Abstract
Recent work points out that strategic openness is an important instrument of impression management to shape legitimacy while also with significant competitive pressure for losing control of resources. How are these effects of strategic openness reflected in firm performance? Answers to this question, we pointed a comprehensive framework examining the dynamic and contingent effects of strategic openness on firm performance. We show how nearly identical mechanisms driving the openness-performance relationship can yield both inverted U- and U-shaped effects due to differences in relative strength between legitimacy and competition. Consistent with our theoretical framework, results combining a text analysis of 29120 annual reports with the financial data from 3366 listed companies in China show an inverted U-shaped effect in the short run, flipping to U-shaped as the time window gets longer, and these relationships are moderated by firms’ strategy deviation and securities reports attention. This study offers new insights into optimal strategic open boundary conditions, supporting a more general yet more precise theory of open paradox.
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