Showing papers in "Strategic Management Journal in 2016"
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TL;DR: A guideline is provided which, when followed, may bring clarity to theoretical motivation and rigor to empirical testing of U- and inverted U-shaped relationships for which current practice falls short.
Abstract: U- and inverted U-shaped relationships are increasingly explored in strategy research, with 11 percent of all articles published in Strategic Management Journal (SMJ) in 2008–2012 investigating such quadratic relationships. Moreover, a movement towards introducing moderation to quadratic relationships has emerged. By reviewing 110 articles published in SMJ from 1980 to 2012, we identify several critical issues in theorizing and testing of these relationships for which current practice falls short. These include insufficient causal argumentation, incorrect testing, mixing up two different types of moderation, and not realizing that the curve can flip completely. For these and other issues, a guideline is provided which, when followed, may bring clarity to theoretical motivation and rigor to empirical testing.
1,075 citations
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TL;DR: In this paper, the authors 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, they find support for their ideas with a sample of Fortune 500 CEOs.
Abstract: 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 Fortune 500 CEOs, operationalizing CEO narcissism with a novel media-based measurement technique that uses third-party ratings of CEO characteristics with validated psychometric scales. Copyright © 2014 John Wiley & Sons, Ltd.
548 citations
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TL;DR: In this article, the authors argue that the social and the environmental practices associated with business sustainability not only contribute to short-term outcomes, but also to organizational resilience, which they define as the firm's ability to sense and correct maladaptive tendencies and cope positively with unexpected situations.
Abstract: Research summary: Prior work on the benefits of business sustainability often applies short-term causal logic and data analysis. In this article, we argue that the social and the environmental practices (SEPs) associated with business sustainability not only contribute to short-term outcomes, but also to organizational resilience, which we define as the firm's ability to sense and correct maladaptive tendencies and cope positively with unexpected situations. Because organizational resilience is a latent, path-dependent construct, we assess it through the long-term outcomes, including improved financial volatility, sales growth, and survival rates. We tested these hypotheses with data from 121 U.S.-based matched-pairs (242 individual firms) over a 15-year period. We also tested, but did not find support for, the relationship between SEPs and short-term financial performance.
Managerial summary: Most managers look for short-term financial benefits to justify socially responsible or sustainable practices. In this article, we argue that such practices also help firms become more resilient, which helps them avoid crises and bounce back from shocks. However, it is difficult to measure the avoidance of shocks, so we analyzed long-term outcomes. We show that firms that adopt responsible social and environmental practices, relative to a carefully matched control group, have lower financial volatility, higher sales growth, and higher chances of survival over a 15-year period; yet, we were unable to find any differences in short-term profits. We hope this research provides good reasons for firms to practice sustainability beyond the pursuit of short-term profits. Copyright © 2015 John Wiley & Sons, Ltd.
471 citations
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TL;DR: The use of Heckman models by strategy scholars to resolve sample selection bias has increased by more than 700 percent over the last decade, yet significant inconsistencies exist in how they have applied and interpreted these models, and three important findings are demonstrated.
Abstract: Research summary: The use of Heckman models by strategy scholars to resolve sample selection bias has increased by more than 700 percent over the last decade, yet significant inconsistencies exist in how they have applied and interpreted these models. In view of these differences, we explore the drivers of sample selection bias and review how Heckman models alleviate it. We demonstrate three important findings for scholars seeking to use Heckman models: First, the independent variable of interest must be a significant predictor in the first stage of a model for sample selection bias to exist. Second, the significance of lambda alone does not indicate sample selection bias. Finally, Heckman models account for sample-induced endogeneity, but are not effective when other sources of endogeneity are present. Managerial summary: When nonrandom samples are used to test statistical relationships, sample selection bias can lead researchers to flawed conclusions that can, in turn, negatively impact managerial decision-making. We examine the use of Heckman models, which were designed to resolve sample selection bias, in strategic management research and highlight conditions when sample selection bias is present as well as when it is not. We also distinguish sample selection bias, a form of omitted variable (OV) bias, from more traditional OV bias, emphasizing that it is possible for models to have sample selection bias, traditional OV bias, or both. Accurately identifying the type(s) of OV bias present is essential to effectively correcting it. We close with several recommendations to improve practice surrounding the use of Heckman models. Copyright © 2015 John Wiley & Sons, Ltd.
454 citations
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TL;DR: In this article, the authors present a framework that considers both the focal competing technologies as well as the ecosystems in which they are embedded to understand why new technologies emerge and quickly supplant incumbent technologies while others take years or decades to take off.
Abstract: Why do some new technologies emerge and quickly supplant incumbent technologies while others take years or decades to take off? We explore this question by presenting a framework that considers both the focal competing technologies as well as the ecosystems in which they are embedded. Within our framework, each episode of technology transition is characterized by the ecosystem emergence challenge that confronts the new technology and the ecosystem extension opportunity that is available to the old technology. We identify four qualitatively distinct regimes with clear predictions for the pace of substitution. Evidence from 10 episodes of technology transitions in the semiconductor lithography equipment industry from 1972 to 2009 offers strong support for our framework. We discuss the implication of our approach for firm strategy. Copyright © 2015 John Wiley & Sons, Ltd.
379 citations
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TL;DR: In this article, the authors identify new value creation opportunities that are especially effective strategically because a single strategic action (1) increases different types of value for two or more essential stakeholder groups simultaneously, and (2) does not reduce the value already received by any other essential group.
Abstract: Our “stakeholder synergy” perspective identifies new value creation opportunities that are especially effective strategically because a single strategic action (1) increases different types of value for two or more essential stakeholder groups simultaneously, and (2) does not reduce the value already received by any other essential stakeholder group. This result is obtainable because multiple potential sources of value creation exist for each essential stakeholder group. Actions that meet these criteria increase the size of the value “pie” available for essential stakeholder groups, and thereby serve to attract exceptional stakeholders and obtain their increasing effort and commitment. The stakeholder synergy perspective extends stakeholder theory further into the strategy realm, and offers insights for realizing broader value creation that is more likely to produce sustainable competitive advantage. Copyright © 2014 John Wiley & Sons, Ltd.
345 citations
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TL;DR: In this article, the authors evaluate six of the leading rating agencies and find little overlap in their assessments of corporate social responsibility (CSR), suggesting that social responsibility is challenging to measure reliably and that users of these ratings should be cautious in drawing conclusions about firms based on this data.
Abstract: Research summary: Raters of firms play an important role in assessing domains ranging from sustainability to corporate governance to best places to work. Managers, investors, and scholars increasingly rely on these ratings to make strategic decisions, invest trillions of dollars in capital, and study corporate social responsibility (CSR), guided by the implicit assumption that the ratings are valid. We document the surprising lack of agreement across social ratings from six well-established raters. These differences remain even when we adjust for explicit differences in the definition of CSR held by different raters, implying the ratings have low validity. Our results suggest that users of social ratings should exercise caution in interpreting their connection to actual CSR and that raters should conduct regular evaluations of their ratings.
Managerial summary: Ratings of corporate social responsibility (CSR) guide trillions of dollars of investment, but managers, investors, and researchers know little about whether these ratings accurately measure CSR. In practice, there are examples of highly rated firms becoming embroiled in scandals and the same firm receiving sharply different ratings from different rating agencies. We evaluate six of the leading raters and find little overlap in their assessments of CSR. This lack of consensus suggests that social responsibility is challenging to measure reliably and that users of these ratings should be cautious in drawing conclusions about firms based on this data. We encourage the rating agencies to regularly validate their data in an effort to improve the measurement of CSR. Copyright © 2015 John Wiley & Sons, Ltd.
340 citations
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TL;DR: In this paper, a longitudinal study of TiVo, a company that pioneered the Digital Video Recorder, reveals how TiVo navigated co-competitive tensions by continually adjusting its strategy, its technology platform, and its relational positioning within the evolving U.S. television industry ecosystem.
Abstract: Research summary: Firms introducing disruptive innovations into multisided ecosystems confront the disruptor's dilemma: gaining the support of the very incumbents they disrupt. Through a longitudinal study of TiVo, a company that pioneered the Digital Video Recorder, we examine how these firms may address this dilemma. Our analysis reveals how TiVo navigated coopetitive tensions by continually adjusting its strategy, its technology platform, and its relational positioning within the evolving U.S. television industry ecosystem. We theorize how (1) disruption may affect not just specific incumbents, but also the entire ecosystem; (2) coopetition is not just dyadic, but also multilateral and intertemporal, and (3) strategy is both a deliberative and emergent process involving continual adjustments, as the disruptor attempts to balance coopetitive tensions over time.
Managerial summary: New entrants confront a dilemma when they introduce a disruptive innovation into an existing business ecosystem, viz., how can they gain the support of the incumbents that their innovation disrupts? Confronting this “disruptor's dilemma”, the disruptor must consider several issues: How might it pitch its innovation to attract end customers and yet reduce the threat of disruption perceived by ecosystem incumbents? How can the innovation be modified to fit into legacy systems while transforming them? Based on an in-depth analysis of TiVo and its entrepreneurial journey, we explore the strategies disruptors can deploy to address these issues. Copyright © 2015 John Wiley & Sons, Ltd.
300 citations
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TL;DR: It is found that calculative trust and relational trust positively influence supplier performance, with calculativeTrust having a stronger association than relational trust, yet, important boundary conditions exist.
Abstract: Our research empirically assesses two distinct bases for trust: calculative trust, based on a structure of rewards and penalties, versus relational trust, a judgment anchored in past behavior and characterized by a shared identity. We find that calculative trust and relational trust positively influence supplier performance, with calculative trust having a stronger association than relational trust. Yet, important boundary conditions exist. If buyers invest in supplier-specific assets or when supply side market uncertainty is high, relational trust, not calculative trust, is more strongly associated with supplier performance. In contrast, when behavioral uncertainty is high, calculative trust, not relational trust, relates more strongly to supplier performance. These results highlight the value of examining distinct forms of trust. Copyright © 2015 John Wiley & Sons, Ltd.
276 citations
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TL;DR: In this paper, the authors explore the effect of the interplay between a firm's external and internal actions on market value in the context of corporate social responsibility (CSR) and find that, on average, firms undertake more internal than external CSR actions.
Abstract: Research summary: We explore the effect of the interplay between a firm's external and internal actions on market value in the context of corporate social responsibility (CSR). Specifically, drawing from the neo-institutional theory, we distinguish between external and internal CSR actions and argue that they jointly contribute to the accumulation of intangible firm resources and are therefore associated with better market value. Importantly, though, we find that, on average, firms undertake more internal than external CSR actions, and we theorize that a wider gap between external and internal actions is negatively associated with market value. We confirm our hypotheses empirically, using the market-value equation and a sample comprising 1,492 firms in 33 countries from 2002 to 2008. Finally, we discuss implications for future research and practice.
Managerial summary: Companies often accumulate intangible assets by taking internally and externally oriented CSR actions. Contrary to popular beliefs, the data show that they undertake more internal than external ones: firms do more and communicate less. How does a potential gap (i.e., a misalignment) between internal and external CSR actions affect a firm's market value? We find that although together (the sum of) internal and external actions are positively associated with market value, a wider gap has negative implications. In other words, firms do not realize the full benefits of their internal actions when such actions are not externally communicated to key stakeholders, and to the investment community in particular. This negative association with market value is particularly salient in CSR-intensive and the natural resources and extractives industries.
254 citations
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TL;DR: In this paper, the authors identify some of the relevant costs (cognitive, transaction, and organizational costs) that open firms can reduce by combining knowledge inflows and outflows.
Abstract: One novel implication of the open innovation paradigm is that inflows and outflows of knowledge are complementary. We argue that engaging simultaneously in buying and selling knowledge should allow firms to increase innovation outcomes. At the same time, we identify some of the relevant costs (cognitive, transaction, and organizational costs) that “open” firms can reduce by combining knowledge inflows and outflows. Empirically, however, we find no evidence for such complementarity in a sample of Belgian manufacturing firms. Firms buying and selling knowledge do increase their sales of new products, but at the same time their R&D costs increase more than proportionally. Our findings, therefore, indicate the need for research into a better understanding of the drivers of actual costs of organizing for open innovation.
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TL;DR: In this article, the impact of female board representation on firm-level strategic behavior within the domain of mergers and acquisitions (M&A) was examined and it was shown that greater female representation on a firm's board will be negatively associated with both the number of acquisitions the firm engages in and, conditional on doing a deal, acquisition size.
Abstract: This study examines the impact of female board representation on firm-level strategic behavior within the domain of mergers and acquisitions (M&A). We build on social identity theory to predict that greater female representation on a firm's board will be negatively associated with both the number of acquisitions the firm engages in and, conditional on doing a deal, acquisition size. Using a comprehensive, multiyear sample of U.S. public firms, we find strong support for our hypotheses. We demonstrate the robustness of our findings through the use of a difference-in-differences analysis on a subsample of firms that experienced exogenous changes in board gender composition as a result of director deaths
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TL;DR: This paper demonstrates how meta-analysis can be combined with structural equation modeling (MASEM) to address new questions in strategic management research and provides more support for the view that boards mediate the top management teams' decisions.
Abstract: This paper demonstrates how meta-analysis can be combined with structural equation modeling (MASEM) to address new questions in strategic management research. We review this integration, describe its implementation, and compare findings from bivariate meta-analyses, a direct-effect structural equations model, and two mediating frameworks using data on the strategic leadership and performance relationship. Results drawn from 208 articles that collectively included data on 495,638 observations demonstrate the new insights available from MASEM while also suggesting a revision to conventional thinking on strategic leadership. Whereas some theories posit that boards of directors influence firm performance through monitoring and disciplining the top management team, MASEM provides more support for the view that boards mediate the top management teams' decisions. Implications for applying MASEM in strategic management are offered
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TL;DR: In this paper, the authors explore how key formal and informal country-level institutions of social power structures combine to shape CEO and worker compensation across countries as well as the resulting pay dispersion.
Abstract: Executive compensation and its relation to that of rank and file employees are vital areas of strategy research. This study contributes to our understanding of cross-national differences in executive compensation by exploring how key formal and informal country-level institutions of social power structures combine to shape CEO and worker compensation across countries as well as the resulting pay dispersion. Analyzing data spanning 54 countries using the configurational approach fuzzy set Qualitative Comparative Analysis (fsQCA), the study also explores the causal asymmetry underlying compensation outcomes by investigating institutional configurations linked to high CEO compensation, high worker pay, and high pay dispersion and those configurations linked to the absence of these outcomes. The article concludes by discussing the study's implications for theory and research on executive compensation.
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TL;DR: This article found that female directors create value for some firms and decrease it for others, and that the impact varies across different performance indicators, firms' ownership, and boards' structure, and called for nuanced responses in relation to women's nominations from both governments and firms.
Abstract: 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 Malaysian 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. Copyright © 2014 John Wiley & Sons, Ltd.
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TL;DR: This research identifies limits to the ‘variance hypothesis’ and reveals two successful approaches to innovation search: ‘cosmopolitans’ who cultivate and attend to external sources and ‘locals” who draw upon internal sources.
Abstract: The “variance hypothesis” predicts that external search breadth leads to innovation outcomes, but people have limited attention for search and cultivating breadth consumes attention. How does individuals' search breadth affect innovation outcomes? How does individuals' allocation of attention affect the efficacy of search breadth? We matched survey data with complete patent records, to examine the search behaviors of elite boundary spanners at IBM. Surprisingly, individuals who allocated attention to people inside the firm were more innovative. Individuals with high external search breadth were more innovative only when they allocated more attention to those sources. Our research identifies limits to the “variance hypothesis” and reveals two successful approaches to innovation search: “cosmopolitans” who cultivate and attend to external people and “locals” who draw upon internal people. © 2014 The Authors. Strategic Management Journal published by John Wiley & Sons Ltd.
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TL;DR: This paper examined the political risk experienced by Google and Yahoo at home and abroad due to their activities in China to illustrate the benefits of a holistic approach to political risk and argued that there is a need to update the bargaining power and political institutions theories and further develop a legitimacy-based view of political risk.
Abstract: Traditional political risk theories often focus on a developing host country government's ability to intervene in the activities of foreign multinationals in the extractive or infrastructure sectors. This results in inadequate understanding of (1) how a government's motivation to intervene is influenced by the broader societal context, (2) the importance of multinationals' political risk at home, and (3) the increasing political risk faced by high-tech and service firms. We argue that there is a need to update the bargaining power and political institutions theories and further develop a legitimacy-based view of political risk. Then, we examine the political risk experienced by Google and Yahoo at home and abroad due to their activities in China to illustrate the benefits of a holistic approach to political risk. Copyright © 2015 John Wiley & Sons, Ltd.
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TL;DR: CREATING REPEATABLE CUMULATIVE KNOWLEDGE in STRATEGIC MANAGEMENT: A call for a broad and deep conversation among authors, reviewers, and editors.
Abstract: CREATING REPEATABLE CUMULATIVE KNOWLEDGE IN STRATEGIC MANAGEMENT: A CALL FOR A BROAD AND DEEP CONVERSATION AMONG AUTHORS, REFEREES, AND EDITORS RICHARD A. BETTIS,* SENDIL ETHIRAJ,2 ALFONSO GAMBARDELLA,3 CONSTANCE HELFAT,4 and WILL MITCHELL5,6 1 Strategy and Entrepreneurship Department, Kenan-Flagler Business School, University of North Carolina, Chapel Hill, North Carolina, U.S.A. 2 Strategy and Entrepreneurship, London Business School, London, U.K. 3 Department of Management and Technology, CRIOS, Bocconi University, Milan, Italy 4 Tuck School of Business, Dartmouth College, Hanover, New Hampshire, U.S.A. 5 Management Department, Rotman Business School, University of Toronto, Toronto, Ontario, Canada 6 Strategy Area, Fuqua School of Business, Duke University, Durham, North Carolina, U.S.A.
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TL;DR: In this paper, the authors meta-analyze 115 studies to investigate the relationship between both ordinary and dynamic capabilities and the financial performance of firms in relatively stable versus changing environments, and found that the performance effects of both types of capabilities are positive and similar in magnitude.
Abstract: Within the capabilities-based view of the firm, there is debate about the relative importance of ordinary and dynamic capabilities for firm performance and about the extent to which their performance effects are contingent on environmental conditions. We meta-analyze 115 studies to investigate the relationship between both ordinary and dynamic capabilities and the financial performance of firms in relatively stable versus changing environments. The results suggest that the performance effects of both types of capabilities are positive and similar in magnitude. Environmental dynamism reinforces the effects of both ordinary and dynamic capabilities. Furthermore, the two types of capabilities are closely associated. Our findings provide support for a moderate capabilities-based view of the firm, rather than one that considers dynamic capabilities as superior to ordinary ones.
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TL;DR: In this paper, a replication of Waddock and Graves (1997) was conducted to examine the relationship between CSP and CFP and found that CSP may not have a positive influence on CFP.
Abstract: R esearch summary: In this study, we revisit the relationship between corporate social performance ( CSP) and corporate financial performance ( CFP) by conducting a replication of Waddock and Graves (1997). Using 1990 KLD ratings as the CSP measure, the original study reports a positive bidirectional relationship between CSP and CFP. However, our replication analyses with a larger sample over a longer time period indicate that the findings of the original study may not be generalizable to different samples. We argue that our replication casts doubt on the original study and can serve as a starting point to reconsider the CSP-CFP relationship. Based on the findings of our replication, we discuss the differences between the replication results and the original findings, and then suggest several approaches to revise and extend the original study. M anagerial summary: Advocates of corporate social performance ( CSP) have long argued that 'doing good leads to doing well.' However, the evidence to support this argument is not strongly convincing, and managers hence doubt whether better CSP leads to improved corporate financial performance ( CFP). In this article, we directly examine the relationship between CSP and CFP. Our article reports that CSP may not have a positive influence on CFP. Instead, our article shows the complexity of the relationship between CSP and CFP. Therefore, we cannot simply argue that doing good will necessarily lead to doing well. Copyright © 2016 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]
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TL;DR: A typology of different types of replications is provided, a comparison with other approaches to cumulating knowledge is compared, and guidelines toward producing high-quality replication studies are provided.
Abstract: Research summary: A replication study assesses whether the results of a particular prior study can be reproduced, including in new contexts with different data. Replication studies are critical for building a cumulative body of research knowledge. This article discusses and provides a typology of different types of replications, compares replications with other approaches to cumulating knowledge, and provides guidelines toward producing high-quality replication studies. The articles in this Special Issue provide examples of replication studies in strategic management. Managerial summary: Research studies sometimes draw implications for managerial practice. A single empirical study, however, is specific to a particular context, relies on a particular set of data, and uses a particular research design. As a consequence, a single study cannot establish whether the findings generalize to a different context and whether the research design is robust to alternative approaches. Replication studies can help to establish the range of applicability of prior studies and better support what implications can be drawn for managerial practice. Copyright © 2016 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]
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TL;DR: In this paper, the authors investigated the relationship between divestitures and firm value in family firms and found that family firms are less likely than non-family firms to undertake divestitures, especially when these companies are managed by family rather than nonfamily-CEOs.
Abstract: This paper investigates the relationship between divestitures and firm value in family firms. Using hand-collected data on a sample of over 30,000 firm-year observations, we find that family firms are less likely than non-family firms to undertake divestitures, especially when these companies are managed by family rather than non-family-CEOs. However, we then establish that the divestitures undertaken by family firms, predominantly those run by family-CEOs, are associated with higher post-divestiture performance than their non-family counterparts. These findings indicate that family firms may fail to fully exploit available economic opportunities, potentially because they pursue multiple objectives beyond the maximization of shareholder value. These results also elucidate how the characteristics of corporate owners and managers can influence the value that firms derive from their corporate strategies
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TL;DR: It is found that contractual governance works best under low to moderate levels of behavioral uncertainty and moderate to high levels of environmental uncertainty, while it is detrimental to alliance performance when both types of uncertainty are low or high.
Abstract: We examine the interplay of behavioral and environmental uncertainty in shaping the effectiveness of two key governance mechanisms used by strategic alliances: contractual and trust-based governance. We develop and test hypotheses, using a meta-analytic dataset encompassing over 15,000 strategic alliances across 82 independent samples. We find that contractual governance works best under low to moderate levels of behavioral uncertainty and moderate to high levels of environmental uncertainty, while it is detrimental to alliance performance when both types of uncertainty are low or high. Trust-based governance is most effective at high levels of behavioral uncertainty and low levels of environmental uncertainty. It suffers a large loss of usefulness at high behavioral uncertainty as environmental uncertainty increases.
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TL;DR: In this article, the authors distinguish entrepreneurial markets from other types of markets and test statistical and psychological hypotheses for all market types and 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.
Abstract: 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
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TL;DR: In this paper, the authors develop and test theory relating geographic variables to the strength of corporate social responsibility engagement and the cost of equity capital, and find strong and robust evidence that firms located in areas characterized by high levels of local CSR density score higher in CSR engagement.
Abstract: Research summary: Building on economic geography and institutional theory, we develop and test theory relating geographic variables to the strength of corporate social responsibility ( CSR) engagement and the cost of equity capital. For a large sample of U.S. firms over the period 1998-2009, we find strong and robust evidence that firms located in areas characterized by high levels of local CSR density score higher in CSR engagement. In addition, firms located close to major cities and financial centers exhibit higher CSR engagement compared to firms located in more remote areas. Moreover, the effect of CSR engagement on reducing equity financing costs is even greater for firms in high CSR density areas than for firms in low CSR density areas. Managerial summary: Does the location of CSR engagement by firms affect the strength of CSR engagement by their neighbors? Does the geography of engagement have an impact on financial performance? Our findings show that a firm's CSR engagement increases in areas where there is dense CSR engagement and when it is located near large cities. In these areas, norms, values, and knowledge related to CSR are transmitted to firms through face-to-face meetings and frequent social interactions with groups such as peers, labor unions, news media, universities, and community organizations, which tend to be concentrated in large cities. Our findings further highlight that CSR engagement reduces equity financing costs for firms in areas where CSR is widely practiced. Copyright © 2015 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]
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TL;DR: It is shown that a dedicated M&A function is a new phenomenon that is positively related to a firm's M& a performance and M&a learning process, and an M&C learning process helps build up an M &A capability.
Abstract: How to improve the performance of mergers & acquisitions (M&A) continues to be a confounding issue. We show that a dedicated M&A function is a new phenomenon that is positively related to a firm's M&A performance and M&A learning process. Moreover, we find that an M&A learning process (involving articulation, codification, sharing, and internalization) helps build up an M&A capability, which in turn is positively related to a firm's overall M&A performance. We use survey data from a sample drawn from the M&A activities of German firms to test our arguments.
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TL;DR: The authors developed hypotheses based on behavioral theory that explain how high technology firms' new product introduction (NPI) performance below aspiration levels impact the number of R&D alliances, and how slack moderates this relationship.
Abstract: We develop hypotheses based on behavioral theory that explain how high technology firms' new product introduction (NPI) performance below aspiration levels impact the number of R&D alliances, and how slack moderates this relationship Using panel data of US biopharmaceutical firms, we find that as firms' NPI performance below historical aspiration levels increases the number of R&D alliances they form increases and slack intensifies this relationship We contribute to alliance research by providing theory and empirical evidence that increases in the distance of NPI below aspirations serve as a motivation for increases in R&D alliances, and empirically to behavioral theory by revealing that NPI goals act similarly to financial performance goals in their impact on firms' actions and slack intensifies this relationship
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TL;DR: In this paper, the authors developed a matching framework to study strategic alliances, taking a market perspective that explicitly incorporates key features of alliance formation: two-sided decision-making; quest for complementarities between indivisible and heterogeneous partner attributes; and competition on each side of the market for partners on the other side.
Abstract: Research summary: Strategic alliances are undertaken to create value through complementarities of resources and capabilities of the partner firms. This paper uses a recently developed estimator of matching games, i.e., the maximum score estimator, to advance strategic management research on partner selection in strategic alliances, with a focus on the formation of research alliances in the biopharmaceutical industry. We contribute to the literature in three ways. First, we develop a matching framework to study strategic alliances, taking a market perspective that explicitly incorporates key features of alliance formation: two-sided decision making; quest for complementarities between indivisible and heterogeneous partner attributes; and competition on each side of the market for partners on the other side of the market. Second, we assess the relative performance of the maximum score and standard discrete choice estimators by performing simulations based on known functional relationships in various matching scenarios. Third, within the context of biopharmaceutical research alliances, we hypothesize and find support using the maximum score estimator for complementarity in partner size and in upstream research capabilities.
Managerial summary: A critical question facing managers who seek to benefit from strategic alliances is “whom to ally with”. Typically, each party seeks a partner whose attributes reinforce their own. This paper explains that the interaction of these preferences leads to a market-wide sorting of alliance partners. Since the value created by an alliance is driven by attributes of all alliance partners, firms cannot successfully bid financial resources to get access to their most preferred partner. Instead, managers need to understand the market-wide competition and invest in the “right” mixture of attributes to make their firm more attractive in the market for alliance partners. Using this framework, we highlight firms' sizes and research capabilities as two drivers of partner selection and sorting in bio-pharmaceutical research alliances.
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TL;DR: In this paper, the authors investigate whether and when shareholders-oriented foreign owners are likely to change corporate governance logics in a stakeholder-oriented setting by introducing shareholder-oriented governance practices.
Abstract: We ask whether and when shareholder-oriented foreign owners are likely to change corporate governance logics in a stakeholder-oriented setting by introducing shareholder-oriented governance practices. We focus on board monitoring and claim that because the bundle of practices used in a stakeholder context does not protect shareholder-oriented foreign owners' interests, they seek to introduce their own practices. Our results suggest that board monitoring is only activated when shareholder-oriented foreign ownership is high and that the influence of foreign ownership is especially strong in firms without large domestic owners, with high levels of risk and poor performance. Our findings uncover the possibility of the co-existence of different corporate governance logics within a given country, shaped by the nature and weight of foreign owners
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TL;DR: This work harnesses the inherent dichotomy in the profiles of independent VCs and corporate investors to study ventures' innovation outcomes and finds CVCs' investees exhibit higher rates of innovation output, compared to independent VC-backed peers.
Abstract: Entrepreneurial ventures are a key source of innovation. Nowadays, ventures are backed by a wide array of investors whose complementary asset profiles differ significantly. We therefore assert that entrepreneurial ventures can no longer be studied as a homogeneous group. Rather, we harness the inherent dichotomy in the profiles of independent VCs and corporate investors to study ventures' innovation outcomes. Our sample consists of 545 U.S. biotechnology ventures founded between 1990 and 2003 and backed by independent venture capitalists (VCs) or corporate VCs (CVC). We find CVCs' investees exhibit higher rates of innovation output, compared to independent VC-backed peers. Moreover, the performance of CVC-backed ventures is sensitive to their ability to leverage corporate assets, underscoring the role of CVC accessibility and FDA approval requirements as the mechanisms associated with CVC contribution