Knowledge that Transforms

The behavioral agency model suggests family firms invest less in R&D than nonfamily firms to protect their socioemotional wealth. Studies support this contention but do not explain how family firms make R&D investments. We hypothesize that when performance exceeds aspirations, family firms manage socioemotional and economic objectives by making exploitative R&D investments that lead to more reliable and less risky sales levels. However, performance below aspirations leads to exploratory R&D investments that result in potentially higher but less reliable sales levels. Using a risk abatement model, our analyses of 847 firms over 10 years supports our hypotheses . Copyright © 2013 John Wiley & Sons, Ltd.

Prior research on corporate innovation highlights the importance of accessing external knowledge from other firms and universities. However, survey evidence indicates that product users are perhaps the most important source of external knowledge. We build on existing theory to identify the conditions under which user knowledge contributes to corporate innovation and when the benefits will be greatest. Using a panel dataset of medical device companies and their collaborative efforts with innovative physicians, we find evidence that inventive collaborations with users enhance corporate product innovation and that the benefits are greatest in new technology areas and in the generation of radical innovations . Copyright © 2013 John Wiley & Sons, Ltd.

This study extends current knowledge of upper echelon executive compensation beyond the CEO , specifically CFO compensation, based on whether they possess generalist or specialist skills. We find that “strategic” CFO s with an elite MBA (generalist) consistently command a compensation premium, while “accounting” CFO s (specialist) and CFO s with a non‐ MBA master's degree, even from an elite institution, do not. Further, scarce “strategic” CFO s are awarded both higher salaries and higher equity‐based compensation. Our findings support the view that unique complementarities between scarce CFO s and firms increase these executives' bargaining power leading to pay premium. Our results are robust to post‐hiring years, firm sizes, board characteristics, and CFO 's insider/outsider status. We contribute at the confluence of upper‐echelon compensation, executive human capital, resource‐based view, and assortative matching literatures . Copyright © 2014 John Wiley & Sons, Ltd.

We study competition as an impetus for firms to reposition—to abandon their current positioning strategy and adopt a new one. We predict that as a strong firm moves closer, competition erodes the profitability of situated firms and prompts them to reposition. We expect this effect is pronounced the greater difference in competitive strength. However, we expect that countervailing forces exist such that the viability of alternative positions and the opportunity cost of abandoning a current position mitigate this effect. Evidence from a natural experiment in C hina's satellite television industry supports our hypotheses. This research adds to the existing literature on repositioning, which emphasizes the phenomenon as opportunity‐driven, and to the competitive interaction literature, which typically does not distinguish between noncounterattack strategies . Copyright © 2013 John Wiley & Sons, Ltd.

Corporate venture capital ( CVC ) activity exposes firms to new technologies and markets. An important but as yet unexplored question is the relationship of the industry diversification profile of the portfolio of venture companies to corporate value creation. Insights from options and diversification perspectives support our hypothesis that diversification of a corporate investor's portfolio of venture companies is related to corporate wealth creation in a U ‐shaped relationship. We also propose that a corporate investor's financial constraints moderate the relationship between the diversification profile of its CVC portfolio and value creation. When we tested our hypotheses using a sample of CVC investments across multiple industries, we found support for them, and these findings may inform the CVC activities of corporate investors . Copyright © 2013 John Wiley & Sons, Ltd.

This study examines and extends the resource dependence logic of diversification for a better understanding of outward foreign direct investment ( OFDI ) activities by emerging market firms. We contend that the diversification logic is bounded by state ownership, an important but less considered component of interdependence. Our empirical results, based on panel data analysis of Chinese listed firms, suggest that the level of interdependence between Chinese and foreign firms in China in multiple forms, including symbiotic, competitive, and partner interdependencies, is positively associated with the level of the Chinese firms' OFDI activities. However, Chinese firms with higher levels of state ownership are less susceptible to the pressures imposed by foreign firms to invest abroad . Copyright © 2013 John Wiley & Sons, Ltd.

The way firms lengthen or shorten their product line with respect to rivals is regarded as one of the possible strategies firms can pursue to respond to competition. This article builds and tests hypotheses to study the effect of different levels of competitive intensity on product line length. The empirical analysis of data on 3,527 handset models introduced by 66 mobile phone vendors from 1994 to 2010 shows a consistent inverse U‐shaped relationship between competitive intensity and the firm's product line length. In this way, we pinpoint an interesting link between the product line extension literature and the competitive dynamics and competitive intensity perspectives . Copyright © 2013 John Wiley & Sons, Ltd

We examine transaction governance in the context of concurrent sourcing, where a manufacturer relies on sourcing from external suppliers and in‐house production simultaneously. Our focus is on (1) a buyer's use of particular safeguards or governance mechanisms vis‐à‐vis an external supplier and (2) how the effects of these mechanisms on various performance outcomes are influenced by the joint presence of an internal manufacturing branch. We conduct two studies in the apparel industry and show that performance outcomes are a joint function of (1) the individual governance mechanisms that are deployed in a particular relationship and (2) the larger sourcing context (concurrent or singular) . Copyright © 2013 John Wiley & Sons, Ltd.

In multidivisional firms, the corporate staff is central to the implementation of corporate‐level strategy, but empirical evidence on its function is limited. We examine one corporate staff through e‐mail analysis. We find sharp cross‐sectional differences in communication patterns: staff members have networks that are larger, more integrative, and richer in structural holes. However, much of this difference is attributed to sorting processes, rather than being caused by employment in the corporate staff per se . Further, once people receive the ‘corporate imprimatur,’ they retain aspects of it even when they move back to the line organization. These results imply that the literature's emphasis on structure as a means to achieve coordination undervalues a selection process in which individuals with broad networks match to coordination‐focused jobs in the corporate staff . Copyright © 2013 John Wiley & Sons, Ltd.

Institutional investors report that they prefer to invest in firms with greater board independence despite the fact that researchers have been unable to demonstrate a link between board independence and firm performance. We investigate whether differences among institutional investors affect these preferences. We find that trading strategies have some effect but that mutual funds—facing the strongest institutional pressures—have significantly stronger preferences for firms with greater board independence than do other types of institutional investors. This suggests that institutional investor preferences for independent boards are at least partially driven by institutional pressures rather than anticipated reductions in agency costs . Copyright © 2013 John Wiley & Sons, Ltd.