Organization Science

Drawing on Social network theory, this article argues for enhancing effects of social capital of entrepreneurs on investment selection decisions of venture capitalists (to invest versus not to invest), and main effects of social capital on investment process decisions such as venture valuation, investment delivery speed and contractual warrants/provisions. The core idea of enhancing effects is that the presence of particularistic ties between venture capitalists and entrepreneurs will affect positively investment selection decisions of venture capitalists if only other main factors for investment making such as management team, industry, market attractiveness, proprietary technologies and products are perceived as strong by investors. The context of the study is People's Republic of China. The empirical data is composed of 158 venture capital investment decisions in Beijing and Shanghai. The main finding is that social capital is supplementary and additive to other investment determining factors such as project and team qualities at selection stage, and social capital is a main factor for investment process decisions once a venture has been selected for funding. The main theoretical implication is that social capital may affect outcome variables in interaction with other factors. The main practical implication for entrepreneurs is that social capital is probably necessary but insufficient for raising venture capital successfully.

This paper illustrates how a learning-curve model can be generalized to investigate potential explanations of organizational learning. The paper examines the hypothesis that knowledge acquired through by learning by doing is embodied in an organization's technology by analyzing the amount of transfer that occurs across shifts within a plant. If knowledge becomes completely embodied in technology, transfer across shifts should be complete since both shifts use the same technology. Methods that can be used for studying intra-plant transfer of knowledge are presented. The methods are illustrated by analyzing data from a plant that began production with one shift and then added a second shift several months into the production program. Three aspects of transfer are analyzed: (1) carry forward of knowledge when the plant makes the transition from one to two shifts, (2) transfer across shifts after both shifts are operating, and (3) transfer across time. Results indicate that substantial, but less than complete, transfer of knowledge occurred when the second shift was introduced. Once both shifts were operating, partial transfer across them occurred. Implications of the results for a theory of organizational learning and practical applications are discussed.

When companies decide to engage in technology transfer through exclusive licensing to other firms, they have two basic options: to use standard licensing contracts or to set-up more elaborate partnership-embedded licensing agreements. We find that broader partnership-embedded licensing agreements are preferred with higher levels of technological sophistication of industries, with greater perceived effectiveness of secrecy as a means of appropriability, and when licensors are smaller than their licensees. Innovative differential between companies, innovative supremacy of the licensor and market and technological overlap between partners appear to have no effect on the preference for a particular form of licensing. Copyright 2009 , Oxford University Press.

Prior studies have emphasized that structural attributes are crucial to simultaneously pursuing exploration and exploitation, yet our understanding of antecedents of ambidexterity is still limited. Structural differentiation can help ambidextrous organizations to maintain multiple inconsistent and conflicting demands; however, differentiated exploratory and exploitative activities need to mobilized, coordinated, integrated, and applied. Based on this idea, we delineate formal and informal senior team integration mechanisms (i.e. contingency rewards and social integration) and formal and informal organizational integration mechanisms (i.e. cross-functional interfaces and connectedness) and examine how they mediate the relationship between structural differentiation and ambidexterity. Overall, our findings suggest that the previously asserted direct effect of structural differentiation on ambidexterity operates through informal senior team (i.e. senior team social integration) and formal organizational (i.e. cross-functional interfaces) integration mechanisms. Through this richer explanation and empirical assessment, we contribute to a greater clarity and better understanding of how organizations may effectively pursue exploration and exploitation simultaneously to achieve ambidexterity.

This paper examines the link between organizational culture and effectiveness for foreign-owned firms operating in Russia. Beginning with a model of organizational culture developed in the USA, the paper presents a multi-method analysis of culture and effectiveness in a transition economy. We argue that effectiveness in Russia relies more on adaptability and flexibility than in the USA. Furthermore, the legacy of the communist era forces firms in Russia to deal with a workforce with a unique time perspective and a unique set of sub-cultures that often undermine attempts at coordination and integration. We first explore these ideas using survey data on 179 foreign-owned firms operating in Russia and compare the results to those obtained for firms in the USA. We then present four case studies designed to ground the results in the Russian context, and to document cultural dynamics not captured by the model.

The keiretsu structuring of assembler-supplier relations historically enabled Japanese auto assemblers to remain lean and flexible while enjoying a level of control over supply akin to that of vertical integration. Yet currently there is much talk of breakdowns in keiretsu networks. This paper examines some recent developments in Japanese parts-supply keiretsu. We argue that keiretsu relationships are drifting from “hybrid” or “network” (i.e., keiretsu) governance modes toward the extremes of arms-length contracting and top-down administration. These changes are best understood through a combination of transaction cost and learning perspectives on alliance. Consistent with transaction-cost economics, the shift in purchase-supply relationships can be traced to changes in the nature of parts transactions and keiretsu-governance structures. A learning perspective on alliance complements and extends transaction-cost theory, providing additional explanation of the sources of change and the specific governance choices being made. Our first two cases document a drift in Toyota's keiretsu supply network toward a hierarchical form in the management of parts-supply transactions. Toyota has effectively internalized its transactions with Daihatsu by taking a controlling interest. Toyota's strategy toward long-term partner Denso, on the other hand, was very different. Toyota built, from the ground up, an in-house capability in electronic components, thus scaling down its dependence on Denso. A third case considers a general trend in the Japanese auto industry toward greater standardization of parts. With the routinization of quality, reliability, and speed in supply management, the need for keiretsu-style governance has declined. The withering of keiretsu obligations is also traceable to globalization and the continuing weakness of the Japanese economy, which have prompted Japanese firms to question received business practice.

This paper examines the organizational arrangements used by New Biotechnology Firms (NBFs) to source scientific knowledge. Using data from two highly successful NBFs, the paper shows that both firms relied principally on hierarchies and networks to source scientific knowledge; market arrangements were insignificant. Most interesting, each firm had a very large, diversified set of boundary-spanning collaborative research arrangements, mostly involving university scientists. It is argued that these external research networks enabled the two firms studied to compete more successfully in a highly turbulent and highly competitive industry environment.

According to the advocates of a "Generalized Darwinism" (GD), the three core Darwinian principles of variation, selection and retention (or inheritance) can be used as a general framework for the development of theories explaining evolutionary processes in the socio­economic domain. Even though these are originally biological terms, GD argues that they can be re-defined in such a way as to abstract from biological particulars. We argue that this approach does not only risk to misguide positive theory development, but that it may also impede the construction of a coherent evolutionary approach to "policy implications". This is shown with respect to the positive, instrumental and normative theories such an approach is supposed to be based upon.

The principles of open collaboration for innovation (and production), once distinctive to open source software, are now found in many other ventures. Some of these ventures are internet-based: Wikipedia, online forums and communities. Others are off-line: in medicine, science, and everyday life. Such ventures have been affecting traditional firms, and may represent a new organizational form. Despite the impact of such ventures, questions remain about their operating principles and performance. Here we define open collaboration (OC), the underlying set of principles, and propose that it is a robust engine for innovation and production. First, we review multiple OC ventures and identify four defining principles. In all instances, participants create goods and services of economic value, they exchange and reuse each other's work, they labor purposefully with just loose coordination, and they permit anyone to contribute and consume. These principles distinguish OC from other organizational forms, such as firms or cooperatives. Next, we turn to performance. To understand the performance of OC, we develop a computational model, combining innovation theory with recent evidence on human cooperation. We identify and investigate three elements that affect performance: the cooperativeness of participants, the diversity of their needs, and the degree to which the goods are rival (subtractable). Through computational experiments, we find that OC performs well even in seemingly harsh environments: when cooperators are a minority, free riders are present, diversity is lacking, or goods are rival. We conclude that OC is viable and likely to expand into new domains. The findings also inform the discussion on new organizational forms, collaborative and communal.

In this paper we suggest that the use of computer-mediated communication technologies in new and fluid organizations can be facilitated by the explicit and ongoing adapting of those technologies to changing contexts of use. In an exploratory study on the use of a computer conferencing system in an R&D setting, we found that the new medium's effectiveness was significantly influenced by the intervention of a few individuals who took on a role we label technology-use mediation. These mediators shaped everyday use of the conferencing technology, modifying the technology as well as the context of use to promote effective electronic communication. Drawing on the insights of this empirical study, we develop a theoretical framework that views technology-use mediation as influencing how users structure their communication technologies, and hence as one form of metastructuring. We believe that the role of technology-use mediation constitutes a valuable mechanism for providing the ongoing attention and resources needed to contextualize what are often generic computer-mediated communication technologies to the shifting conditions of dynamic organizational forms.

A growing body of research in management and related public policy fields concludes that the 1980s and 1990s saw greater dynamic competition throughout technology-intensive ("TI") industries, with wide-spread, steady increase in TI industry and business performance instability as principal consequences. We test for evidence of these consequences in a large sample of US businesses operating from 1978-1997 in 31 industries with high average R&D expenditure-to-sales ratios. In the full sample, we find no evidence of sustained increase in TI industry and business performance instability, nor any evidence of significant cross-sectional differences in performance instability between TI and non-TI industry businesses over these 20 years. For a small segment of very high-performing businesses from TI industries, however, we do uncover evidence of both significantly declining performance stability as well as evidence of significant cross-sectional differences in performance stability compared to similarly high-performing businesses from non-TI industries over 20 years. We conclude that assumptions of wide-spread, long-term increase in dynamic competition lack robust evidentiary support. It is premature to embrace and apply broadly new theoretical perspectives, management practices and public policies to TI industry competitive dynamics that may be little changed since the late 1970s. Yet, we find evidence of increasing dynamic competition within the strict boundary conditions of very high-performing TI industry businesses. Careful application of new perspectives, practices and policies within these boundary conditions may contribute significantly and substantially to explanations of business behavior and performance in TI industries.

Excess entry – or the high failure rate of market-entry decisions – is often attributed to overconfidence exhibited by entreprene urs. We show analytically that whereas excess entry is an inevitable consequence of imperfect assessments of entrepreneurial skill, it does not imply overconfidence. Judgmental fallibility leads to excess entry even when everyone is underconfident. Self-selection implies greater confidence (but not necessarily overconfidence) among those who start new businesses than those who do not and among successful entrants than failures. Our results question claims that “entrepreneurs are overconfident” and emphasize the need to understand the role of judgmental fallibility in producing economic outcomes.

Infusing hierarchies with elements of market control has become a much-used way of simultaneously increasing entrepreneurialism and motivation in firms. However, this paper argues that such "internal hybrids," particularly in their radical forms, are inherently hard to successfully design and implement, because of fundamental credibility problems related to managerial promises to not intervene in delegated decision-making > an incentive problem that is often referred to as the "problem of selective intervention." This theoretical theme is developed and illustrated, using the case of the world-leading Danish hearing aids producer, Oticon. In the beginning of the 1990s, Oticon became famous for its radical internal hybrid, the "spaghetti organization." Recent work has interpreted the spaghetti organization as a radical attempt to foster dynamic capabilities by imposing loose coupling on the organization, neglecting, however, that about a decade later, the spaghetti organization has given way to a more traditional matrix organization. This paper presents an organizational economics interpretation of organizational changes in Oticon, and argues that a strong liability of the spaghetti organization was the above incentive problem. Motivation in Oticon was strongly harmed by selective intervention on the part of top-management Changing the organizational structure was one means of repairing these motivational problems. Refutable implications are developed, both for the understanding of efficient design of internal hybrids, and for the more general issue of the distinction between firms and markets, as well as the choice between internal and external hybrids.

The increasing reliance on teams in organizations raises the question of how these teams should be formed. Should they be formed completely of engineers or should they include a range of specialists? Should they be made up to people who have long tenure in the organization, or those with a wide range of experience? As teams increasingly get called upon to do more complex tasks and to cross functional boundaries within the organization, conventional wisdom has suggested that teams be composed of more diverse members. This study suggests that the answer may not be so simple. Using 409 individuals from 45 new product teams in five high-technology companies, this study investigates the impact of diversity on team performance. We found that functional and tenure diversity each has its own distinct effects. The greater the functional diversity, the more team members communicated outside the team's boundaries. This communication was with a variety of groups such as marketing, manufacturing, and top management. The more the external communication, the higher the managerial ratings of innovation. Tenure diversity had its impact on internal group dynamics rather than external communications. Tenure diversity is associated with improved task work such as clarifying group goals and setting priorities. In turn, this clarity is associated with high team ratings of overall performance. Yet diversity is not solely positive. While it does produce internal processes and external communications that facilitate performance, it also directly impedes performance. That is, overall the effect of diversity on performance is negative, even though some aspects of group work are enhanced. It may be that for these teams diversity brings more creativity to problem solving and product development, but it impedes implementation because there is less capability for teamwork than there is for homogeneous teams. These research findings suggest that simply changing the structure of teams (i.e. combining representatives of diverse function and tenure) will not improve performance. The team must find a way to garner the positive process effects of diversity and to reduce the negative direct effects. At the team level, greater negotiation and conflict resolution skills may be necessary. At the organization level, the team may need to be protected from external political pressures and rewarded for team, rather than functional, outcomes.

Using data from a novel laboratory experiment on complex problem solving in which we varied the structure of 16-person networks, we investigate how an organization’s network structure shapes performance of problem-solving tasks. Problem solving, we argue, involves both exploration for information and exploration for solutions. Our results show that network clustering has opposite effects for these two important and complementary forms of exploration. Dense clustering encourages members of a network to generate more diverse information, but discourages them from generating diverse theories; in the language of March (1991), clustering promotes exploration in information space, but decreases exploration in solution space. Previous research, generally focusing on only one of those two spaces at a time, has produced an inconsistent understanding of the value of network clustering. By adopting an experimental platform on which information was measured separately from solutions, we bring disparate results under a single theoretical roof and clarify the effects of network clustering on problem-solving behavior and performance. The finding both provides a sharper tool for structuring organizations for knowledge work and reveals challenges inherent in manipulating network structure to enhance performance, as the communication structure that helps one determinant of successful problem solving may harm the other.

Grammar has been used metaphorically to describe organizational processes, but the metaphor has never been systematically developed so that it can be applied in empirical research. This paper develops the grammatical metaphor into a rigorous model for describing and theorizing about organizational work processes, defined here as sequences of actions that occur in the context of enabling and constraining structures. A grammatical model starts with a lexicon of elementary actions (called moves) and specifies the ways in which they can be combined to create a process. Unlike other sequential data analysis techniques, grammatical models provide a natural way of describing the layering and nesting of actions that typifies organizational processes. The example of a simple retail sales transaction is used to illustrate the underlying concepts. The paper also examines some methodological considerations involved in using process grammars and proposes an agenda for research , including: (1) creating descriptive taxonomies of organizational processes; (2) creating disconfirmable theories about the relationship between processes and the structures that enable and constrain them; (3) explaining the distribution of observed processes and predicting new processes that have not yet been observed; and (4) designing new organizational processes. KEYWORDS: Grammars; Process models; Business processes; Sequential analysis.

This paper presents a theory of innovation which presumes that new technologies emerge from a firm's accumulated stock of skills. Among these we distinguish technological and networking skills. We examine two aspects of innovating firms: their inclination to adopt a technological innovation, and their propensity to implement innovation alone or with other firms. Historical conditions pertaining to organizational skills are examined to account for these aspects. Among the most important are a firm's cumulative stream of technological projects that have some affinity to the new technology. A second important antecedent can be inferred from a firm's history of technological networking. Networking includes licensing, joint ventures and long-term contracts and can be formed for technological reasons, or for reasons having to do with the delivery of products and services. Networking is deemed important for facilitating access to strands of technology that are alien to a firm. Linkages are also conducive for contemplating strategic partnerships through which a firm can share the risks of innovation with others and which make such partnerships comparatively easy. The study examined a sample of United States commercial banks during the period 1977–1987, some of which were engaged in a new technology: home banking. The findings indicate that technological networking is the best predictor of technological innovation. They reveal also that firms with extensive networking are more likely to implement the innovation with strategic partners. Finally, the paper discusses the implications of the findings for organization design and proposes an expanded theoretical framework for organizational innovation.

This study presents a new model of search on a “rugged landscape,” which employs modeling techniques from fractal geometry rather than the now-familiar NK modeling technique. In our simulations,firms search locally in a two-dimensional fitness landscape, choosing moves in a way that responds both to local payoff considerations and to a more global sense of opportunity represented by a firm-specific “preferred direction.” The latter concept provides a very simple device for introducing cognitive or motivational considerations into the formal account of search behavior, alongside payoff considerations. After describing the objectives and the structure of the model, we report a first experiment which explores how the ruggedness of the landscape affects the interplay of local payoff and cognitive considerations (preferred direction) in search. We show that an intermediate search strategy, combining the guidance of local search with a moderate level of non-local “obsession,” is distinctly advantageous in searching a rugged landscape. We also explore the effects of other considerations, including the objective validity of the preferred direction and the degree of dispersion of firm strategies. We conclude by noting available features of the model that are not exercised in this experiment. Given the inherent flexibility of the model, the range of questions that might potentially be explored is extremely large.

We develop a dynamic cognitive model of network activation and show that people at different status levels spontaneously activate, or call to mind, different subsections of their networks when faced with job threat. Using a multi-method approach (General Social Survey data and a laboratory experiment), we find that, under conditions of job threat, people with low status exhibit a winnowing response (i.e., activating smaller and tighter subsections of their networks), whereas people with high status exhibit a widening response (i.e., activating larger and less dense subsections of their networks). We integrate traditional network theories with cognitive psychology, suggesting that cognitively activating social networks is a pre-condition to mobilizing them. One implication is that narrowing the network in response to threat might reduce low-status group members’ access to new information, harming their chances of finding subsequent employment and exacerbating social inequality.

Two competing predictions about the effect of status on performance appear in the organizational theory and sociological literatures. On the one hand, various researchers have posited that status elevates levels of performance. This line of work emphasizes tangible and intangible resources that accrue to occupants of high-status positions and thus pictures status as an asset. On the other hand, a second line of work emphasizes complacency and distraction as deleterious processes that plague occupants of high-status positions and thus portrays status as a liability. Which of these two approaches best characterizes the actual performance of individuals in a market setting? And are these views in any way reconcilable? In this article, we summarize the two views and test them in two empirical settings: the Professional Golf Association (PGA) and the National Association for Stock Car Racing (NASCAR). Using panel data on the PGA Tour, we model golfers’ strokes from par in each competition as a function of their status in the sport. Using similar data on NASCAR’s Winston Cup Series, we model drivers’ speed in the qualifying round as a function of their status in the sport. We find curvilinear effects of status in both empirical settings. Performance improves with status - until a very high level of status is reached, after which performance wanes. This result not only concurs with the view that status brings tangible and intangible resources, but also provides empirical support for the contention that status fosters dispositions and behaviors that undermine performance.

This research addresses the tensions that arise between the collection and use of personal information that people provide in the course of most consumer transactions, and privacy. In today's electronic world, the competitive strategies of successful firms increasingly depend on vast amounts of customer data. Ironically, the same information practices that provide value to organizations also raise privacy concerns for individuals. This study hypothesized that organizations can address these privacy concerns and gain business advantage through customer retention by observing procedural fairness: customers will be willing to disclose personal information and have that information subsequently used to create consumer profiles for business use when there are fair procedures in place to protect individual privacy. Because customer relationships are characterized by social distance, customers must depend on strangers to act on their behalf. Procedural fairness serves as an intermediary to bu...

This paper introduces and empirically explores the concept of an organizational reference group: the set of people an individual perceives as belonging to his or her work environment that defines the social world of work in which he or she engages. The concept is proposed to fill a gap in studies of social context. Scholars tend only to infer, not identify, the people an individual is aware of at work. This surmise creates no problem in groups or small organizations where everyone knows everyone else. However, it becomes troublesome in large organizations where the set of people one individual discerns may vary considerably from that of another. Social network studies of large organizations examine people an individual perceives, but focus on interpersonal communication through salient relationships. They tend to neglect the many distant others who populate an individual's social context: those known only through company newsletters or office gossip, those with whom the individual never has contact, and those who carry little immediate salience. Data from a large organization are used to explore whether organizational reference groups provide distinct, useful information about individuals' perceptions of their social context at work. The findings replicate those showing individuals' preferences for similar others, but also note previously unobserved systematic differences in the composition of close associations compared to the broader ones of organizational reference groups. Distant associations are considerably more homogeneous than close ones. Moreover, the results show that organizational reference groups illuminate career referent selection and expected achievement beyond what would be learned from a typical social network analysis. (PsycINFO Database Record (c) 2012 APA, all rights reserved)

This paper begins to answer the call to broaden current theories of individual decision-making by including in them the effects of human mood. Grounding our arguments in psychological literature on the effects of mood on information processing, motivation, and decision heuristics, we develop hypotheses about how mood can significantly affect individuals' use of structured decision protocols. In support of our hypotheses, results from an experimental study of complex decision-making suggest that, in situations where a structured decision protocol is the usual method of decision-making, individuals in moderately negative moods are significantly more likely than those in moderately positive moods to: (1) carefully execute all the steps of a structured decision protocol, (2) execute the steps of a structured decision protocol in the correct order, and (3) rely on the outcome of the structured decision protocol as the primary basis for the decision. We discuss these findings in terms of the...

Reviews research in psychology, sociology, and organizational behavior to develop a conceptual framework that specifies how positive emotion (PE) helps employees obtain favorable outcomes at work. It is proposed that feeling and expressing PEs on the job have favorable consequences on (1) employees, independent of their relationships with others (e.g., greater persistence); (2) reactions of others to employees (e.g., "halo," or overgeneralization to other desirable traits); and (3) reactions of employees to others (e.g., helping others). Results from an 18-mo study of 272 employees indicate that PE on the job at Time 1 is associated with evidence of work achievement (more favorable supervisor evaluations and higher pay) and a supportive social context (more support from supervisors and coworkers) at Time 2. PE at Time 1 is not significantly associated with job enrichment at Time 2. (PsycINFO Database Record (c) 2012 APA, all rights reserved)

This paper theoretically and empirically engages the relationship between organizational identity and deception using the market for early jazz recordings as a setting. In this setting, pseudonyms (where a recording is reissued under a fictitious name) were used deceptively as a way to preserve a firm's identity while selling profitable but identity-threatening products to the mass market. Firms founded in the Victorian Era actively sought alignment with the cultural elite and used pseudonyms to deceive observers into believing that their production of cultural products was consistent with their Victorian Era identity. In effect, pseudonyms allowed these firms to decouple their position in identity space from their position in product space by inflating production of identity-preserving products. Using product data from jazz discographies, record company directories, and record advertisements in major U.S. newspapers, we provide strong empirical evidence that Victorian Era firms were active in using pseudonyms to preserve their identities.