Old technology meets new technology: complementarities,similarities, and alliance formation

Alliance formation is commonplace in many high‐technology industries experiencing radical technological change, where established firms use alliances with new entrants to adapt to technological change, while new entrants benefit from the ability of established players to commercialize the new technology. Despite the prevalence of these alliances, we know little about how these firms choose to ally with specific firms given the range of possible partners they may choose from. This study explores factors that lead to alliance formation between pharmaceutical and biotechnology companies. We focus on the alliance tie as the unit of analysis and argue that dyadic complementarities and similarities directly influence alliance formation. We then introduce a contingency model in which the positive effect of complementarities and similarities on alliance formation is moderated by the age of the new technology firm. We draw theoretical attention to the intersection between levels of analysis, in particular, the intersection between dyadic and firm‐level constructs. We find that a pharmaceutical and a biotechnology firm are more likely to enter an alliance based on complementarities when the biotechnology firm is younger. Another noteworthy finding is that proxies for broad capabilities appear to be at least as effective, if not more so, in predicting alliance formation compared to fine‐grained science and technology‐related indicators, like patent cross‐citations or patent common citations. We conclude by suggesting that future studies on alliance formation need to take into account interactions across levels; for example, how dyadic capabilities interact with firm‐level factors, and the advantages and disadvantages of more or less fine‐grained measures of organizational capabilities. Copyright © 2007 John Wiley & Sons, Ltd.     

Responding to public and private politics: corporate disclosure of climate change strategies

The challenges associated with climate change will require governments, citizens, and firms to work collaboratively to reduce greenhouse gas emissions, a task that requires information on companies' carbon risks, opportunities, strategies, and emission levels. This paper explores the conditions under which firms participate in this endeavor. Building on theories of how social activists inspire changes in organizational norms, beliefs, and practices, we hypothesize that shareholder actions and regulatory threats are likely to prime firms to adopt practices consistent with the aims of a broader social movement. We find empirical evidence of direct and spillover effects. In the domain of private politics, shareholder resolutions filed against a firm and others in its industry increase a firm's propensity to engage in practices consistent with the aims of the related social movement. Similarly, in the realm of public politics, threats of state regulations targeted at a firm's industry as well as regulations targeted at other industries increase the likelihood that the firm will engage in such practices. These findings extend existing theory by showing that both activist groups and government actors can spur changes in organizational practices, and that challenges mounted against a single firm or a single industry can inspire both firm and field‐level changes. Copyright © 2009 John Wiley & Sons, Ltd.     

TOP MANAGEMENT TEAM AGREEMENT ABOUT THE STRATEGIC DECISION PROCESS: A TEST OF SOME OF ITS DETERMINANTS AND CONSEQUENCES

The level of agreement among a firm’s top executives about how things are done in that firm has a variety of important implications. For example, agreement about a firm’s decision-making norms may allow members of the top management team (TMT) to focus on the substance of their most critical decisions and not get bogged down in debates about the process. In the present study, data from 65 firms in two industries were used to identify determinants and consequences of TMT agreement about the comprehensiveness of the strategic decision process. Results for consequences indicate that the level of TMT agreement was positively related to organizational performance. As for the determinants of agreement, organizational size was negatively related to agreement but past performance exhibited no association. Therefore, the results suggest that it is TMT agreement that influences performance, not the reverse. In addition, a surprising result was that firms in an industry with an unstable environment exhibited significantly more agreement about the process than did their counterparts in an industry whose environment was stable. © 1997 by John Wiley & Sons, Ltd.     

Innovation Management Practices Compared: The Example of Project‐Based Firms*

The importance of project‐based firms is increasing, as they fulfill the growing demands for complex integrated systems and knowledge‐intensive services. While project‐based firms are generally strong in innovating their clients' systems and processes, they seem to be less successful in innovating their own products or services. The reasons behind this are the focus of this paper. The characteristics of project‐based firms are investigated, how these affect management practices for innovation projects, and the influence of these practices on project performance. Using survey data of 203 Dutch firms in the construction, engineering, information technology, and related industries, differences in characteristics between project‐based and nonproject‐based firms are identified. Project‐based firms are distinguished from nonproject‐based firms on the basis of organizational configuration, the complexity of the operational process, and the project management capabilities of the firm. Project‐based firms also differ with regard to their level of collaboration and their innovation strategy, but not in the level of autonomy. A comparison of 135 innovation projects in 96 of the firms shows that project‐based firms do not manage their innovation projects different from other firms. However, the effects of specific management practices on project performance are different, particularly the effects of planning, multidisciplinary teams and heavyweight project leaders. Differences in firm characteristics provide an explanation for the findings. The implication for the innovation management literature is that “best” practices for innovation management are firm dependent.     

M-form organization and firm profitability

Theoretical discussions of internal organization stress the importance of organization for firm success and profitability. The Williamsonian hypothesis that firms organized using M-form should be more profitable than firms organized using U-form or other organizational structures is the focus of empirical testing in this paper. Pairs of firms are observed over two periods of time. In the first period, the principal firm adopts M-form while the control firm is organized with a non-M-form structure. In the second period, the control firm adopts the M-form structure. Using this matched firm technique across a number of industries, we find the adoption of M-form leads to statistically significant increases in return on asset and return on equity measures.     

Incubation of an industry: Heterogeneous knowledge bases and modes of value capture

Research summary : We examine firms' technological investments during an industry's incubation stage—the period between a technological breakthrough and the first instance of its commercialization. Using the agricultural biotechnology context, we develop stylized findings regarding the understudied knowledge evolution preceding product evolution in an industry's life cycle, the trend and diversity of firms undertaking technological investments in anticipation of industry emergence, their leverage of markets for technology and corporate control, and their use of alternative modes of value capture. We juxtapose these stylized findings with existing literature to identify new theoretical insights, and set the stage for future scholarly work to develop and test new theories for the incubation period, examine its existence in other industries, and study its impact on subsequent firm and industry evolution. M anagerial summary : New technological breakthroughs present managers of existing firms and aspiring entrepreneurs with opportunities to create altogether new industries. During the vibrant incubation period, we find that multiple firms capitalize on diverse knowledge bases to shape the industry's knowledge evolution and also capture economic value in diverse ways. Existing firms in the obsolescing industry are more likely to become targets in acquisitions given their complementary knowledge. Science‐based start‐ups are more likely to engage in acquisitions and collaborations with established firms. Diversifying firms are more likely to commercialize products after leveraging of internal development, acquisitions, and alliances. Our study highlights the importance for managers to think about “success” and “failure” across multiple yardsticks of performance, rather than only as product commercialization as the sole goal. Copyright © 2016 John Wiley & Sons, Ltd.     

Stacking the deck: the effects of top management backgrounds on investor decisions

Young firms going public are dependent upon the decisions of investors for a successful public offering. Yet convincing investors to invest is not easy, as young firms have limited track records and, thus, face challenges associated with gaining legitimacy in their respective industries. This paper examines ways in which select information about firms undertaking an initial public offering (IPO) can affect investor decisions. Building upon recent research on upper echelons and signaling theory, we propose that the composition of a firm's top management team can signal organizational legitimacy that in turn affects investor decisions. In the context of young firms undertaking an IPO, such signals are critical, especially when objective measures of firm quality are not easily available. We introduce a typology of signals of organizational legitimacy to elaborate on our hypotheses. Analyses of a comprehensive set of data on the career histories of the top management teams of young biotechnology firms show that investor decisions are affected by the extent to which a firm's top management team has employment affiliations with prominent downstream organizations (e.g., pharmaceutical companies), with a diverse range of organizations, and upon the role experience of one key member of the top management team—the Chief Scientific Officer. We assess and find that these effects are not mediated by the prestige of a firm's lead underwriter. We conclude with a discussion of the implications of our study for strategy research on upper echelons and organizational legitimacy. Copyright © 2006 John Wiley & Sons, Ltd.     

Entry into new niches: the effects of firm age and the expansion of technological capabilities on innovative output and impact

We provide evidence that young firms systematically differ from older firms in their innovative output when they enter ‘new to the firm’ technological niches. We analyze data from 128 biotechnology firms since their inception and track these firms over time. Our analyses reveal that the organizational age at which the firm branches into new technological niches significantly influences its innovative activity. We refine the focus of the extant literature by separately examining the effects of branching on the quantity of innovative output and the impact that this output has on the technology domain. Subsequent to branching into new niches, we find that older firms have a higher quantity of output than their younger counterparts, whereas young firms tend to outpace their older rivals with higher impact. We discuss the implications of these findings for the literature on dynamic capabilities and entrepreneurship. Copyright © 2011 John Wiley & Sons, Ltd.     

Entry into Nascent Industries: Disentangling a Firm's Capability Portfolio at the Time of Investment Versus Market Entry

Research summary : This article examines the capability antecedents of firm entry into nascent industries. Because a firm's technological investments in nascent industries typically occur before market entry, this study makes a distinction between firm capabilities at the time of market entry and at the time of initial investment. At the time of market entry, core technical capabilities and complementary assets influence the likelihood of entry. However, at the time of investment, a firm's integrative capabilities as well as the initial stocks of related technical capabilities and complementary assets become critical, as they enable endogenous development of core technical capabilities and complementary assets by the time of entry. The empirical sample consists of firms involved in field experiments in agricultural biotechnology during the period 1980–2010. Managerial summary : New product commercialization in a nascent industry typically requires access to not only core technologies of the focal industry, but also supporting commercialization assets. However, firms may not possess these critical capabilities when they first invest in the industry. Instead, empirical evidence from the context of agricultural biotechnology shows that at the time of first investment, a firm's integrative capabilities partly explain their likelihood of entry. Integrative capabilities encompass a set of practices that enable effective coordination and communication, and in turn put firms in an advantageous position to develop the needed capabilities by the time of entry. Copyright © 2017 John Wiley & Sons, Ltd.     

Entrepreneurial Orientation and Firm Performance: Drawing Attention to the Senior Team

Prior studies have argued entrepreneurial orientation (EO) plays an important role in explaining firm performance. This study aims to assess how senior team attributes moderate the relationship between EO and firm performance. For this purpose, an attention‐based perspective is adopted, focusing on attention scope as well as distributed and situated attention. By considering the role of senior team heterogeneity in broadening the attention scope of senior teams and the role of senior team shared vision in aligning distributed attention across organizational functions, this research investigates how senior teams may enhance the value‐creating potential of EO. In addition, we assess situated attention by including the notion of environmental dynamism and examining whether the role of the senior team attributes is contingent upon environmental conditions. Using a time‐lagged sample of 346 firms operating in various industries, we find that senior team heterogeneity helps firms to leverage their EO and improve their performance. Moreover, once environmental conditions are taken into account, results indicate that the absence of heterogeneity at senior team level may be particularly detrimental for firms operating in stable environments. The direct moderating effect of shared vision on the relationship between EO and performance is not substantiated. However, senior team shared vision has a positive impact for firms operating in dynamic environments, providing a premium for firms aiming to realize the inherent value of EO. Our research provides important implications for senior teams aiming to leverage their EO into increased firm performance. Evidence shows that while a heterogeneous team composition and senior team shared vision may provide several benefits, these advantages may fluctuate across environmental conditions.     

Vertical Disintegration and the Disorganization of German Industrial Relations1

Drawing on case studies from the telecommunications and auto industries, the authors argue that the vertical disintegration of major German employers is contributing to the disorganization of Germany’s dual system of in‐plant and sectoral negotiations. Subcontractors, subsidiaries and temporary agencies often have no collective bargaining institutions or are covered by different firm‐level and sectoral agreements. As core employers move jobs to these firms, they introduce new organizational boundaries across the production chain and disrupt traditional bargaining structures. Worker representatives are developing new campaign approaches and using residual power at large firms to establish representation in new firms and sectors, but these have not been successful at rebuilding co‐ordinated bargaining.     

Learning to collaborate through collaboration: How allying with expert firms influences collaborative innovation within novice firms

Research summary : Strategic alliances have been recognized as a means for firms to learn their partners' proprietary knowledge; such alliances are also valuable opportunities for partner firms to learn tacit organizational routines from their counterparts. We consider how relatively novice technology firms can learn intraorganizational collaborative routines from more experienced alliance partners and then deploy them independently for their own innovative pursuits. We examine the alliance relationships between Eli Lilly & Co. (Lilly), a recognized expert in collaborative innovation, and 55 small biotech partner firms. Using three levels of analysis (firm, patent, and inventor dyad), we find that greater social interaction between the partner firm and Lilly subsequently increases internal collaboration among the partner firm's inventors. Managerial summary : Can collaborating externally advance internal collaboration? Yes. Our research found that collaboration among scientists at small, early‐stage biotechnology firms significantly increased after these firms formed highly interactive R&D alliances with a large pharmaceutical company known for its expertise in such collaboration. It is well known that alliances help new firms learn specific new technologies and commercialize innovations. Our study broadens the scope of potential benefits of alliances. New firms can also learn collaboration techniques, deploying them internally to enhance their own abilities in collaborative innovation. Managers should take this additional benefit into consideration in developing their alliance strategies. Pursuing alliance partners with expertise in collaboration and keeping a high level of mutual interactions with partner firm personnel should be important considerations to extract this value. Copyright © 2015 John Wiley & Sons, Ltd.     

What Makes a Family Firm Innovative? CEO Risk‐Taking Propensity and the Organizational Context of Family Firms

Investigating the new product portfolio innovativeness of family firms connects two important topics that have recently received considerable attention in innovation and family firm research. First, new product portfolio innovativeness has been identified as a critical determinant of firm performance. Second, research on family firms has focused on the questions of if and why family firms are more or less innovative than other organizational forms. Research investigating the innovativeness of family firms has often applied a risk‐oriented perspective by identifying socioemotional wealth (SEW) as the main reference that determines firm behavior. Thus, prior research has mainly focused on the organizational context to predict innovation‐related family firm behavior and neglected the impact of preferences and the behavior of the chief executive officer (CEO), which have both been shown to affect firm outcomes. Hence, this study aims to extend the previous research by introducing the CEO's disposition to organizational context variables to explain the new product portfolio innovativeness of small and medium‐sized family firms. Specifically, this study explores how the organizational context (i.e., ownership by top management team [TMT] family members and generation in charge of the family firm) of family firms interacts with CEO risk‐taking propensity to affect new product portfolio innovativeness. Using a sample of 114 German CEOs of small and medium‐sized family firms operating in manufacturing industries, the results show that CEO risk‐taking propensity has a positive effect on new product portfolio innovativeness. Moreover, the analyses show that the organizational context of family firms impacts the relationship between CEO risk‐taking propensity and new product portfolio innovativeness. Specifically, the relationship between CEO risk‐taking propensity and new product portfolio innovativeness is weaker if levels of ownership by TMT family members are high (high SEW). Additionally, the effect of CEO risk‐taking propensity on new product portfolio innovativeness is stronger in family firms at earlier generational stages (high SEW). This result suggests that if SEW is a strong reference, family firm‐specific characteristics can affect individual dispositions and, in turn, the behaviors of executives. Therefore, this study helps extend the knowledge on the determinants of new product portfolio innovativeness of family firms by considering an individual CEO preference and the organizational context variables of family firms simultaneously.     

From Corporate Crisis to Turnaround in East Asia: A Study of China Huajing Electronics Group Corporation

In this article, we investigated some of the pre-conditions of crisis faced by technology-focused firms, as a group, in the emerging markets facing globalization and looked at the modalities for turnaround. We applied the “entrepreneurial leadership” model recently proposed by Gupta, Macmillan and Surie (2004) for defining the processes needed for adapting to the globalization-induced crisis. Our context for the globalization-induced crisis was the 1997 East Asian crisis, and we studied how the crisis galvanized a leading Chinese electronics firm—Huajing—to develop and execute a turnaround strategy for recovering from a near bankruptcy state. We discussed how organizational and other factors conjoined to create crisis at Huajing in the midst of globalization and trace the process through which entrepreneurial leadership was implemented. We distil various insights into a prototypical, unified model that underscores the significance of entrepreneurial leadership in developing and applying the different strategic flexibility platforms embedded in the resources and capabilities of the firms and in generating a relationship-anchored market position. The findings suggest that in situations where the crisis occurs at the level of organizational field, firms need turnaround strategies that help strengthen not only their organizational field but also their own value generation capabilities.     

An empirical analysis of organizational strategies by entrepreneurial high-technology firms

Many start-up, high-technology firms commercialize an emerging technology through cooperative arrangements. This paper empirically investigates the determinants of entrepreneurial high-technology firms to form cooperative relationships. The statistical results on data drawn from the commercialization of the new biotechnology show that the propensity to cooperate is positively correlated with the distance of firms' competitive position in relation to their rivals. The follower is more likely to seek cooperative relationships than the leader in commercializing new products. However, the competitive pressure impacts firms in different ways, depending on their internal capabilities to commercialize a new product. We found that firm size is negatively correlated with the use of cooperative arrangements. The study also found that the organizational mode of cooperative arrangements is predominantly selected by the high-tech. start-up firm in commercializing their new products in foreign markets.     

Information Use and New Product Outcomes: The Contingent Role of Strategy Type

Information is an important resource for firms to develop new products successfully, and firms must rely on their ability to use information effectively. This research builds on information processing and contingency theories to explore the effect of firm strategy type and the conceptual and instrumental use of information on new product outcomes. Firms operating in high-tech industries are faced with high levels of uncertainty caused by rapidly evolving technologies. Consequently, creating innovative and successful products becomes particularly challenging. Past research examining organizational use of information points to the presence of strategic contingencies that may impact the new product outcomes that accrue to a firm. A cross-sectional study was conducted to examine how the impact of information use on new product outcomes varies by strategy type. Using data from 150 software development firms based in a developing economy, the theoretical hypotheses proposed are tested. After controlling for environmental turbulence, the research results demonstrate that firms focusing on specific types of information use innovate successfully only when that information use is congruent with an appropriate strategic orientation. Specifically, the present study finds that prospector firms focusing on conceptual information use enhance both their new product performance and new product creativity outcomes, whereas analyzer firms enhance only their new product performance outcomes. A focus on instrumental information use has different effects for firms. Defender firms enhance both their new product performance and creativity outcomes only when focusing on instrumental information use. In contrast, prospector firms detract from their new product creativity outcomes, and analyzer firms reduce their new product performance outcomes when focusing on instrumental information use.     

Exploration and exploitation alliances in biotechnology: a system of new product development

We link the exploration–exploitation framework of organizational learning to a technology venture's strategic alliances and argue that the causal relationship between the venture's alliances and its new product development depends on the type of the alliance. In particular, we propose a product development path beginning with exploration alliances predicting products in development, which in turn predict exploitation alliances, and that concludes with exploitation alliances leading to products on the market. Moreover, we argue that this integrated product development path is moderated negatively by firm size. As a technology venture grows, it tends to withdraw from this product development path to discover, develop, and commercialize promising projects through vertical integration. We test our model on a sample of 325 biotechnology firms that entered 2565 alliances over a 25‐year period. We find broad support for the hypothesized product development system and the moderating effect of firm size. Copyright © 2004 John Wiley & Sons, Ltd.     

Established companies diversifying into young industries: A comparison of firms with different levels of performance

Differences in performance among established firms diversifying into young industries were investigated, with hypotheses concerning 11 ‘corporate level’ strategic and organizational variables being examined. Performance was found to be associated with firm size and financial strength, time of entry, and the maturity of the firm's markets. The importance of several variables examined also appears to change as an industry evolves.     

Development of Novel Products Through Intraorganizational and Interorganizational Networks

The pendulum appears to be swinging away from the merger mania of the 1980s, with many leaner-and meaner organizations refocusing on their core competencies. However, these more focused organizations often lack the breadth of skills and expertise necessary for developing products and services which cut across traditional technological and marketing boundaries. Complex product systems such as those under development in the home automation industry include elements from such disparate sectors as consumer electronics, telecommunications, construction, and energy. A narrow focus may prevent the novel forms of innovation necessary for successful development of such products. Using the home automation industry as an example, Joe Tidd examines the challenges involved in the development of complex product systems. When products and services cut across traditional marketing and technological boundaries, radical innovation is difficult because different firms and industries are typically responsible for developing the various subsystems and components. Successful development efforts may require novel forms of innovation–for example, architectural innovation and technology fusion. Architectural innovation involves changes in the way the components of a product are linked together, but leaves the core design concepts untouched. Technology fusion creates new products and market opportunities through the blending of diverse technologies from various fields. Two organizational factors affect a firm's ability to develop and commercialize new products based on novel forms of innovation: the internal organization of the firm, and the firm's links with other organizations, including suppliers, customers, and networks of collaborating organizations. Within a firm, the development of complex product systems is likely to require managing across traditional product-division boundaries. The breadth of competencies required may necessitate strong interfirm linkages. Comparing organizational approaches and the networks of alliances for home automation in the United States, Europe, and Japan, it appears that European firms tend to be more narrowly focused then American and Japanese firms. A rigid focus on core competencies may cause these European firms to overlook the potential for new products. Because various technologies and industries are involved, open networks are more effective than closed networks or alliances. European and American firms tend to favor closed strategic alliances, while Japanese firms typically participate in open networks and overlapping consortia. This approach gives Japanese firms an edge in the home automation industry.     

Status in a strange land? Context‐dependent value of status in cross‐border venture capital

Research Summary: While recent literature has depicted status as an intangible asset that is firm‐specific and mobile, we have a limited understanding of whether status confers advantage in a way similar to other intangible assets. This study examines the macro‐structural contingencies that influence the marginal value of firm status as firms expand to new markets. Building on the literatures on status and social approval assets, as well as globalization and international management, we hypothesize that two conditions influence how valuable home‐country status will be in a given host country: the interconnectedness of the home and host countries, and their relative position in the global network. We test our hypotheses in a study of 187 venture capital (VC)‐backed biotechnology ventures in 19 countries between 1990 and 2006. Managerial Summary: Startups typically prefer high‐status VC investors for endorsements, network connections, and resources. One might expect the benefits of high‐status VCs to be even higher when they invest across borders. Yet, we show that status is ingrained in context, and that the performance advantage of partnering with high‐status cross‐border VC firms depends on the relationship between the country of the VC firm and that of the startup. We find that, when the VC industries in the two countries are more connected, the positive effect of cross‐border VC firm status on successful exit is amplified. However, when the VC firm comes from a more central country than the startup, the benefits of VC firm status are less pronounced and vice versa.