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More Than Just a Number? The Conceptualization and Measurement of Firm Age in an Era of Temporary Organizations
Abstract
Despite the long history of research on firm age, recent theorizing on firm age has been rare. Meanwhile, significant shifts in the business landscape have altered how firms age and limited the age they are likely to reach. This article seeks to reinvigorate research on firm age by providing the first comprehensive review of the construct while considering how recent studies on time and organizing may be pertinent. We provide evidence that certain long-held assumptions about age have changed as organizations have become increasingly temporary and discuss what this means for organizational research going forward. We inductively structured our review along five themes in the literature: [1] research on age-dependence in organizational mortality rates; [2] research on age-related differences in firm processes or structures; [3] research enriching the theoretical understanding of firm age; [4] research that includes firm age as a control variable; and [5] methodological issues in the study of firm age. Across these five themes we identify important work, integrate what we know, identify gaps and inconsistencies, and offer recommendations for future research. While we believe the implications we discuss hold general value for a broad spectrum of research that includes firm age in either a primary or secondary manner, we derive more specific recommendations for two streams of research in particular, namely (1) research on entrepreneurial success and failure, which is directly tied to the liability of newness and hence firm age, and (2) the literature on temporary organizations, which is concerned with the intended and actual durations of firms.
... Firm age, defined as the duration since an organization's founding, is a fundamental and critical descriptor of organizations (Bakker & Josefy, 2018). SADI firms are one category of hidden champions, operating in industries with long life cycles whose age is the significant organizational characteristic and influences the firm's information search as well as the accompanying costs (Bakker & Josefy, 2018;Daft & Weick, 1984;. ...
... Firm age, defined as the duration since an organization's founding, is a fundamental and critical descriptor of organizations (Bakker & Josefy, 2018). SADI firms are one category of hidden champions, operating in industries with long life cycles whose age is the significant organizational characteristic and influences the firm's information search as well as the accompanying costs (Bakker & Josefy, 2018;Daft & Weick, 1984;. Thus, we expect the impact of strategic cognition-action inconsistency on a firm's performance to change, moderating by the firm's age. ...
... Firstly, we argue that older SADI firms with highly consistent strategic cognition and action will be locked more in existing modes of strategic cognition and action and face more challenges in receiving the benefits of extra information search (Bakker & Josefy, 2018;Kaplan, 2008). Older firms with extremely strategic cognition and action consistency are more willing to rely on their existing information search sources based on their successful previous experience (Hannan & Freeman, 1984;Le Mens et al., 2015). ...
The term “discrepancy” originates from the Latin “discrepantia,” meaning the noticeable difference between two things that are assumed to be the same. Strategic cognition and actions are critical to firm growth. While existing literature has underscored the relationship between strategic cognition and actions, limited research has been devoted to comprehending the role of inconsistency between them on firm performance. In light of this gap, our study concentrates on SADI (specialization, advancement, differentiation, and innovation) firms who are niche leaders with the characteristics of hidden champions in China to investigate how the inconsistency between strategic cognition and action affects firm performance, especially considering structural differences between strategic cognition and action, in the configurations of multi-dimensional strategic orientations. Analyzing a comprehensive sample comprising 1222 Chinese-listed SADI firms spanning the period of 2012 to 2021, our findings reveal a substantial inverted U-shaped relationship between strategic cognition-action inconsistency and firm performance. Moreover, we identify firm age and industry concentration as crucial boundary conditions, which amplify the steepness of the inverted U-shaped relationship. By offering innovative theoretical exploration and empirical evidence, this study sheds light on the advantages and disadvantages of the strategic cognition-action inconsistency of SADI firms operating under four-dimensional strategic orientations.
... Furthermore, to account for other potential impacts on bootleg music releases, we included a set of controls at both the organizational and national levels. At the organizational level, we controlled for organization age, expecting that older music organizations are more likely to have their music products bootlegged than younger ones (Bakker and Josefy, 2018). This variable was measured as the time lag between the establishment of a music organization and the release year of a focal song. ...
... This is the number of years that have passed in year t since the firm's establishment. This variable is considered to reflect factors such as the establishment of organizational routine and legitimacy (Bakker and Josefy, 2018). Domestic and foreign technological distance. ...
The Penrose effect, or the limitation of the growth rate during expansion due to managerial constraints, has beenexamined in the context of business diversification, withdrawal, and MNE’s foreign direct investment, primarily inthe for-profit sector. However, insufficient attention has been paid to its impact on professional service firms,particularly in the context of their expansion through service exports. The main purpose of this study is toexamine the Penrose eff ect in the internationalization of professional service firms through service exports.
This study focuses on large Japanese patent firms as traditional professional service firms and constructs paneldata for 48 large patent firms over the observation period from 2002 to 2010 to test our hypotheses.
Our results demonstrate a negative relationship between degree of internationalization and internationalbusiness growth, thus confirming the Penrose eff ect. Furthermore, we found that the degree ofinternationalization has a curvilinear relationship with international business growth, and that institutionaldistance does not have a negatively moderating eff ect on the relationship between degree of internationalizationand international business growth.
This study made a theoretical contribution to Penrose's growth theory and previous studies on internationalmanagement and professional service firms and international management by showing that the Penrose eff ectcan be observed in the international expansion of professional service firms through service exports. Moreover, this study identifies the factors that modify the Penrose eff ect, thereby making a significant theoreticalcontribution.
... At the firm level, we first control for Firm size by taking the natural logarithm of total employees because large firms tend to have abundant resources for corporate risk-taking, and firm size is an important predictor of firm performance (Collins and Clark, 2003). Because firm age can affect firm legitimacy and resource attainment, we control for Firm listing age by taking the natural logarithm of the number of years since a firm went public (Bakker and Josefy, 2018). We control for Long-term debt ratio because the debt ratio can affect a firm's borrowing capacity and firm performance (Hiwt and Smart, 1994). ...
Corporate risk‐taking is key to a firm's ability to achieve competitive advantages. Drawing on the attention‐based view and the information‐processing perspective, we argue that firms with higher strategy disclosure intensity (i.e. greater frequency of ‘corporate strategy’ mentions in a firm's public disclosure) will allocate more attention to corporate strategy and develop stronger information‐processing capacities, enabling them to undertake more intensive risk‐taking. This is particularly true when investment opportunities are more abundant and the environment is more dynamic. In addition, corporate risk‐taking will lead to better financial performance when firms exhibit stronger strategy disclosure intensity. Findings from 3190 firms support our arguments. Overall, this study advances strategic management research by demonstrating that strategy disclosure intensity provides important insights into a firm's risk‐taking decisions and performance.
Radical innovation and innovation efficiency are important for a firm's competitive advantage. Past research has established that the firm's upper echelons disproportionately contribute to the radicalness and efficiency of innovation efforts. Relying on a social‐interactionism view of the CEO–TMT interface, we study the effects of CEO–TMT shared cognition in the form of subconscious cohesion and collective thinking, which is understood as relational adaptation at the group level on firms' attainment of radical innovation and innovation efficiency. We test our hypotheses on firms listed in the S&P 500 for at least three consecutive years between 2005 and 2018 and find that CEO–TMT shared cognition positively affects firms' pursuit of radical innovation, up to a certain point, at which shared cognition negatively affects firms' pursuit of radical innovation. We posit that the positive effect persists due to increasing CEO–TMT cohesion and concomitant confidence in pursuing high‐risk business endeavors. After a certain point, these positive effects are outweighed by the negative effect of groupthink, which limits divergent thinking and creativity. These effects differ for innovation efficiency, which increases linearly with CEO–TMT shared cognition and its effects on cohesion. Supplementary analyses on organizational slack further contextualize these findings. High‐discretion slack may dampen the benefits of cohesion and confidence, while low‐discretion slack appears to reinforce them. Our study develops the understanding of radical innovation and innovation efficiency, contributing to the literature on shared leadership at the CEO–TMT interface. It offers valuable insights for innovation decision‐makers, guiding them on the path to achieving breakthrough innovations and innovation efficiency.
Purpose
Sustainable innovation (SI) has emerged as a unique challenge for the organizations. A recent call on SI highlighted that little knowledge exists about different antecedents of SI, specifically, the contextual factors in emerging economies. This study aims to address this research gap by highlighting firm age (culture-free firm characteristic) as an antecedent of SI.
Design/methodology/approach
The data were collected from 223 respondents serving in 168 different manufacturing firms listed on Pakistan Stock Exchange.
Findings
The results demonstrated that the firm age is positively associated with double-loop learning (DLL) and SI. The findings also demonstrate that DLL significantly mediates the relationship between firm age and SI.
Practical implications
This study offers some practical insights for achieving SI outcomes.
Originality/value
This study offers some practical insights for achieving SI outcomes.
Although prior research has documented that some necessity-motivated ventures grow, and later develop into what researchers have traditionally called “opportunity-driven” ventures, the existing dichotomous framework offers no theoretical explanation for how this transition occurs. We build on the actualization view of entrepreneurship to describe the process by which an entrepreneur’s underlying needs—basic, psychological, and self-fulfillment needs—motivate both the desired future states that they envision, and their evaluation of the actions and conditions necessary to actualize the futures they imagine. We then extend actualization theory beyond the identification and evaluation of opportunities to include venture creation. We describe how needs effect the identification of key milestones, the pace at which milestones must be reached, and the level of uncertainty that entrepreneurs are willing to bear. In doing so, we illustrate how basic needs motivation leads to the selection of imitative or replicative actions, but that subsequent needs actualization can free necessity entrepreneurs to pursue voluntary forms of entrepreneurship once their basic needs have been met. Our model invites scholars to go beyond describing the antecedents and outcomes of necessity entrepreneurship, to research aimed at understanding the process through which necessity entrepreneurs transition to more voluntary forms of venturing.
Several studies on cultural clusters classify Japan as independent, meaning that wherever Japanese firms go abroad, they must adapt to very different environments. This study examines how Japanese firms treat deterrent effects of geographic distance, cultural distance, and political hazards and whether the deterrent effects may vary with firm size, firm age, and ownership solution. Results using data on Japanese firms' outbound mergers and acquisitions (M&A) from 2010 to 2019 reveal that (1) only the deterrent effect of geographic distance is absolute. (2) Larger firms with larger slack resources in their home country are less concerned about geographic distances and political hazards. (3) Older firms, exposed to typical practices and norms for a long time, are less adaptable to cultural distances. (4) The deterrent effect of geographic distance is weaker for complete control mode on the one hand, on the other hand, the moderating effect of complete control mode on political hazards hinges on firm size and age due to trade‐offs between integration benefits and resource/experience constraints.
Purpose
A significant body of research has investigated open innovation and absorptive capacity as well as the relationship between them. Moreover, recent research has classified each concept into subcategories on the basis of theoretical reasoning. However, the relationships among these subcategories in terms of theoretical and empirical aspects are unknown. Thus, this study makes several hypotheses related to the generally accepted subcategories, i.e. academic and business collaboration and potential and realized absorptive capacity. We empirically tested data from a questionnaire survey and public data from Japanese industrial firms.
Design/methodology/approach
This study empirically analyzes the relationship between open innovation and absorptive capacity via a quantitative approach and a questionnaire survey.
Findings
The results show that the types of collaboration partners might affect certain subcategories of absorptive capacity related to firm performance. Specifically, academic collaboration enhances potential absorptive capacity but diminishes realized absorptive capacity. Business collaboration has a positive effect on firm performance but limited effects on both potential and realized absorptive capacity.
Originality/value
This study considers the advancements of previous studies to study the relationship between open innovation and absorptive capacity. This study elucidates the efficacy and limitations of these concepts and advances our knowledge of innovation research areas.
The article presents the results of research on first-mover advantage and strategies which can be employed by follower firms in order to obtain compensatory competitive advantages. An overview of related previous studies is provided, along with details of the research protocol, which involved data analysis of information on the 50 largest management consulting firms between 1989 and 1999, derived from the U.S. Trademark database. It was found that organizational innovation was related to issues such as imitation and market expectations.
Many studies argue that the continual creation of new ideas by small, young, entrepreneurial firms steadily destroys the competitive positions of their larger, older, and more established rivals. Despite this attention, empirical results in this tradition are exceedingly fragile. This paper proposes three reasons for the empirical inconsistencies in the literature--that small and large firms differ in the extent to which they may offer efficient incentive contracts, that small and large firms differ in their stock of technological experiences, and that small and large firms differ in their ability to efficiently utilize internal and market contracts. The paper suggests that the instability in existing work is at least partially due to the failure of prior work to fully capture the joint and interactive effects associated with these three differences. Results from a ten-year study of 523 semiconductor firms indicate that the benefits of technological experience developed internally and of technological experience accessed via co-development partners diminish as a firm increases in size. In contrast, the benefits of experiences accessed via production-sourcing contracts are strengthened as a firm increases in size. These results are broadly consistent with the notion that differences in the relative incentives and abilities of entrepreneurial and established firms affect their innovative activity.
Patricia (Pat) Yancey Martin spent nearly 40 years studying work, organizations, and gender (including at work/in organizations but also in relation to violence against women). She published many articles and several books, her most recent book: Rape Work: Gender, Victims, and Emotions in Organizations and Communities (2005).
We add to neglected research on how venture resources and founder experience outside the home country interplay in facilitating venture creation speed. In particular, we investigate how returnee entrepreneurs influence the role of venture resources in the speed of entrepreneurial entry. Using a novel sample of 388 new ventures covering a range of technologies in China, we find that returnees from abroad are slower in new venture entry in the home country, compared with homegrown entrepreneurs. At the same time, ventures with innovative technology and backed by foreign capital are slower to set up due to higher levels of liability of newness and liability of foreignness. However, when these firms have a returnee founder who can leverage their experience with foreign resources and technological knowhow, such negative effects on entry speed are significantly mitigated. We discuss implications for further research and practice.
Prior research on age dependence describes entire populations as exhibiting a liability of newness, adolescence, or obsolescence. By comparison, this study considers how strategy affects aging. A study of firms in the U.S. personal computer industry reveals that age dependence varied not only by strategy, but also across outcomes.
Forthcoming at The Academy of Management Annals: http://tx.ag/survival
Understanding why some firms survive while others fail is a central question of strategic management research. Indeed, many consider survival the quintessential indicator of firm performance. As such, survival research is vast, but also frustratingly disjointed across several thematic areas in the organizational literature. In this review of firm survival and failure, we organize this research across three stages of firm development: new ventures, single-business units and diversified firms. We therefore add order to the diverse survival literatures and clarify how scholars’ conceptualizations of survival differ. Notably, different streams’ conceptualization of survival reflect a multi-faceted construct including three dimensions: operations, ownership and solvency. Identifying these dimensions provides a lens that adds clarity when reviewing the literature as well as important richness to better situate future work on survival and failure. In addition, we highlight outdated assumptions prevalent in this research, which have further limited the theoretical development of survival and failure. This review also sheds light on the timely question: “who benefits or suffers from survival and failure?”, as scholars and policymakers alike seek to understand factors that promote entrepreneurial activity and grapple at the other end of the spectrum with “too big to fail” policies.