Strategy Scholars Research Articles

Firm-Specific Worker Incentives, Employee Retention, and Wage–Tenure Slopes

Strategy scholars have long studied the strategic implications of firm-specific human capital but have almost completely ignored their conceptual dual: firm-specific worker incentives. This paper proposes that firm-level incentives can also vary in firm specificity, and accordingly, firm-specific incentives may help to explain advantages independent of the firm specificity of human capital. Results from a proprietary data set, including data from 284 software development firms and matched employee-level compensation data for 8,208 software developers in 99 of those firms, suggest that firms with higher firm specificity in their incentive bundles may have lower dysfunctional employee turnover rates as well as lower wage–tenure slopes. In other words, these firms may lose fewer employees who they would prefer to keep and may be able to do so while still offering lower wage increases over time than their competitors in the labor market. Thus, firm-specific incentives may provide a viable alternative pathway to human capital–based competitive advantages.

Using the SHAPLEY value approach to variance decomposition in strategy research: Diversification, internationalization, and corporate group effects on affiliate profitability

AbstractResearch SummaryVariance decomposition methods allow strategy scholars to identify key sources of heterogeneity in firm performance. However, most extant approaches produce estimates that depend on the order in which sources are considered, the ways they are nested, and which sources are treated as fixed or random effects. In this paper, we propose the use of an axiomatically justified, unique, and effective solution to this limitation: the “Shapley Value” approach. We show its effectiveness compared to extant methods using both simulated and real data, and use it to explore how the importance of business group effects varies with group diversification and internationalization in a large, representative sample of European firms. We thus demonstrate the method's superior accuracy and its usefulness in asking and answering new questions.Managerial SummaryA key contribution of strategic management research to managerial practice is identifying drivers of firm performance that operate at firm, corporation, industry, and national levels. A branch of this research measures the relative importance of factors at these different levels in producing variation in firm performance, thus helping top managers focus efforts on aspects of their businesses most likely to yield performance differences. However, estimates produced by extant methods are sensitive to method used, and to modeling choices made. This paper proposes the use of the “Shapley Value” approach, which is free from such sensitivity, shows its effectiveness compared to extant methods, and uses it to explore how the importance of factors at the level of the business group varies with group diversification and internationalization.

Accounting for the Nuance in Information Asymmetries in the Hiring Process

This symposium showcases research by human resource management and strategy scholars on information asymmetries in the hiring context. The papers featured in the symposium offered nuanced perspectives on how the availability of incomplete information related to prospective applicants, managers, and organizations impacted the perceptions and decisions among both prospective employees and employers during the hiring process. The rich diversity of viewpoints represented in the symposium offers numerous starting points for multilevel and multidisciplinary discourse. Shields and Shadows: Stars’ Protective and Eclipsing Effects in the Face of Failure and Success Presenter: Rebecca Rheinhardt Kehoe; Cornell U. Presenter: Frederick Scott Bentley; Binghamton U.-State U. of New York The Varying Credibility of Company and Non-Company Information Sources Presenter: Julian Ernesto Martinez-Moreno; Cornell U. Presenter: Christopher Collins; Cornell U. Targeted Recruiting & Firm Attractiveness: The Divergent Role of Familiarity for Large & Small Firms Presenter: Rhett Andrew Brymer; U. of Cincinnati Presenter: Anni Peng; U. of Cincinnati Presenter: Laurens Bujold Steed; Miami U. Examining Contexts in which Managerial Openness to Voice Shapes Employee Attraction Presenter: John E. McCarthy; Cornell U.

The Non-Normality of Firm Performance and the Consequences for Strategic Management Theory

Firm performance represents an integral outcome for most strategic management scholarship and corresponding theoretical frameworks (e.g., agency theory, RBV, competitive dynamics, and many more). Despite the inherent idea across strategy research that firm performance is heterogeneous, we have little knowledge about just how heterogeneous it is across samples of firms and how this might impact empirical tests of theories used by strategy scholars. We investigate performance heterogeneity by examining the distributions of firm performance measures (e.g., ROA, ROS, EPS, etc.). We find that extreme levels of both skewness and kurtosis vary substantively across different measures, samples, transformations, and years. We create simulations to mimic these distributions and find that such non-normality negatively impacts the efficiency of OLS, robust regression, and OLS with winsorized values. In contrast, we illustrate that quantile regression is more appropriate for modeling dependent variables following these types of extremely non-normal distributions and represents an attractive approach for researchers examining firm performance. The primary implication of our research is that the extreme non-normality of performance measures makes it difficult for researchers to find support for theoretical frameworks when using models that focus on average relationships (e.g., OLS, multilevel models, etc.). Instead, we suggest strategy theories could benefit from re-examining theorized relationships using the types of non-parametric techniques that are more appropriate for the non-normal distributions of firm performance.

Touched by Greatness: Symbolic Value Creation and the Market for Vintage Guitars

Value perception is a key notion in strategy scholars and practitioners as well, but existing research has paid less attention to how consumers socially construct market value of a product. Building on the consumer benefit experienced perspective, we examine how symbolic value—perception and consumption of highly-visible, prestigious consumers—is transmitted to general customers’ value perception and is generalized across the market. Our preliminary analyses of the vintage guitar market between 1942 and 1988 demonstrate that consumption and authenticity perception of high-status musicians made critical impacts on market valuation of the products.

Managing Complexity: Time Pacing of Product Innovation in the Mobile App Industry

Time pacing is an important, yet understudied, area of inquiry for strategy scholars interested in fast-changing settings. To date, we know little about the conditions under which time pacing is used. Integrating research on time pacing and complexity, we propose that organizations rely on time pacing to organize important strategic activities, e.g., innovation introductions. Further, we theorize how different forms of complexity challenges condition organizations’ use of time pacing as a simple strategic approach. Our theoretical arguments receive significant empirical support based on analyses of generational product innovation in the mobile apps industry. We find that innovation introductions exhibit a regular temporal pattern, i.e., consistent time intervals. Moreover, different forms of complexity expose organizations to distinct challenges, such that product and action complexity facilitate, and market complexity inhibits, the use of time pacing as a simple strategic approach. This study offers important contributions for current understanding of time pacing and complexity.

Strategizing the Co-Developments of Business Models and Ecosystems for Platforms

Business Models and Ecosystems represent two important theoretical lenses for understanding value creation (and subsequent value capture). Each perspective brings great insights to understanding platform firms. When explaining platform’s value creation and capture mechanism, strategy scholars tend to focus on just one perspective. While each perspective has usefully explained mechanisms for value creation and capture and acknowledged the conceptual significance of another, interactive aspect between them has been under-explored. We suggest that bringing the two perspectives together brings added insights, especially in the cases where complementors can both create and destroy value. This paper advances theory by offering a preliminary integrated framework . Building on interdependencies as foundations of both ecosystem and business model, it shows how platform entrepreneurs can choose to design different interdependencies on a same service. With each design choice having different implications for both scale and scope, entrepreneurs can co-develop both platform business model and ecosystem. The integral view offers theoretical insights on 1) platform competitive dynamics, 2) changes in value creations and capture mechanisms understood as business model / ecosystem changes, and 3) entrepreneurial opportunity formations.

The Social Media, Politics of Disinformation in Established Hegemonies, and the Role of Technological Innovations in 21st Century Elections

Deep concerns about the rise in the number of technological innovations used for perpetrating viral dissemination of disinformation, via major social media platforms during multiparty elections, have been expressed. As strategy scholars observe, it is inimical to democratic systems whose election results are questioned by reason of faulty electoral processes. The Marxian alienation theory and Marilyn's ex-post facto research designs were used for evaluating the consequences of adopting political disinformation strategies (PDS) as tools for manipulation, via innovative artificial intelligent technologies, on established social media networks during recent democratic elections in the US and other rising hegemonies. The study observed that most governments and expert political campaigners continue to find it a politically viable platform suitable for swinging the votes of electorates in desired directions. Authors recommended stiffer regulations for media platforms and party agents as this would aid discontinuing the practice of PDS during elections in established and rising hegemonies.

Sustaining the lean ideology

PurposeThe purpose of this paper is to explore the interface between Lean strategy and organisational transformation by scrutinising the literature on why Lean strategies fail to be implemented and/or sustained.Design/methodology/approachAs a conceptual and research paper, it develops a hypothesis. It encompasses philosophical discussions and comparative studies of others’ work and Lean thinking alongside its links to the principles, ideology, philosophy and underpinning values. The search involved a total of 1,931 articles spanning across 75 different journals. The content analysis approach suggested by Mayring (2004) was selected.FindingsSuccessfully implementing Lean is more complex than often recognized within the literature, and the alignment between strategy and organisational transformation is repeatedly not undertaken. The investigation indicates policymakers need to view Lean as an ideology and not simply another process.Research limitations/implicationsThis paper addresses the inaccurate representation in the concept of Lean as a strategy. While a major evolution has occurred comprising the inputs perceived as imperative for Lean success, a translucent empathy of its philosophy alongside an acknowledgement of the magnitude of the change and transformation necessary has been comparatively perplexing. This paper has implications for academic scholars of strategy and organisational change, as well as for practitioners seeking to implement organisational change.Originality/valueEmpirical evidence suggests that most Lean strategies struggle. Customers are becoming more demanding, markets are becoming more customised, and product life-cycles getting shorter are dictating that Lean needs to be embraced as an ideology.

The Influence of Core Self-Evaluations on Group Decision Making Processes: A Laboratory Experiment

The personal trait called Core Self-Evaluations (CSE) has been receiving increasing attention from behavioral strategy scholars due to its ability to predict job performance and to explain some facets of decision-making processes. However, despite previous studies hypothesizing that managers with high values of CSE are intuitive thinkers, beyond any doubt of their capacities and that they significantly lead to positive results for their organization, no one has empirically investigated these assumptions. This gap can be substantiated by the following research question: “How do high Core Self-Evaluations influence team decision-making processes?”. Answering it provides insights on how the evaluations that decision makers make about situations (and the consequent actions that are implemented) highly depend on decision makers’ inner traits and their effect on cognition. To fill this gap, 120 graduate students—divided into groups of four—took part in a simulation game and were asked to make decisions acting the role of General Manager of a small-sized manufacturing firm. Tests aimed at identifying the CSE and intuitive/reflecting thinking approach of participants were administered; moreover, the performance resulting from their decision-making processes and their estimation of reached results were collected. Results show that an average level of CSE is preferable to balance intuitive and reflective thinking, as well as avoiding overconfidence bias and reaching the best performance possible. This work suggests that there is a huge misattribution in considering a high level of CSE as being beneficial for decision-making processes and consequent performance.

Leveraging diverse knowledge sources through proactive behaviour: How companies can use inter‐organizational networks for business model innovation

The relevance of business model innovation (BMI) for strategic renewal and competitive advantage has been increasingly recognized by both strategy scholars and managers. In this paper, we explore how inter‐organizational networks and firms' proactiveness influence BMI. By examining Dutch design companies, we show that having a network of companies with different sizes has a positive effect on BMI. We also observe a positive effect of ties change. Finally, we show the importance of firms' proactiveness. Through the discussion of network elements and proactiveness as antecedents of BMI, we contribute to the business model and social network literature.

Entry diversion: Deterrence by diverting submarket entry

AbstractResearch SummaryGoing back to Bain (1956), strategy scholars have long recognized the importance of deterring entry for sustaining incumbents' profits in an industry. We introduce a new mechanism, entry diversion, to better understand the empirical phenomenon of persistent firm entry in spite of investments in entry deterrence by incumbents in some industries. Entry diversion happens when preemptive strategic investments by incumbents decrease the expected future profits from a target submarket such that entrants choose to enter another submarket within the same industry. Empirical evidence from the global semiconductor manufacturing industry suggests that incumbents expand their capacities beyond demand growth, and that these investments effectively divert entry into other submarkets. Greenfield entrants are more responsive to entry diversion than incumbents.Managerial SummaryManagers have long understood that deterring entry of new players into their industry could sustain their firms' profits. In this article, we introduce a new mechanism, entry diversion, where the incumbent diverts potential entrants from its submarket toward other submarkets in the same industry. Entry diversion happens when preemptive strategic investments by incumbents decrease the expected future profits of the entrant in a submarket of the industry such that the entrant chooses not to enter the incumbent's submarket. Contrary to entry deterrence, new players will still enter the industry but settle in different submarkets. Empirical evidence from the global semiconductor manufacturing industry suggests that incumbents expand their capacities beyond demand growth, and that these investments effectively divert entry into other submarkets.

The Development of Strategic Cognition

Strategy scholars have long supposed that individual cognition can boost competitive advantage, but causal evidence is scarce. Here we empirically explore the competitive role of strategic cognition and two specific skills: strategic intelligence analytic skill. We begin by documenting their heterogeneous distribution, even among those trained in management. Then, we introduce highly competitive markets, where participants vie for cash. We find that performance is well predicted by the possession of the two skills. Next, we ask whether some form of strategic cognition can be developed to affect performance. We introduce a simple treatment, anchored in strategy theory. Treated participants perform much better than the control group. What is more: Markets with treated participants manifest lower inequality in outcomes. If cognitive skills can be developed, it can herald a prescriptive approach to the development of better strategists—and better markets.

CEO Activism and Stakeholder Opinion Formation: How Does Incongruence Affect Stakeholder Influence?

In recent years, we have seen an increase in the prevalence of corporate executives taking public stances on social and environmental issues that do not directly impact their firms. Strategy scholars, such as Chatterji and Toffel (2017), have begun to refer to this emergent phenomenon as CEO activism. Scholars within the domain of non-market strategy, however, have been slow to examine CEO activism, which is unfortunate insofar as this sub-field possesses the theoretical toolkit necessary for explicating this phenomenon. Thus, in drawing on the rich theoretical tradition within of non-market strategy and CSR, I argue that political CSR provides a useful conceptual foundation by which to theoretically enrich research on CEO activism, while CEO activism scholarship, on the other hand, is able to reciprocate by helping to extend the scope of political CSR theorizing beyond the socially responsible actions of the corporation to that of the CEO. Moreover, I further the CEO activism literature by engaging in a theoretical assessment of stakeholder (i.e. the general public, consumers, investors, and SMOs) reactions to CEO activism, when such action is both congruent and incongruent with firm action.

Addressing Strategy Endogeneity and Performance Heterogeneity: Evidence from Firm Multinationality

Our aim in this study is to present when strategy scholars can use a quantile estimator to examine the performance implications of strategies tinted with both strategy endogeneity and performance h...

How Much of a Problem is Omitted Variable Bias Really? Examining Strategy Research with the ITCV

Strategy scholars are increasingly concerned about biased empirical analyses from endogeneity. Treatments of the topic offer a dreary assessment, suggesting endogeneity is pervasive and remedies to...

Strategic Alliances And New Product Development In High-Tech Ventures: The Moderating Role Of Alliance Type And Alliance Capability

Strategy scholars have proposed that capacity for managing alliance can be a source of superior performance. This study focuses on the role of this capacity, and investigates how alliance management capability of entrepreneurial firms affects the relationship between a firm’s allying and its performance. Because the capability is inherently unobservable, we take alliance experience and average duration of each alliance as proxy variables for measuring alliance management capability. An analysis of multiple allies of entrepreneurial ventures in Korean photovoltaic industry indicate that capacity for managing varying allies, and alliance type positively moderate the relation between alliance and its innovation outcomes.

Knowledge comes but wisdom lingers! Learning orientation as the decisive factor for translating social capital into organisational innovativeness and performance in Turkey

The Turkish economy has been growing fast and Turkish organisations increasingly rival their Western competitors in terms of innovativeness. While strategy scholars primarily focus on internal capabilities such as learning orientation, network scholars typically consider external network ties as determinants of organisational success. Building on both research streams, our study develops and empirically tests an integrative framework that incorporates the specific cultural context of Turkey. Based on empirical data from 178 organisations, we demonstrate that in Turkey organisational innovativeness results from learning orientation mediating the effect of network ties on innovativeness. Thus, our study links external and internal explanations of what drives innovativeness and suggests that organisations in Turkey need to develop a network-enabled orientation towards learning. We make important recommendations for managers of Turkish organisations and those wishing to enter the Turkish market.

Knowledge comes but wisdom lingers! Learning orientation as the decisive factor for translating social capital into organisational innovativeness and performance in Turkey

The Turkish economy has been growing fast and Turkish organisations increasingly rival their Western competitors in terms of innovativeness. While strategy scholars primarily focus on internal capabilities such as learning orientation, network scholars typically consider external network ties as determinants of organisational success. Building on both research streams, our study develops and empirically tests an integrative framework that incorporates the specific cultural context of Turkey. Based on empirical data from 178 organisations, we demonstrate that in Turkey organisational innovativeness results from learning orientation mediating the effect of network ties on innovativeness. Thus, our study links external and internal explanations of what drives innovativeness and suggests that organisations in Turkey need to develop a network-enabled orientation towards learning. We make important recommendations for managers of Turkish organisations and those wishing to enter the Turkish market.

Organisational regulatory legitimacy, entrepreneurial orientation, and SME innovation: an optimal distinctiveness perspective

ABSTRACTThe optimal distinctiveness perspective argues that firms face competing pressures to be both ‘like’ and ‘different from’ their peers. On the one hand, institutional scholars assert that firms need to be similar to peers in order to gain legitimacy. On the other hand, strategy scholars insist that firms need to strive to be different to gain competitive advantage. In order to enrich the optimal distinctiveness perspective, the present study builds a conceptual model that addresses the relationships among organisational regulatory legitimacy, entrepreneurial orientation, and SME innovation under the context of China’s transition economy. Our empirical results show that organisational regulatory legitimacy has an inverted-U relationship with SME innovation. Further, entrepreneurial orientation strengthens this inverse-U shaped relationship. That is, entrepreneurial orientation magnifies both the positive and the negative effect of organisational regulatory legitimacy on SME innovation. This study echoes to the call to conduct broader optimal distinctiveness research by integrating institutional theory and strategic management. Furthermore, our findings provide new evidence for the strategic balance perspective of optimal distinctiveness.