Showing papers in "Organization Science in 2008"

Framing Contests: Strategy Making Under Uncertainty

Abstract: I develop a model of framing contests to elucidate how cognitive frames influence organizational strategy making. By using ethnographic techniques to study the day-to-day practices of strategy making in one firm, I examine the ways actors attempted to transform their own cognitive frames of a situation into predominant frames through a series of interactions. Frames are the means by which managers make sense of ambiguous information from their environments. Actors each had cognitive frames about the direction the market was taking and about what kinds of solutions would be appropriate. Where frames about a strategic choice were not congruent, actors engaged in highly political framing practices to make their frames resonate and to mobilize action in their favor. Those actors who most skillfully engaged in these practices shaped the frame that prevailed in the organization. This framing perspective suggests that frames are not only instrumental tools for the ex post justification of actions taken through p...

Academic Entrepreneurs: Organizational Change at the Individual Level

Abstract: This study explores the process of organizational change by examining localized social learning in organizational subunits. Specifically, we examine participation in university technology transfer, a new organizational initiative, by tracking 1,780 faculty members, examining their backgrounds and work environments, and following their engagement with academic entrepreneurship. We find that individual adoption of the new initiative may be either substantive or symbolic. Our results suggest that individual attributes, while important, are conditioned by the local work environment. In terms of personal attributes, individuals are more likely to participate if they trained at institutions that had accepted the new initiative and been active in technology transfer. In addition, we find that the longer the time that had elapsed since graduate training, the less likely the individual was to actively embrace the new commercialization norm. Considering the localized social environment, we find that when the chair of the department is active in technology transfer, other members of the department are also likely to participate, if only for symbolic reasons. We also find that technology transfer behavior is calibrated by the experience of those in the relevant cohort. If an individual can observe others with whom they identify engaging in the new initiative, then they are more likely to follow with substantive compliance. Finally, when individuals face dissonance, a situation where their individual training norms are not congruent with the localized social norms in their work environment, they will conform to the local norms, rather than adhering to the norms from their prior experience.

Do Cultural Differences Matter in Mergers and Acquisitions? A Tentative Model and Examination

Abstract: Asubstantive body of theory and research on the role of culture in mergers and acquisitions (M&A) suggests that cultural differences can create major obstacles to achieving integration benefits. However, the opposite view---that differences in culture between merging firms can be a source of value creation and learning---has also been advanced and empirically supported. In an attempt to reconcile these conflicting perspectives and findings, we present a model that synthesizes our current understanding of the role of culture in M&A, and we develop a set of hypotheses regarding mechanisms through which cultural differences affect M&A performance. The results of a meta-analysis of 46 studies, with a combined sample size of 10,710 M&A, suggest that cultural differences affect sociocultural integration, synergy realization, and shareholder value in different, and sometimes opposing, ways. Moderator analyses reveal that the effects of cultural differences vary depending on the degree of relatedness and the dimensions of cultural differences separating the merging firms, as well as on research design and sample characteristics. The implications for M&A research and practice are discussed.

Interorganizational Trust, Governance Choice, and Exchange Performance

Abstract: This paper looks at when and how preexisting interorganizational trust influences the choice of governance and in turn the performance of exchange relationships. We theorize that preexisting interorganizational trust complements the choice of governance mode (make, ally, or buy) and also promotes substitution effects on governance mode choice while impacting exchange performance. We evaluate hypotheses using a novel three-stage switching regression model and a sample of 222 component-sourcing arrangements of two assemblers in the automobile industry. Analysis of our data broadly supports our hypotheses. High levels of preexisting interorganizational trust increased the probability that a less formal, and thus less costly, mode of governance was chosen over a more formal one. This finding suggests a substitution effect of interorganizational trust on governance mode choice that in turn shapes exchange performance. We also found a complementary effect of trust on performance: Regardless of the governance mode chosen for an exchange, trust enhanced exchange performance. Additional evidence of the complementary effect of trust on performance was that trust somewhat reduced interorganizational conflict.

An Organizational Approach to Comparative Corporate Governance: Costs, Contingencies, and Complementarities

Abstract: This paper develops an organizational approach to corporate governance and assesses the effectiveness of corporate governance and implications for policy. Most corporate governance research focuses on a universal link between corporate governance practices (e.g., board structure, shareholder activism) and performance outcomes, but neglects how interdependencies between the organization and diverse environments lead to variations in the effectiveness of different governance practices. In contrast to such closed systems approaches, we propose a framework based on open systems approaches to organizations, which examines these organizational interdependencies in terms of the costs, contingencies, and complementarities of different corporate governance practices. These three sets of organizational factors are useful in analyzing the effectiveness of corporate governance in diverse organizational environments. We also explore the impact of costs, contingencies, and complementarities on the effectiveness of different governance aspects through the use of stylized cases and discuss the implications for different approaches to policy such as soft law or hard law.

A Core/Periphery Perspective on Individual Creative Performance: Social Networks and Cinematic Achievements in the Hollywood Film Industry

Abstract: The paper advances a relational perspective to studying creativity at the individual level. Building on social network theory and techniques, we examine the role of social networks in shaping individuals’ ability to generate a creative outcome. More specifically, we argue that individuals who occupy an intermediate position between the core and the periphery of their social system are in a favorable position to achieve creative results. In addition, the benefits accrued through an individual’s intermediate core/periphery position can also be observed at the team level, when the same individual works in a team whose members come from both ends of the core/periphery continuum. We situate the analysis and test our hypotheses within the context of the Hollywood motion picture industry, which we trace over the period 1992–2003. The theoretical implications of the results are discussed.

Too Little or Too Much? Untangling the Relationship Between Corporate Philanthropy and Firm Financial Performance

Abstract: What is the relationship between corporate philanthropy and corporate financial performance? Some scholars argue that corporate philanthropy facilitates stakeholder cooperation and helps secure access to critical resources controlled by those stakeholders, suggesting that corporate philanthropy should be positively associated with corporate financial performance. In contrast, other scholars take a negative stance, suggesting that corporate philanthropy diverts valuable corporate resources and tends to inhibit corporate financial performance. Existing empirical studies have not found conclusive evidence on the corporate philanthropy--financial performance relationship. Integrating and extending existing perspectives, this study develops the argument that the relationship between corporate philanthropy and financial performance is best captured by an inverse U-shape. In addition, it posits that the inverse U-shaped relationship varies with the level of dynamism in firms' operational environment. Using a panel data set of 817 firms listed in the Taft Corporate Giving Directory from 1987 to 1999, we find strong support for these arguments.

Founding the Future: Path Dependence in the Evolution of Top Management Teams from Founding to IPO

Abstract: We contrast life-cycle and path-dependent views of entrepreneurial firms by examining the evolution of top management teams. We show how initial conditions constrain subsequent outcomes by demonstrating that the founding team's prior functional experiences and initial organizational functional structures predict subsequent top manager backgrounds and later functional structures. We find that narrowly experienced teams have trouble adding functional expertise not already embodied in the team. We also find that firms beginning with a limited range of functional positions are less likely to develop complete functional structures. Importantly, we do not find functional structure and functional experience to be interchangeable. We find that firms beginning with more complete functional structures are likely to go public faster, and firms beginning with broadly experienced team members obtain venture capital more quickly regardless of the experience and structural composition of the top management team in place at the time of these outcomes. Further, broadly experienced founding teams that build an early team with a full complement of functional positions achieve important milestones faster than firms that start with neither experience nor structure. This suggests that creating positions as “placeholders” in new ventures, where positions are created and filled with the intent of bringing individuals with more relevant experience onboard later, is not obviously a path by which to succeed. By examining the origins of top management team experience and functional structures, we illustrate the lasting imprint of founders on top management team composition and firm outcomes.

Knowledge Flows Within Multinational Corporations: Explaining Subsidiary Isolation and Its Performance Implications

Abstract: Applying a new theoretical and empirical approach to intrafirm knowledge transfers, this paper provides some initial insight to the little-researched phenomenon of why some subsidiaries are isolated from knowledge-transfer activities within the multinational corporation (MNC). Knowledge transfer is framed as a problemistic search process initiated by the recipient unit. We show that knowledge flows from units that are perceived to be highly capable to units that perceive themselves to be highly capable. Knowledge flows are also associated with existing levels of communication and reciprocity. Taken together, these findings suggest that knowledge transfers in MNCs typically occur between highly capable members of an “in crowd,” and the isolated minority rarely, if ever, engages in knowledge-sharing activities. Finally, we show that the isolated minority underperforms other subsidiaries, suggesting the possibility of a “liability of internal isolation.”

On the Problem of Participation in Strategy: A Critical Discursive Perspective

Abstract: We still know little of why strategy processes often involve participation problems. In this paper, we argue that this crucial issue is linked to fundamental assumptions about the nature of strategy work. Hence, we need to examine how strategy processes are typically made sense of and what roles are assigned to specific organizational members. For this purpose, we adopt a critical discursive perspective that allows us to discover how specific conceptions of strategy work are reproduced and legitimized in organizational strategizing. Our empirical analysis is based on an extensive research project on strategy work in 12 organizations. As a result of our analysis, we identify three central discourses that seem to be systematically associated with nonparticipatory approaches to strategy work: “mystification,” “disciplining,” and “technologization.” However, we also distinguish three strategy discourses that promote participation: “self-actualization,” “dialogization,” and “concretization.” Our analysis shows that strategy as practice involves alternative and even competing discourses that have fundamentally different kinds of implications for participation in strategy work. We argue from a critical perspective that it is important to be aware of the inherent problems associated with dominant discourses as well as to actively advance the use of alternative ones.

Managing the Impact of Employee Turnover on Performance: The Role of Process Conformance

Abstract: We examine the impact of employee turnover on operating performance in settings that require high levels of knowledge exploitation. Using 48 months of turnover data from U.S. stores of a major retail chain, we find that, on average, employee turnover is associated with decreased performance, as measured by profit margin and customer service. The effect of turnover on performance, however, is mitigated by the nature of management at the store level. The particular aspect of management on which we focus is process conformance---the extent to which managers aim to reduce variation in store operations in accordance with a set of prescribed standards for task performance. At high-process-conformance stores, managers use discipline in implementing standardized policies and procedures, whereas at low-process-conformance stores, managers tolerate deviations from these standards. We find that increasing turnover does not have a negative effect on store performance at high-process-conformance stores; at low-process-conformance stores, the negative effect of turnover is pronounced. Our results suggest that, in settings where performance depends on the repetition of known tasks, managers can reduce turnover's effect by imposing process discipline through standard operating procedures.

Perspective—Making Doubt Generative: Rethinking the Role of Doubt in the Research Process

Abstract: In this paper, we want to shift the attention of our scholarly community to the living condition of doubt and its underappreciated significance for the theorizing process. Drawing on Peirce's notion of abduction, we articulate the relationship between doubt and belief in the everyday imaginative work central to theorizing, and establish the role played by doubt as abduction's engine in these efforts. We propose three strategic principles for engaging and using doubt in the research process. In concluding, we explore our field's overemphasis on validation to the exclusion of discovery processes and to the detriment of excellence in theorizing. We call for a broadening of our notions of “methodology” to incorporate discovery processes and to begin their explication.

Ownership Structure and the Relationship Between Financial Slack and R&D Investments: Evidence from Korean Firms

Abstract: We use agency theory to examine the influence of ownership structure on the relationship between financial slack and R&D investments, highlighting how that relationship might differ depending on the identity of the owners, and their potentially different interests. In doing so, we extend the scope of agency theory by examining the principal-principal conflicts of interests that may exist among different types of owners. Using a sample of Korean manufacturing firms in R&D-intensive industries between 1998 and 2003, we find that financial slack has an inverted U-shaped relationship with R&D investments. Furthermore, that relationship varies depending on the presence of different types of owners. Family ownership positively moderates the relationship between financial slack and R&D investments, whereas domestic institutional investors and foreign investors negatively moderate that relationship. Our results show that distinguishing among different types of owners is instrumental in enhancing our understanding of the nature of the relationship between financial slack and R&D investments.

Perspective---Professional Work: The Emergence of Collaborative Community

Abstract: This paper traces the main lines of evolution of the organization of professional work. The argument is illustrated with material on the case of doctors and hospitals. While market and hierarchy principles have become progressively more salient in professional work, we argue that, in parallel, the community principle has been growing more influential, too. We further argue that professional community is mutating from a Gemeinschaft, craft guild form, via Gesellschaft forms, toward a new, collaborative form. This evolution, however, is a difficult one, and the outcome is uncertain. We identify some implications for future research.

New Directions in Corporate Governance Research

Abstract: In this essay, we seek to identify the contributions that strategy and organizational researchers have made, and continue to make, in enhancing our understanding of a wide variety of important corporate governance questions. We begin by discussing how these research contributions stem from a willingness to draw from and contribute to different streams of intellectual thought, and we provide an orienting framework to situate this work.

Alternative Origins to Interorganizational Trust: An Interdependence Perspective on the Shadow of the Past and the Shadow of the Future

Abstract: Despite the widespread acceptance of trust as an informal governance institution, our understanding of its origins is nascent. Our review of the literature identified two distinct explanations: Trust emerges from either a shadow of the past (i.e., prior history) or a shadow of the future (i.e., expectations of continuity). In this paper we develop and empirically examine a third perspective: The potential interdependence of these two explanations. Our results strongly endorse this third perspective. We find that prior history does not directly affect trust; instead, the observed positive relationship between the two is mediated by expectations of continuity. Consistent with this result, analyses further show that a longer prior history makes the effect of continuity on trust much stronger than a shorter prior history. We interpret these findings as suggesting: (1) the criticality and centrality of a shadow of the future (i.e., a forward-looking calculus) in generating trust in interorganizational exchanges and (2) that a shadow of the past plays a facilitating, albeit indirect, role in trust building. Our conceptual model also extends the conventional use of the transaction cost logic to show how reciprocal investments in asset specificity and uncertainty drive expectations of continuity, and consequently, interorganizational trust. Our results also show, unexpectedly, that prior history has a direct negative effect on trust after specifying the mediating path of continuity. Our moderation analysis indicates when this effect occurs: When weak expectations of continuity exist, trust is lower for exchanges characterized by a longer prior history, suggesting a potential darkside of overembedded ties.

Alliance Portfolio Internationalization and Firm Performance

Abstract: Alliance research has traditionally focused on structural and relational aspects of the networks in which firms are situated, paying less attention to the inherent characteristics of their partners. This study introduces the notion of alliance portfolio internationalization (API), which refers to the degree of foreignness of partners in a firm's collection of immediate alliance relationships. We develop a framework to explain how API impacts firm performance. We suggest that as a firm's API increases, financial performance is expected to initially decline, then improve, and finally decline again. This sigmoid relationship between API and financial performance is ascribed to evolving learning effects that shape the net benefits of API. When the firm's alliance portfolio, on average, consists of proximate foreign partners, the firm may fail to recognize latent national differences, but at moderate levels of API, its absorptive capacity and specialized collaborative routines support the exchange of valuable network resources. Nevertheless, high levels of API undermine firm performance because of the failure of collaborative routines and mounting liabilities of cross-national differences. We test the framework using data on the alliance portfolios of U.S.-based software firms from 1990 to 2001. The results provide support for the sigmoid relationship as well as for our predictions that firms, which have gained experience with foreign partners and maintained wholly owned subsidiaries in their partners' countries of origin, can overcome some of the liabilities of API and better leverage its benefits.

Drivers and Performance Outcomes of Trust in International Strategic Alliances: The Role of Organizational Complexity

Abstract: Trust between partners has become a key construct in interfirm relationship management. However, elucidating the precise nature of the trust-performance link in international strategic alliances remains an important theoretical and empirical challenge for management scholars. Discordant findings evident in existing alliance research raise concerns that interpartner trust does not always enhance venture performance. To investigate this issue, we build and test a theoretical framework that integrates different perspectives of alliance functioning by focusing on the social and bureaucratic forces critical to cooperative processes. The model (1) identifies organizational complexity mechanisms underlying the development of trust in international strategic alliances, (2) points to alliance size as an important factor that conditions the trust-performance relationship, (3) incorporates a new, third-order conceptualization of interpartner trust in alliances, and (4) suggests a theory-based multidimensional assessment of alliance performance. Based on data collected through personal interviews in 177 international strategic alliances, the results suggest that, while interpartner trust is positively associated with alliance performance, this relationship becomes stronger when alliance size declines. We find that both distributive fairness and partner similarity are central to the achievement of a trusting alliance partnership. Managerial insights into developing successful trust-based international alliance exchanges are offered, and fruitful avenues of research are discussed.

Determinants of Firms' Backward-and Forward-Looking R&D Search Behavior

Abstract: This study develops and operationalizes a behavioral forward-looking search model by incorporating prospect theory, organizational risk literature, and the logic of the behavioral theory of the firm. With recognition of the bounded rationality of decision makers and the goal-directed, rule-based nature of organizations, this model suggests that a comparison between firms' performance expectation and performance target translates the cognitive representation of the firms' future into their subsequent actions. By examining the research and development (R&D) expenditures of U.S. manufacturing firms from 1980 to 2001, this study explores how performance, aspirations, expectations, and slack affect decision making about firms' R&D search investments. The findings show that both performance feedback and performance prospect are important determinants of firms' search behavior after controlling for firm, industry, and time effects. In addition, backward-and forward-looking determinants have interactive effects on search behavior. Firms' problem-driven search activity further increases when firms feel unlikely to achieve the performance target for another year. In contrast, search intensity is reduced when firms expect to improve their performance from an underperforming situation to an outperforming situation. The findings suggest that future research on performance feedback and experiential learning should also consider the effect of forward-looking prospects on firm behavior.

Moving Closer to the Action: Examining Compensation Design Effects on Firm Risk

Abstract: We examine the influence of CEO equity-based compensation on strategic risk taking by the firm. Building off the Behavioral Agency Model, Agency Theory, and Prospect Theory, we develop arguments about when equity-based compensation elements will increase or decrease executive risk propensity and, in turn, strategic risk taking. Incorporating a behavioral perspective into our models of incentive alignment provides us with new and potentially more accurate predictions about how individual elements of CEO pay will influence risk selection, as well as how equity compensation interacts with cash compensation and with other factors to influence risk preferences. In general, this study provides evidence that CEO equity-based compensation significantly influences strategic risk, but that this influence is more nuanced and complex than conventional treatments of executive compensation assume. In particular, we find that different forms of equity-based pay exhibit dissimilar influences on strategic risk and that their influence changes as their value and vesting status change. Second, we find that cash-based forms of pay moderate the incentive properties of equity-based pay, indicating that cash-based pay may affect how executives perceive risks associated with equity pay. Finally, we find that stock price volatility and board actions each also moderate the incentive effects of equity-based pay. In sum, our results argue for increased recognition of a behavioral perspective on executive compensation and greater precision in how we measure and model the incentive alignment properties of CEO compensation.

Performance Implications of Firm Resource Interactions in the Acquisition of R&D-Intensive Firms

Abstract: We explore the role of resource interactions in explaining firm performance in the context of acquisitions. Although we confirm that acquisitions do not lead to higher performance on average, we do find that complementary resource profiles in target and acquiring firms are associated with abnormal returns. Specifically, we find that acquiring firm marketing resources and target firm technology resources positively reinforce (complement) each other; meanwhile, acquiring and target firm technology resources negatively reinforce (substitute) one another. Implications for management theory and practice are identified.

Antecedents and Outcomes of Retaliation Against Whistleblowers: Gender Differences and Power Relationships

Abstract: Whistle-blowing represents an influence attempt in which organization member(s) try to persuade other members to cease wrongdoing; sometimes they fail; sometimes they succeed; sometimes they suffer reprisal. We investigated whether women experienced more retaliation than men, testing propositions derived from theories about gender differences and power variables, and using data from military and civilian employees of a large U.S. base. Being female was correlated with perceived retaliation. Results of structural equation modeling showed significant gender differences in antecedents and outcomes of retaliation. For men, lack of support from others and low whistleblower's power were significantly related to retaliation; for women, lack of support from others, serious wrongdoing, and the wrongdoing's direct effect on the whistleblower were significantly associated with retaliation. Retaliation in turn was negatively related to relationships with the supervisor for both men and women, and positively related to women's---but not men's---decisions to blow the whistle again, using external channels. We finish by discussing implications for theory and practice.

Investigating the Microstructure of Network Evolution: Alliance Formation in the Mobile Communications Industry

Abstract: Theories of network evolution frequently focus on “network endogeneity,” which stresses predictable, path-dependent evolution rooted in previous network structure. However, theories of technological evolution and innovation remind us that networks may undergo significant change as technological discontinuities exert pressures on existing relationships and firms engage in exploratory search. How can we incorporate sources of change into our theories of network evolution instead of focusing so squarely on sources of inertia? By using recent advances in graph theory, we develop a more flexible theory of network evolution by examining two patterns of partner selection that have the potential to change networks: “shortcut” formation between relatively unconnected partner clusters, and the entry of new firms into the “main component” of incumbent partners. Our findings suggest an important contingency for the endogeneity perspective: structural homophily predicts shortcut formation but not alliance formation within clusters. Furthermore, we demonstrate that the pattern of alliance formation between incumbents and new entrants to the alliance network is driven by a combination of endogenous and exogenous mechanisms. New entrants attach to more prominent incumbents, but they are more likely to attach with an alliance deal that comprises multiple partners. We demonstrate these findings in an industry where systemic technology encourages cooperation and where network entry is prevalent—the mobile communications industry from 1993–2002.

Dumb and Dumber: The Impact of Downsizing on Firm Performance as Moderated by Industry Conditions

Abstract: Workforce downsizing through employee layoffs has become commonplace in American businesses over the last 20 years. While these initiatives are typically undertaken in the quest for improved firm performance and competitiveness, empirical research to date has been equivocal in supporting the efficacy of these initiatives. In addition, extant research has not thoroughly examined factors or conditions that may influence or moderate the performance impact of workforce downsizing. In this paper, we address the question: Do industry conditions moderate the impact of workforce downsizing on firm performance? We examine this question using matched primary and secondary data on a sample of U.S. manufacturing firms. After controlling for a set of industry and firm-level variables, including firms' prior performance levels, our results indicate that downsizing is associated with decreases in subsequent firm profitability and that these negative effects are more pronounced in industries characterized by research and development (R&D) intensity, growth, and low capital intensity.

Directors' Multiple Identities, Identification, and Board Monitoring and Resource Provision

Abstract: Scholars and practitioners are interested in board effectiveness, yet we know relatively little about directors' engagement in the boardroom. We integrate identity theory and social identity theory research with literature on board monitoring and resource provision to model how directors' multiple identities affect their behavior. We propose that directors' strength of identification with multiple identities affects the extent to which they engage in monitoring and resource provision. We discuss implications for corporate governance research and practice.

Knowledge Collaboration Among Professionals Protecting National Security: Role of Transactive Memories in Ego-Centered Knowledge Networks

Abstract: Current social cognition models of knowledge coordination based on transactive memory systems (TMS) theory have not generally considered conditions in which goals among partners are incongruent, and that those with specialized knowledge will not necessarily act to share their knowledge. As expected from previous literature, when facing a problem requiring inputs from others, an individual will draw on her personal or ego-centered network using the knowledge of her network's TMS; however, we theorize that the mixed motives within her network will cause the individual to also take into account her perception of the level of distrust within the network when combining the received knowledge from others in the network. Moreover, an individual's view of her network's TMS will be shaped not by specific policies or enforcement mechanisms, but by semistructures for how knowledge is disseminated, owned, and discussed. Our theory is supported based on a survey of security professionals responding to national security threats. The findings encourage a reexamination of certain assumptions of TMS theory, as well as extending theories of ego-centered networks and social-cognitive information processing to include how individuals manage the knowledge-sharing/protection tension in interorganizational collaborations.

The Penguin Has Entered the Building: The Commercialization of Open Source Software Products

Abstract: Previous literature on open source software (OSS) mostly analyzes organizational issues within communities of developers and users. This paper focuses on for-profit organizations that release software products under OSS licenses, and argues that variations in their endowments of intellectual property rights, namely patents and trademarks, help to determine which firms will tend to incorporate OSS into commercial products. We explain whether and under what conditions preexisting stocks of intellectual property rights can be useful complementary assets that allow firms to benefit directly or indirectly from commercializing OSS products, and test our hypotheses on a novel data set built on firms' announcements of OSS product releases in the specialized press between 1995 and 2003. We find three robust results: (a) firms with large stocks of software patents are more likely to release OSS products; (b) firms with large stocks of software trademarks are less likely to release OSS products; (c) firms with large stocks of hardware trademarks are more likely to release OSS products.

Process Virtualization Theory and the Impact of Information Technology

Abstract: In our increasingly virtual society, more and more processes that have traditionally been conducted via physical mechanisms are being conducted virtually. This phenomenon of “process virtualization” is happening in many contexts, including formal education (via distance learning), shopping (via electronic commerce), and friendship development (via social networking sites and virtual worlds). However, some processes are more amenable to virtualization than others. For example, distance learning seems to work better for some educational processes than others, and electronic commerce has worked well for some shopping processes but not for others. These observations motivate the central question posed in this paper: What factors affect the “virtualizability” of a process? This question is becoming increasingly important as advances in information technology create the potential for society to virtualize more and more processes. To provide a general theoretical basis for investigating this question, this paper proposes “process virtualization theory,” which includes four main constructs (sensory requirements, relationship requirements, synchronism requirements, and identification and control requirements) that affect whether a process is amenable or resistant to being conducted virtually. Recognizing that processes can be virtualized with or without the use of information technology, this paper makes explicit the theoretical significance of information technology in process virtualization by discussing the moderating effects of representation, reach, and monitoring capability. This helps explain how advances in information technology are enabling a new generation of virtual processes.

The Impact of CEO Status Diffusion on the Economic Outcomes of Other Senior Managers

Abstract: In this paper we develop and test predictions regarding the impact of CEO status on the economic outcomes of top management team members. Using a unique data set incorporating Financial World's widely publicized CEO of the Year contest, we found that non-CEO top management team members received higher pay when they worked for a high-status CEO. However, star CEOs themselves retained most of the compensation benefits. We also show that there is a “burden of celebrity” in that the above relationships were contingent on how well a firm performs. Last, we found that, when compared with the subordinates of less-celebrated CEOs, members of top management teams who worked for star CEOs were more likely to become CEOs themselves through internal or external promotions.

Constrained Growth: How Experience, Legitimacy, and Age Influence Risk Taking in Organizations

Abstract: Poor performance indicates that an organization's routines are not well suited for its environment and prompts decision makers to search for solutions. However, results conflict regarding how this search process influences risk taking in organizations. Managers in some organizations facing actual or expected performance shortfalls tend to take risks, while managers in other poorly performing organizations avoid risky changes. This conflict is interesting because some level of risk taking appears necessary for organizations to remain competitive, adapt to their environment, and improve performance. This study examines several mechanisms that moderate risk taking following performance shortfalls. First, I draw from organizational learning theories to argue that organizations with limited operating experience are less buffered from failure, and hence that poor performance constrains risk taking at these organizations. Second, I argue that organizations with poor legitimacy are also less buffered, and hence that performance shortfalls also lead to risk aversion at these organizations. Third, I draw from structural inertia theory to suggest that older organizations are less able to support risk taking following performance shortfalls. A test of these hypotheses on the capacity expansion behavior of U.S. railroad companies generally supports these hypotheses, although the effect of age is weaker. The findings contribute to theories of organizational learning and to several perspectives in organization theory more broadly.