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Appendix to:
Managerial attention to exploitation versus exploration:
Toward a dynamic perspective on ambidexterity
This appendix reports the geographical distribution of the sample and several robustness tests
conducted to assess the reliability of the results in “Managerial attention to exploitation versus
exploration: toward a dynamic perspective on ambidexterity.” (This appendix is made available
to the reviewers. In case the paper is published, the document will be available from the authors
as well as made accessible via a public website.)
Geographical distribution of the final sample
Country
Number of firms
United States of America
66
Germany
7
France
3
Great Britain
3
The Netherlands
3
Norway
1
Sweden
1
Spain
1
Swiss
1
SUM
86
The length of the letters to shareholders
The length of the letters can possibly influence the independent variable; for example, shorter
letters can be expected to exhibit more extreme exploitationexploration (EE) ratios. That is,
finding one additional keyword in a shorter text, that is likely to contain a relatively small
number of keywords, may have a greater influence on the EE ratio than finding one additional
keyword in a longer text. To test for this possible confounding effect, we took the absolute value
of 0.5 (the mean of EE ratio scale), subtracted the EE ratio and correlated the result with the
number of characters appearing in a letter. This procedure effectively tests whether fewer
characters result in more extreme EE ratios. This robustness check produced a nonsignificant
2
relationship (r = 0.010, p > .1); therefore, the length of the letters in our sample appears to have
no significant effect on the EE ratio distilled.
Robustness tests with respect to the analysis
We also assessed the robustness of the key findings. More specifically, we tested the model:
(a) by varying the number of instruments (Tables I and II);
(b) with a two and six quarters delay in how managerial attention affects firm performance
(rather than four quarters) (Table III);
(c) with return on assets as dependent variable (rather than net profit) (Table IV);
(d) with a quarterly varying measure of the EE ratio (i.e., a moving average over 3
observations) (Table V);
(e) by means of competing pooled OLS and randomeffects GLS regression (allowing for
timeinvariant variables) (Table VI).
Overall, these tests serve to demonstrate sufficient levels of robustness of our main findings. The
outcomes of these tests are reported in the remainder of this appendix.
3
a. Varying the number of instruments
Tables I and II denote the results of these robustness tests. All tests conducted confirm the
robustness of the results.
Table I.
Robustness tests with respect to the number of lags (instrument matrix) (Part 1)
Dependent variable:
Profit margin
1–1 lag (min)
1–2 lags
1–4 lags
Coeff.
(SE) b
Coeff.
(SE) b
Coeff.
(SE) b
b1 – EE ratio t – 4
3.36
(1.63)*
3.67
(1.50)**
3.36
(1.35)**
b2 – (EE ratio)2 t – 4
–2.28
(1.17)*
–2.51
(1.08)*
–2.31
(.96)**
b3 – Recovery dummy
1.35
(.70)*
1.46
(.65)*
1.10
(.51)*
b4 – EE ratio t – 4 × Recovery dummy
–4.06
(2.29)*
–4.39
(2.09)*
–4.09
(1.84)*
b5 – (EE ratio)2 t – 4 × Recovery dummy
2.81
(1.76)+
3.04
(1.61)*
2.80
(1.44)*
b6 – Profit margin t – 1 a
.16
(.08)*
.15
(.09)*
.18
(.09)*
b7 – Net income a
.70
(.24)**
.70
(.24)**
.67
(.22)**
b8 – Total assets a
–.55
(.34)+
–.55
(.31)*
–.46
(.25)*
b9 – R&D–Sales ratio a
–.01
(.10)
.01
(.10)
.01
(.08)
b10 – R&D missing dummy
.16
(.27)
.17
(.24)
.33
(.20)+
b11 – Firm size a
.04
(.27)
.04
(.24)
–.03
(.19)
b12 – Firm age a
–.14
(.20)
–.18
(.13)+
–.16
(.09)*
b13 – GICS 4510 dummy
.14
(.16)
.16
(.15)
.11
(.14)
b14 – GICS 4520 dummy
.14
(.15)
.13
(.13)
.13
(.13)
b15 – US location dummy
–.09
(.15)
–.11
(.14)
–.09
(.12)
b16 – Constant
–1.14
(.52)*
–1.23
(.50)**
–1.13
(.47)**
Hansen test of overidentification
1.00
1.00
1.00
Arellano Bond AR(1) c
–2.87
**
–2.91
**
–2.94
**
Arellano Bond AR(2) c
–.03
–.05
.08
a Standardized value; b The standard errors are robust to heteroskedasticity and arbitrary patterns of autocorrelation within agents
(Roodman 2009a); c z values reported; + p < .10; * p < .05; ** p < .01; *** p < .001. Time dummy variables were included in all
models but are omitted from these results. One–tailed significance levels are reported.
4
Table II.
Robustness tests with respect to the number of lags (instrument matrix) (Part 2)
Dependent variable:
Profit margin
1–16 lags
1–20 lags (max)
All endogenous
Coeff.
(SE) b
Coeff.
(SE) b
Coeff.
(SE) b
b1 – EE ratio t – 4
3.16
(1.27)**
3.12
(1.26)**
3.35
(1.43)**
b2 – (EE ratio)2 t – 4
–2.18
(.91)**
–2.16
(.90)**
–2.28
(1.01)*
b3 – Recovery dummy
1.44
(.55)**
1.14
(.51)*
1.27
(.53)**
b4 – EE ratio t – 4 × Recovery dummy
–3.62
(1.67)*
–3.52
(1.66)*
–3.86
(1.80)*
b5 – (EE ratio)2 t – 4 × Recovery dummy
2.52
(1.31)*
2.46
(1.31)*
2.70
(1.38)*
b6 – Profit margin t – 1 a
.21
(.09)**
.21
(.09)**
–.22
(.09)**
b7 – Net income a
.60
(.19)**
.60
(.19)**
.57
(.19)**
b8 – Total assets a
–.39
(.19)*
–.38
(.19)*
–.36
(.18)*
b9 – R&D–Sales ratio a
–.02
(.07)
–.02
(.08)
–.02
(.07)
b10 – R&D missing dummy
.02
(.10)
.01
(.10)
.06
(.08)
b11 – Firm size a
–.04
(.13)
–.04
(.12)
–.03
(.12)
b12 – Firm age a
–.11
(.05)*
–.10
(.05)*
–.08
(.05)+
b13 – GICS 4510 dummy
0.17
(.12)+
.17
(.12)+
.14
(.11)+
b14 – GICS 4520 dummy
0.13
(.11)
.13
(.11)
.12
(.11)
b15 – US location dummy
–.08
(.10)
–.08
(.10)
–.05
(.10)
b16 – Constant
–1.32
(.47)**
–1.03
(.44)*
–1.42
(.54)**
Hansen test of overidentification
1.00
1.00
–
Arellano Bond AR(1) c
–3.09
**
–3.10
**
–3.15
**
Arellano Bond AR(2) c
.26
.28
.33
a Standardized value; b The standard errors are robust to heteroskedasticity and arbitrary patterns of autocorrelation within agents
(Roodman 2009a); c z values reported; + p < .10; * p < .05; ** p < .01; *** p < .001. Time dummy variables were included in all
models but are omitted from these results. Onetailed significance levels are reported.
5
b. Varying the delay in the effect of managerial attention on firm performance
In the paper, we assumed the effect of senior management’s attention to exploitationexploration
on the profit margin involves a delay of four quarters. To test for robustness, we also ran the
model with delays of two quarters and six quarters. The results reported in table III are similar,
especially with a delay of two quarters. This also supports our key assumption that, in the IT
industry, performance effects of different EE ratios arise over a relatively short time span (e.g.,
compared to the electronics or pharmaceutical industry).
Table III.
Robustness tests with respect to lagging the EE ratio (8/20 lags used)
Dependent variable:
Profit margin
EE ratio lagged 2
quarters
EE ratio lagged 4
quarters (presented)
EE ratio lagged 6
quarters
Coeff.
(SE) b
Coeff.
(SE) b
Coeff.
(SE) b
b1 – EE ratio t – x
2.36
(1.19)*
3.39
(1.33)**
.84
(.75)
b2 – (EE ratio)2 t – x
–1.57
(.87)*
–2.35
(.95)**
–.59
(.59)
b3 – Recovery dummy
.63
(.51)
1.56
(.61)**
.39
(.55)
b4 – EE ratio t – x × Recovery dummy
–2.46
(1.55)+
–3.93
(1.82)*
–.92
(1.72)
b5 – (EE ratio)2 t – x × Recovery dummy
1.51
(1.19)
2.72
(1.41)*
.95
(1.34)
b6 – Profit margin t – 1 a
.20
(.09)*
.20
(.09)*
.20
(.09)*
b7 – Net income a
.62
(.20)**
.62
(.20)**
.60
(.20)**
b8 – Total assets a
–.39
(.21)*
–.40
(.22)*
–.39
(.21)*
b9 – R&D–Sales ratio a
–.01
(.07)
–.00
(.07)
–.03
(.07)
b10 – R&D missing dummy
.15
(.14)
.17
(.17)
.16
(.13)
b11 – Firm size a
–.04
(.15)
–.04
(.16)
–.03
(.15)
b12 – Firm age a
–.13
(.06)*
–.14
(.07)*
–.12
(.06)*
b13 – GICS 4510 dummy
.14
(.13)
.15
(.13)
.10
(.12)
b14 – GICS 4520 dummy
.10
(.12)
.12
(.12)
.08
(.11)
b15 – US location dummy
–.09
(.11)
–.09
(.11)
–.07
(.11)
b16 – Constant
–.77
(.41)*
–1.39
(.49)**
–.50
(.28)*
Hansen test of overidentification
1.00
1.00
1.00
Arellano Bond AR(1) c
–2.90
**
–3.03
**
–2.90
**
Arellano Bond AR(2) c
.43
.18
.42
a Standardized value; b The standard errors are robust to heteroskedasticity and arbitrary patterns of autocorrelation within agents
(Roodman 2009a); c z values reported; + p < .10; * p < .05; ** p < .01; *** p < .001. Time dummy variables were included in all
models, but are omitted from these results. Onetailed significance levels are reported.
6
c. ROA and Tobin’s Q as dependent variable
The model was also tested with return on assets (ROA). Table IV shows the results, which are
highly similar to the main model.
Table IV.
Robustness tests regarding the dependent variable (8/20 lags used)
Dependent variable:
Profit margin
(presented)
ROA
Coeff.
(SE) b
Coeff.
(SE) b
b1 – EE ratio t – x
3.39
(1.33)**
3.85
(1.63)**
b2 – (EE ratio)2 t – x
–2.35
(.95)**
–2.68
(1.17)*
b3 – Recovery dummy
1.56
(.61)**
1.24
(.60)*
b4 – EE ratio t – x × Recovery dummy
–3.93
(1.82)*
–4.41
(1.96)*
b5 – (EE ratio)2 t – x × Recovery dummy
2.72
(1.41)*
3.00
(1.49)*
b6 – Autocorrelation t – 1 a
.20
(.09)*
.14
(.05)**
b7 – Net income a
.62
(.20)**
.60
(.19)***
b8 – Total assets a
–.40
(.22)*


b9 – R&D–Sales ratio a
–.00
(.07)
–.07
(.07)
b10 – R&D missing dummy
.17
(.17)
.29
(.21)
b11 – Firm size a
–.04
(.16)
–.38
(.11)***
b12 – Firm age a
–.14
(.07)*
–.18
(.06)**
b13 – GICS 4510 dummy
.15
(.13)
.11
(.14)
b14 – GICS 4520 dummy
.12
(.12)
.03
(.13)
b15 – US location dummy
–.09
(.11)
–.22
(.12)*
b16 – Constant
–1.39
(.49)**
–1.26
(.59)*
Hansen test of overidentification
1.00
1.00
Arellano Bond AR(1) c
–3.03
**
–2.79
**
Arellano Bond AR(2) c
–.18
–.36
a Standardized value; b The standard errors are robust to heteroskedasticity and arbitrary patterns of
autocorrelation within agents (Roodman 2009a); c z values reported; + p < .10; * p < .05; ** p < .01; *** p
< .001. Time dummy variables were included in all models but are omitted from these results. One–tailed
significance levels are reported.
7
d. Quarterly varying measure of attention to exploitationexploration
As a robustness test, we developed and tested another measure of managerial attention to
exploitationexploration, one that varies quarterly, by taking the moving average of the annual
EE ratio (over three t’s). The results of the model run with this alternative EE ratio are highly
similar with our main findings (see Table V).
Table V.
Robustness tests regarding yearly versus quarterly
operationalization of the EE ratio (8/20 lags used)
Dependent variable:
Profit margin
EE ratio (yearly)
(presented)
EE ratio as moving
average
Coeff.
(SE) b
Coeff.
(SE) b
b1 – EE ratio t – x
3.39
(1.33)**
4.92
(1.90)**
b2 – (EE ratio)2 t – x
–2.35
(.95)**
3.56
(1.41)**
b3 – Recovery dummy
1.56
(.61)**
1.98
(.77)**
b4 – EE ratio t – x × Recovery dummy
–3.93
(1.82)*
5.60
(2.41)*
b5 – (EE ratio)2 t – x × Recovery dummy
2.72
(1.41)*
4.06
(1.89)*
b6 – Profit margin t – 1 a
.20
(.09)*
.22
(.10)*
b7 – Net income a
.62
(.20)**
.66
(.21)**
b8 – Total assets a
–.40
(.22)*
.38
(.25)+
b9 – R&D–Sales ratio a
–.00
(.07)
.02
(.08)
b10 – R&D missing dummy
.17
(.17)
.04
(.14)
b11 – Firm size a
–.04
(.16)
.05
(.19)
b12 – Firm age a
–.14
(.07)*
.13
(.06)*
b13 – GICS 4510 dummy
.15
(.13)
.20
(.14)+
b14 – GICS 4520 dummy
.12
(.12)
.17
(.13)+
b15 – US location dummy
–.09
(.11)
.12
(.11)
b16 – Constant
–1.39
(.49)**
1.85
(.68)**
Hansen test of overidentification
1.00
1.00
Arellano Bond AR(1) c
–3.03
**
2.83
**
Arellano Bond AR(2) c
–.18
.54
a Standardized value; b The standard errors are robust to heteroskedasticity and arbitrary patterns of
autocorrelation within agents (Roodman 2009a); c z values reported; + p < .10; * p < .05; ** p < .01; *** p
< .001. Time dummy variables were included in all models but are omitted from these results. Onetailed
significance levels are reported.
8
e. Competing pooled OLS and randomeffects GLS regression
Table VI denotes the results of competing pooled OLS and randomeffects GLS regression
model (bootstrapped 100 iterations). Once more, the results are highly comparable to our main
findings.
Table VI.
Robustness test with respect to method
Dependent variable:
Profit margin
Pooled OLS
Randomeffects
GLS
(bootstrapped;
100 iterations)
Coeff.
(SE) b
Coeff.
(SE)
b1 – EE ratio t – 4
2.61
(.79)***
2.61
(1.52)*
b2 – (EE ratio)2 t – 4
1.82
(.60)**
1.82
(1.07)*
b3 – Recovery dummy
1.10
(.41)**
1.10
(.53)*
b4 – EE ratio t – 4 × Recovery dummy
3.28
(1.45)*
3.28
(1.69)*
b5 – (EE ratio)2 t – 4 × Recovery dummy
2.19
(1.18)*
2.19
(1.29)+
b6 – Profit margin t – 1 a
.24
(.07)***
.24
(.10)**
b7 – Net income a
.62
(.14)***
.62
(.27)**
b8 – Total assets a
.39
(.12)**
.39
(.22)*
b9 – R&D–Sales ratio a
.01
(.04)+
.01
(.12)
b10 – R&D missing dummy
.06
(.04)
.06
(.09)
b11 – Firm size a
.03
(.05)
.03
(.15)
b12 – Firm age a
.04
(.03)+
.04
(.04)
b13 – GICS 4510 dummy
.13
(.07)*
.13
(.13)
b14 – GICS 4520 dummy
.14
(.08)*
.14
(.15)
b15 – US location dummy
.05
(.06)
.05
(.11)
b16 – Constant
.94
(.28)***
.94
(.55)**
a Standardized value; + p < .10; * p < .05; ** p < .01; *** p < .001. Onetailed significance levels
are reported. b Robust standard errors.