Problem Solving through the Lenses of Identity, Identification, and Work Groups: A Socio- Cognitive Theory of the Firm

Abstract

Strategy management as a phenomenon needs greater integration in order to clarify and progress knowledge development and accumulation (Durand, Grant, and Madsen 2017). In this paper we integrate three canonical pillars of strategy: 1) how to firms differ from other firms, 2) why a firm organization differs from a market organization, and 3) the process of strategic decision making. Consistent with others, we view strategic decision making as a problem solving arena in which firms grapple with complex problems and face situations in which goals exist yet the paths that yield an effective solution are indeterminate and not clearly understood, established, or defined. Our first assertion is that the work group is the critical level for problem solving, not the the firm or the individual manager. Our second claim focuses on our socio-cognitive contribution: the social levers of identity and identification are a fundamental design solution when groups are the focal level of analysis for, they align individual and collective interests and cognition, thereby facilitating the work necessary to think about and solve complex problems. Our third claim is that this base model distinguishes firms from each other (e.g., a source of firm differences) as well as firms from hybrid market forms of organization due to: 1) a relational advantage and 2) a cognitive advantage stemming from congruency in organizational and group goal frames. Relational advantages strengthen members’ interest in the work group and project at hand, enabling greater levels of knowledge work at individual and group levels. Cognitive advantages occur when organizational and group goal frames are congruent and linked, for when group members’ attention is directed by organizational goals, they are primed to think more holistically and thus generate more effective creative solutions. While our model relates to any group charged with problem solving, we envision this model operating: 1) as organizations adapt their businesses processes and products due to changes in the external environment, 2) in sequence with strategic formulation and implementation, 3) for problems that relate to the most important parts of a firm’s value chain, and 4) in groups, which may include top managers, R&D specialists, those tasked with business development, or any number of other organizational members.

Full text

Socio-Cognitive Foundations
1
Problem Solving through the Lenses of Identity, Identification, and Work Groups: A Socio-
Cognitive Theory of the Firm
Laura Poppo
Professor of Management
Donald and Shirley Clifton Chair in Leadership
University of Nebraska, Lincoln, College of Business
Lincoln, Nebraska 76588-0491
Lpoppo2@unl.edu
Hilary Schloemer
Assistant Professor
Arkansas State University, Neil Griffin College of Business
State University, AR 72467
(870)980-8525
HSchloemer@astate.edu
Keywords: Problem solving, Identity, Identification, Creativity, Strategy Process, Groups
Acknowledgements: Both authors contributed equally, and acknowledge Kristie Rogers, Nick Argyres,
anonymous reviewers, as well the Editor, Jeff Reuer, for their guidance as well constructive comments on
earlier versions.

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Problem Solving through the Lenses of Identity, Identification, and Work Groups: A Socio-
Cognitive Theory of the Firm
Strategy management as a phenomenon needs greater integration in order to clarify and progress
knowledge development and accumulation (Durand, Grant, and Madsen 2017). In this paper we integrate
three canonical pillars of strategy: 1) how to firms differ from other firms, 2) why a firm organization
differs from a market organization, and 3) the process of strategic decision making. Consistent with
others, we view strategic decision making as a problem solving arena in which firms grapple with
complex problems and face situations in which goals exist yet the paths that yield an effective solution are
indeterminate and not clearly understood, established, or defined. Our first assertion is that the work
group is the critical level for problem solving, not the the firm or the individual manager. Our second
claim focuses on our socio-cognitive contribution: the social levers of identity and identification are a
fundamental design solution when groups are the focal level of analysis for, they align individual and
collective interests and cognition, thereby facilitating the work necessary to think about and solve
complex problems. Our third claim is that this base model distinguishes firms from each other (e.g., a
source of firm differences) as well as firms from hybrid market forms of organization due to: 1) a
relational advantage and 2) a cognitive advantage stemming from congruency in organizational and group
goal frames. Relational advantages strengthen members’ interest in the work group and project at hand,
enabling greater levels of knowledge work at individual and group levels. Cognitive advantages occur
when organizational and group goal frames are congruent and linked, for when group members’ attention
is directed by organizational goals, they are primed to think more holistically and thus generate more
effective creative solutions. While our model relates to any group charged with problem solving, we
envision this model operating: 1) as organizations adapt their businesses processes and products due to
changes in the external environment, 2) in sequence with strategic formulation and implementation, 3) for
problems that relate to the most important parts of a firm’s value chain, and 4) in groups, which may
include top managers, R&D specialists, those tasked with business development, or any number of other
organizational members.

Socio-Cognitive Foundations
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Problem Solving through the Lens of Identity, Identification, and Work Groups: A Socio-Cognitive
Theory of the Firm
Two canonical origins of strategic management inquiry focus on distinguishing a firm
organizational form from market governance and distinguishing firms from other firms. These origins
took aim at common assumptions in economics, namely that firms are merely a nexus of contracts and
that the industry, not the firm, explains variance in firm profitability (Rumelt, Schendal & Teece, 1994).
With the development and empirical verification of transaction cost economics, Schumpeterian
economics, and behavioral and evolutional theories of the firm, strategic management is no longer
questioned as an accepted domain of study, either theoretically or in the classroom. Yet, because the
phenomenon of strategy is both dynamic and complex, our theories about why firms differ and whether
firms are different than markets must evolve (see also Durand, Grant, Madsen, 2017).
To redirect theorizing regarding these two pillars of strategic management, we add a third: the
strategic decision-making process. Consistent with a growing body of research, we view strategic
decisions as a problem solving process marked by significant interdependencies among people and
organizational processes (Foss, Frederiksen, & Rullani, 2016; Leiblein, Reuer, & Zenger, 2018;
Nickerson & Argyres, 2018). Because of this complexity, expertise required to problem solve resides in
different people. This represents a significant managerial challenge: how can firms create a problem
solving process that reliably aligns individual, group, and firms interests? Can this process then
distinguish firm organizations from market organizations? Can this process also distinguish firms from
other firms?
Before explaining our problem solving process that addresses these three questions, we want to
emphasize the catalyst that primed our thinking: the 21st century is marked not by stability and
predictability but by adaptation and turbulence. Over the last 5 to 10 years, we have consistently heard
from managers of the seemingly subtle but significant differences in “how the world is changing.” In the
language of our textbooks: managers are struggling with strategic fit. Numerous examples exist when we

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consider the general and competitive external environment. The values of U.S. millennials are thought to
differ from the mindset that is considered characteristic of most baby boomers: acceptance of and
obedience to authority. Because millennials increasingly outnumber baby boomers in the workforce, it is
important to understand them, how they can be attracted and retained, and whether non-market retention
strategies, such as those focused on corporate social responsibility or work-life balance, would be
effective. Alternatively, global competition exists in many product markets, which makes it increasingly
difficult for companies to realize or sustain a competitive advantage, putting pressure on managers of
product categories to continually refresh and modify products, create new products, or rethink their value
chain in order to better satisfy customer needs. A third major force of change is technology, which experts
predict will continue to modify most companies’ value chains as well as introduce wholly new ways of
doing things in niche spaces (i.e., new products and entrepreneurship) for the next several decades. A
fourth major force of change is political for government policies and directives can have national,
international, as well as global impacts. How can managers effectively sift through these complex
problem spaces, to determine the ‘what and how’ of change?
Prior theorizing demonstrates that this space, problem solving, is not easy to navigate. Because
complex problems require a broad array of specific knowledge sets, managers do not have the knowledge
to solve them and must delegate and rely on those with the requisite diverse yet specific knowledge sets
that define the problem space. Complexity increases with the number of interdependencies, and in the
context of knowledge, those who possess diverse knowledge sets do not naturally come together and
share knowledge even though knowledge set integration (i.e., joint production) can be critical to creating
value (e.g., Arrow, 1974). Work in game theory suggests that, even if those possessing diverse knowledge
sets were to come together, they would not be prone to cooperation (Axelrod, 1984); additionally,
bounded rationality easily constrains effective search which impacts the generation of alternative courses
of action triggered by ‘problems’ and/or unmet expectations (e.g., Simon, 1991). Thus, how can we
understand how firms overcome these challenges to solve complex problems?

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We build a socio-cognitive theory of the firm in which the work group is the cornerstone of
knowledge production, arguing that complex problems require creative solutions and, thus, a group
process primed for creativity, and relating two socio-cognitive levers, identity and identification, as
mechanisms to motivate and direct a work group tasked with solving a complex problem with a novel and
useful solution (i.e., one that serves the group’s interests as well as the collective interests of the
governing entity). Because group production is notoriously difficult to incentivize, we show how identity
and identification are uniquely situated to align self and collective interests. As a theory of the firm and
firm differences, we argue that two categories of sources of advantage, relational and cognitive, can
moderate how well members and groups work together to create novel and useful-to-the organization
solutions.
Our focus on linking identity and identification both extends and challenges prior views on
identity, theory of the firm, and knowledge-based views. Kogut and Zander’s (1993; 1996: 503) work was
foundational and directed our inquiry because of their abstraction envisioning firms as “a social
community specializing in the speed and efficiency in the creation and transfer of knowledge.” For Kogut
and Zander (1996), the employment contract is instrumental in creating the emotive bond of belonging to
an organization. Contrary to our focus on complex problem solving as requiring creative solutions and
thus an identity primed for creativity, they argue that “identities rule out potentially interesting avenues of
innovation and creativity” (pg. 502). The title of this foundational article aptly summarizes their
perspective: “What firms do? Coordination, identity and learning.”
A second relevant branch of prior research in strategic management focuses on the classification
or categories that explain a firm’s identity. A firm-level identity is generally viewed as the central,
enduring, distinctive characteristics that inform how firms view “what they do” and “who they are”
(Albert & Whetton, 1985). This perspective directs attention from economic to cognitive drivers of
competitive advantage: “how managers interpret and process information about their own organization,
competitors, and the industry” relate to how they formulate and enact competitive actions (Irwin,
Lahneman, & Parmigiani, 2018: 270; see also Nadkarni & Barr, 2008, Reger & Huff, 1993). Multiple

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cognitive identities exist in organizations (i.e., business, corporate, strategic group, industry) and
managers draw on these identities to both formulate and enact product strategy decisions (Irwin et al.,
2018). These cognitive identities are not only nested but also linked because organizational goals require
internal coherence (Ashforth, Rogers, & Corely, 2011). Prior conceptualization also suggests that an
organizational identity may represent a core competence when the firm is able to define its identity, who
it is and how it competes, through a distinct position and approach (Barney & Stewart, 2002). Using Koch
Industries as one example, Barney and Stewart (2002) show how an organizational identity can take the
form of a cognitive and normative schema, becoming a dominant logic that is widely shared among
employees, and resulting in more effective strategic decisions.
We build on this literature in two ways. First, we emphasize a particular characteristic, creativity
(see Anderson, Potočnik, & Zhou, 2014, George, 2007, Hennessey & Amabile, 2010 for recent reviews),
as a necessary part of the identity of a group tasked with solving complex problems. Second, we argue
that organizational identity directs member and group attention toward organizational goals and forms the
basis of the overarching frame that directs attention toward a more effective solution set to the complex
problem. Prior research supports our contention that a more dynamic process model of organizational
identification and identity may result in better problem solving (Gioia, Schultz, & Corley, 2000; Jalonen,
Schildt, & Vaara, 2018; Schilke, 2018). In our conceptual model, we further argue that managers are a
critical factor in the formation of a work group’s identity. Managers play a central role in both reinforcing
the significance and importance of the group’s work and in orienting the group toward thinking
differently to solve the complex problem. As Schilke (2018: 1451) suggests, managers that “steer identity
salience and content” are likely to benefit when conformity is not the best strategic response. We view
identity as representing a language for communicating current strategic concepts and for creating new
ones (see Jalonen et al., 2018 for example).
In the following sections, we begin with a critique of the existing solutions to self-interest and
collective action and argue that further extensions of the knowledge-based view are necessary to reconcile
how the firm organizational form compares to hybrid market forms in solving complex problems. We

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introduce a necessary correlate to complex problem solving, creativity, and explain how firms can
strengthen a work group identity and member identification in a way that enables greater creativity. We
further offer a process that can explain how and why firm differences might arise from relational and
cognitive advantages in solving complex problems. Our extension and central challenge is to find a
process-based solution that more reliably aligns individual and collective interests in the context of
complex problem solving.
GROUP IDENTITY AND IDENTIFICATION AS IMPORTANT LEVERS FOR BRIDGING
SELF AND COLLECTIVE INTERESTS AND ACTION
Motivating and coordinating knowledge sharing and integration among individuals to achieve joint
production underlies many strategic activities, from new and improved processes and products to
corporate-level initiatives that chart a firm’s strategic direction. According to the knowledge-based view,
sharing, transferring, and integrating knowledge sources are fundamental to firm growth, productivity,
and competitive advantage (Argote, 2012; Conner & Prahalad, 1996; Grant, 1996). Yet, significant
challenges exist, especially as problems and the requisite knowledge sources become more complex –
diverse knowledge sets, bounded rationality, and economic self-interest can easily undermine effective
knowledge sharing, transfer, and integration (e.g., Simon, 1991). In this section, we review the challenges
that arise when groups are formed to solve complex problems and explain why authority, formal
incentives, and organizational identity are insufficient to consistently facilitate joint production.
Existing Solutions to Self-Interest and Collective Action
The primary design challenge for complex tasks is to find levers that will positively and reliably
motivate cooperation towards a collective problem. Strategists generally consider the formal distinctions
of markets and hierarchies as the critical design factors surrounding knowledge production and problem
solving (Dosi, Levinthal, & Marengo, 2003), embracing three core concepts: asset ownership, authority,
and incentives (e.g., Hennart, 1993, Libeskind, 1996, Makadok & Coff, 2009, Nickerson & Zenger,
2004). Organizational economics and knowledge-based views are early responses to questions about how

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to manage knowledge production.
Organizational economics emphasizes how governance choices influence the costs of joint
production, answering the question of why firms are different from market forms of organization in a
succinct fashion: because firms own their assets, this form of organization is uniquely situated to not only
protect but to efficiently direct joint production through authority. Thus, firm ownership, or hierarchy, is a
fundamental boundary when modeling the costs of knowledge production (Williamson, 1996). Simply
put, organizational economics views hierarchy as more efficient (less costly) than hybrid market forms of
organization, such as alliances, joint ventures, and long-term trading relationships when the tradeable
assets are knowledge-based (Chi & Seth, 2009; Poppo & Zenger, 1998).
More generally, transaction cost economics is based on a discriminating alignment hypothesis in
which managers seek to maximize performance and minimize costs by aligning transactions, which differ
in their attributes or characteristics, with governance structures, which differ in their costs and adaptive
capacities. In this way, managers align incentives within a firm through ownership (Williamson, 1996).
Additional advantages of firm organization include selective intervention, fiat, and monitoring. Formal
authority and fiat allow managers to redirect and/or resolve disputes without having to negotiate or
renegotiate processes as they would in an inter-organizational exchange (Williamson, 1996). This reduces
transactions costs and facilitate adaptation relative to market hybrids. In addition, because of formal
authority, managers can monitor activities, establishing a level of transparency that market hybrids lack.
This allows managers to problem solve with more complete (i.e., valid) information.
Another early response to how to manage knowledge production were knowledge-based
perspectives that challenge the above governance logic by removing opportunism as a motive for
internalizing production of knowledge assets. Instead, they advance firm-level characteristics to explain
why firms better coordinate knowledge production through the unique firm lever of authority, arguing
that authority enables efficiencies in knowledge management by directing the use of knowledge, blending
it, and adapting it to incorporate learning or unexpected developments (Conner & Prahalad, 1996) and
may serve as the microfoundation for cabability development (Gavetti, 2005). A second knowledge-based

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explanation examines the virtues of firm ownership in knowledge production, emphasizing the firm
advantage of shared language and common knowledge in knowledge production that hybrid market forms
of organization lack (Grant, 1996). As discussed earlier, a third advantage of knowledge production
within a firm is the potential for organizational identity to encourage the formation of a social community
that creates efficiencies in knowledge transfer (Kogut & Zander, 1996).
Limitations to Existing Solutions to Self-Interest and Collective Action
While we acknowledge the above benefits and distinctions of organizing knowledge production within a
firm, they are incomplete explanations of a process that can more reliably align individual and collective
interests. While each factor can remove or decrease some obstacles or hazards, their effects are indirect
and therefore second-best solutions: they do not unequivocally connect individual self-interest with the
larger interest of the group or firm. For example, by removing authority and invoking low-powered
incentives, employees with relevant knowledge and skill sets are empowered to make decisions and may
choose to exert effort toward sharing and integrating new knowledge when performing an activity. By
owning assets, obstacles such as misappropriation of quasi-rents and hoarding of knowledge are
weakened, but ownership does not in and of itself augment cooperative problem-solving (Milgrom &
Roberts, 1988). Similarly, by measuring easy-to-monitor tasks, managers may reduce effort in synergistic
but hard-to-measure tasks (Makadok & Coff, 2009; Nickerson & Zenger, 2004). Because self-interest in
these cases is not fully aligned with group interests, there is still substantial potential for employees to act
in ways that are not desirable from a group perspective.
Consistent with this logic, Nickerson and Zenger (2004: 9) counter that the utility of authority is
limited: “[a]s problems become more complex and nondecomposable, the cognitive limits of managers to
develop useful search heuristics, combined with a manager’s propensity to meddle, contaminates the
efficiency of search.” Rather, coordination should be necessarily pooled because the complex,
nondecomposable tasks at hand are highly interdependent, requiring extensive interaction among
employees in their quest to develop applicable heuristics to solve the problem. Thus, they argue that for

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complex problems, consensus among employees best supports search and the formulation of heuristics to
guide solutions.
Shared language and common knowledge are also too diffuse to explain why firms better
coordinate knowledge production. By their nature, the diverse skills and expertise that are required to
solve complex problems can undermine the level of collective effort. Specialization of knowledge
typically involves specialization of language (Baer, Dirks, & Nickerson, 2013; Kogut & Zander, 1996)
and cognitive frames (Foss & Weber, 2016), creating and emphasizing communication and
comprehension barriers. Furthermore, expertise is linked to social categorization based on the member’s
specialty, and individuals are motivated to prefer and engage more with others with whom they have
common social categories, exhibiting higher levels of within-category communication, understanding,
and cooperation and higher levels of extra-category bias that negatively affect collective performance
(e.g., Van der Vegt & Bunderson, 2005).
Most applicable to our extension of the knowledge-based view is Kogut and Zander’s (1996)
description of how a shared firm identity fosters convergent expectations among employees, thereby
enabling coordination and communication. Similar to Nickerson and Zenger (2004), Kogut and Zander
describe consensus produced by these convergent expectations as important to knowledge production but
view the mechanism for consensus as shared language, agreed-upon communication channels, and
overarching organizational principles. The problem with such an aggregate level of identity is that when
sub-groups (e.g., divisions, departments, work groups) share a common superordinate identity (e.g., firm),
this shared superordinate identity in and of itself does not necessarily foster a preference to work with one
another. Lawler and Yoon (1996) demonstrate this result through a series of behavioral experiments, and
across different network structures, they consistently find that a common superordinate identity does not
produce a preference for greater engagement (transactions) with the internal unit. Thus, the problem
solving advantages of consensus provided by a superordinate identity (i.e., Kogut & Zander, 1996;
Simon, 1997) cannot be fully realized at the sub-group level, as group members do not necessarily have
an affinity to work together even though they belong to the same organization. We recognize and accept

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these views that convergent expectations and heuristics are important to how groups solve complex
problems, and our model highlights and extends this process as conditioned and influenced by group- and
firm-level identities and goals.
A second limit of knowledge-based extensions of a theory of the firm is the logic restricted the
concept of organizational identity to exist only for a firm. Social communities and identification are not
unique to firm organizations but can occur with any kind of social group or organizational form (Ashforth
& Mael, 1989; Grandori & Kogut, 2002). Well-established in the strategic management literature is that
hybrid market forms (i.e., alliances) create social communities that share important sources of new ideas
and information (Dyer & Singh, 1998; Inkpen, 2000), which may constitute a unique and productive
resource for value creation and synergistic outcomes (Madhok & Tallman, 1998). That is, partners may
“invest” in knowledge-sharing routines by establishing shared goals and values as well as committing
specific individuals to frequent interactions, meetings, and problem-solving activities (Kale, Dyer, &
Singh, 2002). These works suggest that firm ownership may not be a necessary boundary condition for
achieving knowledge production.
Simply put, motivating individuals to effectively engage and cooperate in highly interdependent
tasks is difficult because it requires interactions among people, tasks, and tools (Argote & Ingram, 2000),
direction regarding search, yet, ideally, limited authority (Nickerson & Zenger, 2004; Shalley, Zhou, &
Oldham, 2004). Indeed, solving complex problems that truly have the potential to create firm advantages
often requires the coordination of diverse knowledge sets (i.e., expertise) and a high level of interaction
among individuals with diverse knowledge. Consistent with this, Simon (1991: 33) argues that “intense
interdependence is precisely what makes it advantageous to organize people instead of depending wholly
on market transactions.” Yet, a challenge remains: how do you motivate and direct effort toward this
task?
Undermining the desired collective effort is the self-interest of individuals with specialized
knowledge who have a natural monopoly position and may exercise opportunistic bargaining by hoarding
their knowledge, withholding effort, leaving the organization, or directing the search process toward the

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use of their knowledge rather than recombining it with other knowledge sets or searching for new
knowledge (Nickerson & Zenger, 2004). Others similarly argue that creating incentives that overcome
self-interest and motivate this type of collective effort is challenging. For example, measuring an
individual’s contribution to the joint task is difficult because individual contributions are complementary
and intertwined (Makadok & Coff, 2009). Additionally, the diverse knowledge sets among employees
make it harder for peers to assess one another’s contributions, both in terms of quality and quantity.
Because of the potential for strategic misrepresentation (e.g., self-report) or noise in observing one
another’s efforts, such incentives can derail employee motivation in joint production. Additionally, absent
strong, group-based incentives, inter-role conflict may also undermine effort put toward the collective
task. When individuals engage in a joint task, they often face the tradeoff of time spent on one’s self
(individual role) versus time spent on the collective task (collective role). When role identity is most
salient, conflict will occur as individuals prioritize the individual role as more salient and critical than the
collective role, thereby participating less in the collective effort (Ashforth & Mael, 1989).
Firm Differences in Problem Solving
Why firms have differences is a central foundation of strategic management, distinguishing the
field of strategy from economics (Rumelt et al., 1994). While most agree that these differences originate
because decision rules, resources, and capabilities are idiosyncratic to firms and are path dependent, the
emphasis on what constitutes advantage differs. The classic view of advantage, characteristically
conveyed in strategic management textbooks, emphasizes sources of resources and capabilities and the
ease of copying, imitating, or trumping them through a strategic equivalent (Barney, 1996). For others,
however, the static framework is inherently limited and shortsighted for, if rent-producing strategies
attract imitation, they cannot be a sustainable source of rents. As an alternative, Schumpeterian economics
emphasize creative destruction, making salient that idea that better questions to advantage may be based
on dynamic junctures (Schumpeter, 1934). This leads evolutionary theories of the firm to emphasize
routines as the key catalyst for change and the source of a dynamic capability: “successful firms can be
understood in terms of a hierarchy of practiced organizational routines” which is “the key building block

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under our concept of core organizational capabilities” (Nelson, 1994: 260). For some, the capabilities
underlying innovative responses to technological change define firm heterogeneity and advantage
(Henderson & Clark, 1990; McGahan, 2004). Others focus on the classification of firms in an industry
into different types, de novo entrants (truly new firms) or diversified entrants, to explore capability
differences in survival, growth, and performance (Cantner, Kruger, & Rhein, 2009; Carroll, Bigelow,
Seidel, & Tsai, 1996; Chen, Williams, & Agarwal, 2012; Ganco & Agarwal, 2009).
Our theory, however, extends an under-researched alternative posited by Williams (1994):
adaptive search by managers explains why firms differ. Similar to decision-making models present in the
literature at the time, Williams proposes that problemistic search is driven by differences in expectations:
when managers find that a project’s value is either not understood, misrepresented, or not justified using
traditional financial analysis firms, firms execute search to develop clarity. Yet, because the search
patterns differ, “no two strategists will identify the same array of options for the firm” (Williams, 1994:
237), and firm differences evolve over time. Uncertainty is a critical assumption of this dynamic
foundation because executives’ expectations of the project value will constantly change due to
competitors’ search for rents, development of capabilities, and execution of strategies, driving adaptive
search. While our model builds on this proposition, it differs in two important ways. First, Williams
argues that decision-making and search are goal-focused responses to changes in the competitive
environment that impact rents from capabilities; we focus on situations in which the external environment
is changing, threatening a firm’s fit and forcing the firm must adapt to achieve its goal though the path
forward is indeterminate. Second, for Williams, the single manager searches for solutions, but for us,
complex problems require a group, not a single manager, to create an effective solution. By recognizing
that the group, not the individual, creates solutions to complex problems, our model addresses
organizational and socio-cognitive processes that enable rather than disable problem solving.
Thus, while Williams assumes capabilities distinguish firms due to idiosyncratic search and path
dependencies, our process model may represent a problem solving capability which, if manifested as a
routine, enables some firms to better solve complex problems than other organizational forms.

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SOCIO-COGNITIVE FOUNDATIONS OF COMPLEX PROBLEM SOLVING
The idea that strategic management theory still needs greater reformulation of its socio-cognitive
underpinnings is not new. Take for example:
“The assumption that firm heterogeneity stems from economic barriers does not align with what
we know about human cognition, emotions, learning, social interactions and institutions. Until
theories of firm heterogeneity fully incorporate psychology, the empirical facts will continue to
frustrate our attempts to explain them, and researchers will find it impossible to integrate theory
with strategy practice” (Powell, Lovallo, & Fox, 2011: 1377).
Similarly, the theory of the firm is restricted by treating an organization as monolithic entity and suffers
by not considering how people intentionally make choices and behave. There are certainly notable efforts
to integrate the macro-micro divide. King and colleagues (2010) argue that an organization is a social
actor that acts intentionally, is influenced by external stakeholders, and fundamentally gains coherence
through identity and goals. Others frame strategic decisions as complex judgments and call attention to
two fundamental challenges: 1) the cognitive processes underlying judgment, which are often plagued by
mental error, faulty attentional and decision processes, and the parallel track of a solution in the form of
an architecture that can produce better judgment (e.g., Levinthal, 2011; Powell et al., 2011), and 2)
motivational challenges, for self-interest often undermines collective effort, and the parallel track of
incentive-alignment solutions (Makadok & Coff, 2009). Our unique contribution is pairing identity and
identification at organizational and work group levels, and the specification of two sets of factors that
may account for firm advantages over other firms as well as quasi-market forms of organization: social
factors which influence the strength of member attachment to the more proximal entity, the group, and
cognitive factors, specifically congruent goals, which enable groups to create more effective solutions to
complex problems.
Our Conceptual Building Blocks
Human beings are motivated to reduce uncertainty associated with their environment. One way in
which we do this is to find a basis of similarity with a part(s) of the social environment. For many, this
social psychological process is largely automatic – when we enter a new space, we look to see if there are

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others that are like us. As we scan this space, finding and then grouping ourselves with others that share a
social membership reduces uncertainty triggered by the social environment. Relatedly, as we introduce
ourselves to others in a new social environment, we are likely to describe ourselves in terms of the social
groups we belong to or “identify” with or perceive ourselves as belonging to (Ashforth & Mael, 1989)
such as our age, profession, religion, marital status, or parental status.
Our human focus on identity and identification naturally extends to the workplace where various
groups have members with shared, central, and enduring characteristics that characterize the identity of
those groups and make them targets for identification (Albert & Whetton, 1985). Employees identify with
the firm they work for, the department they are part of, and the profession that defines their expertise and
skills when they consider themselves to be a part of those groups and their membership in those groups to
be an important part of their personal identity (Ashforth & Mael, 1989; Gioia & Thomas, 1996; Whetten,
2006). As a process, identification occurs as an individual explores his or her self-concept or seeks to
answer the question “Who am I?” (Ashforth & Mael, 1989: 21). Because identity informs individuals’
sense of self and subsequent behaviors, identification “is at the core of why [people] approach their work
the way they do and why they interact with others the way they do during that work” (Ashforth, Harrison,
& Corley, 2008: 334).
Drawing on this literature, we showcase the socio-cognitive mechanism of identification, for it is
uniquely suited to motivate and coordinate joint production: when an individual identifies with their work
group, the strength of their identification with the work group will trigger behaviors that enable the
individual and the group to effectively problem solve. That is, work group identity and identification are
social levers that, by definition, create a collective orientation that aligns self-interest, enabling effective
and creative problem solving (See Figure 1). While the literature provides insights on the importance of
members’ propensity for identification with collectives, our review of the literature indicates that little is
known about how a collective identity is formed at the work group level (Poppo, Schloemer, & Rogers, In
Press). This begs the question, how can a work group identity be formed, serve as an attractive target of
identification for members, and prime the group for collaborative problem solving and knowledge

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creation? We thus begin this section by describing autonomous group formation processes and how such
processes may construct a strong group identity and cue and prepare a group for creativity.
Next, we argue that firms (i.e., a simple hierarchy) possess a distinct relational advantage over
market hybrids in this process. Every firm can be viewed as a social category such that members identify
with their place of employment. This organizational identity can then positively moderate the strength of
the work group identity that results from group formation processes in the following ways: by increasing
(1) the perceived salience of the work group as a proximal target over more distal identification targets,
(2) the group’s ability to meet members’ needs for belonging , and (3) the perceived status of the work
group. Each of these firm advantages strengthens and directs effective problem solving in the work group.
As a result, these socio-cognitive foundations of complex problem solving view the challenges of
organization (i.e., bounded rationality, coordinating interdependent knowledge sets, cooperation, and
adaptation) as a forum in which organizational identity and member identification with the work group
become the basis of a firm advantage over market hybrids. To further elucidate our logic, we also
examine how the salience of the work group as an identification target, the ability of the work group to
satisfy members’ needs for belonging, and the perceived status of the work group are likely to vary within
different hybrid organizational forms.
Then, we examine the effects of identity and identification on creativity. Substantial work in the
organizational behavior literature around creativity and innovation has resulted in the development of a
broad understanding of the individual, group, organizational, and contextual factors that affect creativity
and innovation at the individual, group, and organizational levels (see Anderson et al., 2014, Garud,
Tuertscher, & Van de Ven, 2013, George, 2007, and Hennessey & Amabile, 2010 for recent reviews).
This literature finds its multilevel roots in the componential model of creativity (Amabile, 1988), which
suggests that the factors that affect creativity and innovation are inherently multilevel and multifaceted.
According to this model, individuals and groups must possess domain-relevant skills (i.e., subject matter
expertise, knowledge diversity), creativity-relevant skills (e.g., cognitive flexibility, risk orientation), and
intrinsic task motivation to be creative, and these factors must be met with organizational resources,

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techniques, and motivation to produce innovation. Significant additional work has provided increased
nuance and contextualization of this model.
Inherent to this literature is the assumption that any individual or group can be creative under
the right circumstance and that an individual’s ability to contribute to the creative mission of a job or
organization is not bounded by their job title. The organizational behavior and psychology literatures
view creativity as a highly contextualized phenomena, as is evidenced in the dominant method of
measuring idea creativity: the Consensual Assessment Technique (Amabile, 1996; Baer, Kaufman &
Gentile, 2004). In this method, multiple assessors with some level of subject matter expertise in the focal
context are asked to independently rate a produced idea on its “creativity,” allowing the assessors to
interpret the meaning of “creativity” based on their own experience with the context and using the
existence of multiple-raters to control for the error inherent to this subjective measurement. This
measurement approach allows the meaning of creativity to become highly contextualized and allows for
creative potential in all situations: artists, scientists, and engineers can be creative but so too can bank
tellers, garbage collectors, and factory workers so long as the meaning of creativity is suitably
contextualized.
The focal outcome of research on creativity is typically creativity itself, rather than
organizational outcomes. Though the link between creativity and organizational outcomes like firm
performance is generally assumed to be positive, work suggests that these relationships may be weaker
and/or more complex than assumed (e.g., Boso et al., 2017; Gong, Zhou, & Chang, 2013; Khedhaouria,
Gurău, & Torrès, 2015 ). Because the focal outcome of the creativity literature is the phenomena itself
rather than what creativity enables a firm to do, there is limited linkage between creativity and strategic
decision-making.
We view creativity as the root of complex problem solving, as generating new knowledge
requires novel insight. Creative thought, by definition, considers and evaluates new ideas (Amabile,
Barsade, Mueller, & Staw, 2005), yet this aspect of knowledge generation is surprisingly lacking in the
problem solving literature. We view individual creativity as a principal driver of problem solving, and the

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challenge is that individual creativity can easily be derailed by fears, upon reflection, that the idea is not
really a good one (Edmondson & Mogelof, 2006). This is not surprising since creating new solutions for
complex problems is hard – many ideas will not move the needle regarding usefulness or novelty. We
argue that a strong member identification with the work group identity enables creative discourse by
fostering positive affect and psychological safety. A strong work group identity also provides direction
for member creativity through the alignment of goals, prompting of creativity and direction of attention
toward problem solving efforts.
Creativity and the knowledge work necessary to engage in effective complex problem solving
both require cooperative behaviors. We argue that identification encourages the requisite collective-other
behaviors and encourages knowledge work more directly. To fully foster effective problem solving, it is
necessary that problem solutions are not only generated but also implemented, and we argue that
identification with the collective promotes the implementation of collectively generated problem solutions
due to increased member ownership of the solutions and the potential for group successes to satisfy
members’ self-enhancement motives. We further argue for a firm cognitive advantage in generating
effective work group solutions: armed with a common organizational identity, members share a collective
goal frame. By drawing attention to these firm-level strategic goals, expectations converge, and work
group members are more likely to devise a solution that is not only creative, but also effective. That is,
members’ sensemaking of the organization’s identity – its strategic purpose, including how its mission,
goals, and relevant activities create value through its key services/products – provides an overarching
frame that defines how a creative solution must also create value for the organization. We argue that in
the firm context as opposed to the hybrid market context, group members generate more valuable
solutions because, when the work group identity is nested within the organizational identity, members
attend to organizational goals as they form solutions.
-----------------------------------
Insert Figure 1 about here
-----------------------------------
Our Boundary Conditions

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As we develop our conceptual model, we wish to acknowledge several boundary conditions.
First, our model focuses on the formation of new teams in organizations that are tasked with solving
complex problems, as complex problems require interdisciplinary collaborations, or, more simply, an
array of diverse knowledge sets. These teams could be composed of top managers, R&D specialists, those
tasked with business development, or any number of other organizational members. We assume that each
member of the group has unique expertise or knowledge pertaining to the problem at hand, creating
moderate diversity of expertise at the group level (Grant, 1996), as identity is most effective at fostering
knowledge sharing and integration for moderately diverse knowledge sets (Van der Vegt & Bunderson,
2005). We assume that, with some cognitive effort, group members can define and elaborate on some of
the knowledge sets associated with the problem, which they either possess or can access through search.
Following the terminology of Nickerson and Zenger (2004), the group’s focal problem is characterized on
the continuum between nearly decomposable and not decomposable; it requires a moderate to high level
of interaction among knowledge sets in which some of the knowledge sets are known ex ante, but others
are recognized during the process of search and knowledge sharing. It requires some level of directional
search, as leaders must validate and endorse the problem space as well as the allocation of resources.
Finally, we view the solution or solution set as emerging from a creative process in which its
effectiveness is in part a function of the group’s attention to translating relevant characteristics of the
organizational identity, specifically goals and/or drivers of value creation, from the organizational level to
the project level. We introduce the concept of a cognitive goal frame to describe this advantage for
organizational identity in the firm context. We further note that this concept is not necessarily inconsistent
with Nickerson and Zenger’s (2004: 5) use of the term “heuristics,” defined as “simplified representations
of the solution set.” We simply highlight that organizational-level cognitive goal frames are critical in
creating solution sets that will be judged as valuable.
As stated above, we assume complex problems of this kind require a creative solution, where
creativity is defined as “the production of novel, useful ideas or problem solutions” (Amabile et al., 2005:
368). This common definition of creativity implies that creative solutions are inherently effective (i.e.,

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useful) and includes the process of generating ideas as well as the outcome: a novel and useful solution
(Amabile et al., 2005; Anderson et al., 2014). In strategic management, useful solutions must create value
– either by making processes more efficient, thereby reducing costs, or by adding, extending, or
modifying products or services which consumers value and thus are willing to pay for. However for our
purposes, the exact way or the dimensions that make the solution useful and valuable are not presently
known and must be created and/or discovered by the group. The assumption is consistent with
popularized practice of ‘design thinking’ in which general objectives defining value can be specified, but
the way in which the solution achieves value is presently unsolvable, and thus requires creativity
(Liedtka, Ogilvie, & Brozenske, 2014).
The problem space that defines the work group must be viewed worthy of dedicating resources –
that is, authority must be willing to allocate resources toward investigating the problem space and
solutions. We further assume that the teams have an innovative purpose and are tasked with being part of
its implementation (Anderson et al., 2014; George, 2007), remaining together for the duration of creative
problem-solving and implementation of the solution. In addition, there is some oversight of the group, but
it takes the form of updates to upper management regarding its current progress, issues, and challenges.
Accordingly, one identity of interest is at this work group level, and we follow the view of collective
identity in organizations as socially constructed and largely residing in the perceptions of members (e.g.,
Corley & Gioia, 2004; Dutton & Dukerich, 1991; Ravasi & Schultz, 2006). The second identity of
interest is the organizational identity. We assume that members identify with their organization in the firm
context, such that they belong to it, derive positive status from it, and at a cognitive level, understand the
various components of its strategy, especially the facets that enable value-creation or advantage in the
market place. We refer to this aspect of identity as a cognitive goal frame.
Priming for Creativity in Groups
Complex problems by definition are messy, characterized by indeterminate solutions that take
shape through the sharing, assimilation, and integration of moderately diverse knowledge sets. In order to
best support problem solving of this kind, creativity must be a central characteristic of a complex problem

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solving group, shared by members as part of their self-definition as well as part of the collective work
group purpose. Our focus in this section is how to prime members and the work group to view their work
as a creative act. That is, creativity must be central as they develop who they are, their shared meaning,
purpose, mission, and end-results (goals) so they are prepared for and prompted to engage in creative
problem solving.
Pratt (2003: 168-169), following Albert and Whetten's (1985) definition, describes a collective
identity as “those characteristics that members feel are central, enduring, and distinctive.” Implicit in this
conceptualization is the notion of shared, and at least somewhat overlapping, beliefs about the group.
When members so deeply share an identity, they are said to identify with the group (Ashforth & Mael,
1989). When an individual identifies with a collective, his or her self-concept expands to include this
larger group; the collective becomes part of the self, and the individual at least partially defines him or
herself as a part of the collective, allowing the collective to help the individual answer the question “Who
am I?” (Ashforth & Mael, 1989: 21). The extent of identification with a collective has a significant impact
on individuals’ behaviors and self-concepts, making identification a core factor in how individuals go
about their work and approach their work relationships (Ashforth et al., 2008).
Autonomy in Purpose, Mission, and Goals. In order to create common beliefs and meanings
that define “who we are” as a group, members must understand the collective's purpose, mission, and
goals with a particular focus on the complex problem and the interdependencies that unite the group.
Common to both social identity theory and perspectives on creativity is that autonomy and autonomous
motivation can lead to behaviors that facilitate complex problem solving (Rousseau, 1998; De Dreu &
Nauta, 2009; Hennessey & Amabile, 2010). At an individual level of analysis, autonomy is a well-
accepted determinant of creativity. Hennessey and Amabile (2010: 584) explain:
“Autonomy in work, leading employees to feel a degree of empowerment, has long been
postulated as an important feature of work environment fostering creativity. The theoretical
argument is that to the extent that employees feel a degree of ownership in and control over their
work, they will be more intrinsically motivated and thus more likely to fully engage their
cognitive processes in solving problems in the work.”
We assert that, at the group level, autonomy is also critical in collective determination of the group’s

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22
meaning, purpose, and goals, for, if individuals do not perceive ownership and control, they will not be
primed for creative work (Rousseau, 1998). Given that members are likely to come from different
functional backgrounds, the shared construction and resulting shared perception of goals, purpose, and
mission are likely necessary to create the commonality and perceived similarity between group members
that strengthen members’ understanding of “who we are” – their identity – as a distinct entity (cf. Dawes,
Van de Kragt, & Orbell, 1988) and the extent to which members identify with the group by incorporating
this shared identity into their own identity (Ashforth & Mael, 1989).
We also see the groups’ determination of goals that explicitly incorporate creativity as important
to the formation process. Research shows that the focus of stated goals must effectively prime members
for creative problem solving. Shalley (2008) suggests in her review of this literature that if managers
desire creative activity and outcomes, they should set creative goals or creative job requirements to ensure
that the work context is supportive of creativity. Consistent with this logic, research shows that most
employees can readily recognize and acknowledge whether creativity is part of their job (Shalley, Gilson,
& Blume, 2000), and such creative role requirements encourage creative performance (Unsworth, Wall,
& Carter, 2005). The implication is that employees are more likely to engage in creativity if they are
assured that this is part of their job. Thus, explicitly discussing and agreeing upon goals and including
creativity in those goals will incorporate creative problem solving into the members’ shared perceptions
of what is central, distinctive, and enduring about “us” as a group.
A critical part of these interactions is a forum for beginning to legitimate a process in which ”no
one knows” the right answer, let alone how all the pieces of knowledge will come together to form a
solution. These impromptu remarks reinforce the meaning of a creative process, and how the nature of
working together will be different than in situations focused on the execution of well-defined tasks that
require interdependence. Members may share prior experiences of work characterized by complex
problems and others may discuss and share processes to facilitate the education of one another, all
encouraging a mutual openness to learning, “not knowing,” and creating. In this way, as members share
information, interpret past events, and converge on the meaning of the new group, they are creating a

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23
blueprint or cognitive frame that will influence and direct subsequent behaviors and decision-making
(Santos & Eisenhardt, 2005).
Spontaneous Communication. Identity formation is thought to largely take place through
conversations between members (Narayanan, Zane, & Kemmerer, 2011). Thus, an additional behavior
that may further assist identity formation is spontaneous communication – informal, unplanned
interactions that often simultaneously occur among individuals as they jointly process the meaning and
purpose of the group. Prior work suggests that informal, unplanned conversations often spill into task-
related conversations increase awareness of others’ moods (Olson, Teasley, Covi, & Olson, 2002) and
strengthen connectedness and community (Sarbaugh-Thomspon & Feldman, 1998). Such spontaneous
conversations are positively related to a shared identity (Hinds & Mortensen, 2005). We believe a critical
facet of unplanned conversation is members’ sharing of themselves, especially when meaningful
identities separate from group life are discussed (e.g., as a parent, member of a church). Group members’
awareness of such other identities may prime greater attachment for individuals as they prefer consistent
and convergent identities (e.g., Ashforth & Mael, 1989). Thus, spontaneous communication may facilitate
perceptions of connectedness, a shared community, and a strong collective identity as well as member
identification with the group identity.
Effects of Priming and Autonomous Formation Processes on Group Identity and Member
Identification. We argue that identity strength, the perception that individuals form a coherent group
(Campbell, 1958), is facilitated by group formation processes in general and a shared formation of
purpose, mission and goals as well as frequent spontaneous communication specifically. Identity strength
is largely determined by the extent to which the identity – what is central, distinctive, and enduring about
the group – is shared by members (Kreiner & Ashforth, 2004). Driving identification is the assumption
that individuals have fundamental needs, such as self-esteem, achievement, and a feeling of belonging to
others, and thus seek to understand and perceive themselves by locating and comparing themselves within
the larger social structure or environment (e.g., Ashforth & Mael, 1989; Rousseau, 1998). Motivating the
self-definition process is the attempt to reduce subjective uncertainty “about one’s perceptions, attitudes,

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feelings, and behaviors and ultimately, one’s self-concept and place within the social world” (Hogg &
Terry, 2000:124). The result of this formation process is a strong, shared identity (i.e., one with which
members identify), a cognitive representation or belief that occurs when a person forms a connection with
a group represented in the larger social structure. As a cognitive state, identification is distinct from and
more fundamental than a specific behavior or a particular motivation and thus can influence behavior and
motivation toward satisfying the collective goals, values, and ambitions (Ashforth et al., 2008; Rousseau,
1998). In sum:
Proposition 1: Priming for creativity and autonomous formation processes positively affect the
strength of group identity and promote high member identification with the work group.
Relational Sources of Comparative Advantage
Research in organizational behavior commonly points to three additional factors that further
influence the strength of a work group identity: its salience, ability to satisfy need for belonging, and
ability to provide opportunities for self-enhancement. This literature also argues that employees generally
view their multiple identities within a firm as nested and convergent when the firm is operating in a
relatively stable as opposed to a dynamic, transitional environment (Ashforth et al., 2011). Thus, while we
view a complex problem solving requiring firms to adapt to the external environment, our focus is on
incremental changes, not radical changes which redefine the structure, goals, normative frameworks that
underlie how social actors relate to the organization. We use these assumptions as a basis to argue that
organizations are uniquely situated to further strengthen and influence the direction of the work group
identity.
Superordinate Identities & Salience. Though identification with salient and structurally
proximal groups (e.g., group, family, function) is generally stronger than identification with less salient or
more distal groups (e.g., organization, nation; Ashforth et al., 2008; Ashforth & Rogers, 2012; Ellemers,
De Guilder, & Haslam, 2004), identifications with organizational targets (e.g., organization, work group)
provide identities that are commonly nested (Ashforth et al., 2011), and “these identities and
identifications are likely to both converge and combine to some degree such that they become a loose

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gestalt” (Ashforth et al., 2008: 359). We extend this logic to firms and hybrid markets. Because members
within a firm share both a common superordinate identity as well as work group identity, this
convergence will cause them to automatically process the work group identity as more salient and thus
direct more attention and meaning to their membership and their identification with this work group.
For market-hybrids, however, there is no central, shared superordinate identity among group
members. As a result, there is no boost to the strength of a work group identity and member identification
provided by nesting identifications. The dominant dynamic reported in alliances is the vacillation between
cooperation and competition (Ring & Van de Ven, 1994; Zajac & Olsen, 1993): the coordination and
cooperation necessary to create value exist in a context of competitive self-interest where alliance
members maintain a concern for individualized value creation and capture even when the alliance
relationship is characterized by a high level of cooperation. We argue that the existence of such
competing identities in hybrid market organizations undermines group cohesion and can be played out in
a number of different ways as groups fracture along “faultlines” and experience intragroup conflict as
sub-groups formed based on various attributes (Lau & Murninghan, 1998) become salient identification
targets. For example, lacking a superordinate identity, group members in a hybrid market organization
may favor a sub-group identity that is based around their nationality (e.g., Italian vs. British) particularly
if this national identity also corresponds to the host-country of each parent company. This type of in-
group/out-group dynamic within a work group undermines cohesion by causing communication and
coordination difficulties as one member (British) finds fault with the type of engagement of the other
(Italian) and justifies the conflict because of the sub-group difference (see for example Salk & Shenkar,
2001). Similar conflicts may arise due to group members’ strong identifications with their parent
company organizational identity, their professional identity, or any number of other labels. Previous work
suggests that groups are more likely to fracture along faultlines when individuals consider themselves
“delegates” from external entities (i.e., identify more strongly with a sub-group identity; Li & Hambrick,
2005: 794). Fractured groups are less able to benefit from communication (Lau & Murninghan, 2005) and
have less effective group processes (Hackman & Morris, 1975), and at an intra-firm-level, faultlines have

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been linked to alliance dissolution (Heidl, Steensma, & Phelps, 2014). The lack of a superordinate
identity allows faultlines to weaken the strength of the workgroup identity in hybrid market organizations,
compromising complex problem-solving performance.
Consistent with this logic, work shows that a superordinate identity serves to mitigate the
differences, biases, and conflicts among competing subunits (Van Der Vegt & Bunderson, 2005). A set of
experiments further illustrates this effect: competition among units coupled with no common
organizational identification (e.g., market exchanges) produces dramatically different exchange behavior
from that which occurs under a common firm-level identification (Lawler & Yoon, 1998). For market
transactions (e.g., where parties are competitors with interests in trading with others but have no
superordinate identity), parties are less cohesive, and as a result less motivated to engage with others,
resulting in a lower frequency of transactions compared to parties involved in intra-organizational
exchanges (e.g., where the parties are part of a large corporation). Not surprisingly, differences in the
allocation of profit are greater (less equal) between the two transacting firms than between two
transacting sub-units within the same organization. In addition, parties in the market transaction condition
report they are less likely to continue to transact with the other, indicating a lower level of loyalty.
Alternatively, members of the intra-organization exchange condition report greater levels of pleasure and
satisfaction from the transaction than participants in the inter-organizational group condition. Lawler and
Yoon’s (1998) experimental study highlights the significant impact and power of a very simple
manipulation: a shared superordinate identification with a firm. That is, trading parties that share a
common superordinate identification, engage in more frequent task interaction and report more positive
feelings about the task negotiations, which in turn enhances the degree to which the two parties view their
exchange relations as cohesive and enduring.
Organizational Tenure & Need for Belonging. In addition to being superordinate and drawing
attention to and strengthening a member’s identification with their work group, organizational
identification is further associated with an emotional attachment, such as members’ feelings of solidarity
or pride in their organization (Ashforth et al., 2008; Riketta, 2005). Members of an organization are partly

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motivated to seek out a target of identification because of their need for belonging (Ashforth & Rogers,
2012; Baumeister & Leary, 1995). The primary benefit of firms over hybrid markets in this matter is the
ability to strengthen the emotional attachment to the work group because of the lasting nature of the firm,
compared to the relative transience of a typical hybrid market structure. One critical correlate is employee
tenure with the firm: in order to satisfy a need to belong, the individual must view his or her relationship
with the firm as long lasting, positive, and significant (Baumeister & Leary, 1995). This leads others to
speculate that the individual’s length of engagement with an organization is positively linked to his or her
identification with the work group (Mael & Ashforth, 1992).
Various rationales exist to explain this emotional attachment and bond. First, while the
identification literature has not specified in detail the identification process, central elements include that
identification is dynamic and turbulent and unfolds over time as individuals reconcile and integrate cues
and daily activities with their life concept (Ashforth et al., 2008). For a deep integration of the self with
the organization, as in deep-structure identification, successive interactions of the worker with the work
setting are needed so the individual can form a mental model that transcends situational cues (Rousseau,
1998). Thus, time is an essential element for a relationship to develop a strong emotional bond between
the individual and the collective, which can then transform an individual’s self-concept to that of a
collective. The transient nature of hybrid market governance structures reduces the time available for
these bonds to develop.
A second factor is symbolic: the employment contract with the firm. The employment contract
provides the necessary stability and duration for individuals to see their membership with the work group
as further serving their organizational attachment (Barley & Kunda, 2004). Consistent with this logic,
Kogut and Zander (1996) argue that the firm has become a modern-day group to which individuals seek
to belong as social structures have changed, supplanting the family or clan as social groups in favor of
work affiliations. Alternatively, for hybrid-market groups, the positive effect of expected tenure (e.g.,
belonging) to a work group is weaker because members view their future and security as resting with the
parent company, not with the work group. Thus, members will continue to prioritize their firm identity as

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serving their needs, not the work group identity. While empirical work in this space is limited, the scant
research that exists suggests that in a hybrid-market context, the natural dominant identity is members’
immediate work group within their parent firm rather than the work group that spans members from two
organizations (Salk & Shenkar, 2001).
Leaders’ Endorsement & Enhancement. Another factor driving group members’ identification
with the group identity is the desire for self-enhancement, as being a member of a group with positive
characteristics increases the positivity associated with one’s sense of self (Ashforth & Mael, 1989; Tajfel
& Turner, 1979). Leader-dictated rewards and recognition may also be critical determinants of identity
strength and member identification. Individuals who view membership in the work group as contributing
to a broad spectrum of rewards, such as work support, social support, participation in decision-making,
and access to information are more likely to identify with the work group (Rousseau, Sitkin, Burt, &
Camerer, 1998). One way in which firms can further strengthen the salience of the work group identity is
by providing meaning and endorsing the significance of the group’s work by, for example, highlighting
its potential impact and importance. By drawing attention to the value and contribution of each group
member as well as to the group as a whole, leaders within a firm can feed perceptions that the group and
its membership are overarching or superordinate (Hirst, van Dick, & van Knippenberg, 2009). For
members, this allows the attraction of the work group identity as a target for identification to ultimately
supersede that which is provided by membership in a particular department, function, or division or by
any other identity (e.g., nationality).
When work groups are situated in a hybrid market form, leadership is more complex, requiring
integration and direction from leaders from two organizations, instead of one. This complexity is best
viewed as a tension, often highlighted in the alliance literature by academics and practitioners alike as
challenges related to trusting each other’s intentions and concerns about knowledge misappropriation and
spillovers, contracts, and learning (e.g., Chi & Seth, 2009; Gulati & Singh, 1998; Lavie, Haunschild, &
Khanna, 2012; see Cao & Lumineau, 2015 and Krishnan, Geyskens, & Steenkamp, 2016 for recent
reviews). This tension arises because the knowledge stocks necessary to think about and solve a complex

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problem are typically tacit and valuable. When leaders across both organizations highlight the dueling
interests of ‘sharing enough, but not too much’ and ‘learning from the other,’ the collective interest of the
work group tasked with problem solving loses strength in favor its organizational or focal work group
identity.
In the language of identification, members resolve this conflict by “ordering, separating, or
buffering the identities” and “deferring to the most subjectively important or valued identity” (Ashforth &
Mael, 1989: 30) which, in the face of such dueling interests, is the organizational identity rather than the
work group identity. Thus, members of a group will attempt intergroup differentiation to provide
themselves with the most positive self-evaluation and self-meaning. In a hybrid market context where
identity conflicts are commonplace, this weakens member identification with the work group identity.
Effect of Governance Form on Identity and Identification. The strength of a work group’s
identity and members’ identification with the group are driven by the extent to which the identity is
salient and satisfies members’ needs for belonging and desires for self-enhancement. We argue that firms,
compared to hybrid market governance forms, are uniquely situated to provide a superordinate identity
that reinforces the work group identity and reduces conflict amongst nested identities. Firms are also
better able to satisfy group members’ need for belonging because they offer stable working arrangements
with expectations of long duration and tenure, making identification targets within the firm, like the focal
work group, more appealing. Leaders have additional power to support members’ identification with the
work group in a firm setting by reinforcing and elevating the importance of the group and its work,
providing members with opportunities to experience self-enhancement if they identify with the decorated
and important collective.
Thus, we propose:
Proposition 2a: The relationship between the collectively-formed work group identity and
members’ identification with the work group is stronger when group members belong to a
common firm, as opposed to hybrid market organizational forms due to (a) the salience of the
shared superordinate identity, (b) the need for belonging satisfied by the organizational tenure of
the employee, and (c) enhancement opportunities provided by leaders’ endorsement of the group.

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Having outlined the comparative advantage of firms over hybrid market organizational forms in
promoting a strong relationship between a collectively-formed work group identity and members’
identification with the work group, we focus here on exploring the nuances of the work group identity-
member identification relationship in different types of hybrid market organizations as a way to bring
further clarity to the relationship between governance forms and our focal socio-cognitive processes. In
this section, we examine the relative effectiveness of three types of organizational forms in promoting
these processes within work groups: an organization composed significantly of contract labor, a purely
contractual alliance, and a joint venture.
Contract Labor
Organizations’ use of professionals through contract labor is common and increasingly popular ,
with its use changing over the last few decades: companies, many of which of technology oriented,
increasingly rely on a temporary supply of highly skilled professionals to provide unique expertise that
employees lack, perform supplemental but important tasks, and may in these capacities join an
understaffed project team (Barley & Kunda, 2004; Mayer & Nickerson, 2005). Thus, a plausible
alternative to a work group comprised of permanent employees is one that relies on the use of some
temporary employees, professional contractors, to assist in the joint production of highly interdependent
tasks. As corporate and legal policies clearly distinguish them from permanent employees, these
temporary employees do not formally belong to the organization (Mayer & Argyres, 2004). The
temporary employment status of the worker means that they will not seek the organization or group as a
collective to fulfill the basic need for belonging with others and are more likely, instead to fulfill this need
by identifying with their occupation or profession (Barley & Kunda, 2004; Hughes, 1958; Van Maanen &
Barley, 1984; Callero, 1985; Hogg, Terry, & White, 1995). Because there is an absence of a shared
superordinate identity between contractual workers or between contractual and permanent workers,
contract workers experience a less salient version of the work group identity, making the work group
identity weaker and a less attractive target for member identification.

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A critical distinction for contractors is that they have a temporary employment status, and, unlike
permanent employees who can expect to satisfy their needs for belonging within an organization due to
the presence of organizational tenure and a long-term employment contract, contractors’ identification
with the work group is necessarily controlled by external cues – their sense of self-worth is tied to their
conditional performance over the temporary interval of employment and their identification as a member
of their occupation or profession (Barley & Kunda, 2004; Hughes, 1958; Van Maanen & Barley, 1984;
Callero, 1985; Hogg et al., 1995). As a result, they do not deeply internalize the values or goals of the
group and view the collective goal as their own. Instead, contractors view their professional identification
as most salient and meaningful since it defines the unique individual qualities that they bring to the work
to be done (van Dick et al., 2004). This effect is amplified by socialization practices that encourage the
formation of distinct identities between contractors and formal employees. By treating them differently,
both socially and symbolically, organizations undermine the temporary professional’s identification with
the organization and/or work group. Consistent with this assertion, Barley and Kunda (2004) found that
temporary professionals do not join the organization in a symbolic manner, such as attending staff
meetings, business meetings, and holiday parties, bearing different badges, or receiving the company t-
shirt, and managers are reluctant to integrate temporary employees.
Relatedly, because contract workers are so often treated as members of an out-group rather than
integrated into the group, they are unable to benefit from any endorsement or enhancement of the group
by organizational leadership. Such temporary professionals reframe their outgroup status in terms of its
positive value: contractors are paid more than employees because they have expertise that employees
lack; however, within the organization, employees are more likely to reinforce the negative and outsider
perceptions of contractors, discouraging contractor identification with the work group. In an especially
insightful ethnographic study, Barley and Kunda (2004) spent two years in a technology company
examining contingent labor, the temporary hire of technical, highly skilled professionals. They found that
formal employees (including managers) are likely to focus on attributes that reinforce the contractors’
out-group status, such as the contractors’ lack of commitment and loyalty. Employees tend be suspicious

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about the quality of the work done by contractors, fearing that contractors lack the persistence and long-
term responsibility necessary for quality work. On the other hand, contractors constantly feel the pain of
estrangement, are less willing to take on extra-role behaviors, and often leave without finishing the
assigned job. In contrast, permanent employees, with more open-ended job descriptions, are more willing
to exert extra-role efforts because they are committed to the well-being of the company (Barley & Kunda,
2004).
Based on the above logic, contractually employed workers are less likely to perceive a work
group identity as a salient or attractive target for identification, and organizations composed significantly
of contract labor are less likely to have members that strongly identify with their work groups.
Contractual Alliance
A central challenge in alliances is how to further the shared alliance interest without
compromising the self-interest of the parent firms (e.g., Poppo et al., In Press; Ring & Van De Ven, 1994;
Williamson, 1996). This tension is particularly salient when the alliance is purely contractual in nature
and lacks a significant foundation for many of the informal, relational mechanisms that can support
alliance performance (see Cao & Lumineau, 2015 for a recent review). In such a contractual governance
setting, superordinate identities are present; however, they are the identities of the parent companies and
are not shared by members of the inter-organizational work group, making the work group identity a less
salient and attractive target for identification as it is less able to fulfill members’ need for belonging.
Additionally, work group members in a contractual alliance perceive that there is an expiration date to
their group tenure, either literally as a contractual end date or figuratively in the form of project or goal
completion. As discussed previously, empirical work suggests that members are more likely to identify
with a work group housed within their parent firm rather than an inter-organizational work group (Salk &
Shenkar, 2001). These group members view their parent firm as the setting of their future work and
source of security and thus prioritize their identification with their parent firm rather than the work group.
Similarly, while there are leaders present that can endorse the alliance venture, these leaders are
not unified in their concerns or their message as they belong to the two parent companies, weakening the

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strength and clarity of their endorsement and its potential to make the work group an attractive setting for
self-enhancement. The endorsement may also be less powerful one set of leaders’ endorsements are likely
to have limited influence on the other firm’s employees. Even in the case that a singular leader emerges
within the inter-organizational work group, parent firm leaders will continue to have influence. As
discussed previously, the effect of these complex leadership structures on work group member
identification is further weakened by the difficulty of delivering a unified endorsement across both
organizations as leaders likely vary in how they strategically balance the shared alliance interest and
parent firm interest in their endorsement.
Because contractual alliances provide weaker incentives and support for member identification
with the work group, such governance structures are less likely to have highly identified work group
members than a more unified governance form. However, the presence of parent firms as potential
attractive and salient targets for identification and sources employment stability and parent firm leaders as
potential work group endorsers may allow for some member identification with the work group if these
characteristics can be highlighted.
Joint Venture
A joint venture is an alliance form where it is most likely that these characteristics can be
highlighted, as there is greater potential for a dedicated venture organization, an expectation of prolonged
venture existence and, dedicated venture leaders. Previous work has established that mechanisms similar
to identification guide joint production in long-term inter-organizational exchanges, including
establishing joint goals, procedures and routines to guide coordination, reward or punishment parameters
for performance as well as strong relational bonds, namely trust (e.g., Das & Teng, 1998; Dyer & Singh,
2002; Shah & Swaminathan, 2008).
A joint venture has the potential to provide a shared superordinate identity for work group
members when the joint venture takes the form of a legal entity that is separate from the parent firms but
governed by a board comprised of members from both organizations. In such a case, members’
identification with their parent firm may become more distal that their identification with the venture

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entity, reinforcing the salience of the work group identity as a target for identification. In a joint venture,
members will also view their employment as stable as they are permanent employees, either of different
organizations or the same organizational entity (i.e., joint venture), enabling them to view the work group
as a collective entity to which they may want to belong. Yet, the positive effect of member tenure on
work group identification is weakened when parties view their future and security as lying with the parent
company, not with the joint venture. That is, as boundary spanners, these group members may struggle to
reconcile conflict or the disparate demands placed on them by the organization that employs them and the
demands of the joint venture. Related to this, if they view the parent organization as their source of future
employment, members will continue to utilize their relationships with persons in the parent firm for
information, influence, and promotions (Salk and Shenkar, 2001). Thus, employees of a joint venture may
see their role in the venture as a temporary assignment, thereby lacking stability and making the work
group and joint venture less attractive targets for identification. When the members’ source of
particularistic resources such as status, work support, social support, participation in decision making, and
access to information is primarily through the parent organization rather than the joint venture, then
identification with the parent organization is stronger than with the work group (Rousseau, 1998).
A joint venture has the potential to suffer from the same complex leadership structures and weak
endorsement effects that a contractual alliance may experience; however, if the joint venture is a separate,
superordinate entity with its own leadership, the endorsement of the work group by those leaders may
increase the potential for the work group to provide members with positive self-evaluations and self-
meaning, making the work group an attractive target for identification.
Consistent with the above logic, hybrid market governance forms vary in the extent to which they
support members’ identification with the work group identity, though a superordinate firm governance
structure provides the greatest enhancement of work group member identification. Thus, we propose:
Proposition 2b: Though weaker than in a firm, the relationship between the collectively-formed
work group identity and members’ identification with the work group in a hybrid market form is
stronger when the governance structure provides (a) a more salient, shared superordinate
identity, (2) tenure expectations to satisfy members’ need for belonging, and (c) leaders capable
of providing meaningful endorsement of the group to satisfy members’ self-enhancement motives.

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Identification and Creative Problem Solving Behaviors
In the above section, we predict that the strength of member identification with the work group
varies systematically with the salience of the shared superordinate identity, employee tenure expectations
and leaders’ endorsement of the work. This has dramatic implications for the effort and motivation to
partake in the work that defines complex problem solving. Prior research suggests that members who do
not identify with a collective are less cohesive, less motivated to engage with others, and less likely to
learn from others, resulting in a lower frequency of interactive behavior and lower group performance
than occurs when members strongly identify with the group identity (Lawler & Yoon, 1998; Kane, 2010).
For highly-identified members of a group, which we argue are more likely to characterize work groups
within a common firm, withholding effort toward achieving group goals threatens their self-definition,
which includes the collective, and there may be social costs, such as stress or distress, from breaking a
bond with the collective group (Akerlof & Kranton, 2005; Burke, 1991). There exists, then a feedback
loop where members are motivated to act in ways that further the collective (Rousseau, 1998) to avoid
weakening their bond with the group and “feel[ing] bad about themselves…los[ing] utility” (Akerlof &
Kranton, 2005: 9).
In this section we address the ways in which identification with a collective can overcome self-
interest and motivate behaviors that encourage creative problem solving. Specifically, we identify two
categories of individual behaviors, which as a set, lead to creative problem solving: directed individual
creativity and cooperative knowledge work, and we discuss the ways in which highly identified
individuals are more motivated to close the loop on creative problem solving by pursuing solutions to
their implementation.
Directed Individual Creativity. We believe that strong work group identification amongst group
members will prime and foster cooperative behaviors central to individual creativity and complex
problem solving. In developing this logic, we first argue that identification primes creative behavior at the
individual level. Identification with an attractive collective is closely linked to positive affect, as

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individuals “want to feel positively about their membership… and thus may generally feel an abiding
sense of positiveness” (Ashforth et al., 2008: 329). Evidence from the study of creativity suggests that
such positive affect primes individuals to be creative by supporting their intrinsic motivation to engage in
creative ideation (Isen & Reeve, 2005) and by promoting flexible or divergent thinking and problem
solving (Amabile et al., 2005; Hirt, Melton, McDonald, & Harackiewicz, 1996; Isen, 2000).
A second factor that primes individuals to generate and share their creative ideas is also linked to
a positive affective experience: psychological safety. Edmondson and Mogelof (2006) propose that
psychological safety is critical for creative problem solving within groups because creativity involves risk
taking and frequent failure (see also George, 2007, Hennessey & Amabile, 2010). By creating a setting in
which group members perceive that the social consequences of presenting a failed idea are minimal,
group members perceive that the group is a “safe” setting for creative activities such as curiosity,
brainstorming, and idea sharing (Harrison & Rouse, 2014; Yuan & Woodman, 2010). In the absence of
psychological safety, there are incentive barriers that inhibit the sharing of ideas and thoughts for fear of
judgment or ridicule and also discourage the generation of such ideas and thoughts in the first place
because there cannot be potential group-level returns on generation efforts when the generated ideas
cannot be shared. Belonging to a group with a shared identity heightens members’ psychological safety
such that they believe others will respond positively when they bring up concerns, mistakes, or new ideas.
Member identification with a strong group identity further supports creative problem solving
because it provides direction for individual creativity. Identification with a collective provides an
opportunity to develop an overarching set of goals that members of the collective ascribe to and accept as
personal goals (Burke, 1991). If given a creative frame, these goals and the cognitive frame they produce
can serve as creativity prompts, stimulating and motivating creative problem solutions (Anderson et al.,
2014; Shalley, 2008). Additionally, this shared understanding of what constitutes success for the group
serves to direct members’ attention and creative efforts so that problem solving activities and energies are
complementary and result in positive group performance outcomes (Poppo et al., In Press).
Cooperative Knowledge Work. While much remains unknown regarding creativity in groups,

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studies suggest additional collective-other behaviors that underlie creative problem solving (Hülsheger,
Anderson, & Salgado, 2009; Hennessey & Amabile, 2010). Additionally, the prototypical language in
knowledge-based work focuses on knowledge sharing, consideration, and integration or transfer (e.g.,
Argote & Ingram, 2000; Nickerson & Zenger, 2004), and knowledge work requires members to carefully
process ideas exchanged in a group, taking their time to fully reflect on ideas following an exchange of
information (Paulus & Yang, 2000). Supportive behaviors are often necessary for these effortful and often
time-consuming processes. In this section, we argue that identification with the work group collective
encourages the behaviors that support complex problem solving.
In an experimental study of knowledge transfer dynamics, Kane and colleagues (2005) showed
that group members are more likely to engage in knowledge transfer when they share a superordinate
identity. They interpret their findings to mean that groups are more receptive to ideas, even from non-
group members, when they perceive each other as sharing such an identity. More recent work has offered
additional nuance to these findings. In their review of this literature, Hennessey and Amabile (2010: 580)
summarize Hargadon and Bechky’s (2006) qualitative study of six professional services firms, which
“identified four sets of interrelated behavioral patterns that can move teams beyond individuals’ insights:
(a) help seeking, (b) help giving, (c) reflective reframing, and (d) reinforcing.” We argue that work group
identification fosters high levels of these behaviors that, in turn, motivate and direct attention to the
problem-solving task. That is, members will expend more cognitive resources to search for, share,
consider, and integrate new and existing knowledge sources as they work toward solving the problem.
Our logic is consistent with prior work that argues that identification motivates persistent effort (Hirst et
al., 2009), directs attention toward the problem-solving tasks (Ocasio, 1997), motivates them to think
deeply, rather than rely on short cuts (Kane, 2010), and more critically analyze the value of knowledge
and assumptions as well as consider different opinions within the group (Van der Vegt & Bunderson,
2005).
In the absence of a strong identification, “self-concern is known to stimulate information search
and processing on individual-level attributes and self-relevant consequences,” but in the context of

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identification with a group identity the resulting “other-orientation, in contrast, is known to focus
information search and processing on group-level attributes” (De Dreu & Nauta, 2009: 913). The
collective-other behaviors that are motivated by a strong group identification encourage members to be
more creative, cooperate with each other, and direct their attention and effort towards solving the complex
problems with which the group has been tasked. Identification with a strong group identity fosters
positive affect and psychological safety and provides direction for creative energies though internalized
group goals that serve as creativity prompts and direct creative efforts to be complementary. Both
identification with a strong group identity and the resulting cooperative behaviors also serve to support
the knowledge work, in the form of knowledge search, consideration, and integration, that are necessary
for effective group creative problem solving.
Motivated Solution Implementation. While the generation of an effective solution to a
complex problem is essential, it is also necessary to implement the generated solution. Empirical work
(e.g., Baer, 2012), suggests that the process of creative idea generation and implementation (i.e.,
innovation) are only loosely connected, and the mere presence of a creative problem solution does not
guarantee its implementation (Anderson et al., 2014). The act of implementation is inherently effortful, as
group members may need to gather additional buy-in from others outside of their group, further develop
and refine the solution, disseminate the solution, and oversee its implementation (Garud et al., 2013). A
strong member identification with the work group can provide the motivation and direction of effort
necessary to implement the generated solution. Strongly identified group members are more likely to take
ownership of a solution generated by the group and will perceive group successes as personal successes
(Ellemers et al., 2004; Hirst et al., 2009; Rousseau, 1998). As a result, they are not only motivated to
engage in group and individual efforts to generate a solution to the focal complex problem but are also
motivated to engage in efforts to implement the generated solution because they view it as the fruits of
their own effort, in part, and experience the enhancement resulting from successful implementation at a
personal level.
Proposition 3: The stronger the group identity and member identification, the greater the degree

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of individual-level creative efforts, cooperative behaviors, and knowledge work motivated and
directed toward group-level problems and the greater the motivation to implement the generated
solution set, resulting in the production and implementation of a more novel and effective
solution set.
Cognitive Advantages in Solution Set Generation
In order to assess the value of a generated solution set, direction is necessary. As discussed in this
literature, direction can be imposed by authority when a manager centralizes and thus chooses the solution
that best realizes value for the organization. In this way, authority establishes direction when members
may not necessarily understand how to direct solutions to the problem in a manner that fulfills
organizational goals (Conner & Prahalad, 1996). The use of managerial expert knowledge is not only
efficient, but also effective. Yet, as problems grow in terms of their complexity, problem-specific
direction, including goals, become indeterminate. Thus, the challenge for a problem solving perspective is
to articulate how group members consider value and usefulness when creating solutions. In this section
we develop the concept of a cognitive goal frame, which is based on members’ sensemaking of the
organization’s identity – specifically its purpose, including its mission, goals, and relevant activities that
provide an overarching frame for how their creative solution, once implemented, creates value for the
organization. We argue that within a firm, identification is going to be stronger and more aligned with
organizational goals, encouraging group-generated solutions that are more valuable to the organization
than would be the case in a hybrid market organization.
We use the theoretical underpinning of attention to develop the construct of cognitive goal
frames. As a cognitive decision-making process, attention is directed and informed in organizations,
through “noticing, encoding, interpreting, and focusing of time and effort by organizational decision-
makers on... problems, opportunities, and threats; and... the available repertoire of action alternatives”
(Ocasio, 1997: 189). This perspective extends the structuring of attention in Simon’s (1997) seminal work
on bounded rationality by examining “the effects of the social structure on the channeling and distribution
of decision-makers’ attention” (Ocasio, 1997: 188) while acknowledging that individuals in organizations
cannot possibly pay adequate attention to all stimuli. In effect, its central tenant is that actions are guided

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by the sorts of things individuals attend to, on their own or with organizational direction, and the context
in which they attend to them.
Cognitive Goal Frame Congruency. As previously discussed, we argue that identification with
a firm increases the strength of a work group identity, in part through the symbolic value of a shared
superordinate identity. In effect, a superordinate identity enables cohesion as members attach to the work
group and view it as a more meaningful and important assignment than that which occurs in hybrid
market forms of organization. In this section, we focus on how identification with firm can also direct
members’ cognition (i.e., problem solving) to consider how the problem relates to not only the group’s
goals but also the organizational goals. When members identify with a firm, they should have access and
internalized a deep understanding of the organizational goals. This cognitive goal frame can broadly
influence group member behavior and motivation toward satisfying the goals, values, and ambitions of
the collective, which in this case is the organization (Ashforth et al., 2008; Rousseau, 1998). In our simple
conceptualization of a firm, we assume that there is transparency and significant leadership
communication and reinforcement of the specific goals that create value for their firm in the marketplace.
This assumption however may well vary across firms due to leadership and path dependencies.
Within firms, as members make sense of the organization’s key characteristics or identity, they
focus on the organization’s strategic purpose and intent at the business level of analysis: its mission,
vision, goals, and relevant activities that describe their primary services and/or products offering.
Consistent with this logic, recent work suggests that organizational identity is likely used to develop
business-level strategies that improve competitive positioning (Irwin et al., 2018), extending prior
conceptualization that differentiation resides in the cognition and capabilities of the firm (Eggers &
Kaplan, 2013). Organizational identity need not be narrowly thought of in terms of developing the next
best innovation to support a product – it may instead be construed as more relational in terms of the many
stakeholders it aims to serve (e.g., consumers, employees, and communities). Thus, in order to take
advantage of the many different venues that can direct complex problem solving, we suggest a broad
number of goal-specific facets of organizational identity (see Table 1). When group members share a

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common organizational identification, they are more likely to apply their collective understanding of the
organizational goals as well as their knowledge of its value chain and stakeholders to form solutions to
the complex problem. This broader reference point will inform, redirect, and/or integrate with the
objectives at the group level, which leads to a more effective solution set.
In contrast, when group members do not share the same superordinate identification, members
will vacillate between serving the collective goals of the work group and the collective goals of their
primary organizational identification, resulting in a less effective solution set. The logic is
straightforward: in hybrid markets each parent firm has a broader set of values and goals which are less
likely to be jointly considered when problem solving. Simply put, the lack of consistency or coherence of
the joint organizational identities makes it more difficult maintain a joint orientation (Das & Teng, 1998).
As a result, group members are not likely to integrate critical organizational goals in a systematic way as
the costs of integration, unless initially vetted and approved by alliance board members, requires a non-
trivial degree of cospecialization or sunk costs. This likely explains why learning motivates alliance
formation (Kale et al., 2002) in an effort to increase innovation output (Hess & Rothaermel, 2011), but
alliances often terminate prematurely (Bakker, 2016; Greve, Baum, Mitsuhashi, & Rowley, 2010) for a
variety of reasons, including that one partner has satisfied its objective of learning from the other or
realized that it is unable to learn from its partner or that competitors have imitated the focal firm’s alliance
strategy, thereby reducing the uniqueness of the partnership resources (Cui, Calantone, & Griffith, 2011)
From a problem solving process perspective, it is important to note that even though the cognitive
collective goal frames within a firm are general, when they become part of the process, they invite
problem solving around a larger abstraction. This abstraction further directs the value proposition of the
emerging solution as problem solving groups consider, for example, the scalability of the solution set, the
size of the market that demands or benefits from the creative solution, and whether novel solution be
applied in other domains. When a group considers the larger, strategic impact of the solution set, they can
rework it in a manner that generates greater organizational value.
This leads to the proposition:

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Proposition 4: The effect of a strong work group identity and member identification and creative
problem solving on the production of a novel and effective solution set is stronger when group
members belong to a common firm, as opposed to hybrid market organizational forms, due to the
congruent cognitive goal frames that arise from organizational identification in the firm context.
-----------------------------------
Insert Table 1 about here
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DISCUSSION
Three pillars of strategic management are central and meaningful to our conceptual query and
focus on complex problem solving: why firms exist, why firms differ from other forms of organization,
and what are strategic decisions. We contend that a contemporary theory of the firm must span levels of
analysis from the individual to the group to the. The reason for this broadened scope is that when strategic
decisions involve problem spaces in which goals exist yet the paths that yield an effective solution are
presently indeterminate and not clearly understood, established, or defined, a group of individuals is
necessary to not only bring forth the relevant knowledge, but also to debate, redirect, inquire, and reflect
on potential next steps as well as solution sets. We further posit that effective solutions push novel
frontiers and thus demand a group orientation primed for creativity. The relevance of our perspective is
situated in 21st century, marked by turbulence and adaptation as well as complexity, layers of
interdependencies that define and surround the problem space.
While our prediction, that firms have an advantage over hybrid market organizational forms when
it comes to solving complex problems, is not different from the net advantage of firms recognized by
organizational economics and the knowledge-based view, we contribute to these literatures by postulating
a different set of advantages. First, the socio-cognitive mechanisms of identity and identification are
unique because they reliably align one’s definition of one’s self and one’s cognitive interests with a
collective orientation. Thus at the group and organizational level, identities that are congruent draw
attention to goals that not only direct problem solving at the group level but also lead to more effective
solutions. We further specify that leaders must prime the group identity to include creativity: complexity
means that the paths that yield an effective solution are presently indeterminate, not clearly understood,

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established, or defined. Creativity, a necessary correlate to problems with indeterminate solutions, is
positively impacted through this strengthening of identity and member identification.
Our third claim is that this base model distinguishes firms from each other (e.g., a source of firm
differences) as well as firms from hybrid market forms of organization due to: 1) a relational advantage
stemming from the strength of members’ identification with the organization as a superordinate identity,
organizational tenure and the ability of the firm to satisfy member need for belonging, and leader
endorsement, and 2) a cognitive advantage stemming from congruency in organizational and group goal
frames. Relational advantages strengthen members’ interest in the work group and project at hand,
enabling greater levels of knowledge work at individual and group levels. Cognitive advantages to
problem solving occur when organizational and group goal frames are congruent and linked, for when
group members’ attention is directed by organizational goals, they are primed to generate more effective
creative solutions.
While our model is conceptual, it resonates with the limitations of alliances regarding joint
production. Because vertical and horizontal alliances by definition lack congruent collective cognitive
goal frames, they are commonly motivated by learning – typically one partner learning from another –
which necessarily limits any collective level influences on problem solving (Alcacer & Oxley, 2014; Chi
& Seth, 2009; Deeds & Hill, 1996; Hoetker, 2006; Kale & Singh, 2007). In addition, since a shared
superordinate identity does not exist in alliances, it is not surprising that this literature emphasizes the
need for social lubricants, like trust, to assess partner motivations as well as prompt effective coordination
and adaptation (Cao & Lumineau, 2015; Krishnan et al., 2016; Poppo et al., In Press).
Our focus on identity and identification also resonates with a movement toward understanding the
cognitive dimensions that influence managerial sensemaking and subsequent decision-making. While we
have known for some time that organizational fit is a critical determinant of a successful strategy, we have
little theorizing for how managers reconcile fit given changes in the external environment. This domain is
complex, with presently indeterminate paths, but must be shaped and directed toward organizational
goals. Yet, if firms can simplify managerial sensemaking by emphasizing the cognitive dimensions that

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define how the firm realizes it strategy, the goals that drive value creation, and then the “pieces” that need
to be adapted, they can better direct adaptation. Our focus of the cognitive message of identity offers a
mechanism for this simplification and resonates well with an emerging literature that emphasizes how
identity can direct strategic decision making (Irwin et al., 2018) and foster adaptation (Schilke, 2018;
Jalonen et al., 2018).
Related to this, our focus on a strategic decision – arising from strategic ‘fit’ and complexity –
draws attention to the fact that as a field, we do not have a clear understanding of the classification or
types of strategic decisions. Recent articles advocate solutions and paths forward to reconcile this
theoretical gap (Durand et al., 2017). For example, Nickerson and Argyres (2018) separate decision-
making from that of problem formulation, Leiblein and colleagues (2018) distinguish strategic from non-
strategic decisions, and others further identify how socio-cognitive models likely influence strategic
decision making (e.g., Irwin et al., 2018; Csaszar, 2018). We hope that others find opportunity in
empirical testing as well as simplifying what is a meant by a strategic decision.
Practical and Managerial Implications
At the core of our theory is that management is needed to offer direction by selecting or
legitimating through resource allocation problems that appear worthy of investigation in ways they cannot
fully understand. Management may be the source of the initial problem space as they draw attention to
their observations or search for dynamics within the firm and marketplace. Alternatively, employees may
generate issues that are worthy of solving, an effort that is often reinforced by having managers that
routinely ask employees for suggestions, are known to be open to new ideas, and/or are generally
respectful and considerate. Our position is that the dynamics of the 21st century will continue to require
firms to adapt to multiple sources of exogenous change, including nation-state politics arising from
globalization, new technologies that transform value chains in incremental, but significant ways, and
demographics shifts. Thus, at the core of a successful strategic planning process is consideration of
problem sources as well as the creation of a creative process that enables exploration and exploitation.
We also suggest that management needs to ensure that employees engage in cognitive

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sensemaking around the collective organizational identity of the firm – its business-level strategy and how
it competes, developing a keen understanding of its stakeholders and how its products and services create
value. When teaching working professionals, we are amazed by how, for some companies, positions
occupying different levels in the hierarchy often do not know or understand the overarching purpose of
the company that employs them or how the firms creates value; whereas, for other companies, the
messaging is quite consistent and convergent. We believe firms are likely to vary in the consistency and
the salience of such messaging. Thus, it is essential that management both “manage” the strategic
sensemaking process of identity formation and prime conditions to strengthen employee identification, as
employees’ understanding is essential for both how units define their purpose as well as how the group
defines its goals and “success” in relation to the firm.
Future Research Directions
We recognize that as an initial foray toward positing identification as a unique advantage of
firms, we have not addressed many interesting questions, potential caveats, and enrichments. Most
notable is whether the concept of nested, congruent identities with a firm is sensitive to firm size and
scope. We believe that it becomes increasingly difficult to maintain a cohesive, coherent, and shared firm-
level identity among members as firms grow increasingly large, diverse, and global. As a result, when
firms become sufficiently large, social judgements, such as trust, may become a more critical driver of
knowledge transfer as demonstrated in Szulanski’s (1996) classic study of the transfer of best practices
across units within multi-national corporations. We also highlight in this section future research
opportunities that relate to: (1) radical change (2) over-embeddedness of identities and identifications, and
(3) how to manage identity and identification dynamics when using hybrid governance mechanisms.
Dynamics of Radical Change, Cultural Differences, and Nested Identities. Our use of nested
identities assumes that organizational identity is stable and constant and that the complex problem does
not threaten or destroy members’ shared meaning of the core elements that define and support their
company’s strategy and how these elements create value. Some argue that the identity of the organization,
the central, distinctive and enduring elements (Albert & Whetten, 1985; Dutton & Dukerich, 1991), may

Socio-Cognitive Foundations
46
make radical change difficult, such as adopting new approaches and routines guiding how work is
performed (e.g., TQM; Nag, Corley, & Gioia, 2007). Others question whether identity is enduring (Gioia,
Schultz & Corley, 2000) and argue instead that identity is likely to be somewhat fluid because
management can alter its aspects (Ravasi & Schultz, 2006). Identity can also change dramatically, such as
during a corporate spinoff (Corley & Gioia, 2004). Relatedly, some level of conflicting identifications
among sub-units may be beneficial for firms as they may widen the cognitive horizon of firm members in
dynamic environments (see Gottschalg & Zollo, 2007). Thus, future research is needed to further specify
contextual factors that limit our focal lens of identity/identification.
Dynamics also exist at the individual level of analysis, which is absent in our conceptual model.
This area of research is nascent but an important focus for the future as individuals carry multiple
identities in the work place beyond our focus on group and organizational identities (Ashforth et al., 2012;
Ashforth & Johnson, 2001). Thus, understanding how role identities and professional identities support or
conflict with our process model is a second avenue of future research.
A third area of future research extends to the multinational corporation, whose efficacy is
predicated on the virtues of common ownership and the efficiency gains created by exploiting or
transferring knowledge and capabilities to other geographic markets. The cultural and national identities
associated with these geographic markets represent additional nested identities, and while there are many
organizations that exist wholly within a single nation, multinational corporations represent one of several
organizational forms that may be composed of nationally and geographically distinct organizational
subunits. In such a case, national or geography-based identities may form attractive targets for
identification and disrupt the potential for an organizational identity to attract member identification. In a
case where the work group is composed wholly of members from that nation or within that geographic
location, this may be irrelevant, but when the work group crosses these boundaries, challenges similar to
those in hybrid market organizational forms may arise. Future research should investigate the dynamics of
identity and identification in work groups within multinational firms and multinational alliances (e.g.,
joint ventures) to explore how they differentially influence creative team problem solving in culturally

Socio-Cognitive Foundations
47
heterogeneous settings and the extent to which they inform differences between firms and between firms
and other organizational forms.
Downsides to Over-Identification. Despite the generally positive outcomes of identification
noted in the literature, work in organizational behavior also suggest the downside of identification.
Potential disadvantages of identification exist, including the possibility of compliant behavior or
automatic trust that hinders creativity. Over-identification, for example, may lead to an automatic form of
trust in other members that suppresses individual creativity and dissent (Dukerich, Kramer & McLean
Parks, 1998), including shared values that prescribe devotion to an individual leader (Johnson, Chang, &
Yang, 2010). Alternatively, members may develop a dysfunctional identity and adhere to goals and values
that undermine task performance, such as when a group identity opposes productive behaviors like
innovation and citizenship (Ashforth et al., 2008). Our conceptual model assumes that the strength of a
work group identity and member identification positively impacts creative problem solving. Yet, further
work may specify more fully factors that negatively impact problem solving.
How to manage identity and identification dynamics when using hybrid governance
mechanisms. Although we focus our theoretical development on the potential for the overarching
organizational identity provided by the firm to strengthen a work group identity and member
identification, it is possible for a work group identity to exist in a hybrid governance context and become
an attractive target for member identification (Poppo et al., In press). However, the existence of
competing identities and conflicting motivations to cooperate and compete may induce feelings of
ambivalence, “the simultaneous experience of opposing orientations toward an object or target”
(Rothman, Pratt, Rees, & Vogus, 2017: 35), and likely make such an identity more dynamic and require
more intentional identity management strategies to avoid members reverting their identification targets to
their parent firms (see Ashforth, Rogers, Pratt, & Pradies, 2014 for a review). Future research is needed to
elucidate how these dynamics evolve and affect problem solving and how managers might avoid, resolve,
or direct the resulting ambivalence and conflicting identities to facilitate problem solving and group
performance.

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49
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Table 1: Cognitive Dimensions of Member Identification with Organizational Identity
Governance Choice
Cognitive Goal Frame
Firm (simple hierarchy/division)
Organizational identity directs attention to
and thus integration of organizational goals
as members of the work group create a
solution set. This results in a more effective
solution to the problem.
Examples of organizational goals represented
in the firm’s value chain that increase the
usefulness of the creative solution: scale,
scope, stakeholder groups and needs,
effectiveness, and efficiency.
Hybrid Market Form (alliance, long-term
trading relationship)
Incongruent cognitive goal frames exist,
making it difficult to resolve and thus direct
the work group’s problem solving. More
often, members focus on the collective goal
of their parent organization and/or their
primary group within the firm context.

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Figure 1: A Model of an Effective Problem Solving Capability