Research summary : Entrepreneurial start‐ups suffer high rates of business failure. Previous research on entrepreneurial failure has focused on two kinds of explanations: statistical and psychological. Statistical explanations attribute excess entry to random errors made by boundedly rational entrepreneurs attempting to estimate business opportunities in risky markets. Psychological explanations focus on entrepreneurial overconfidence and competition neglect. These explanations emerged independently and have not been tested or compared in the same study. In this experimental study, we distinguish entrepreneurial markets from other types of markets and test statistical and psychological hypotheses for all market types. We find that excess entry is significantly greater in small, risky markets than in other market types, and that confidence levels account for excess entry, over and above the effects of unbiased statistical errors . Managerial summary : How can we explain the fact that most entrepreneurial ventures fail within five years? Market risk, inadequate capital and inexperienced management certainly play a role. However, from an economic point of view, it seems odd that inexperienced, under‐funded people continue to engage in risky behavior that is widely known to fail. We conducted experiments that tested two explanations of entrepreneurial failure. The first explanation – the statistical hypothesis – argues that entrepreneurship involves high uncertainty, so random errors are inevitable and can produce excess entry (or under‐entry). The second explanation – the psychological hypothesis – says that entrepreneurs' mistakes are not random but skewed heavily toward excess entry; hence, their decisions are distorted by psychological factors such as overconfidence. Our experiments found support for both of these explanations. Random errors under uncertainty explained 60% of the excess entry in our experiments. However, the overconfidence hypothesis correctly predicted that excess entry exceeds under‐entry, and our psychological measures of overconfidence found support in the data. We also found that the markets that most often attract entrepreneurial investment – emerging markets with high uncertainty – were the markets most conducive to excess entry, due to a combination of psychological and market factors. Hence, we conclude that potential entrepreneurs should pay less attention to their own abilities and aspirations, and more attention to the external realities of competition in the marketplace . Copyright © 2015 John Wiley & Sons, Ltd.

Research summary: Many boards view their chairs as valuable resources. We predict that whether a board adopts such a view depends on the board chair's human and social capital. Data from S&P 500 firms suggest that while a board chair's human capital increases the probability that the board views him or her as a resource, social capital has no overall effect. In a post‐hoc investigation, however, we find the board chair's independence to be an important boundary condition for the effect of social capital. With this exploratory research, we aim to spur research devoted specifically to board chairs. Such research will become increasingly important over time as firms continue to separate their CEO and board chair positions . Managerial summary: The purpose of this research was to determine the factors that lead a board of directors to view its chair as a valuable resource. We expected that board chairs with high human and social capital would be more likely to be viewed as a resource by their colleagues. Surprisingly, only human capital exhibited such an effect overall. Social capital increases the likelihood a chair is viewed as a resource when the chair is independent, but actually decreases the likelihood a chair is viewed as a resource when the chair is either the current or former CEO . These results suggest that boards generally value human capital in their chairs, but view social capital through a somewhat more complex lens. We explore the possible implications of these findings in the article . Copyright © 2015 John Wiley & Sons, Ltd.

Research summary : We address conflicting claims and mixed empirical findings about adaptation as a response to increased environmental dynamism. We disentangle distinct dimensions of environmental dynamism—the direction, magnitude, and frequency of change—and identify how selection shapes adaptive responses to these dimensions. Our results show how frequent directional changes undermine the value of exploration and decisively shift performance advantages to inert organizations that restrict exploration. In contrast, increased environmental variance rewards exploration. Our results also show that, in dynamic environments, the best‐performing organizations are generally more inert than less successful organizations. Managerial summary : Our research helps managers to understand under what business conditions investments into exploration and strategic flexibility are more likely to pay off. Dynamic business environments characterized by persistent trends and by large, infrequently occurring structural shocks reward strategic pursuit of temporary advantage. Thus, exploration and strategic flexibility are preferred strategies. In contrast, the challenge in frequently changing environments with fleeting opportunities is to identify and to focus on strategic actions whose payoffs on average are high, independent of environmental volatility. Low levels of exploration and long‐term strategic focus are preferred strategies in these circumstances. Copyright © 2015 John Wiley & Sons, Ltd.

Research summary: This article reviews structural change in the automotive sector from 1997 to 2007. We find that, following internal framing contests, O riginal E quipment M anufacturers ( OEMs) led efforts to change their sector's architecture, starting from both strong and weak competitive positions and working with suppliers to advocate a new vision based on modularity and outsourcing. As the risks and costs of this vision became apparent, OEMs were able to reverse course and reaffirm their hierarchical control on the sector, taking advantage of structural features that weren't salient ex ante. We consider why certain OEMs initiated this status‐quo challenging change, and identify how sector structure mediated their (and suppliers') efforts to implement it. We document the complex change process, driven by agency, structure, and heterogeneity in firms' understanding of their sector's architecture . Managerial summary: We study the “industry architecture” (i.e., division of labor and profit) of the automotive sector. During the late 1990s, O riginal E quipment M anufacturers ( OEMs) embraced a new vision, based on “ M odularity + O utsourcing,” inspired by an analogy with Personal Computers (PCs). This seems puzzling since such a change was hard to implement and could have led to OEMs relinquishing strategic control of the sector. The misstep was caused by internal framing contests and the agendas and influence of suppliers, consultants, and academics. We also consider why OEMs were able to partially reverse these changes, and document the role of structural features that let them control their sector and retain value: managing the customer experience, acting as guarantors of quality, and preserving hierarchical supply chains in which they functioned as system integrators . Copyright © 2015 John Wiley & Sons, Ltd.

Research summary: The formation of interorganizational ties is a consequential phenomenon examined in strategic management research. Beckman, Haunschild, and Phillips (2004) is one of the first studies to comprehensively consider interorganizational network change by exploring factors that affect both alliance and board interlock formation. They find that firm‐specific uncertainty relates to broadening actions, whereas market‐level uncertainty causes firms to reinforce current structures. Our replication considers whether these relationships operate similarly in a differing temporal context. Building from the framework of the original study, we suggest our findings offer intriguing new empirical evidence highlighting the importance of time as a boundary condition in understanding embedded firm actions . Managerial summary: The development of interorganizational relationships, such as alliances and ties between boards of directors, has an important impact on innovation, strategic actions, and firm performance. This study examines whether the dynamics of interorganizational relationship formation remain consistent over time. We replicate earlier work by Beckman and colleagues (2004), but with an expanded data set covering more than 20 years. Over this broader time horizon, we find a shift in behavior, with companies facing firm‐specific uncertainty seeking to reinforce their current relationships and companies facing industry‐wide uncertainty seeking to diversify their risk by expanding their network. Our results demonstrate the importance of replication studies in research and contribute to a more nuanced understanding of the complexity surrounding interorganizational relationships . Copyright © 2016 John Wiley & Sons, Ltd.