Executive succession: The importance of social capital in CEO appointments

Research Summary: Firm performance and corporate governance have been shown to influence CEO selection, but our understanding of the role of social capital is more limited. In this study, we seek to provide further insight into the role of social capital by examining the influence of both “bonding” and “bridging” forms of social capital on CEO appointments. We find that candidates who have relational social capital, in terms of overlap with the CEO in organizational tenure, board tenure, and CEO tenure are more likely to be appointed as CEO. We also find that candidates who have external linkages to the CEO in the form of geographic, prestigious university, and prior employment affiliations are more likely to be appointed CEO. Managerial Summary: The appointment of a new CEO has significant and widespread implications for the firm’s future strategic direction and performance, the relationship between the board and CEO, and perceptions by investors, employees, and other key stakeholders. Our study finds that candidates who have shared connections and experiences with the CEO in terms of geographic, prestigious university, or prior employment affiliations as well as overlap in terms of organizational tenure, board tenure, and CEO tenure are more likely to be appointed CEO. Given the enormous impact that executive appointments have on the strategic direction and performance of the company, it is important to recognize that social factors such as shared experiences and connections influence how candidates are perceived, and thus, may affect appointment decisions.     

Structural vs. relational embeddedness: social capital and managerial performance

This paper examines the impact of managers' social capital on managerial performance. Two dimensions of social capital are compared—the structural embeddedness (i.e., configuration) of a manager's network of work relations and the relational embeddedness (i.e., quality) of those relations. Based on a sample of 120 product and sales managers in a Fortune 100 pharmaceutical firm, this paper presents evidence indicating that both elements of social capital influence managerial performance, although in distinct ways: structural embeddedness plays a stronger role in explaining more routine, execution‐oriented tasks (managerial sales performance), whereas relational embeddedness plays a stronger role in explaining new, innovation‐oriented tasks (managerial performance in product and process innovation). This research considers resource exchanges within firms as key to value creating behaviors and contributes a deeper understanding of how social capital influences productive resource exchanges. Copyright © 2005 John Wiley & Sons, Ltd.     

Organization–stakeholder fit: A dynamic theory of cooperation,compromise, and conflict between an organization and its stakeholders

Research Summary : We advance the concept of organization–stakeholder fit (O–S fit) to explain cooperative behavior between an organization and its stakeholders. O–S fit describes the compatibility that exists between an organization and a stakeholder when their characteristics are well matched. We highlight two dimensions of O–S fit: value congruence, or the supplementary fit of organizational and stakeholder values, and strategic complementarity, or the complementary fit of strategic needs and resources. For each dimension, we detail the unique relational factors—including core elements of trust, predictability, attraction/exchange, and communication—that motivate cooperation. We then explicate the ways in which value congruence and strategic complementarity dynamically interrelate over time. Finally, we consider how organization‐stakeholder misfit may result in alternative relational behaviors, such as conflict or compromise. Managerial Summary : We develop a new way of thinking about the relationship between organizations and stakeholders. Recognizing that positive relationships require a degree of fit or compatibility, we argue that cooperative behavior between an organization and its stakeholders is maximized when relational partners share both core values and strategic priorities. We explain that high fit along these two dimensions increases trust, relational predictability, attraction/exchange, and communication. We also describe how positive relationships might be formed with fit along only one dimension, and how negative relationships might result in the presence of misfit. Ultimately, we suggest that managers who want to foster positive relationships with stakeholders should concentrate on aligning their values and priorities, rather than simply concentrating on one or the other.     

Cognitive flexibility and adaptive decision‐making: Evidence from a laboratory study of expert decision makers

Research Summary : How can strategic decision makers overcome inertia when dealing with change? In this article we argue that cognitive flexibility (i.e., the ability to match the type of cognitive processing with the type of problem at hand) enables decision makers to achieve significantly higher decision‐making performance. We show that superior decision‐making performance is associated with using semiautomatic Type 1 cognitive processes when faced with well‐structured problems, and more deliberative Type 2 processes when faced with ill‐structured problems. Our findings shed light on the individual‐level mechanism behind organizational adaptation and complement recent work on strategic inertia. In addition, our findings extend management studies that have stressed the relevance of cognitive flexibility for responding to the demands of increasingly open, flexible, and rapidly changing organizations. Managerial Summary : Humans are creatures of habits. We tend to prefer known courses of action over new ones. In many cases, habits are good. However, when things change in unpredictable ways, the past may not be good guidance for the future. We argue that “cognitive flexibility”—the ability of understanding when to rely on habits vs. when to explore new courses of action—enables managers to switch from a “fast” decision mode, based on habits, to a “slow,” more deliberate decision mode that facilitates the exploration of new courses of action. Managers high in cognitive flexibility reflect on the situation at hand, recognize and value diversity in viewpoints, and integrate such diversity in their own decision processes. By valuing diversity, they are more likely to overcome inertia.     

企业社会资本与技术创新：基于吸收能力的实证研究

本文针对我国企业社会资本影响技术创新的机制问题展开分析,从企业社会资本的特征维度出发,引入吸收能力的视角,提出了基于吸收能力的企业社会资本与技术创新绩效的概念模型。在问卷调查的基础上,通过多元线性回归分析和结构方程模型分析,对我国企业社会资本如何影响技术创新的问题进行了实证研究。研究结果表明,在不考虑吸收能力作用的情况下,企业社会资本的结构、关系和认知等三个维度的水平对于我国企业技术创新绩效的提升均具有积极显著的作用;企业社会资本三个特征维度的水平通过提高吸收能力进而正向影响技术创新绩效;其中,认知维度在结构维度和关系维度发挥效应中承担中介变量的作用。为提高企业技术创新绩效,建议以知识的获取和利用为导向,注重企业社会资本三个维度水平的均衡提高。     

Knowledge,firm boundaries,and innovation: Mitigating the incumbent's curse during radical technological change

We explore the relationship between a firm's organization and its ability to face a radical technological change. We suggest that, during such a change, the presence of both in‐house upstream knowledge and downstream market linkages, within a firm's boundary, has its advantages. We test our predictions in the context of the robotics industry where manufacturers of mechanically controlled “brawny” robots, which were valued mainly for their payload capacity, faced the advent of electrically controlled “brainy” robots that emphasized accuracy and repeatability. We find that “preadapted” firms—the ones with prior relevant technological knowledge and with access to internal users of “brainy” robots—were the innovation leaders in the emerging new technology but were laggards in the old technology. Copyright © 2014 John Wiley & Sons, Ltd.     

I know something you don't know!: The role of linking pin directors in monitoring and incentive alignment

Increasing regulatory pressures have created specialization within boards, with more requirements and responsibilities being refocused to the committee level. Using data from S&P 1,500 firms, we find that board committee overlap associated with linking pin directors (i.e., those serving simultaneously on the audit and compensation committees) is an important conduit for knowledge transfer between boards' monitoring and incentive alignment functions. These directors are associated with lower executive compensation and influence pay mix. In studying the dynamics behind this process, we find that newly created linking pins improve monitoring effectiveness whereas recently dissolved linking pins decrease it. We also find that linking pins are all the more important when managers make less conservative accounting choices. Copyright © 2014 John Wiley & Sons, Ltd.     

Alleviating managerial dilemmas in human‐capital‐intensive firms through incentives: Evidence from M&A legal advisors

Research summary: We examine how human‐capital‐intensive firms deploy their human assets and how firm‐specific human capital interacts with incentives to influence this deployment. Our empirical context is the UK M&A legal market, where micro‐data enable us to observe the allocation of lawyers to M&A mandates under different incentive regimes. We find that law firms actively equalize the workload among their lawyers to seek efficiency gains, while “stretching” lawyers with high firm‐specific capital to a greater extent. However, lawyers with high firm‐specific capital also appear to influence the staffing process in their favor, leading to unbalanced allocations and less sharing of projects and clients. Paradoxically, law firms may adopt a seniority‐based rent‐sharing system that weakens individual incentives to mitigate the impact of incentive conflicts on resource deployment. Managerial summary: The study highlights the dilemmas when professional service firms allocate their key individuals to incoming projects, and the role that monetary incentives play in aggravating or alleviating these dilemmas. In the context of UK M&A law firms, we find that partners have a tendency to be attached to too many projects and not to share enough work, which is exacerbated when individual monetary incentives are stronger. Firms adopting a seniority based incentive system (lockstep system) are able to alleviate this effect. This implies that there is a trade‐off between rewarding personal performance versus balancing workloads and fostering collaboration among professionals. Copyright © 2015 John Wiley & Sons, Ltd.     

The impact of culture on the relationship between governance and opportunism in outsourcing relationships

To address concerns of opportunism, outsourcing firms are encouraged to deploy contractual and relational governance. The individual and collective effects of these mechanisms have been previously examined but not in specific contexts. This study examines the effects of contractual and relational governance on provider opportunism, incorporating the moderating influence of a “shift parameter”—national culture. Our results reveal that contractual governance is more effective in individualistic and low uncertainty avoidance cultures. Relational governance is more effective in collectivist and high uncertainty avoidance societies. The individualism–collectivism dimension also moderates the joint effect of these mechanisms. While the mechanisms are generally complementary in mitigating opportunism, a singular focus on either contractual or relational can be just as effective under situations of high individualism and collectivism, respectively. Copyright © 2014 John Wiley & Sons, Ltd.     

上海医药产业发展战略的选择

“知彼知己,胜乃不殆;知天知地,胜乃可全”,是中国春秋时期著名军事家孙武战略思想。上海医药要实现跨越式发展,选择正确的发展战略方向非常重要。本文提出上海医药产业发展应采取资源集聚、引资发展、品牌引领、资本扩张、联动发展等五大战略。     

Downstream Vertical Foreclosure and Upstream Innovation

I examine a link between downstream foreclosure and upstream innovation. The crucial ingredient of the model is the presence of dynamic economies of scale upstream in the form of competition in R&D. The reason an upstream supplier has a captive buyer is to force rival suppliers to incur the disadvantages of low-scale production and discourage them from innovating. The downstream buyer is offered favorable terms and is “convinced” to sign an exclusive supply contract and accept captivity. In this context, downstream foreclosure may reduce consumer welfare.     

Gains from Specialization and Free Agency: The Story from the Gridiron

In the field of personnel economics, there are few opportunities to convincingly test for salary returns to specialization as against versatility. This paper performs such a test by modeling returns to performance measures associated with two different skills practiced by running backs in the National Football League. We find gains to both specialization and free agency with substantial predicted differences in returns for alternative skills. These differences vary across the salary distribution. In the top half of the salary distribution, model simulations show that specialists in either particular skill generate higher marginal returns than do versatile players.     

Start-ups,entrepreneurial networks and equity crowdfunding: A processual perspective

This paper outlines findings from a large-scale interview based study of start-ups who obtained equity crowdfunding in the UK. It takes a novel integrative approach towards the analysis of entrepreneurial networks by examining both personal and business networks involved in the equity crowdfunding process. Adopting a processual perspective, the empirical findings show that networks and social capital play a critical role in the crowdfunding process. Start-ups leverage, build and draw upon a complex array of network actors and “ties” as they move through the different stages of their crowdfunding journey. The paper shows that this form of funding confers important relational benefits to recipients which amount to “more than money”. It concludes that equity crowdfunding is a highly “relational” form of entrepreneurial finance, requiring holistic forms of empirical investigation. Implications for theoretical development, managerial practice and further research are outlined.     

Examining a key corporate role: The influence of capital allocation competency on business unit performance

Research on the role of the corporate office in firm performance has focused on establishing how much performance variance can be attributed to a “corporate effect,” with little attention devoted to understanding how this influence occurs. In this study, we model capital allocation competency as a dynamic managerial capability and find that lower levels of allocation competency in the form of excess investment to business units with relatively poorer future prospects reduce business unit performance. We also find that market conditions affect performance implications of capital allocation—allocation competency is more salient in more competitive markets. These results enhance our understanding of how the corporate office influences business unit performance through its role in allocating capital across business units. Copyright © 2014 John Wiley & Sons, Ltd.     

Strategic human capital management in the context of cross‐industry and within‐industry mobility frictions

Research Summary: We develop and test a theory examining how frictions that restrict mobility across industries and frictions constraining mobility within an industry can co‐occur to effectively isolate individual human capital, ultimately changing the firm's make‐versus‐buy decision for human capital. Empirically, we demonstrate that when cross‐industry frictions in the form of limited skill transferability and within‐industry frictions in the form of noncompete enforceability are both present, employees exhibit longer tenures, firms hire workers with less initial experience, firms change the amount and nature of training provided, and wages marginally increase. These findings suggest that sufficiently strong and complementary mobility frictions shift the emphasis of firms’ human capital management practices toward internal development of human capital relative to acquisition on the external market. Managerial Summary : In the face of frictions to employee mobility both within and across industries, which we capture empirically using measures of noncompete enforceability and limited skill transferability across industries, firms tend to hire less experienced workers, such workers exhibit longer tenures, and firms invest more in their training, particularly in the development of new skills. Our findings imply that for firms operating under such complementary frictions, better hiring and internal development capabilities are particularly important for performance, while those firms without such capabilities may benefit from considering ways to circumvent the mobility frictions, including moving out of the focal state or lobbying for different noncompete laws.     

Enabling relationship structures and relationship performance improvement: The moderating role of relational capital

Based on data from 248 asymmetric subcontractor–customer relationships in Finland, this study analyzes the direct impact of relationship structures, relational capital, and the subcontractor's relationship-specific investments on the improvement of operational relationship performance. In addition, the study investigates the moderating role of relational capital on the links between relationship structures, relationship-specific investments, and relationship performance improvement. We found that both relational capital and relationship-specific investments directly affect the relationship performance improvement, while relationship structures do not. However, relational capital positively moderates the link between relationship structures and relationship performance improvement by creating enabling structures. Thus, our findings contribute to the existing literature and discussion on enabling organizational and relationship structures by demonstrating how relational capital changes the role and impact of relationship structures.     

The power and limits of modularity: A replication and reconciliation

Research Summary: We ask two questions: First, what are the underlying mechanisms that explain the power of modularity? Second, is the power of modularity robust in nonmodular problems? We replicate and then reconcile the key results in two prior models on modularity: E&L and S‐search. Our results yield several important insights. First, a significant portion of the advantage enjoyed by S‐search is attributed to multi‐bit mutation. Second, organization‐evaluation needs to be used in combination with multi‐bit mutation. Third, when the underlying problem structure becomes nonmodular, S‐search outperforms E&L search, even though the advantage is reduced. More generally, organizational designers need to pay close attention to how different elements of modular search interact, and avoid making incremental adjustments. Managerial Summary: Modularity in product or organizational design is an approach that divides a system into smaller modules and attempts to augment the system level performance by experimenting with new modules. Because of its potential benefits such as parallel problem solving, adaptability in turbulent environment, or high speed in experimentation, both scholars and practitioners subscribed to the “power of modularity” thesis. Despite its popularity, there are significant number of cases where the superiority of modular design does not hold. We compare and contrast two representative prior studies that had different views on modeling organizational evolution under a modular design principle. By doing so, we are able to uncover what contributes to the superiority of modular design. Our results suggest that, when conducting experimentation under a modular design, it is important to (a) experiment multiple decision components simultaneously within a single module; and (b) allow evaluation of the changes to be made by the module‐level manager not by the organization‐level manager. When the manager does not know whether the modularity in organizational design fits with the modularity in the task, it is advised to do multiple experimentation in a single module at a time while allowing the organization‐level manager to evaluate the changes.     

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.     

Is there a “Dark Side” to Monitoring? Board and Shareholder Monitoring Effects on M&A Performance Extremeness

Research summary: W e investigate the effects of monitoring by boards of directors and institutional shareholders on merger and acquisition (M&A ) performance extremeness using a sample of M&A deals from 1997 to 2006. Both governance research and legal reforms generally have espoused a “raise all boats” view of monitoring. We instead investigate whether monitoring may serve as a double‐edged sword that limits CEO discretion to undertake both value‐destroying M&A deals and value‐creating ones. Our findings indicate that the relationship between monitoring and M&A performance is more complex than previously believed. Rather than “raising all boats” in a shift towards better M&A outcomes, monitoring instead is associated with lower M&A losses, but also with lower M&A gains . Managerial summary: M ergers and acquisitions (M&A s) are a quintessential corporate activity. There were $3.8 trillion worth of M&A deals in 2015, despite scholars and practitioners reporting that M&A s often perform poorly. We question the widespread belief that more vigilant monitoring by boards of directors and large shareholders will raise M&A performance, overall. Put differently, does monitoring constrain CEO s' discretion to pursue bad deals, while simultaneously encouraging them to pursue good ones? We find that monitoring limits both large M&A losses and large M&A gains. Contrary to widely held beliefs, our results indicate that constraining executives' ability to pursue value‐destroying M&A deals does not simultaneously encourage or enable CEO s to pursue value‐creating deals . Copyright © 2017 John Wiley & Sons, Ltd.     

Nested identities as cognitive drivers of strategy

Research Summary: Organizations face tensions to conform to industry norms for legitimacy yet differentiate for competitive advantage when implementing strategies. We suggest this tension is due to and resolved through organizations’ cognitive negotiations of multiple levels of identity. Through an inductive study in the recreational vehicle industry, we find that organizations concurrently draw on identities at the organizational, industry, and strategic group levels to formulate and enact specific competitive actions. Specifically, we find that organizational identity relates to decisions on product offerings; industry identity relates to downstream strategy; and strategic group identity relates to upstream strategy, firm boundaries, and expansion mode. Our findings highlight the importance of strategic group identity and inform a grounded model describing how organizations draw upon different levels of identity to influence strategy. Managerial Summary: Many managers experience tensions of differentiating their firms’ competitive actions from rivals, while conforming with industry norms and practices. In this article, we argue that a manager can navigate these tensions by understanding their firm, strategic group, and industry identities and how these identities interrelate. Through a qualitative case study of the U.S. recreational vehicle industry, we show that each level of identity influences different competitive actions, with firm identity connected to product offerings, industry identity related to managing downstream distribution, and strategic group identity related to firm boundary and acquisition strategies. Overall, strategic group identity is the most critical for managers as this level filters how they view competitors and provides the rules of competition.