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Alert and Awake: Role of alertness and attention on rate of new product introductions
Abstract
Integrating the attention-based view and entrepreneurial alertness perspective, we develop our theoretical framework to test the influence of CEO attention and alertness on rate of new product introduction (NPI). We propose that a firm's rate of NPI is predicted independently and jointly by attention and alertness, two different yet complementary cognitive characteristics of the CEO. Using a sample of 271 US-based small and medium size enterprises (SMEs) from 2004 to 2015, we show that CEO's attention to R&D, customers, and competitors positively influence NPI, while attention to organization negatively impacts the relationship. We also find that CEO alertness has positive impact on the rate of NPI; however, high alertness hurts the rate of NPI. Such theoretical elaboration and empirical illustrations contribute to a better understanding of the microfoundations of managerial cognition and its role in NPI. By adding alertness from entrepreneurship literature and explicating the nexus between alertness and attention, our study explains how some CEOs who are able to acquire novel information and stay focused are able to achieve higher rate of NPI.
... The person's alertness is affected by their attention and adrenaline rush, and their alertness may be increased by prior high alertness (directed alertness) [38,39]. Workers' adrenaline rush is improved by strict deadlines and job demands, as well as a lack of communication and information management at work [40][41][42]. Time pressure among workers has a significant impact on workplace demands, including a lack of job control [43,44]. ...
... The attention and adrenaline rush affect the alertness of the person [38] and the person's alert may increase by previous high alertness (directed alertness) [39]. The adrenaline rush of workers is increased by time pressure and job demand [40,41] as well as lack of communication and information management during the work [42]. ...
... The simulation trace is shown in Fig. 7 shows the worker's attention is controlled by the worker's alertness and complex adaptive systems around him/her as well as it is recent finding [40]. Thus, by taking = 1 , the worker's attention is solely based on alertness. ...
Self-awareness emotional intelligence symptoms will be unavoidable in the job. These symptoms are
generally regarded as acceptable by certain standards, as they are an important part of keeping people informed (or
commonly known as situational awareness). However, the most recent research focuses on external components of
situational awareness aspects and lacks adaptable methods to deal with the individual's situational awareness dynamics.
This study investigated the use of an agent-based modeling strategy for situational awareness in the workplace. It
focuses on environmental and personal factors that influence the level of situational awareness at work in a dynamic
way. The outcomes included a range of scenarios that corresponded to various personality traits and environmental
conditions. Finally, equilibria analysis and automated logical verification were employed to evaluate this
computational model in order to check whether there were any conceptual defects, as indicated in the literature. The
suggested computational agent-based model has shown rational behavior patterns that are consistent with existing
psychology literature on situational awareness in the workplace.
... Drawing on the rich literature on coalitions (Cyert and March, 1963;Mithani and O'Brien, 2021;Stevenson et al., 1985) and corporate venturing (Ireland et al., 2009;Narayanan et al., 2009), we create a theoretical framework encompassing the parent firm, the parent firm-venture intersection, and the venture levels to delineate the factors that might jointly affect CV innovation. We build upon fuzzy-set qualitative comparative analysis (fsQCA) (Fiss, 2011;Ragin, 2008), which has recently gained prominence in leading management and innovation journals (Douglas et al., 2020;Gilbert and Campbell, 2015;Kimmitt et al., 2020). ...
... As such, our findings show that the involvement of the dominant coalition can replace autonomy, thus opening the discussion for a reconceptualization of CV autonomy. Finally, we contribute to the research on coalitions in organizations (Mithani and O'Brien, 2021;Pearce, 1995;Stevenson et al., 1985) by drawing out how dominant coalitions can balance interdependence with subunits, such as CVs, by installing them as either controlled, linked, or detached coalition setups. ...
... The concept of organizations as consisting of coalitions vying for influence has been popularized by the work of Cyert and March (1963), who used the term to describe a group of individuals (temporarily) working together striving to achieve a shared goal. Since its inception, the term coalition has been adopted by several research streams (Mithani and O'Brien, 2021;Stevenson et al., 1985). For instance, resource dependence theory has built upon coalitions to investigate the allocation of resources and conflicts between subunits (Pfeffer and Salancik, 1978;Schwochau et al., 1988), while upper echelon theory has focused on the organization's elite, the "dominant coalition," and its impact on organizational outcomes (Hambrick and Mason, 1984). ...
Organizations often create new businesses, so-called corporate ventures (CVs), with the purpose of fostering innovation. However, not all venture initiatives turn out to be innovative. Prior research in particular refers to the ambivalent role of the parent firm's dominant coalition in fostering or hindering innovation in CVs. Using a configurational (fsQCA) approach, we investigate the interplay of five key conditions at the parent firm, the parent firm-venture intersection, and venture levels that potentially drive CV innovation. Building on 62 interviews from 43 corporate ventures, we identify four equifinal configurations and outline four roles that the dominant coalition plays in creating CV innovation. This study contributes to the understanding of which CV configurations drive innovation, extends the role of the dominant coalition in corporate venturing, and shows how dominant coalition involvement can replace autonomy as a driver of innovation.
... We position entrepreneurial alertness schemata (Tang et al., 2012) as a key intervening construct in transforming cross-cultural experience into intentions to pursue entrepreneurship. Entrepreneurial alertness comprises three dimensions proven to be influential in recognizing or developing commercial opportunities: scanning and search, association and connection, and evaluation and judgment (Srivastava et al., 2020). Thus, we argue that breadth of cross-cultural experience-the diversity of foreign countries visited, in particular, provides individuals with the range and novelty of cognitive inputs required to enhance these entrepreneurial schemata. ...
... Entrepreneurial alertness is a set of schemata whereby some individuals possess this entrepreneurial "antenna" that enables them to identify commercial potential (Valliere, 2013). A body of literature has emerged on entrepreneurial alertness and found that it is an influential capacity among both existing and prospective entrepreneurs for developing and taking action on new ideas (e.g., Levasseur et al., 2020;Sharma, 2019;Srivastava et al., 2020). Tang et al. (2012) suggest that entrepreneurial alertness consists of three distinct yet mutually important schemas. ...
... While we find significant paths for only the scanning and search and evaluation and judgment dimensions, we are confident that entrepreneurial alertness is meaningfully influential in connecting novel experiences with proclivities to engage in entrepreneurship. Indeed, recent studies have drawn on this same conceptualization to develop alternate linguistic-based measures of alertness dimensions and found evidence for its link to related outcomes (Srivastava et al., 2020). Further, as alertness is cognitive construct grounded in processing unique combinations of stimuli for novel entrepreneurial ideation, we provide a foundation for research exploring the mediating role of conceptually similar constructs such as paradoxical mindset (Liu et al., 2019;Prashantham et al., 2018;Waldman et al., 2019) and Janusian thinking (Ko and Butler, 2006). ...
Emerging evidence suggests that there is a meaningful link between overseas experience and entrepreneurial activity. However, we find very limited inquiry at the individual-level into why cross-cultural exposure seems to enhance proclivities to engage in entrepreneurship. Drawing from Schema Theory, we argue that breadth of cross-cultural experience cultivates entrepreneurial intentions through the role of alertness—a set of schematic aptitudes for spotting commercial potential. Using a sample of lay individuals from the U.S. (N = 581) with diverse entrepreneurial and overseas experience, we find support for our model. Our findings help explain why cross-cultural experiences can be so impactful for nascent venturing. The greater the diversity of foreign cultural exposure one attains, the greater it expands scanning and search, association and connection, and evaluation and judgment schemata salient to the pursuit of new venture opportunities.
... Ahn, 2020;Muller & Whiteman, 2016), innovation (e.g. Chen et al., 2015;Srivastava et al., 2021;Yadav et al., 2007), headquarters-subsidiary relationships (e.g. Ambos & Birkinshaw, 2010;Bouquet et al., 2009;Y. ...
... Overall, innovative outcomes seem to depend on a certain minimum attention of decisionmakers (e.g. Eggers & Kaplan, 2009;Yadav et al., 2007) and seem to be sensitive to the diversion of attention to unrelated issues (Mithani, 2017;Srivastava et al., 2021). ...
Over two decades ago, Ocasio (1997) introduced the Attention-Based-View (ABV) of the firm with a powerful argument: Firm-level behaviour is the result of the situated distribution and allocation of managerial attention, embedded in broader organizational structures and the environmental context. ABV-based research has received substantial and increasing scholarly attention, resulting in a complex and incoherent body of research. In order to address this issue, this paper takes stock of extant research on the ABV and consolidates key debates. Based on a systematic review of 173 papers, we synthesize existing research into a unifying framework. Drawing on this framework, we propose situated attention as a central theme for future research. We elaborate on four situational factors (materiality, social dynamics, temporality, and, what we call, framing of the strategic setting), which may influence how actors' attention is situated in the particular context.
... Further, it has been suggested that the activities a founder engages in are dependent on the EP domain that is activated (Cardon et al., 2009(Cardon et al., , 2013Drnovsek, Cardon and Patel, 2016;Mueller, Wolfe and Syed, 2017). This is consistent with the attention-based literature, which suggests that founders' attention is connected with a specific object which leads them to give preference to certain activities over others (Srivastava, Sahaym and Allison, 2020). The attention-based literature has primarily focused on stimuli originating from the organizational environment (Cho and Hambrick, 2006;Kammerlander and Ganter, 2015). ...
... passion for founding) can take entrepreneurs' attention away from other activities that might be more relevant for the venture strategy. Indeed, researchers argue that the attention of key decisionmakers is bounded, and it is difficult for them to pay attention to multiple activities simultaneously (Srivastava, Sahaym and Allison, 2020). The attention given to a particular activity reduces the attention that founders can allocate to other activities (Stevens et al., 2015). 2 As founders can employ their agency to influence new venture activities (Zheng, Ahsan and DeNoble, 2020), it is likely that their EP will influence the new venture activities and outcomes. ...
In this paper, we examine the differential effects of entrepreneurial passion (EP) on product innovation intensity through the mediating mechanisms of exploration and exploitation activities. Using time-lagged data from 260 new ventures from Ghana, we examine the direct relationships between the three domains of EP (i.e., inventing, developing and founding) and a new venture’s product innovation intensity (PII). Further, we test the indirect relationships between the three domains of EP and PII through the mediating mechanisms of a new venture’s exploration and exploitation activities. The empirical results provide a fine-grained understanding of the relationship between EP, exploration and exploitation activities and PII. Implications for theory and practice are also discussed.
... Growth (Ndeveni et al., 2019), Business performance (Ndeveni et al., 2019), Firm performance (Srivastava et al., 2021), Financial performance (Tang et al., 2021), Perceived Firm Success (Amato et al., 2017), Market performance (Njeru and Bwisa, 2012), Satisfaction (Chen & Tseng, 2020), International performance (Crespo et al., 2014) Opportunity Recognition Ability to find new business opportunities based on existing information (You et al., 2020). Opportunity entrepreneurship (GEM, 2022), Opportunities (Lim 2019), Opportunity discovery (González et al., 2017), Perceived opportunity , Opportunity novelty (Cox, 2016), Opportunity development (Cox, 2016) Innovation Creation of new products, services, or work practices (Van de Ven, 1986). ...
Entrepreneurial alertness (EA) has attracted increasing attention in scholarly work, and a multitude of empirical studies have examined the antecedents and outcomes of entrepreneurial alertness. Although there is consistent evidence for significant associations, ambiguities exist concerning the directions and magnitude of the relationships. The purpose of this study is to meta-analytically assess the antecedents and outcomes of EA. A total of 125 empirical studies were analyzed with 597 effect sizes derived from 18 different constructs and a sample of 1,820,331 individuals. We advance our understanding of the critical role of alertness in generating entrepreneurial outcomes, its antecedents, and the directions and magnitude of the associations. We also provide several directions for further theorizing the role of alertness in entrepreneurship.
... Although entrepreneurial alertness helps an SME's executive director to identify opportunities that were cast aside by other individuals, this is only true in certain circumstances because sometimes the information obtained does not help the entrepreneur to grasp the potential (Brockman, 2014). So, executive directors must first concentrate on the factors that are essential for innovation, before distributing resources among other opportunities found, aiming for greater control and preventing an excess of common alternatives, i.e. an overload effect (Srivastava et al., 2021). In fact, as an intangible resource (Mosakowski, 1998), entrepreneurial alertness can help entrepreneurs be more successful in opportunity identification (Ardichvili et al., 2003;Bilal and Fatima, 2022). ...
Objective – This study aims to understand whether entrepreneurial alertness is a relevant determinant in creating opportunities in the context of small and medium-sized enterprises (SME).
Methodology – To this end, qualitative research was undertaken, specifically the case study method. The study context was formed of four SMEs (cases) located in an inland region of Portugal. The data-collecting instrument was an individual interview held with the owners-managers of the chosen firms and the data treatment technique was content and thematic analyses.
Findings – The results obtained reveal that entrepreneurial alertness is always present in the SME entrepreneurs/business-people’s daily lives and clearly creates good business opportunities not yet observed by the competition.
Practical implications – This study seeks to help SME owners-managers to understand the phenomenon of entrepreneurial alertness and understand the importance of this determinant for their firms’ success.
Originality/value – This study is innovative as it helps to characterise and understand entrepreneurial alertness by showing its importance for SMEs in creating valuable opportunities and achieving success.
... Entrepreneurial initiatives are key contributors to firm adaptation and growth (Covin & Miles, 1999;Dougherty & Hardy, 1996). Such initiatives involve judgments about deploying resources to particular (entrepreneurial) projects (Casson & Wadeson, 2007;Foss & Klein, 2012) as well as associated processes of bringing those projects to fruition (Srivastava et al., 2021). Current understanding of firm growth reflects a received view from neoclassical economics thatalthough firm growth rate could be influenced by some systematic factors related to the firm or the industrial environmentgrowth itself is a nearly random process (Geroski, 2005). ...
This paper uses system dynamics modelling to explore processes through which entrepreneurial initiatives within firms lead to firm growth. Our model captures the interplay among various sub-processes and finds these processes form a complex system involving multiple interacting feedback processes. Simulation analysis shows that minor changes in firm conditions could lead to qualitatively different growth trajectories. They involve growth dynamics such as better before worse, and worse before better scenarios. These findings prompt us to move beyond linear understanding of how entrepreneurship contributes to firm growth.
... Innovative performance and output are the cornerstones of the strategic management of technology and innovation (Keupp et al., 2012). Many of the reviewed articles explored the microfoundations of such outcomes as the number of new products (e.g., Srivastava et al., 2020) or the revenues made with new products (e.g., Mollick, 2012). Nevertheless, the investigation of innovative performance and output in a microfoundations perspective exhibits three shortcomings. ...
While innovations and new technologies are often pivotal to the long-term prosperity of firms, such firm-level outcomes emerge from the actions and interactions of organizational members who develop innovations and use new technologies. The “microfoundations movement” seeks to understand how micro-level (e.g., individual) actions and interactions lead to macro-level (e.g., organizational) outcomes and mediate relations between macro-level variables. Although the movement has grown tremendously over the last decade, it has yet to deeply pervade the domain of strategic technology and innovation management. Due to its tremendous growth, it is quite fragmented and dispersed, which impedes the identification of the most promising opportunities for future research. To overcome this problematic situation, we conduct a systematic literature review of existing research on microfoundations in the strategic management of technology and innovation, synthesize it into an integrative framework, and chart promising paths for future research. Specifically, we apply a multi-coder, multi-step approach, identify 87 relevant articles published in 23 leading academic journals over the period from 2003 to 2022, and propose a research agenda comprising more than 20 promising avenues for future research based on the resulting insights. These findings have important implications for the academic literature and management practice.
... When entrepreneurs turn their attention to customers by continuously interacting with them, they can gain valuable information about future market demand, which helps them decide whether to adjust the size of the business. In contrast, when entrepreneurs turn their attention to R&D, it can increase the level of innovation activity and the rate of new product introductions (Srivastava et al., 2021). ...
The manufacturing industry is the foundation for building and strengthening a country. Micro-manufacturing enterprises are the basis for the development of manufacturing, and products are the core and life of enterprises. Based on micro data from industrial enterprises, this study conducts a statistical measurement on the indicators of high-quality product development. Taking the Baidu Index as the proxy variable for attention allocation, the influence of attention allocation on high-quality development of products is systematically examined both theoretically and empirically; Additionally, it seeks to ascertain whether factor stock adjustment has a mediating effect. The findings are as follows: 1. Within the full sample, 63.63% of the attention allocation process to promote high-quality development of products is achieved by optimizing the factor stock adjustment channels. 2. Capital stock and labor stock adjustment have a partial mediating effect on the high-quality development of products in capital-intensive industries, while labor stock adjustment has a partial mediating effect on labor-intensive industries. 3. The regional results show that the adjustment of capital and labor stock has a partial mediating effect in the eastern region. This conclusion provides a theoretical basis for realizing the high-quality development of China's manufacturing industry.
... Nevertheless, the underlying mechanism which leads different people to employ different strategies in deciding on entrepreneurial action still lacks exploration from a synthetic perspective, since people always make a general decision based on a series of evaluations unconsciously [19]. The underlying mechanism which is cultivated or educated would intuitively dominate the decision process [20]. ...
Given its impact on preference for different information, the cognitive schema is recognized as a critical mechanism for people to make up their minds on willingness to act. However, how entrepreneurial cognitive schema influences cognitive processes remains unclear. Based on entrepreneurial action theory and information processing theory, we delineate the relationship between entrepreneurial cognitive schema and decision of entrepreneurial action by decomposing the cognitive process of comprehending external information related to entrepreneurial opportunity. We randomized 123 participants into different priming groups and collected their decision policies with a conjoint analysis experiment. Firstly, we found the individuated cognitive process, since the positive effect of founding rates is strengthened, and dissolution rates are reduced by positive knowledge-relatedness. Further, we partly validated the moderating role of entrepreneurial cognitive schema, with a more positive relationship between founding rates and willingness to act, and between knowledge-relatedness and willingness to act when participants are primed with this future-focused schema. This paper proves one critical cognitive unit while making a decision to act on entrepreneurial opportunity and indicated an active role of entrepreneurial cognitive schema in enabling people to emphasize and make better use of relevant information.
... However, despite the above outlined good intentions in trying to "bring realistic assumptions about human cognition, emotions, and social behavior to the strategic management of organizations" (Powell et al., 2011;p. 1371), behavioral strategy research has mainly established its foundations on works investigating psychological variables on secondary data (Schumacher et al., 2020;Srivastava et al., 2020). Yet, the required consideration of the emotional side of human mind (Prietzel, 2020) which, for some scholars, is the driver of cognition and consequent behavior (Healey and Hodgkinson, 2018;, has been lacking. ...
The milestone work of Powell, Lovallo, and Fox (2011) established the boundaries of a new field of research in management and organization studies: Behavioral Strategy. This new field “merges cognitive and social psychology with strategic management theory and practice” (Powell, 2011; p. 1371). From that, the ‘behavioral revolution,’ based on bounded rationality (Simon, 1947), dominant coalitions (Cyert and March, 1963), the investigation of sociodemographic features of executives (Hambrick and Mason, 1984), and the study of executives’ deviations from rationality (i.e., cognitive biases; Kahneman et al., 2011), is finally gain momentum in strategy research (Greve 2013; Levnithal, 2011). Additionally, behavioral strategy also serves as a good interpretative lens for the ongoing COVID-19 pandemic (Foss, 2020).
Notably, behavioral strategy is aimed at understanding: i) how the cognition of the individual scale up to collective behavior (Lovallo and Sibony, 2010; Gavetti, 2012), ii) how complex judgment in organizations is made (Garg, 2017; Augier et al., 2018), and iii) how designing organizational environments that can reduce the occurrence of biases (Echols and Neck, 1998; Cristofaro, 2017; Sibony et al., 2017). In brief, behavioral strategy deals with the “psychological origins of strategy” and try to advance them as to better exploit the antecedents of strategy – such as personality traits, mental health or disorders, beliefs, spirituality emotions, etc. (e.g., Ackers and Preston, 1997; Mendenhall, Butler, and Ehat, 2014) – and how it is ‘really’ formed in organizations.
However, despite the above outlined good intentions in trying to “bring realistic assumptions about human cognition, emotions, and social behavior to the strategic management of organizations” (Powell et al., 2011; p. 1371), behavioral strategy research has mainly established its foundations on works investigating psychological variables on secondary data (Schumacher et al., 2020; Srivastava et al., 2020). Yet, the required consideration of the emotional side of human mind (Prietzel, 2020) which, for some scholars, is the driver of cognition and consequent behavior (Healey and Hodgkinson, 2018; Cristofaro; 2020), has been lacking.
As such, the goal of this Special Issue is to (re-)affirm the foundations of Behavioral Strategy as conceived in its origins. In brief, research based on multi-level theories and/or multiple empirical approaches – based on primary data – that take into account the behavior of executives intertwining affective states and cognition are strongly encouraged, so that our collective efforts will advance strategy as an act of human behavior rather than an application of tools.
... After many rounds of discussions, they established an IoT strategy for the ecosystem business, starting from the mobile phone peripheral products. Such a process reflects the importance of the two distinct yet complementary cognition of the top management team in influencing a firm's strategy [72]. ...
Establishing a hub-based innovation ecosystem is an effective way for companies to cope with technological transformation and achieve sustainable development. While existing literature has explored how a hub firm develops or manages an innovation ecosystem, little attention has been paid to the strategic challenges in the development and management process. In strategic management, managerial cognitive capability has been proposed as a key factor that influences how firms make strategic changes and adapt to dynamic environments. Hence, from the perspective of managerial cognitive capability, this paper strives to investigate the development of an innovation ecosystem from the perspective of managerial cognitive capability. To do so, we conducted a qualitative case study of Xiaomi’s innovation ecosystem from 2010 to 2019. The research adopts an interpretive approach and finds that (1) the evolution of the innovation ecosystem can be divided into incubation, growth, and regeneration periods, with developing core products, related products, and unrelated products as respective focus; (2) under rapid technological and market changes, it is critical to match the managerial cognitive capability of the hub-firm with its innovation ecosystem; (3) building innovation ecosystems enables the hub-firm to achieve sustainable competitive advantages. The study builds a model for the growth of innovation ecosystems and enriches theoretical research on innovation ecosystems and managerial cognitive capability.
The literature presents entrepreneurial alertness (EA)—a cognitive resource—as an antecedent of entrepreneurial opportunity identification, although empirical evidence is lacking. The aim of this study is to test this relationship and explore the influence of entrepreneurial orientation (EO), which provides a mobilizing vision for leveraging firm's resources, as a mediating mechanism for this relationship. Using data collected from 152 French entrepreneurs, our results empirically confirm the relationship between EA and entrepreneurial opportunity identification. Furthermore, we find a positive relationship between EA and each of the three dimensions of EO (i.e. innovativeness, proactiveness, and risk-taking propensity). However, only one dimension of EO—proactiveness—has a significant relationship with entrepreneurial opportunity identification. Our results highlight the mediating role of proactiveness in the relationship between EA and the identification of entrepreneurial opportunities and also confirm the interest in further research on this critical dimension of EO.
The strategy-by-doing perspective argues that firms operating in highly dynamic environments can benefit from taking strategic actions in lieu of advance planning because such actions have learning effects that help the firm keep pace with changes in the environment. The implicit assumption is that strategy by doing is effective in dynamic environments but likely not in stable environments. This study challenges this notion and expands the purview of the strategy-by-doing perspective. We first argue that strategy by doing is generally an effective strategy due to the organizational learning it facilitates. We next discuss how environmental dynamism is multidimensional, encompassing both market and technological dynamism. The positive effects of strategy by doing on product-market performance are amplified in highly dynamic environments that feature high levels of both market and technological dynamism. We go on to argue that stable environments are also suitable for strategy by doing, where it can facilitate opportunity creation. However, strategy by doing may hinder performance in mixed environments where one form of dynamism is present and the other is not. Focusing on strategy by doing in the form of product changes, our analysis of 4,000 firms over a period of 20 years shows support for our arguments about environmental contingencies affecting the relationship between strategy by doing and performance. We discuss how these findings have implications for theory and practice.
In his seminal contribution, Baumol (1990) proposes that the direction of entrepreneurial effort towards its productive (e.g., start-up activity) or unproductive (e.g., rent-seeking) use in a society depends on institutions or the “rules of the game”. We focus on an important micro-foundation of Baumol's theory namely that certain individuals change the direction of entrepreneurial efforts with institutional change. Our research contrasts with previous work on the role of institutions, which mostly focuses on the aggregate macro-level, while not observing individual behavior. We analyze who decides to start a venture in East Germany after the fall of the Berlin Wall and find that many individuals who demonstrated commitment to the anti-entrepreneurial communist regime in the GDR were active in launching new ventures soon after German re-unification. We argue that commitment to communism among post-communist entrepreneurs reflects rent-seeking. Once institutions change radically, entrepreneurial efforts are directed towards start-up activity. We rely on the German Socio-Economic Panel Study (SOEP) that includes information on whether East German respondents had a telephone before German re-unification, which was one of the most sought-after rewards for commitment to the regime. We find that telephone owners had a higher propensity of becoming successful firm founders. Telephone owners were also more likely to have an entrepreneurship-prone personality profile and value orientation. Our results confirm Baumol's theory and suggest that alertness to entrepreneurial arbitrage opportunities is guiding the redirection of entrepreneurial effort in the face of drastic institutional change.
Executive summary
There is a large body of literature on the effect of institutions on entrepreneurship. A good share of this literature is rooted in the seminal contribution by Baumol (1990) who argues that the shape of institutions determines whether people direct entrepreneurial effort to productive, unproductive or destructive entrepreneurial activities. Despite the fact that Baumol‘s main argument is at the individual micro-level, most of the literature focuses only on the macro-level implications of his theory. In contrast to most previous studies, we are not focusing on the aggregate level of entrepreneurship but explore the micro-foundations of Baumol's theory and analyze how (drastic) institutional change affects the entrepreneurial choice at the individual level.
In our discussion of Baumol's work, we also introduce Kirzner's concept of individual alertness to arbitrage opportunities which he originally formulated for market economies. We extend Kirzner's insights on the role of alertness to other institutional contexts (e.g., socialism) and forms of arbitrage (e.g., engagement in socialist organizations) other than start-up activity, and highlight the role of institutional change in shaping processes of opportunity formation.
It is important to understand how individuals allocate their entrepreneurial effort in times of major historical shocks and institutional changes for several reasons. First, since entrepreneurship is an important driver of economic growth and development, it is crucial to understand how institutional change affects entrepreneurial behavior at the individual level for designing policy measures targeted at increasing the entrepreneurial propensity of people. Second, the share of people with an entrepreneurial talent in a society is an enormous resource to cope with socio-economic change. Third, it is also important to understand the micro-foundations of Baumol's work as vast empirical evidence on the impact of institutions on entrepreneurial activities that is available at the macro-level relies on the validity of the micro-foundations.
We find that people who demonstrated commitment to one of the most anti-entrepreneurial institutional regimes in history—communism—were more likely to start a firm after transition to a market economy. Our analysis is based on the case of East Germany that saw a sudden shift from an anti-entrepreneurial communist regime that did not reward start-up activities towards an entrepreneurship-facilitating market economy after the fall of the Berlin Wall. Those people who were actively committed to the regime as evidenced by material rewards obtained in the GDR were more likely to become (successful) self-employed after the fall of the Berlin Wall. We also observe that people with an entrepreneurship-prone personality profile and those who put a strong emphasis on entrepreneurial values were more likely to have obtained material rewards in communism that indicate a strong commitment to the system.
We argue that applying and extending Baumol's and also Kirzner's ideas helps understanding this puzzling phenomenon. In essence, regime commitment can be seen as a form of rent-seeking activity, which is a classic example of unproductive entrepreneurial activity discussed by Baumol. Rent-seeking in the context of communism could be expressed, for example, in enthusiastic engagement in public organizations (e.g., party councils, youth organizations, state-owned enterprises) in exchange for specific material rewards. Their pronounced alertness to new arbitrage opportunities may have enabled these same individuals to switch to start-up activity once this option became available to them and if it was more profitable than rent-seeking.
We contribute to the literature by supporting the idea that the institutional framework conditions determine the type of entrepreneurial activity to which entrepreneurially talented people devote their efforts. So far, this claim found support mainly in aggregated macro-level data. Another important insight from our analysis is that entrepreneurs are flexible and agile economic agents who are alert to arbitrage opportunities and able to promptly adapt themselves to even radical changes, such as the shock transition from a socialist command economy to a market economy. Alertness to opportunities in a market economy context could hardly be learned in an anti-entrepreneurial context. Hence, an immediate re-allocation of entrepreneurial efforts indicates that alertness to arbitrage opportunities emerging in a market economy does not necessarily require experience in a market economy context.
Our assessment also suggests that institutional change is shaping subjective processes of opportunity formation. Hence, the debate on whether opportunities are ‘out there’ or they have to be created should take into consideration how institutions and institutional change set the boundaries for opportunities. In particular, identifying and pursuing new opportunities brought about by institutional change could represent a specific form of “entrepreneurship talent.”
Alertness is increasingly associated with entrepreneurial opportunities. However, ambiguity in the conceptualization and operationalization of the construct have limited its potential and utility for entrepreneurship research. Given the variations in treatment of alertness, we investigate the concept as it is currently evolving in entrepreneurship scholarship. With this examination, we bring to the forefront inconsistencies and emerging trends regarding the nomological alignment and measurement of alertness. This review and synthesis of alertness research clarifies conceptual inconsistencies stemming from its Kirznerian roots and offers a framework with agenda for entrepreneurial alertness research. This agenda includes the application of entrepreneurial alertness to the opportunity creation paradigm.
We investigate the impact of entrepreneurs' cross-cultural experience on new venture performance. Drawing on social cognitive theory, we examine how two socio-cognitive traits, entrepreneurial self-efficacy, and alertness to opportunities moderate the relationship between cross-cultural experience and new venture performance. We adopt a multi-method approach. In Study 1, we implement an experiment on a sample of 177 participants enrolled in an innovation and entrepreneurship program. In Study 2, we conduct a field survey of 65 entrepreneurs with varying cross-cultural experience. Our findings suggest that cross-cultural experience has a positive effect on new venture performance, and that entrepreneurial self-efficacy and alertness to opportunities bolster this relationship. Our research contributes to entrepreneurship research in a cross-cultural context and to the growing literature regarding individual cognitions in entrepreneurship.
Recognition of potentially valuable business opportunities is often the start of entrepreneurship. The present research focused on entrepreneurial alertness, which has been found to play a role in this process. Previous research has highlighted the effects of alertness; we seek to extend this research regarding alertness by investigating its antecedents. Drawing upon psychological capital literature, we focus on two potential contributors to alertness: self-efficacy and optimism. We also seek to clarify the relationship between alertness and firm outcomes. Data collected from CEOs of public firms in China were first used to validate the alertness scale, and data collected with entrepreneurs of private small and medium-sized enterprises in Taiwan were used to test our theoretical model. Results indicated that both entrepreneurs’ self-efficacy and optimism are positively related to alertness. Findings also clarify the effects of alertness by indicating that it is positively related to firm innovation which, in turn, is positively related to financial performance.
Pursuing sources of entrepreneurial and competitive advantage, researchers have been exploring cognition. We examine how cognitive capabilities affect competitive performance, drawing on two constructs rooted in psychology and economics. A familiar one is analytic skill, the ability to solve abstract problems. To that, we add strategic intelligence — the ability to anticipate competitors’ behavior and preempt it. Using incentivized experiments, we measure the constructs in participants, then let them compete for cash in a highly competitive market. Although the market is designed to eliminate any advantages, whether from market structure or strategic resources, some profit much more than others. We trace performance differences to heterogeneity in analytic skill and strategic intelligence, and show how the two fuel superior performance, even against tough competition.
Keywords: Cognition, Skill, Theory of Mind, Market, Asset, Experiment, Cognitive ability, Bounded rationality, Level-k, Nonequilibrium behavior, Beauty contest, Repeated games, Intelligence, Raven test
JEL Classification: C92, C73, D83
We examine how country-level institutional context moderates the relationship between three socio-cognitive traits-entrepreneurial self-efficacy, alertness to perceived business opportunities, and fear of failure-and entrepreneurial action. To do this, we blend social cognitive theory (SCT) with institutional theory to develop a multi-level model of entrepreneurial entry. We merge data from the Global Entrepreneurship Monitor (GEM) surveys and the Economic Freedom of the World (EFW) index for 45 countries from 2002 to 2012. Our results, which are based on a multi-level fixed-effects model, suggest that entrepreneurs' self-efficacy and alertness to perceived opportunities promote entrepreneurial action while fear of failure discourage it. However, the strength of these relationships depends on the institutional context, with entrepreneurial self-efficacy and alertness substantially more likely to lead to new ventures in countries with higher levels of economic freedom. These results suggest that economic freedom not only channels individual efforts to productive entrepreneurial activities, but also affects the extent to which individuals' socio-cognitive resources are mobilized to encourage high-growth entrepreneurship.
Research summary: Pursuing sources of entrepreneurial and competitive advantage, researchers have been exploring cognition. We examine how cognitive capabilities affect competitive performance, drawing on two constructs rooted in psychology and economics. A familiar one is analytic skill, the ability to solve abstract problems. To that, we add strategic intelligence — the ability to anticipate competitors' behavior and preempt it. Using incentivized experiments, we measure the constructs in participants, then let them compete for cash in a highly competitive market. Although the market is designed to eliminate any advantages, whether from market structure or strategic resources, some profit much more than others. We trace performance differences to heterogeneity in analytic skill and strategic intelligence, and show how the two fuel superior performance, even against tough competition .
Managerial summary: Why do some entrepreneurs outperform others? How can companies succeed against tough competition? Certainly, some benefit from unique resources, such as patents, and others can winnow competition, as through mergers. But some have entered highly competitive markets, lacking obvious resources, yet managed to achieve impressive success: think Under Armour, Wal‐Mart or Home Depot. Here we test how advantage can stem from managerial cognition. We measure two kinds of cognitive skill in market participants, and then let them vie for cash in intensely competitive markets. Some end up with far more profit than others. Tracing the root of high performance, we find it is predicted by a combination of analytic skills, the ability to solve abstract problems, and strategic intelligence—ability to anticipate competitors' behavior and preempt it . Copyright © 2017 John Wiley & Sons, Ltd.
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This article has earned an Open Data badge for making publicly available the digitally‐shareable data necessary to reproduce the reported results. The data is available at http://doi.org/10.17605/OSF.IO/P49YA . Learn more about the Open Practices badges from the Center for Open Science: https://osf.io/tvyxz/wiki .
Since its inception, entrepreneurship has struggled with the academic version of a new venture’s liability of newness; the field was considered pre-paradigmatic (Research methodology in strategy and management, New York, pp 1–32, 2005b), bereft of theory or conceptual frameworks (J Bus Ventur 19:617–620, 2004; Acad Manage Rev 26):8–11, 2001) and so lacking in understanding that investigators could not agree on what constituted the phenomenon of interest: any kind of self-employment? New venture creation? Corporate venturing? Something else? All of the above (J Bus Ventur 5:15–28, 1990; Acad Manage J 48:556–564, 2005a; Entrep Theory Pract 26:17–25, 2001, Encyclopedia of entrepreneurship, Englewood Cliffs, 1982)?
This article addresses the problem of testing the difference between two correlated agreement coefficients for statistical significance. A number of authors have proposed methods for testing the difference between two correlated kappa coefficients, which require either the use of resampling methods or the use of advanced statistical modeling techniques. In this article, we propose a technique similar to the classical pairwise t test for means, which is based on a large-sample linear approximation of the agreement coefficient. We illustrate the use of this technique with several known agreement coefficients including Cohen’s kappa, Gwet’s AC1, Fleiss’s generalized kappa, Conger’s generalized kappa, Krippendorff’s alpha, and the Brenann–Prediger coefficient. The proposed method is very flexible, can accommodate several types of correlation structures between coefficients, and requires neither advanced statistical modeling skills nor considerable computer programming experience. The validity of this method is tested with a Monte Carlo simulation.
More than five decades after the seminal works on how individuals process information and make decisions within organizations were published (Cyert & March, 1963; Simon, 1957), the thesis that individuals, groups, and organizations are bounded in their rationality and ability to attend to information continues to remain salient. Individuals and organizations display cognitive and motivational biases, both in their attention to information and in their decisions based on that information (De Dreu, Nijstad, & van Knippenberg, 2008; Ocasio, 2011; Tversky & Kahneman, 1974). The nature and volume of information, and managers' behaviors in seeking and using information, have undergone massive transformation over these past 50 years, which have seen the emergence of electronics, computers, and the Internet. Advances in information technology, mobile communications, and big data collection and storage mean that more people and firms have access to more information than ever before (George, Haas, & Pentland, 2014; Hilbert & Lopez, 2011). Yet, our frameworks of attention and decision making have not seen corresponding radical shifts. Perhaps, the underlying processes of decision making remain the same despite the transformative change in context. Alternatively, it is plausible that our theoretical advances have not matched the speed of change in information contexts confronted by businesses and policymakers alike. The growing ubiquity of information provides unprecedented opportunities—for learning, creativity , and innovation, as well as for performance. Understanding how to leverage these possibilities becomes an important challenge for management research and practice. However, the abundance of information also implies increasing competition for the attention of individuals, groups, and organizations ; increasing potential for information overload to fuel biases in decision making; increasing costs of collecting, storing, and sharing information ; and an increasing risk that all this information becomes a distraction from more relevant information or indeed from the job itself. Thus, a key challenge in the information age is to manage this wealth of available information and channel it to productive ends. In this thematic issue, we explore how management in the information age potentially differs and challenges our existing theoretical frameworks and assumptions. We assembled articles that address the rapidly evolving opportunities and challenges of managing in this new information-rich context. These articles are motivated by emergent themes and trends that set the stage for current and future scholarly research on information, attention, and decision making. We follow a brief analysis of these articles with potential directions for future research and highlight broader pastures where systematic research could further improve our understanding of how we live and work in the information age.
Research Summary: U- and inverted U-shaped relationships are increasingly explored in strategy research, with 11 percent of all articles published in Strategic Management Journal (SMJ) in 2008–2012 investigating such quadratic relationships. Moreover, a movement towards introducing moderation to quadratic relationships has emerged. By reviewing 110 articles published in SMJ from 1980 to 2012, we identify several critical issues in theorizing and testing of these relationships for which current practice falls short. These include insufficient causal argumentation, incorrect testing, mixing up two different types of moderation, and not realizing that the curve can flip completely. For these and other issues, a guideline is provided which, when followed, may bring clarity to theoretical motivation and rigor to empirical testing.
Managerial Summary: Too much can be as bad as too little. Many relationships in strategic management follow an inverted U-shaped pattern, where moderate levels of a strategy lead to optimal performance. To gain deeper insights into the conventional wisdom that too much of a good thing can be harmful to performance, we discuss how such relationships can be better theorized and tested based on a review of articles exploring U-shaped relationships in Strategic Management Journal during 1980–2012. We identify several critical issues that require close attention and provide a guideline to further develop and validate this important managerial intuition.
We develop and test an attention-based theory of search by top management teams and the influence on firm innovativeness. Using an in-depth field study of 61 publicly traded high-technology firms and their top executives, we find that the location selection and intensity of search independently and jointly influence new product introductions. We have three important findings. First, in contrast to the portrait of local managerial search, we find teams that select locations that contain novel, vivid, and salient information introduce more new products. Next, unlike informationgathering approaches that merely "satisfice", persistent search intensity may lead to increases in new product introductions. Finally, level of search intensity must fit the selected location of search to maximize new product introductions.
This research examines an integrated theoretical model that explains how strategies for participating in the market for corporate control (acquisitions and divestitures) affect internal control mechanisms and, together, influence internal and external innovation. Nine out of ten hypotheses received support, with results showing that firms engaging in acquisitions and divestitures emphasize financial controls, de-emphasize strategic controls, and thereby produce less internal innovation. Furthermore, these firms are likely to seek external innovation to gain short-term benefits in competitive advantage. We conclude that engaging in the market for corporate control strongly affects the context in which innovation is framed, the control mechanisms employed, and the design and process of innovation.
This article uses theoretical approaches from cognitive psychology to examine the basis for entrepreneurial alertness and to connect it to existing theories of attention in strategic management and decision-making. It thereby provides a theoretical basis for understanding how entrepreneurial alertness leads the individual to pay attention to new opportunities. A model is developed to show how attention and entrepreneurial alertness work together to support the recognition or creation of opportunities. Entrepreneurial alertness is believed to be a manifestation of differences in the schemata and cognitive frameworks that individuals use to make sense of changes in the environment. This suggests that entrepreneurial alertness mediates the impact of observed phenomena upon the situated attention of individual decision-makers.
Purpose ‐ The aim of this study is to explore the drivers of supply and demand for attention in the managerial context, and develop a framework of managerial tools for allocating attention to various competing demands. Design/methodology/approach ‐ Deliberative attention refers to the application of attention to prolonged reflection and consideration of problems where routine approaches are insufficient. Drawing on theories of cognitive and structural constraints to the allocation of attention among competing stimuli, the paper investigates how managers match the strategic demands for deliberative attention and the supply available to individuals in their firms. This is used to develop a model of factors influencing the matching of supply and demand. Findings ‐ The paper uses this model to recommend specific strategies for explicitly managing deliberative attention and to categorize the appropriate application of a range of existing strategic management tools based on the nature and inherent uncertainty of the organizational problem being faced. Practical implications ‐ The model suggests that a primary strategic task of top managers is the appropriate management of attention within the firm. Understanding attention as a firm resource to be appropriately and deliberately managed helps to advance theoretical understanding of the human side of valuable resources in the firm. Such knowledge may also help practitioners to be more cognizant of their investments of valuable attention resources. Originality/value ‐ This is one of the first studies to treat attention as a scarce and valuable firm resource to be managed, and to use this as the foundation for more appropriate application of a wide range of current management techniques.
The current literature presents a mixed view of top managers, often characterizing them as an impediment to innovation, irrelevant for innovation, or, at best, having an indirect effect on innovation. In contrast, the authors use an attentional perspective to argue that chief executive officers (CEOs) have a positive, direct, and long-term impact on how firms detect, develop, and deploy new technologies over time. The authors test their arguments on longitudinal data from the U.S. retail banking industry. They show that CEO attention is a critical driver of innovation even (1) when the target of attention is not innovation per se but simply future events and external events in a generic sense; (2) when the innovation outcomes occur far in the future (sometimes several years in the future); (3) when the innovation outcomes are conceptually, empirically, and temporally distinct; and (4) in an empirical context (i.e., banking) that is not traditionally viewed as “high tech” and, thus, innovation centric.
Quick responses to environmental changes have become a vital success factor for today's companies. This study aims to identify the differential mechanisms that drive responsiveness to customers and responsiveness to competitors. In particular, the authors propose a conceptual framework that distinguishes between a cognitive and an affective organizational system as two important antecedents of organizational responsiveness. The results from a large-scale, cross-industry study show that the affective organizational system is more important in driving responsiveness to customers and that the cognitive organizational system is more important in driving responsiveness to competitors. Moreover, the relative importance of the cognitive system as a driver of responsiveness is greater in firms with a low market share and in markets with low entry barriers for new competitors.
Research Summary
This article explicitly introduces cognitive considerations into the treatment of strategic interactions, using the value‐based framework as an extended example. Through real‐world examples and prior empirical findings, it shows that many of the implicit assumptions of the framework are regularly violated in practice when actors simplify their complex realities into incomplete, inaccurate mental models. These violations lead to outcomes that are often contrary to the predictions of the classical framework. As initial steps toward developing a cognitively grounded theory of strategic interactions, the article characterizes the core components of strategic mental models that might form the foundation of such a theory and then lays out some open questions that this theory would need to address. These questions, when answered, can point to novel cognitive capabilities.
Managerial Summary
This article argues that a realistic analysis of interactions between strategic agents requires us to include the mental models, that is, belief systems, of those agents into the analysis. Real‐world examples and prior empirical findings are used to show that if such mental models are not accounted for, the outcomes predicted by the analysis could be quite different from those obtained in reality. The article identifies a few key aspects of these strategic mental models that deserve attention. It also identifies a few central questions that, when answered, could allow firms to develop novel cognitive capabilities that confer competitive advantage.
This study examines how CEO cognition, organizational capabilities, and organizational incentives interacted to shape firm strategy during the fiber-optic revolution. I tested for these factors' association with subsequent investment in optical technologies using longitudinal data from 71 communications firms. Results show that each is separately important in shaping outcomes, and their alignment toward the adoption of a new technology leads to the greatest levels of change. In addition, cognition can compensate when organization-level factors are lacking. Considering cognition, capabilities, and incentives together contributes to a more contingent view of the conditions under which CEO cognition matters for firm strategy.
Computer-aided text analysis (CATA) is a form of content analysis that enables the measurement of constructs by processing text into quantitative data based on the frequency of words. CATA has been proposed as a useful measurement approach with the potential to lead to important theoretical advancements. Ironically, while CATA has been offered to overcome some of the known deficiencies in existing measurement approaches, we have lagged behind in regard to assessing the technique’s measurement rigor. Our article addresses this knowledge gap and describes important implications for past as well as future research using CATA. First, we describe three sources of measurement error variance that are particularly relevant to studies using CATA: transient error, specific factor error, and algorithm error. Second, we describe and demonstrate how to calculate measurement error variance with the entrepreneurial orientation, market orientation, and organizational ambidexterity constructs, offering evidence that past substantive conclusions have been underestimated. Third, we offer best-practice recommendations and demonstrate how to reduce measurement error variance by refining existing CATA measures. In short, we demonstrate that although measurement error variance in CATA has not been measured thus far, it does exist and it affects substantive conclusions. Consequently, our article has implications for theory and practice, as well as how to assess and minimize measurement error in future CATA research with the goal of improving the accuracy of substantive conclusions.
Previous studies suggest that entrepreneurs play a key role in the success of their ventures. But
relatively little is currently known about how they produce such effects. The present research provides
data suggesting that two modes of entrepeneurs’ self-regulation—locomotion and assessment—
enhance a firm’s success through their effects on the components of alertness. This
mediational model was tested and supported with data from 120 entrepreneurs. Locomotion was
positively related to the scanning and search component, while assessment was positively related to
the association and evaluation components. These findings are discussed in terms of the role of
founders’ self-regulation in the performance of their companies.
Research summary: We examine the interplay of behavioral and environmental uncertainty in shaping the effectiveness of two key governance mechanisms used by strategic alliances: contractual and trust-based governance. We develop and test hypotheses, using a meta-analytic dataset encompassing over 15,000 strategic alliances across 82 independent samples. We find that contractual governance works best under low to moderate levels of behavioral uncertainty and moderate to high levels of environmental uncertainty, while it is detrimental to alliance performance when both types of uncertainty are low or high. Trust-based governance is most effective at high levels of behavioral uncertainty and low levels of environmental uncertainty. It suffers a large loss of usefulness at high behavioral uncertainty as environmental uncertainty increases. Managerial summary: Strategic alliances allow firms to gain greater efficiency and create value. Yet, many such alliances fail because they are not able to deal with the twin challenges posed by behavioral and environmental uncertainty. Findings from our meta-analysis imply that under conditions of high behavioral uncertainty and low-to-moderate levels of environmental uncertainty, the use of trust-based governance alongside contractual governance might enhance the latter's effectiveness. The combined effectiveness of contractual and trust-based governance under high levels of both behavioral and environmental uncertainty is not obvious. When both behavioral and environmental uncertainty are high, contractual governance hurts alliance performance while trust-based governance does not function at its best either. Under these conditions, it might be better for firms to turn to hierarchy or vertical integration.
Previous studies of the market value impact of announcements of joint ventures have not considered industry effects. It is suggested that the impact of such announcements varies with the information-processing load associated with analyzing events in the relevant industry. An event study analysis based on a stratified sample of 108 announcements in 3 industry groups, one with a light, one with a moderate, and one with a heavy information-processing load, confirms this hypothesis. The implications for a signaling perspective on joint venture announcements are examined.
The authors developed hypotheses about the effectiveness of response rate techniques for organizational researchers surveying executives. Using meta-analytic procedures to test those hypotheses, the authors analyzed response rate data from 231 studies that surveyed executives and appeared in top management journals from 1992 to 2003. They found mean response rates to be declining over the period, yielding an overall 32% rate. Of the various methods suggested to increase response rates in other populations, none were found to be effective for executives. However, topical salience and sponsorship by an organization or person in the executive's social networks did bring about response rate increases. The authors provide recommendations about what (not) to do when trying to collectoriginal data from members of a firm's upper echelons.
An introduction is presented to articles in this issue including "What Are Microfoundations?," "Rational and Reasonable Microfoundations of Markets and Institutions" and " Microfoundations of Management: Behavioral Strategies and Levels of Rationality in Organizational Action."
Investigating behavioral explanations for the timing of corporate acquisitions, we focus on the effects of performance relative to aspiration level, slack, and proximity to bankruptcy. We used event history modeling to explain the hazard of acquisitions among U.S. manufacturing firms from 1980 to 2000. Results indicate acquisition activity increases as performance rises among firms performing below aspirations, but falls among firms performing above aspirations. Slack has a positive relation with acquisitions, and financial distress inhibits acquisitions. We also found support for shifts in firms' focus of attention between survival, aspirations, and slack.
To examine the transition from a planned to a market economy in China, this study uses census data from China’s National Bureau of Statistics from 1998–2006 to investigate multi-population dynamics across the three main organizational forms in China’s domestic sector: state-owned enterprises (SOEs), collectively owned enterprises (COEs), and privately owned enterprises (POEs). We conceptualize economic transition as a community-level change from an old, dominant organizational form (SOE), through a transitional form (COE), to a new form (POE). When the new organizational form conflicts with the prevailing identity codes represented by the old form, the transitional form—which has identity overlap with both the new and old forms—performs the critical tasks of transferring legitimacy to the new form and supporting its survival and proliferation. Our analysis showed that, though the existence of state-owned enterprises increased the exit rate of privately owned enterprises, collectively owned enterprises provided legitimation for privately owned enterprises. Meanwhile, privately owned enterprises crowded out both state-owned enterprises and collectively owned enterprises. We contribute to ecology theory by extending research that typically depicts a two-population scenario. Our framework accommodates cross-effects involving three organizational forms: old, transitional, and new.
The complexity surrounding globalization offers a unique context in which to study the moderating role of uncertainty on top management team (TMT) demographic effects. In a sample of United States-based industrial firms, TMT international experience, educational heterogeneity, and tenure heterogeneity were positively related to firms' global strategic postures, and functional heterogeneity exhibited a negative association. However, when the level of uncertainty facing TMTs was accounted for, these associations were found to be nonlinear.
How do entrepreneurs identify opportunities for new business ventures? One possibility, suggested by research on human cognition, is that they do so by using cognitive frameworks they have acquired through experience to perceive connections between seemingly unrelated events or trends in the external world. In other words, they use cognitive frameworks they possess to "connect the dots" between changes in technology, demographics, markets, government policies, and other factors. The patterns they then perceive in these events or trends suggest ideas for new products or services-ideas that can potentially serve as the basis for new ventures. This pattern recognition perspective on opportunity identification is useful in several respects. First, it helps integrate into one basic framework three factors that have been found to play an important role in opportunity recognition: engaging in an active search for opportunities; alertness to them; and prior knowledge of an industry or market. In addition, it also helps explain interrelations between these factors (e.g., the fact that active search may not be required when alertness is very high). Second, a pattern recognition perspective helps explain why some persons, but not others, identify specific opportunities. Third, a pattern recognition framework suggests specific ways in which current or would-be entrepreneurs can be trained to be better at recognizing opportunities. Future directions for research on a pattern recognition perspective are described, and its practical implications for entrepreneurship education are examined.
Using a multidimensional framework of CEO temporal focus (the degree to which CEOs characteristically devote attention to perceptions of the past, present, and future), we propose that a company's rate of new product introduction (NPI) is predicted by a CEO's focus on each of the three distinct time frames in interaction with environmental dynamism. Based on a longitudinal (from 1996 to 2003) analysis of 221 firms in 19 industries, we show that, in stable environments, new products are introduced faster in firms headed by CEOs with high past focus, high present focus, and low future focus. In dynamic environments, new products are introduced faster in firms headed by CEOs with low past focus, high present focus, and high future focus. These findings demonstrate how CEO temporal attentional bias shapes the rate of NPI.
Research about transformational CEOs' impact on firm-level outcomes, particularly corporate entrepreneurship, has been equivocal, partially because the underlying mechanisms remain largely unexplored. Given that the individuals most closely influenced by a firm's CEO are its top management team (TMT) members, we focus on the CEO-TMT interface as a salient intervening mechanism. We posit that transformational CEOs influence TMTs' behavioral integration, risk propensity, decentralization of responsibilities, and long-term compensation and that these TMT characteristics impact corporate entrepreneurship. Data from 152 firms supported most of our hypothesized links, underscoring how the CEO-TMT interface helps explain transformational CEOs' role in promoting corporate entrepreneurship.
We adopt an information acquisition and learning perspective to explore the relationship between new product development (NPD) strategy implementation duration and new venture performance. We suggest that the relationship between NPD strategy implementation duration and new venture performance is contingent on the level of environmental turbulence as reflected in an industry’s growth level and firm information-processing capabilities as reflected in the level of centralization of top management team (TMT) mental models. Longer NPD strategy implementation durations are appropriate in stable, low-growth industry environments or when firms are run by TMTs who exhibit high mental model centralization. Meanwhile, shorter NPD strategy implementation durations are called for in turbulent, high-growth industry environments or when firms are run by TMTs who exhibit low levels of mental model centralization. We also suggest that level of industry growth and TMT mental model centralization jointly influence the relationship between NPD strategy implementation duration and new venture performance and that this relationship is strongest for low-growth industries and high levels of TMT mental model centralization. Tests performed on a sample of 94 new ventures founded between 1996 and 2006 and competing in technology intensive industries confirm our hypotheses. We offer theoretical implications for research on new venture performance and on firm competitive strategy implementation.
People frame and make sense of their worlds through the use of cognitive categories, which researchers can only indirectly access. Public corporate statements are easily accessible and comparable across companies and over time, but it is unclear to what extent such statements reflect organization members' cognitive categorizations. This study is the first to directly compare executives' public and private statements to explore whether and along what dimensions public statements reflect internal company communications. Comparisons of internal and external documents generated by the forest products industry over ten years revealed no significant correlations in the two sets of documents between executives' positive or negative evaluations of events and situations; however, the correlations between their perceptions of control were positive and significant.
In this study, we examine the existence and performance of cognitive groups. In accordance with the attention-based view of managerial cognition, cognitive groups are defined as groups of firms in which the CEOs focus their attention on similar strategic elements when seeking to maximize their firm's competitive advantage. We developed a panel data extension of the original Data Envelopment Analysis to gauge CEOs’ focus of attention and then clustered firms into groups. We compared our approach, with other approaches that use content analysis of CEOs’ letters to shareholders and CEOs’ demographic characteristics to measure CEOs’ attention. Although the different approaches are related, indicating the existence of a common underlying construct (i.e., mental models), our approach explains a higher proportion of the variation in organizational performance.
The microfoundations of dynamic capabilities have assumed greater importance in the search for factors that facilitate strategic change. Here we focus on microfoundations at the level of the individual manager. We introduce the concept of ‘managerial cognitive capability’, which highlights the fact that capabilities involve the capacity to perform not only physical but also mental activities. We identify specific types of cognitive capabilities that are likely to underpin dynamic managerial capabilities for sensing, seizing, and reconfiguring, and explain their potential impact on strategic change of organizations. In addition, we discuss how heterogeneity of these cognitive capabilities may produce heterogeneity of dynamic managerial capabilities among top executives, which may contribute to differential performance of organizations under conditions of change. Finally, we propose possible directions for future research.
This paper studies the role of publishing and patenting activities as predictors of new product development for a sample of companies in the U.S. pharmaceutical industry. The research also examines the relation between new product development and firm performance. Hypotheses are developed based on the well-established absorptive capacity literature. The results show that publishing scientific articles and stock of patents are both significant predictors of the number of new molecular entities (NMEs) for which a firm receives approval. In addition, the degree to which a firm builds on its own technology (measured as self-citations in its patents) also predicts NMEs, but the regression coefficient had an unexpected negative sign. Finally, the performance results confirm that the approval of NMEs is significantly associated with the market-to-book ratio of a firm. The managerial implications of these findings and study limitations are also discussed.
This paper analyzes the theory of “entrepreneurial incentives” in the work of Israel Kirzner. It argues that there is a logical problem with the notion of profit opportunities as exogenous causal agents: Without additional assumptions, the existence of opportunities alone does not sufficiently explain the alertness of entrepreneurs. The paper considers both stronger and weaker versions of this problem. It also questions the relation between entrepreneurial incentives and the tendency toward entrepreneurial success. Finally, it provides some commentary on the relevance of entrepreneurial incentives for an overall theory of the entrepreneur, and identifies several potential solutions to the problems discussed.
Organizations create high-impact inventions when they combine disparate strands of technology in their corporate research and development. We theorize that when undertaking complex inventive search characterized by high breadth, i.e., drawing on multiple diverse technology components, an organization’s propensity toward high-impact inventions depends on its stock of experience with recombining such components and on the focus of its inventive search. Building on learning transfer theory, we argue that the complexity and causal ambiguity of higher-breadth projects is such that experience with similar inventive search will be a poorer guide, comparatively reducing their inventive impact; however, this negative effect can be attenuated by the degree of focus of an organization’s contemporaneous inventive search. Using a longitudinal data set of patents from the photographic imaging industry, we find support for our predictions.
This paper argues that a key component in a firm's strategic response to unfamiliar environmental events is the interpretations managers develop about the event itself and about key dimensions of their strategy. Using historical data from the pharmaceutical industry, the revealed interpretations of top management from six firms over a ten-year period are analyzed and are compared to the timing and content of the changes in strategy each firm undertook following a significant change in regulation. The results reveal two distinct patterns of interpretation development that appear to be linked to whether or not the target of interpretation is familiar. Further, interpretations appear to be linked both temporally and in terms of content to the strategic change undertaken by each firm. Both sets of results suggest that the interpretations of managers are linked to organizational actions.
Organizational theory and research has increased attention to the determinants and consequences of attention in organizations. Attention is not, however, a unitary concept but is used differently in various metatheories: the behavioral theory of the firm, managerial cognition, issue selling, attention-based view, and ecology. At the level of the brain, neuroscientists have identified three varieties of attention: selective attention, executive attention, and vigilance. Attention is shaped by both top-down (i.e., schema-driven) and bottom-up (i.e., stimulus-driven) processes. Inspired by neuroscience research, I classify and compare three varieties of attention studied in organization science: attentional perspective (top-down), attentional engagement (combining top-down and bottom-up executive attention and vigilance), and attentional selection (the outcome of attentional processes). Based on research findings, I develop five propositions on how the varieties of attention in organization provide a theoretical alternative to theories of structural determinism or strategic choice, with a particular focus on the role of attention in explaining organizational adaptation and change.