Knowledge that Transforms

Received research suggests that a firm subsidiary's acquisition by a new owner has countervailing effects on the subsidiary's innovation adoption behavior. On one hand, ownership change can make a subsidiary more receptive to innovation by reducing some inertial forces and introducing new resources to overcome others. Alternatively, the costs and demands of an acquisition can draw decision makers' attention away from important innovations in the technological environment. This event history study disentangles these countervailing influences by examining the influences of radio station ownership change on stations' adoptions of HD Radio ® technology. The study finds that a change in ownership control does have a positive direct influence on the likelihood of technology adoption, but that it also curtails tendency for subsidiaries to subsequently mimic others' technology adoptions.

Although considerable research has examined the role of trust in interorganizational relationship (IOR) contracting, scholars have devoted less attention to how trust and distrust jointly influence this process. We propose and test a model wherein trust, based on partner reliability, is constrained to the IOR exchange context where it develops and does not generalize to other contexts. Distrust, rooted in value incongruence, more readily generalizes across exchange contexts. Results support these predictions. In addition, our analysis shows that trust and distrust combine such that managers decrease their preferences for highly specific focal‐context contracts only when in‐context trust is high and distrust is low. We discuss how these findings may provide a more nuanced understanding of the relationship between trust‐based and contract‐based IOR governance.

Although an entrepreneur's initial strategy choices have a critical effect on a new venture's survival, growth, and long‐term performance, few studies have explored how pre‐founding experience influences these choices. Founders who over rely on their historical industry experiences may simply replicate the strategies of legacy firms. In turn, little is known about how founders can break these experience‐based constraints, if they exist. In an empirical analysis of 120 prospective entrants in air transportation from 1995–2005 we find that a founder's past experience strongly constrains choices, and the effect depends on the form of experience and type of strategy choice. Diversity of experience, at the level of the founder and founding team, lessens these constraints. Our results have valuable implications for research in strategy and entrepreneurship.

In light of increasing licensing, we challenge the common assumption that product development and technology licensing are substitutes. We develop a resource‐based framework, which distinguishes a firm's technological resource base and technology exploitation processes. We further combine survey, patent, and financial data of 228 medium‐sized and large industrial companies to examine the interactions of firms' product development processes and technology licensing processes in order to explain heterogeneity in new product revenues, licensing performance, and firm performance. The results underscore that product development, which indicates innovative capacity, and technology licensing, which indicates desorptive capacity, are complements rather than substitutes in integrated knowledge exploitation in medium‐sized and large firms. This complementarity is particularly pronounced in firms with an emphasis on cross‐licensing and with a strong patent portfolio.

Customers develop switching costs when they invest time and effort to develop capabilities required to optimally use a given product. Such capabilities are likely to be firm specific and cannot be transferred perfectly to competitors' product offerings. Customers who face switching costs are likely to remain with the same firm and consume complementary products that meet their needs. Thus, firms can achieve competitive advantage by exploiting customers' switching costs. In this paper, we hypothesize that the extent to which firms can benefit from customers' switching costs is contingent upon the firms' internal cross‐selling capabilities. We use online banking data to test our hypotheses and find that customers' switching costs contribute to banks' profitability only in the presence of high levels of internal cross‐selling capabilities.

This article explores how knowledge embodied in executives is tied to the organizational context in which it develops. Drawing on the knowledge‐based view of the firm and human capital theory, we predict that executives will move between units with similar ‘structural composition’—a characteristic representing unit origin (as acquired or internally developed) and how the unit was reconfigured. We further argue that executives will be conduits of organizational change. We predict that units receiving more transferred executives, executives with recombination experience, and executives from core internal units will have a greater likelihood of being recombined, while units receiving executives from previously acquired units will tend to remain unchanged. The study examines a 20‐year panel of 48 multidivisional firms from the U.S. medical sector.

Localization of knowledge flows has been extensively examined in the literature on innovation. However, almost all previous research has focused on technological knowledge. This study examines why knowledge of demand can also be tacit and localized. We provide a detailed empirical study of the global pharmaceutical industry and find not only that demand is as important as technological knowledge in determining the pattern of innovation in this industry but also that innovation is a locally determined phenomenon. These findings contribute to research regarding determinants of innovations and provide an explanation for geographic patterns of innovation that is distinct from technological knowledge spillovers.

Recent research suggests that managers often make strategic decisions in novel situations by utilizing past experiences to reason by analogy. However, there is substantial evidence that decision makers often fail to identify and apply knowledge about one situation to a similarly structured situation. Two experimental studies investigated the mechanisms impacting knowledge transfer from one managerial situation (the source) to an analogous situation. The results show that exposure to variation in the source situation improves transfer performance. Variation decreases performance in the short term but improves learning and increases analogical transfer. Higher performance on and systematic search of the source situation also increase transfer performance. These results yield important implications for enhancing analogical transfer in strategic decision making and for future research on reasoning by analogy.

In contrast to broad generalizations about the short‐termism of managers, this paper explains changes in the temporal orientation of specific firms over time based on performance relative to aspirations and top management team incentives. We gain empirical traction on temporal orientation by measuring the durability of acquired property, plant, and equipment (asset durability) from reported data on depreciation expense. Consistent with predictions, we find that performance relative to aspirations positively influences asset durability. Surprisingly, we find no evidence that stock‐based compensation produces the same effect. Instead, we find stock‐based compensation lowers asset durability.