Established Firms Research Articles

It's Time to Break Up: Dynamics Surrounding Young-Established Firm Alliance Duration

While young firms often benefit from their relationships with established firms, these relationships can be risky. Hence, during their relationship with established firms, young firms must constantly monitor signs of a failing partnership and terminate it before being in a disadvantageous position. However, discontinuing the alliance with an established firm can also be risky, especially if the young firm has limited alternative collaborative opportunities. Our study adopts the young firm's perspective and dynamically weighs the tradeoffs between the risks of continuing and discontinuing its relationship with established firms, thereby deciding on its termination. We first develop an analytical model to understand how the alliance duration (time from alliance formation to termination) between young and established firms is affected by alliance, firm, and industry characteristics. We then test the resulting hypotheses on a sample of 1,111 alliances with licensing deals formed between 159 established pharmaceutical firms and 448 young biotechnology firms during the 1986 to 2000 period, which straddles the technological discontinuity of combinatorial chemistry. Our empirical results provide partial support for the hypotheses derived from the analytical model, informing us of firms’ rational alliance duration decisions as well as their deviations from rationality. In presenting both optimal alliance duration decisions and suboptimal alliance duration practices, our mixed-method approach offers important implications for theory and practice.

Multivariate Regression Analysis of the Impact of Open Market Share Repurchase Activity on the Malaysian Market

This research thesis revolves around the need to understand the relationship between share repurchases and the share price behavior of companies listed on Bursa Malaysia on a more recent basis given the economic stability in Malaysia and throughout the world from 2017 to 2021. It started in the West and reached maturity in the 1980s in the United States, but it only began in Malaysia in the 1990s. The studies of share repurchase are still considered an infant in Malaysia as in other countries throughout the world, companies pursue share repurchases for several reasons mainly to signal undervaluation, reward shareholders, defend against the takeover, utilize financial resources efficiently, and many more motives that are interesting for researchers to look at. Unlike other studies that look at announcement dates, since an announcement does not mean the companies will implement the transactions, this research is important since it looks at and analyzes the actual effective repurchase day done by established firms which is are most crucial aspect in analyzing the consequences and the results are that it shows positive abnormal mean returns for most of the companies. Event study methodology was used since this is the best empirical research method and as empirical evidence to analyze abnormal returns from all the other studies. The days observed are 120 days before and after the announcement. Returns for the estimation window, event window (repurchase day), and post-event window were analyzed to see the effects of price movement on repurchase activities at Bursa Malaysia (BSKL).

‘I’d Give My Right Arm to Be Ambidextrous’: Exploration Unit Managers Facing Competing Demands for Differentiation and Integration

This paper examines how managers of internal exploration units – also labeled as innovation labs – address the competing demands of differentiation and integration over time, and the implications for their unit’s ability to execute its intended exploration strategy. Based on a longitudinal study of four exploration units implemented by established firms, we find that their managers face two types of undocumented paradoxical tensions: one related to the evolution of the mandated charter and the other related to the implementation of the performance management system. In response, we show that exploration unit managers adopt four balancing patterns to face these paradoxical tensions: decoupling, conforming, promoting, and synchronizing. These patterns consist of specific combinations of differentiating and/or integrating practices. Drawing on paradox research, we show how each pattern facilitates or impedes the pursuit of the unit’s intended exploration strategy. Our research contributes to the development of a more integrative and systemic understanding of the locus of structural ambidexterity and how it is pursued in practice, and to current debates about the different types of responses adopted when faced with paradoxes. Finally, we provide managerial insights into the management of exploration units and innovation labs within established firms.

Strategies for fostering intra-entrepreneurial behaviour: the role of high performance work practices and knowledge management processes

Established firms are increasingly adopting practices aimed at fostering intrapreneurial initiatives to ensure their long-term survival. This paper analyzes the role that employee perceptions of high-performance work systems and knowledge management processes can play in fostering intrapreneurial behavior. The findings offer guidance to help practitioners promote these behaviors, highlighting the importance of high-performance work systems that enhance knowledge management processes, particularly knowledge sharing.

Two entrepreneurial firms, a digital disruption, and different responses: the role of organizational mission and experiential computing digital options

Two leading digital entrepreneurial firms responded to a digital disruption differently. One adapted, whereas the other stagnated and eventually went bankrupt. In this inductive multi-case study, we strive to understand how they came to do so. Through constant comparison analysis between data, emerging theory, and existing literature, we develop a nuanced theoretical model suggesting that for entrepreneurial firms, having an abstract mission and pursuing diverse digital options actually constrain firms’ ability to respond to a digital disruption. But a specific mission and selective options enable adaptive agility. Overall, our emergent process theory highlights critically overlooked entrepreneurial firms, which are increasingly facing disruptions from powerful, established firms. Our emergent theory also prompts us to reconsider the conventional wisdom that digital options inherently enable agility.

Internal Disagreement and Disruptive Technologies

This paper models the adoption by established firms of internally disruptive technologies in that different parts of an organization stand to lose or gain from adoption. When agents disagree with a decision, they impose costs on the firm. The paper shows that any resistance to change that this yields is often accompanied by others who are aggrieved should change not occur. Thus, the firm likely cannot avoid disagreement costs regardless of whether they adopt the technology or not. In some cases, depending on their ability to impose costs, such firms may be more likely to adopt technologies due to internal disagreement.

Partnering with green start-ups: a vehicle for eco-innovation?

ABSTRACT Established firms are increasingly forming alliances with green start-ups, i.e. newly-started ventures dedicated to eco-innovation. This study explores the rationales for the initiation and continuation of such alliances. We investigate how established firms leverage these alliances to facilitate eco-innovation adoption alongside their pursuit of legitimacy. Findings from a case study on seven alliances focused on food waste reduction initiatives in Italy and Sweden indicate that legitimacy-seeking rationales are predominant during alliance formation. As alliances evolve, they transition into a phase where firms identify opportunities for eco-innovation, while ambitions of capability-building and new revenue creation shape the development of the alliances. This study contributes to eco-innovation and environmental alliance literature by showcasing how the pursuit of legitimacy facilitates established firms’ adoption and implementation of eco-innovation through alliances with green start-ups.

A multilevel view of internal technological innovation

ABSTRACT This article views organizational innovation as a fundamentally multilevel phenomenon. Project teams conceive of new offerings and work to obtain their final approval. This process unfolds within a structural context shaped by executives in response to environmental dictates. Using Bower’s definition–impetus–context model as a guiding framework, I argue that structures and processes with both functional and dysfunctional consequences arise at various levels. Innovation teams develop well-defined cultures that, if not properly channeled, can produce negative effects on the innovation effort. Similarly, corporate leaders evolve a structural context to facilitate innovation, but risk introducing dislocations into existing patterns of interaction in doing so. Given these challenges, the mediating role of the corporate division takes on importance for organizations seeking to profit from innovative undertakings. Established firms that mobilize their corporate divisions to balance the competing needs of innovating teams and the broader company seem well poised to excel at internal technological innovation.

THE MICROECONOMICS OF INNOVATION UNDER UNCERTAINTY AND THE RESOURCE-BASED VIEW OF BUSINESS STRATEGY

We link end-product innovations with those entrepreneurial endeavors aimed at developing firm-specific valuable, rare and unique resources (VRIO) under uncertainty. These resources are responsible for rent and sustainable competitive advantage by the resource-based view (RBV) of business strategy, yet their uncertain cost and productivity are not explicitly operationalised in RBV. We argue that acknowledging resource-uncertainty implies uncertainty in the path-dependent evolution of VRIO resources, which translate to heterogenous end-product attributes that shape the competitive environment. Resource-uncertainty requires management to be active in resource-risk-management, a role that ultimately reduces the uncertainty management observes, compared with the uncertainty that an outsider observes. Our framework highlights complementarities between those entrepreneurs responsible for disruptive innovations, and routinised innovation processes of established firms. Both cope with and manage innovation risk, and both are essential for the creative destruction process.

Transition policy mixes and business model adaptation: Incumbent firms' response to zero‐carbon policy in the housing sector

AbstractThis paper provides a firm‐level perspective on sustainability transitions by analysing how government can use transition policy mixes to entice industry incumbents to adapt their business model to integrate sustainable technologies. It examines firm‐level barriers to policy implementation, why these exist, and how government can use transition policy mixes to overcome them. The empirical analysis provides an in‐depth case study of the UK Zero Carbon Homes (ZCH) as a transition policy mix and considers the point of view of policymakers and incumbent housebuilders. The paper sheds light on the question of how transition policy mix designs can support incumbents' business model adaptation to bring about transformational change for sustainability. The results show that the interaction between various policy shortcomings and business model adaptation barriers led to a failure of government to move the housebuilding sector towards a stronger integration of sustainable technologies. The paper concludes by arguing that decarbonising housing in the UK was a system failure, rather than a market or policy failure, as the government failed to address the underlying reasons of incumbents' resistance to changing their business model. The findings suggest that taking incumbents' business models into consideration while designing policies for sustainability transitions is necessary to entice established firms to actively take part in the process of transitions and adapt to new sustainable norms.

Selective revealing for building ecosystems: a conjoint experiment with managers of established firms

Researchers have identified selective revealing, that is, the voluntary, purposeful, and irrevocable disclosure of information to third parties, as a mechanism in ecosystem building. However, there is a lack of understanding of the ecosystem‐level factors that drive managers' decisions to share such information in emerging ecosystems. To shed light on how managers of established firms engage in selective revealing when building ecosystems, we draw on the resource‐based view. We theorise about the information revealing behaviour of established firms' managers, based on the threats of substitution and imitation that cause trade‐offs in emerging ecosystems of established firms and new ventures. We test our hypotheses with a choice‐based conjoint experiment analysing 640 decisions of managers responsible for ecosystem building. We find that managers from established firms are more likely to engage in selective revealing when the ecosystem aims at radical innovation (over incremental innovation), when other established firms have high knowledge diversity (over a low knowledge diversity), and when new ventures demonstrate technological superiority (over being on par with established firms' technologies). Our study therefore illuminates which ecosystem‐level constructs influence managers' decisions to reveal information when co‐building ecosystems, even when no immediate payoff is recognisable.

Inventor CEO involvement and firm exploitative and exploratory innovation

AbstractResearch SummaryThis study extends recent findings that inventor CEOs increase innovative output in large established firms by examining how their involvement in the innovative process influences the nature of innovations produced. Our theory suggests that inventor CEOs who take a hands‐on approach to innovation lead their firms to engage in more exploitative rather than exploratory innovation. We further posit that this effect is particularly strong for insider inventor CEOs, and especially founders, but weaker for outsiders and when the firm's board has broader industry experience. Using a sample of S&P 1500 firms from 1994 to 2010 and inventor CEOs' engagement in patenting as an indicator of hands‐on involvement, we find considerable support for our predictions.Managerial SummaryCEOs with hands‐on experience innovating can substantially increase innovative output in large established firms. Yet, we show that inventors who remain directly engaged in their firms' innovation activities as CEO can limit their scope to incremental innovations that exploit existing technologies as opposed to more radical innovations that result in novel product or service offerings. These tendencies are stronger for inventors who come to the CEO position from inside the firm, especially founders, but weaker when the firm's board has broader industry experience. Overall, our study reveals an important tradeoff for large firms of having an inventor as CEO, how hands‐on involvement by inventor CEOs may narrow their firms' innovative trajectories, and how or when these tendencies can be mitigated.

Sustainability Disclosures and Their Influence on Cost of Capital: A Comprehensive Bibliometric Study

Since the beginning of the twenty-first century, corporate social responsibility (CSR) has emerged as a global phenomenon in the business sector, capturing the attention of all stakeholders. Both early-stage and established firms often engage in high levels of voluntary disclosure, thereby reducing their cost of capital. This study synthesizes existing literature related to the impact of CSR on the cost of capital, focusing on sustainability and environmental disclosure. Utilizing the Scopus database, we conducted a bibliometric analysis through VOSviewer, analyzing 76 research articles from reputable academic journals published between 2002 and 2022. Our analysis identified three primary clusters: (1) the red cluster, titled "CSR and ESG disclosure and its impact on cost of capital" with 43 articles examining corporate social performance strategies, environmental risks, and green support; (2) the green cluster, titled "CSR activities and environmental or voluntary disclosure" with 21 articles focusing on corporate social investment, greenhouse gas emissions, voluntary disclosure, and their impact on cost of capital; and (3) the blue cluster, titled "sustainability disclosure or toxic release" with 12 articles centered on corporate social decoupling and toxic release. Our findings provide valuable insights for enhancing a firm's environmental and economic performance and offer guidance for decision-makers, lenders, investors, shareholders, and policymakers on reducing a firm's cost of capital through sustainability policies and strategies. Additionally, we highlight unexplored dimensions for future research, including forecasting firm investments using decoupling techniques, exploring the mediating role of CSR on the cost of capital, and examining the relationship between carbon intensity, greenhouse gases, and toxic release.

Startup growth in pandemic: organizational resilience in an extreme crisis situation

PropósitoEste estudo examina a resiliência das startups peruanas durante a pandemia da COVID-19 usando uma abordagem proposta por Lengnick-Hall et al. (2011), na qual a resiliência tem um efeito fortalecedor nas organizações. Seu objetivo é identificar as características que permitiram que determinadas startups descobrissem oportunidades de crescimento em meio a essa crise.MetodologiaAnalisamos variáveis de capital humano, social e empresarial em start-ups peruanas usando dados de uma pesquisa realizada em julho de 2020. A regressão logística binária foi usada para determinar quais recursos organizacionais aumentaram a probabilidade de identificar oportunidades de crescimento durante a pandemia.ResultadosNossas análises sugerem que as capacidades humanas se tornam secundárias em crises extremas, como as pandemias. Os fatores essenciais para a resiliência das startups incluem parcerias comerciais com empresas estabelecidas, investimento de capital dos fundadores, maturidade dos negócios e adoção de tecnologias digitais avançadas.OriginalidadeEsta pesquisa fornece informações exclusivas sobre a resiliência e o crescimento de startups no Peru durante a crise da COVID-19. Observamos que o crescimento das empresas durante esse período foi amplamente imprevisível, com menos ênfase nas capacidades humanas. O estudo destaca a importância de fatores externos na resiliência, o papel da colaboração com empresas estabelecidas, a integração de tecnologias digitais avançadas e a influência dos investimentos dos fundadores e da maturidade dos negócios na superação de tempos difíceis.

The interplay between product development failures and alliance portfolio properties in the formation of exploration versus exploitation alliances

We investigate the role of product development failure as an important behavioral driver of explorative (vs. exploitative) search in interfirm collaborations. We also suggest that the effect of product development failure on the level of exploration in subsequent alliances hinges on the properties of the firm’s existing alliance portfolio. We suggest and show that the positive association between a firm’s product development failures and the level of exploration alliances is mitigated when the firm faces a high level of relational embeddedness. We also demonstrate that the positive association is amplified when the firm has a low level of technological diversity in its current alliance portfolio. We test our hypotheses using established firms’ alliances in the biopharmaceutical industry and find evidence that supports our arguments.

Dynamics of related and unrelated digital diversification in established firms: Strategies, programs, process, and outcomes

Research on digital transformation focuses on business models and technological innovation but it often lacks a detailed exploration of how firms develop, execute, and evaluate related and unrelated digital diversification strategies. To address this gap, this study employs a multiple case study approach to uncover the varied processes and outcomes of implementing digital diversification programs in established firms. The findings reveal that established firms frequently refine and adjust their digital diversification strategies to achieve desired results. Specifically, related digital diversification strategies benefit from well-defined market segments, clear technological focus, and robust senior management support. In contrast, unrelated digital diversification strategies thrive through extensive exploration and experimentation with novel digital technologies and markets, reduced senior managerial intervention and increased middle- and lower-level management involvement. Semi-related digital diversification strategies, which incorporate elements of both related and unrelated approaches, often encounter tensions owing to conflicting traditional and new program execution methods, posing significant realization challenges. Key factors identified as instrumental in the success of digital diversification strategies include technology, markets, management & organization, and program execution. The study concludes by discussing the managerial and academic implications and offers recommendations for future research in this domain.

Corporate Social Responsibility Practices and Financial Performance of New Ventures: The Moderating Role of Government Support

This study enhances our comprehension of the link between corporate social responsibility (CSR) practices and financial performance in the context of new ventures. Specifically, it investigates the impact of primary and secondary stakeholder CSR practices on the financial performance of new ventures. It also examines the moderating roles of direct and indirect government support on the effect of secondary stakeholder CSR practices on new ventures’ financial performance. The data collected from manufacturing firms in China demonstrate the following: (1) primary stakeholder CSR practices can promote the financial performance of new ventures; (2) compared with established firms, the negative effect of secondary stakeholder CSR practices on the financial performance of new ventures is stronger; (3) only indirect government support can positively moderate the relationship between secondary stakeholder CSR practices and new ventures’ financial performance, and such a moderating effect is stronger than that in established firms.

Knowledge diffusion in nascent industries: Asymmetries between startups and established firms in spurring inventions by other firms

AbstractResearch SummaryResearch on industry evolution highlights the role of knowledge‐building activities of startups and established firms in shaping knowledge evolution in a nascent industry. Yet, research thus far has overlooked the possibility that differences between startups and established firms might also shape the diffusion of the knowledge that they build. This study abductively explores this conjecture in the context of solar energy by examining the extent to which the photovoltaic cell inventions that firms create spur subsequent inventions by other firms. In contrast with existing literature highlighting differences across firms in the types of inventions they create, this study reveals asymmetries between startups and established firms in the diffusion of the knowledge underlying their inventions, even when they create inventions with similar attributes.Managerial SummaryThis study examines differences between startups and established firms in shaping knowledge diffusion in a nascent industry. Using data from photovoltaic cell patents, it shows that startups' inventions spur more subsequent inventions by other firms, even when compared to established firms' inventions with similar attributes. Findings indicate that such asymmetry is not driven by knowledge transfer mechanisms but rather by factors associated with knowledge spillovers. Specifically, findings reveal that university citations of a startup's patents draw other firms' attention to those patents, and that startups are less able to preempt rivals through cumulative inventions and less able to rely on litigiousness to deter rivals from building on their patents. These findings underscore the asymmetric influence startups have in shaping the knowledge underlying a nascent industry.

How Does Paradox Strategic Cognition Affect Radical Innovation Performance in Established Firms?

How Does Paradox Strategic Cognition Affect Radical Innovation Performance in Established Firms?

Entrepreneurial judgment governance adaptation for digital transformation in established firms

AbstractResearch SummaryWe contend that entrepreneurial judgment governance (EJG) is a profound yet poorly understood process in which firms sense, seize, and transform opportunities related to digital transformation. Grounded in a rich, multi‐case study of six large incumbent firms, we conceptualize and examine how firms change EJG through three phases: recognizing, distributing, and orchestrating. We find that EJG adaptation is at the heart of why some firms succeed in responding to the challenges associated with digital transformation while others fail. Implications and opportunities for future research are discussed.Managerial SummaryEntrepreneurial judgment governance (EJG) is central to explaining why some firms succeed in digital transformation (DT) whereas others do not. EJG determines who has the right to exercise entrepreneurial judgment (EJ) about allocating and using resources to address new opportunities. As distinct types of uncertainties require distinct EJ features, established firms face the challenge of EJG adaptation to the unique DT uncertainties. Based on a multiple‐case study, we offer a three‐stage framework that facilitates and expedites EJG adaptation to DT. Furthermore, our study highlights that strategic leaders who fail to comprehend the need for changes in EJG, neglect to establish an EJG architecture aligned with DT goals or overlook implementing necessary adjustments internally and externally, may hinder positive DT outcomes.