumed to achieve resonance and gain support when actors deploy the culture they share with their targeted audiences. But what if actors and audiences hold cultural repertoires that poorly overlap? We consider actors' efforts to “mobilize” and “enrich” the repertoires of both parties. Specifically, we introduce a typology identifying four strategies: anchoring, retooling, channeling, and seeding. Viewing culture as an engine of stability and change, we contend that each strategy addresses a distinct tension that actors must skillfully balance. We develop propositions to explain how and when actors manage these tensions. Managerial Summary Entrepreneurs must explain their endeavors in terms that audiences (investors, analysts, or customers) will understand and value. We know that entrepreneurs do so by telling stories and performing other symbolic actions, or by revising their stories and actions. However, prior insights assume a preexisting fit between what entrepreneurs and audiences value. How is this fit created? We identify four strategies by which entrepreneurs leverage a preexisting fit, and foster greater fit. We explain how entrepreneurs leverage a preexisting fit by presenting endeavors in familiar terms, and guiding audiences' interpretations. We explain how entrepreneurs foster greater fit by learning what audiences value, and educating audiences about their endeavors' value. Considering the inherent tension that each strategy entails, we explain how and when entrepreneurs use these strategies.

Research Summary Organizational learning studies demonstrate that specialization conditions multiple aspects of firm performance, including productivity and financial returns, through its effect on skill development and coordination. We know little, however, about how specialization may influence a firm's R&D performance, including both R&D productivity and innovation impact. We propose that specialization is a double‐edged sword for R&D performance that can be influenced via changing scientists' collaborators: specialization increases scientist and firm R&D productivity but decreases the impact of innovations, while changing collaborators in a team reverses how specialization relates to productivity and impact. We validate this argument using a long panel (1970–2017) from the biotechnology industry. Specialization and collaborator change may thus serve as mechanisms to manage the trade‐off between productivity and impact in R&D activities. Managerial Summary This article studies how managers in firms may leverage their R&D workers' specialization to optimize their R&D performance. Our study shows that specialization is a double‐edged sword for R&D performance: it facilitates R&D productivity at the detriment of R&D impact, while the trade‐off shifts when collaborators within a scientist's team change. Thus, specialization and collaborator change condition R&D performance, with two implications for strategy. First, a firm's managers can recruit specialists or generalists depending on whether they want to prioritize productivity or impact in R&D activities. Second, job rotation practices that create periodic collaborator change may disrupt R&D productivity, yet invigorate explorative activity and increase the likelihood of impactful innovation.

Research summary The role structure of a top management team (TMT)—the roles of TMT members and the relationships among those roles—has important implications for how TMT members work together as a group in directing an organization and shaping its strategy. Although the importance of TMT role structure has long been noted, it has received scant attention until recently when upper‐echelons scholars started examining its formation and influence. To stimulate a concerted effort in studying TMT role structure, we develop a framework elaborating its main themes, draw out key contributions from extant research (see the SMS Collection), and outline promising future directions. In particular, we highlight important dynamics of how formal and informal structures complement or compete with each other in the strategic leadership of an organization. Managerial summary How to structure a TMT is critical for the strategic leadership of an organization. The roles of senior executives and the relationships among these roles shape how executives work together as a group in directing an organization and shaping its strategy. In this article, we develop a framework for understanding how a role structure develops in the senior management team and how it affects strategy and performance of the firm. We synthesize and present key contributions from recent research and discuss important areas that deserve future research. Our article highlights important dynamics of how formal and informal role structures complement or compete with each other in the strategic leadership of an organization.

Research Summary Orchestrating complementors' value creation activities is critical to platform owners but is challenging. Emerging literature on platform governance suggests that platform access control can shape complementors' contributions to platforms. We extend this literature by using the coopetition framework from strategic management to examine the relationship between platform gatekeeping, a prominent policy for governing platform access, and knowledge sharing among complementors. Exploiting the iOS 7 jailbreak as an exogenous shock to Apple's gatekeeping policy and tracing iOS and Android app developers' knowledge sharing activity on an online forum, we find causal evidence that a lapse in gatekeeping reduces knowledge sharing among iOS app developers. Further, this effect is mitigated among developers with greater knowledge complexity but magnified among those with greater knowledge routineness. Managerial Summary Platform owners can use governance policies, such as gatekeeping, to control complementors' platform access and shape their value creation activities. This study examines how platform access control affects the interactions among complementors in the form of knowledge sharing. We find that iOS app developers share knowledge less frequently after a lapse in Apple's gatekeeping policy, suggesting that strict platform access control can facilitate complementors' interactions with one another. Further, the decrease in knowledge sharing is more pronounced among app developers with routine knowledge and less so among those with complex knowledge, indicating that complementors' characteristics also matter. This study highlights the value of understanding the impact of the design and deployment of platform governance policies on complementors' interactions and value creation activities more generally.

Research Summary While the established, coherence view of internal fit provides a compact representation of firms and strategy, it also discounts the strategic benefits of tensions and contradictions, and downplays strategy creation and change. Here, we develop a novel dialectical alternative to fit‐based models of strategy. Within our model, contradictions and tensions serve as a key engine for strategic renewal and transformation. If carefully harnessed through what we call “disciplined incoherence,” contradictions can help firms establish and change their strategies and business models, adapt to and shape their environment, and enhance and sustain their competitive advantage. We offer a dynamic, endogenous view of how configurations are generated, transformed, and maintained, and present a processual alternative to current strategy models that are grounded in equilibrium and coherence assumptions. Managerial Summary Prior thinking suggests that firm strategies should focus on achieving fit between the firm's different elements such as activities, organizational structures, and policies, and that tensions and inconsistencies should be eliminated or minimized. We argue that this view overlooks the important role of contradictions in fostering innovation and competitive advantage and driving strategic change and renewal. Conflicts and contradictions pose their own risks. Yet, given the potential for their firms to thrive on contradictions, managers and strategists should neither dismiss these challenges nor be paralyzed by them. Instead of stamping out tensions and contradictions, managers can apply a process of “disciplined incoherence” where they relinquish some control while drawing on organizational arrangements and their own creativity and skills to allow contradictions to develop.

Research Summary Whether diversified firms have advantages over their single‐business counterparts is the focus of much research in strategic management. Indeed, there is sparse evidence that corporate advantage exists, on average. We explore one potential driver of corporate advantage—that multi‐business firms have more flexibility than single‐business firms to cope with uncertainty, because they can internally redeploy resources across businesses. Using Compustat data, we show that uncertainty increases the relative advantage of multi‐business firms, a finding robust to controls for endogeneity. Consequently, the paper provides important insight and evidence around when corporate advantage might obtain. Moreover, we find that growth option value is accentuated in the presence of switching flexibility. Finally, multi‐business firms with redeployment experience and businesses with more inversely correlated returns benefit more from uncertainty. Managerial Summary Multi‐business firms have a flexibility advantage over single‐business firms as they can reallocate firm resources from one business unit to another depending on inducements. What is the impact of this flexibility on firm value? In this paper, we test whether such a flexibility advantage translates into greater economic returns in more volatile markets. We expect that resource redeployment creates value if it amplifies business‐specific positive shocks while alleviating business‐specific downturns. Consistent with this argument, we find empirical evidence that with increasing stock market volatility, multi‐business firms benefit significantly more in terms of firm value than their single‐business counterparts. In particular, in highly volatile stock markets, monthly adjusted returns are 2.3 times higher for multi‐business firms than for single‐business firms.

Research Summary This study investigates how dual‐purpose technical and relational capabilities influence two types of product innovation: component and full product. We consider product modification, manufacturing, supplier relationship, and customer relationship capabilities, analyzing their interactions and interrelationships through an inductive study set in the motorhome industry. We find patterns between capabilities and types of product innovations and then use a descriptive qualitative comparative analysis to refine and explore the nuances of these relationships, uncovering combinations of capabilities that enable and inhibit different types of product innovation. We thus provide empirical evidence for how dual‐purpose capabilities are deployed dynamically, in that skills can be used in both the normal course of business and to create something new. Managerial Summary Firms strive to innovate and create new full products and new components. Skills related to innovation include product modification, manufacturing, supplier management, and customer relations, all of which are also important for normal activities. While an adequate level of these capabilities can support the day‐to‐day business, a superior level is required to innovate. Our study of the motorhome industry indicates that supplier management is most important for component innovation and manufacturing expertise is most critical for full product innovation. However, we also find that a lack in some capabilities can be compensated for by superior capabilities in other areas, which could be important in situations of scarce resources and shows different possible paths toward product innovation.

Research Summary How does an acquisition initiated by a firm's alliance partner affect the value that the firm can create and capture from its alliance with that partner? We conjecture that the similarity between the businesses of the firm and its partner's acquisition target restricts the firm's ability to create and capture value from its alliance, whereas the complementarity between their businesses enhances the firm's gain from its alliance. We further expect relational embeddedness between the firm and its partner to mitigate the competitive tension associated with similarity while reinforcing synergies ascribed to complementarity. Our analysis of 361 firms and their 590 alliances with 91 partners that acquired 164 targets during 2000–2016 supports our predictions about business similarity and complementarity but refutes those concerning relational embeddedness. Managerial Summary When a firm's partner engages in an acquisition, this can impact the value of their alliance. We show that when the acquired target competes with the firm, the value of the alliance declines. In turn, when the target and firm's businesses are complementary, the alliance creates more value. We also find that when the firm and the partner had extensive experience working together, this reinforces the negative effect of business similarity with the target, probably because of perceived betrayal and knowledge leakage. Joint experience also reduces the value of complementarity, likely due to the difficulty of modifying collaborative practices. We encourage managers to scrutinize their partners' corporate initiatives, reduce commitment when the partner acquires a competing target, and leverage new complementarities following the partner's acquisitions.

Research Summary This article asks how distinct communication frames used by corporate social initiatives (CSIs) affect beneficiary engagement, specifically their reach vis‐à‐vis disadvantaged groups. Through a unique randomized field experiment in France, we assess the effectiveness of a series of communication frames on beneficiaries' decisions to enroll and use the social goods provided. Our results show that empathy‐ and simplicity‐oriented frames significantly increase program enrollment and utilization rates relative to other strategies, notably the widely used charity frame. We find that none of the tested communication frames raised take‐up by nonnative French beneficiaries, and only the empathy frame augmented the response of the very poor. Our work opens new research directions for strategic management studies on CSIs, communication frames, inclusion and social outcomes. Managerial Summary Many corporate social initiatives (CSIs) launch large information campaigns to raise awareness about the social goods they provide. Findings from a field experiment reveal that the communication frames that CSIs deploy matters. Communication that expresses empathy ( how the CSI understands and cares about its target beneficiaries) or presents simple information ( what the CSI does) is far more effective at raising take‐up than communication frames that emphasize what for ( why ) and the charitable identity ( who ) about the CSI. However, results also reveal that foreigners and the economically most disadvantaged beneficiaries responded the least to these communication frames. This suggests that more is needed to effectively raise take‐up by these subgroups. Our work speaks to strategy researchers and practitioners interested in CSIs, communication frames, and social inclusion.