Explaining post‐IPO venture performance through a knowledge‐based view typology

We extend the knowledge‐based view with a new typology and its application to post‐IPO firm performance. The typology categorizes knowledge development activity along the dimensions of familiarity (whether the firm has experience with the knowledge or it is new) and source (whether the firm creates it independently or with partners). We use this typology to determine direct and interaction effects of knowledge development activity on survival, RoA, and Tobin's q of newly public firms. Using a sample of 1,056 high‐technology manufacturing IPOs in 1990–2005, we find that focused, internal knowledge development correlates with higher performance. We also find a positive interaction effect in combining focused, internal and diversifying, alliance‐based knowledge development, and a negative interaction effect in combining diversifying, internal and alliance‐based knowledge development. Copyright © 2013 John Wiley & Sons, Ltd.     

Firm heterogeneity in complex problem solving: A knowledge‐based look at invention

Research summary : The knowledge‐based view suggests that complex problems are best solved under hierarchical (within‐firm) governance. We examined why firms assumed to be in general alignment with this theory might nonetheless produce solutions of varying usefulness. We theorize that a firm's internal knowledge variety (IKV) is associated with its capacity to support cross‐domain knowledge flows during search, and its ability to identify and explore promising areas on the solution landscape. We further theorize that partner knowledge in familiar (unfamiliar) domains can offset specific weaknesses in searching rugged landscapes, inherent with low or high (moderate) IKV. We find support for these ideas in the context of drug discovery, extending KBV's focus on governance alignment to explain variation in problem‐solving effectiveness within hierarchy. Managerial summary : Firms that concentrate their inventive efforts in a few technological domains, but also dabble in several others, have problem‐solving advantages: they can better support knowledge transfer and recombination across domains. Firms that focus too narrowly or spread their inventive efforts thinly across many domains lose these advantages, but might compensate through alliance partnerships. Our study of drug discovery shows that while firms with very low or high knowledge variety tend to produce weaker solutions than firms in the moderate range, their inventive performance improves when alliance partners afford them access to additional knowledge in familiar domains. We explain how the combination of firm and partner knowledge enables firms to better identify, evaluate, and implement alternative solutions to complex problems. Copyright © 2016 John Wiley & Sons, Ltd.     

Firm‐specific knowledge resources and competitive advantage: the roles of economic‐ and relationship‐based employee governance mechanisms

The resource‐based view of the firm emphasizes the role of firm‐specific resources, especially firm‐specific knowledge resources, in helping a firm to achieve sustainable competitive advantage. However, the deployment of firm‐specific knowledge often requires key employees to make specialized human capital investments that are not easily redeployable to other settings. Thus, in the absence of effective safeguards and trust building devices, employees with foresight may be reluctant to make such specialized investments. This study explores both economic‐ and relationship‐based governance mechanisms that might mitigate this underinvestment problem. Effective use of these governance mechanisms enables a firm to obtain greater performance from its efforts to deploy firm‐specific knowledge resources. Empirical results further support these key arguments. Copyright © 2009 John Wiley & Sons, Ltd.     

Technological development at the boundaries of the firm: a knowledge‐based examination in drug development

This paper examines how the knowledge‐based view (KBV) can be applied to firm boundary decisions and the performance implications of those decisions. At the center of the paper is a theoretical and empirical examination of how firms most efficiently organize for technological development. We find that distinct organization approaches are advantaged in the speed of technological development depending on the structure of technological development problems and the depth of firms' technological area experience. We make theoretical and empirical contributions to KBV research that examines knowledge development and transfer. Drug development in the pharmaceutical industry serves as our empirical setting. Copyright © 2012 John Wiley & Sons, Ltd.     

Corporate governance antecedents to shareholder activism: A zero‐inflated process

Research summary: Shareholder activism has become more widespread, yet the role of corporate governance as antecedent to shareholder activism remains equivocal. We propose a new conceptual model that characterizes the stochastic of observable shareholder activism as a compound product of two latent components representing (1) shareholder activists' propensity to target a company and (2) executives' propensity to settle activists' demands privately. Our model explicitly decouples corporate governance expectations for the two latent components embedded in activism process, and thus allows us to relax assumptions of homogenous shareholder interests and constrained managerial discretion where corporate managers are expected to negotiate privately and settle only value‐creating activist demands. Bayesian analysis of zero‐inflated Poisson regression reveals that corporate governance relationships with activism vary across shareholder demands and private settlements. Managerial summary: Increasing shareholder activism has generated debates as to whether activism promotes managerial accountability and responsibility or instead encourages managerial short‐termism. Our research model allows for heterogeneous interests among a company's shareholders. We theorize and empirically investigate a broader role of corporate governance: governance mechanisms need to ensure that executives are not (1) ignoring activists' value‐increasing demands or (2) accommodating activists' value‐decreasing demands in a private, opaque manner that disenfranchises other shareholders. Our results indicate that corporate governance implications differ for visible shareholder demands in contrast with private activism. A plausible application of our model is that it provides estimates of the probability of the numbers of shareholder demands to be received by a firm and the probability of privately settling a demand. Copyright © 2015 John Wiley & Sons, Ltd.     

A Bayesian operationalization of the resource‐based view

This paper argues that the gap between the theoretical utility and the practical utility of the resource‐based view (RBV) may be narrowed by operationalizing the theory more consistently with Penrose's original framework. The operationalization proposed here is a twofold approach. First, the RBV may be enhanced by the explicit recognition of Penrose's two classes of resources, namely, administrative resources and productive resources. This distinction suggests a focus on the administrative decisions of managers that lead to economic performance. Second, we argue that the RBV is a theory about extraordinary performers or outliers—not averages. Therefore, the statistical methods used in applying the theory must account for individual firm differences, and not be based on means, which statistically neutralize firm differences. We propose a novel Bayesian hierarchical methodology to examine the relationship between administrative decisions and economic performance over time. We develop and explain a measure of competitive advantage that goes beyond comparisons of economic performance. This Bayesian methodology allows us to make meaningful probability statements about specific, individual firms and the effects of the administrative decisions examined in this study. Copyright © 2004 John Wiley & Sons, Ltd.     

Toward greater understanding of market orientation and the resource‐based view

Connor's commentary offers a series of thoughtful comments on the ideas presented in Hult, Ketchen, and Slater (2005). We focus on two of his contentions in our response. First, we argue that the theory underlying our study—the resource‐based view—is not tautological. This is because resources and performance are not directly related. Instead, realizing the potential value of resources depends on those resources being exploited through a firm's strategic actions. Second, we disagree with Connor's contention that market‐oriented and customer‐led firms lie along a continuum. We propose a richer conceptualization centered on a two‐by‐two matrix that contains market‐oriented firms, customer‐led firms, and two additional types. Copyright © 2007 John Wiley & Sons, Ltd.     

Testing a model of reasoned risk‐taking: governance,the experience of principals and agents,and global strategy in high‐technology IPO firms

Research on the governance of risky ventures, like the initial public offerings (IPOs) of high‐technology firms, has focused primarily on the relationship between governance mechanisms and firm performance. While such an emphasis is clearly important, it does little to shed light on potential relationships between governance and the strategies pursued by risky firms, nor does it take into account the complementary role of key stakeholders in affecting those strategies. To partially remedy this deficit we integrate agency and behavioral perspectives to develop a theory of ‘reasoned risk‐taking,’ whereby the nature of risks undertaken is a consequence of the interaction of governance mechanisms and stakeholder characteristics. We demonstrate our theory by predicting when corporate governance should be associated with strategic risk‐seeking beyond a firm's technical core—as seen in the degree to which it has expanded internationally. Surprisingly, even though venture capitalists (VC) are risk specialists, we find that technology‐based IPO firms are less likely (i.e., a negative relationship) to have extensive global sales when they are backed by a VC. In support of our reasoned risk‐taking theoretical framework, we find that VCs are indeed risk‐seeking when VC backing is complemented by the international experience of their board appointees, top management team (TMT) members, or both. IPO firms with significant insider ownership are similarly global risk‐seekers, and those effects are strongest with an internationally seasoned board and TMT at the helm. Copyright © 2003 John Wiley & Sons, Ltd.     

Corporate social responsibility as an employee governance tool: Evidence from a quasi‐experiment

Research summary : This study examines whether companies employ corporate social responsibility (CSR) to improve employee engagement and mitigate adverse behavior at the workplace (e.g., shirking, absenteeism). We exploit plausibly exogenous changes in state unemployment insurance (UI) benefits from 1991 to 2013. Higher UI benefits reduce the cost of being unemployed and hence increase employees' incentives to engage in adverse behavior. We find that higher UI benefits are associated with higher engagement in employee‐related CSR. This finding suggests that companies use CSR as a strategic management tool—specifically, an employee governance tool—to increase employee engagement and counter the possibility of adverse behavior. We further examine plausible mechanisms underlying this relationship. Managerial summary : This study examines whether companies employ corporate social responsibility (CSR) to improve employee engagement and mitigate adverse behavior at the workplace (e.g., shirking, absenteeism). We find that companies react to increased risk of adverse behavior by strategically increasing their investment in employee‐related CSR (e.g., work‐life balance benefits, health and safety policies). Our findings have important managerial implications. In particular, they suggest that CSR may help companies motivate and engage their employees. Hence, companies dealing with employees that are unmotivated, regularly absent, or engage in other forms of adverse behavior, may find it worthwhile to design and implement effective CSR practices. Further, our findings suggest that CSR can be used as employee governance tool. Accordingly, managers could benefit from integrating CSR considerations into their strategic planning. Copyright © 2015 John Wiley & Sons, Ltd.     

A resource‐based view of manufacturing strategy and the relationship to manufacturing performance

This paper examines manufacturing strategy from the perspective of the resource‐based view of the firm. It explores the role of resources and capabilities in manufacturing plants that cannot be easily duplicated, and for which ready substitutes are not available. Such resources and capabilities are formed by employees' internal learning based on cross‐training and suggestion systems, external learning from customers and suppliers, and proprietary processes and equipment developed by the firm. Based on data from 164 manufacturing plants, the paper empirically demonstrates that competitive advantage in manufacturing (as measured by superior plant performance) results from proprietary processes and equipment which, in turn, is driven by external and internal learning. The implication is that resources such as standard equipment and employees with generic skills obtainable in factor markets are not as effective in achieving high levels of plant performance, since they are freely available to competitors. The paper also demonstrates the important role of internal and external learning in developing resources that are imperfectly imitable and difficult to duplicate. Copyright © 2002 John Wiley & Sons, Ltd.     

The persistence of knowledge‐based advantage: an empirical test for product performance and technological knowledge

Resource‐based theory maintains that intrinsic characteristics of resources and capabilities, such as their tacitness, complexity, and specificity, prevent imitation and thereby prolong exceptional performance. There is little direct evidence to verify these claims, yet a substantial literature encourages firms to formulate competitive strategies around resources with these attributes. Further, work outside the resource‐based tradition suggests that these attributes can slow innovation, and it is not clear when this effect outweighs the benefits of inimitability. This paper seeks to clarify whether and how the complexity, tacitness, and specificity of a firm's knowledge affect the persistence of its performance advantages. We find that the complexity and tacitness of technological knowledge are useful for defending a firm's major product improvements from imitation, but not for protecting its minor improvements. The design specificity of technological knowledge delayed imitation of minor improvements in this study. Copyright © 2002 John Wiley & Sons, Ltd.     

The effectiveness of contractual and trust‐based governance in strategic alliances under behavioral and environmental uncertainty

Research summary: 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. Managerial summary: Strategic alliances allow firms to gain greater efficiency and create value. Yet, many such alliances fail because they are not able to deal with the twin challenges posed by behavioral and environmental uncertainty. Findings from our meta‐analysis imply that under conditions of high behavioral uncertainty and low‐to‐moderate levels of environmental uncertainty, the use of trust‐based governance alongside contractual governance might enhance the latter's effectiveness. The combined effectiveness of contractual and trust‐based governance under high levels of both behavioral and environmental uncertainty is not obvious. When both behavioral and environmental uncertainty are high, contractual governance hurts alliance performance while trust‐based governance does not function at its best either. Under these conditions, it might be better for firms to turn to hierarchy or vertical integration. Copyright © 2015 John Wiley & Sons, Ltd.     

Communication and attention dynamics: An attention‐based view of strategic change

Research Summary : The attention‐based view (ABV) has highlighted the role of organizational attention in strategic decision making and adaptation. The tendency to view communication channels as “pipes and prisms” for information processing has, however, limited its ability to address strategic change. We propose a broader role for communication as a process by which actors can attend to and engage with organizational and environmental issues and initiatives and argue that such a view can significantly advance understanding of strategic change. On this basis, we offer suggestions for future research on communication practices, vocabularies, rhetorical tactics, and talk and text in shaping organizational attention in strategic change. We also maintain that this enhanced view of the ABV can help advance research on dynamic capabilities, strategy processes, strategy‐as‐practice, and behavioral strategy. Managerial Summary : To further enhance our capabilities to manage strategic change and renewal processes in organizations, we need a better understanding of how to manage organizational attention. In this article, we highlight the importance of understanding the role of communication and discuss the use of different communication practices, vocabularies, rhetorical tactics, and talk and text as possible levers that can be used to dynamically shape organizational attention. We call for further research to advance the understanding of how these levers can be used to influence the ways in which different sets of strategic issues, initiatives, and action alternatives are handled. We believe that such an enhanced view of organizational attention can enable the development of new, improved strategy practices to manage strategic change and renewal processes.     

Testing metric equivalence in cross‐national strategy research: an empirical test across the United States and Japan

We propose a conceptual and analytical framework for assessing metric equivalence in cross‐national strategy research. We illustrate this framework by testing the equivalence of measurement models for a set of strategy constructs across the United States and Japan. Results of a two‐group LISREL analysis conducted on a data set of 447 interorganizational relationships reveal that some constructs have strong cross‐national equivalence, while others need content respecification or reconceptualization. We discuss implications and offer suggestions about how to conduct empirical strategy research in cross‐national settings. Copyright © 1999 John Wiley & Sons, Ltd.     

Managing knowledge in foreign entry strategies: a resource‐based analysis

International strategies vary in their potential to exploit and augment a firm's resources, especially its knowledge base. Resource‐based analysis suggests clustering the diverse entry modes in terms of their exploitation and augmentation characteristics. We thus introduce a new categorization of entry modes based on their potential to augment the resources of an entrant. We then explore the antecedents of these modes, and advance testable propositions delimiting for which firms and in which circumstances each mode maximizes long‐term value creation. Finally, we outline how our resource‐based framework complements transaction‐cost‐based frameworks. Copyright © 2009 John Wiley & Sons, Ltd.     

Comparing the resource‐based and relational views: knowledge transfer and spillover in vertical alliances

We compare resource‐based and relational perspectives to examine competitive advantages within the context of vertical learning alliances. Previous research has shown that through such alliances suppliers acquire knowledge to forge new capabilities and attain performance improvements. We ask whether such improvements are exclusive to the learning partnership, or are available in other average partnerships of this supplier. We posit that the extent to which such performance improvements are partnership exclusive depends on whether the newly forged capabilities lie entirely within the supplier firm's boundaries, or at the learning dyad level. As such, we untie two forms of performance improvements arising from learning dyads. While the resource‐based view helps explain the performance gains learning suppliers deploy across average partners, the relational view reveals the additional performance edge that remains exclusive to the learning partnership. Based on empirical evidence from a survey of 253 suppliers to the equipment industry, we find that partnership exclusive performance (i.e., ‘relational performance’), the true source of learning dyads' competitive advantage, is a function of suppliers acquiring know‐how within the dyad, developing dyad‐specific assets and capabilities, and structuring buyer‐supplier relational governance mechanisms. We discuss implications for research and practice. Copyright © 2008 John Wiley & Sons, Ltd.     

Productivity enhancement at home via cross‐border acquisitions: The roles of learning and contemporaneous domestic investments

We examine whether ex post domestic productivity gains accrue to firms making cross‐border acquisitions. We argue that cross‐border acquisitions can enhance the acquirers' productivity at home, and we posit that these domestic productivity gains will be greater when there are learning opportunities in the target's host country and when contemporaneous domestic productivity‐enhancing investments are made by the acquirer in conjunction with the acquisition. These predictions are supported by data drawn from a sample of French acquiring and nonacquiring firms. Our results indicate that cross‐border acquisitions and investing in productivity at home are complementary: each makes the other more beneficial to firm productivity. Copyright © 2014 John Wiley & Sons, Ltd.     

Empirical research on the resource‐based view of the firm: an assessment and suggestions for future research

The resource‐based view (RBV) is one of the most widely accepted theories of strategic management. However, to date no systematic assessment of the RBV's level of empirical support has been conducted. In response, a sample of RBV‐grounded empirical articles was analyzed from which it was found that the RBV has received only modest support overall and that this support varies considerably with the independent variable and theoretical approach employed. It is therefore suggested that scholars avoid the tendency to test models reflecting early incarnations of the RBV and instead test those that incorporate its more contemporary theoretical extensions. Copyright © 2007 John Wiley & Sons, Ltd.     

Explaining interfirm cooperation and performance: toward a reconciliation of predictions from the resource‐based view and organizational economics

Interfirm cooperation and its performance implications are examined in the context of two widely cited theoretical approaches to organizations. Broadly speaking, the resource‐based view suggests that firms seek to capitalize on and increase their capabilities and endowments, whereas organizational economics asserts that firms focus on minimizing the costs of organizing. Although these perspectives agree on managers’ likely actions in many areas, their predictions diverge when interfirm cooperation is considered. We take a step toward reconciling these differences by positing that firms place resource‐based concerns in front of considerations from organizational economics when deciding whether or not to engage in interfirm cooperation. We examined this prediction using data from 94 publicly held restaurant chains. The results support our integrated view, but also suggest that giving primacy to resource concerns detracts from the performance of some firms. We derive several implications of these findings in an effort to guide subsequent inquiry. Copyright © 1999 John Wiley & Sons, Ltd.