Knowledge that Transforms

Research summary: Although previous studies have explored the value of government directors, less attention has been directed at the antecedents of government directors' engagement in value‐adding activities, such as managerial monitoring and resource provision. Drawing on social identity theory, we offer a novel model that specifies how a government director's dual identifications with the focal firm, and with the government individually and interactively affect his or her governance behavior. An investigation of government directors in China shows that their identification with the focal firm enhances monitoring and resource provision, while their identification with the government affects monitoring and resource provision differently. depending on the dominance of state ownership. The synergistic/substitutable effects between the two types of identification are contingent on state ownership and governance roles. Managerial summary: This study examines how a government director's dual identities—as a government official and as a board member of a focal firm affect his or her engagement in managerial monitoring and resource provision. Using data of Chinese listed firms, we find that government directors who strongly identify with the focal firm or with the government are highly motivated to fulfill their fiduciary obligations. However, the positive effects of their identification with the government differ between state‐owned enterprises ( SOEs ) and non‐ SOEs . The combination of the two identifications offers a further boost to monitoring in non‐ SOEs , and to resource provision in both SOEs and non‐ SOEs , but it acts as a disincentive to monitoring in SOEs .

This study builds on insights from both upper echelons and agency perspectives to examine the effects on corporate social responsibility ( CSR ) practices of CEO 's narcissism. Drawing on prior theory about CEO narcissism, we argue that CSR can be a response to leaders' personal needs for attention and image reinforcement and hypothesize that CEO narcissism has positive effects on levels and profile of organizational CSR ; additionally, CEO narcissism will reduce the effect of CSR on performance. We find support for our ideas with a sample of F ortune 500 CEOs , operationalizing CEO narcissism with a novel media‐based measurement technique that uses third‐party ratings of CEO characteristics with validated psychometric scales .

Research summary : This inductive study examines how firms make decisions about the timing of innovations, focusing on the mobile handset industry during the feature‐phone era. Through qualitative and quantitative data, we reveal how individual technology‐entry decisions are influenced by a portfolio‐level timing preference, and how this preference informs other aspects of innovation strategy, too. Early movers address greater, more uncertain revenue opportunities with broader, less selective innovation portfolios. Conversely, late movers target lower, more certain revenue opportunities with narrower, more selective portfolios. While timing per se seems unrelated to performance, a timing‐strategy alignment is. Future research on the equifinal configurations we propose—broad/nonselective for early movers and narrow/selective for late movers—could thus help resolve the debate about the link between timing and performance. Managerial summary : We study how firms make decisions about the entry of new product features, in this case mobile phone technologies. During development firms weigh the scale and likelihood of features' commercial success. Some firms display a preference for earlier entry, which offers temporary monopoly rewards if uncertainty resolves favorably, while others tend to opt for later entry, which offers greater certainty but lower rewards due to competitive preemption. The innovation portfolios of these companies thus pursue differently structured opportunities, bringing about different strategic approaches. Since early movers aim for big hits to compensate for a higher failure rate, they launch a broader set of features and exert little selective pressure on the development portfolio. By contrast, late movers' lower payoffs reduce their tolerance for failure, making them launch fewer features and emphasize selectiveness; i.e., they invest in learning from the resolution of uncertainty so as to choose features more discriminately. When we examine innovation performance, timing has no significant effect but matching timing with feature breadth does.

Many governments seek to impose gender equality on boards, but the consequences of doing so are not clear and could harm firms and economies. We shed light on this topic by conceptualizing the relationships as firm‐ and board‐specific and embedded within specific contexts. The theory is developed with reference to emerging markets, and tested on M alaysian firms. We find that female directors create value for some firms and decrease it for others. The impact varies across different performance indicators, firms' ownership, and boards' structure. The findings call for nuanced responses in relation to women's nominations from both governments and firms .

Research summary : We argue that the extent to which a firm faces takeover threats affects its knowledge structure. In particular, takeover threats may lead to managers' reluctance to adopt a strategy toward firm‐specific knowledge accumulation because implementing this strategy requires them to acquire specialized skills, which are at risk under takeover threats. Conversely, takeover protection leads to an increase in firm‐specific knowledge. Further, the relationship between takeover protection and firm‐specific knowledge is positively moderated by managerial ownership, which helps align managerial interests with those of shareholders. But the relationship is negatively moderated by managerial tenure, as long‐tenured managers have already committed to their firms. Using a differences‐in‐differences method with D elaware antitakeover rulings in the mid‐1990s as an exogenous shock, we found results supporting these arguments . Managerial summary : We examined how changes in the D elaware antitakeover rulings in mid‐1990s affected the knowledge structure of firms incorporated in D elaware. We reasoned that with a greater level of takeover protection, top managers of those firms incorporated in D elaware felt higher job security, thus providing them stronger incentives to make strategic decisions toward the development of firm‐specific knowledge and to make corresponding human capital investments in specialized skills. Empirically, firms incorporated in D elaware were found to have an increase in the level of firm‐specific knowledge in their knowledge structure after the mid‐1990s. Furthermore, our analysis suggests that the role of takeover protection on top manager incentives is particularly salient when the managers are awarded with more company shares and when the managers have shorter organizational tenure .

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 .

Organizations learn by reinforcing past actions. When firms experience actions with negative outcomes, they change in response. Any persistence with such actions is said to be suboptimal, attributable to factors such as threat rigidities. This paper theorizes that persistence may sometimes be rational, attributable to the characteristics of feedback. It uses a novel dataset of medical devices to show how organizations learn to search for future novel or incremental innovations based on failure. It finds that firms change innovation activities when novel innovations fail, but persist when incremental innovations fail. These findings support the hypothesis that inferences based on failure from incremental innovations tend to be more robust, leading firms to be more willing to persist when failure occurs .

Do CEO s nearing retirement attempt to boost short‐term firm performance or do they care more about what type of legacy they will leave behind? The two opposing predictions about the behavior of CEO s upon retirement suggest that retiring CEO s' decisions about certain long‐term investment items may be more complex than suggested in the literature. In search of an answer to this question, we examine the relationship between CEO retirement and the level of firm commitment to corporate social responsibility ( CSR ). The results show that CEO retirement has a negative effect on firm commitment to CSR . However, we found that the negative effect becomes weaker when CEO s retire at relatively older ages or are retained on the board of directors of their own firms. Our finding suggests that CEO s who face weaker pressure from the labor market for corporate directors may pay more attention to preserving their legacy.