John Eklund

Scholars have highlighted executive attention as a vital organizational resource. However, as prior studies have examined different facets of attention, a theoretical tension has emerged as to whether attention to a broader or narrower set of strategic issues better facilitates firm performance. On the one hand, a narrower breadth of strategic attention limits the risk of managerial cognitive overload. On the other hand, a greater breadth of strategic attention helps managers avoid blind spots and identify more or better opportunities. We argue that this balance shifts based on the quantity and quality of opportunities available in the market and on firms’ recently demonstrated ability to execute against these opportunities effectively and efficiently. Using a novel text-analysis tool that we develop, validate, and make available, we find support for our arguments within a random sample of S&P 500 companies. We find that broader strategic attention is associated with enhanced performance in weaker opportunity environments, with firms using their resources efficiently, or with firms’ failure to utilize their capabilities effectively. In supplementary analyses, we also provide new insights into the importance of following attention with subsequent organizational action.

Firms face a tradeoff with the design of their Research & Development (R&D) units. Centralization engenders increased intra-organizational knowledge flows enhancing innovation. However, decentralization enables higher observability of effort facilitating the effective use of incentives, increasing innovation efforts. I unpack this tradeoff by dividing innovation into invention and development within the context of the pharmaceutical industry. I find that the relative importance of knowledge flows and incentives varies across the invention and development continuum. Centralization facilitates the creation of more
novel inventions through enhancing knowledge flows but comes with cost of the creation of fewer inventions due to reduced incentives. Centralization is associated with the increased progression of more novel inventions into development, whereas decentralization is associated with the increased progression of less novel inventions.

An important problem for many firms is sustaining their rate of innovation by launching new products on an ongoing basis. Accordingly, firms need to replenish their innovation pipelines with new inventions as existing inventions are weeded out or reach fruition. The replenishment can be done through internally generated inventions or through externally sourced inventions via licensing, alliance, or acquisition modes. Drawing on incentives-and knowledge-based views of the firm, we consider the difference in managerial decision making between centralized and decentralized research and development (R&D)organization designs and how it impacts firms’ propensities to draw on externally sourced inventions. As compared with centralized designs, decentralized designs are associated with greater incentives for managers to replenish their firms’ pipelines but are limited in terms of intra-organizational knowledge flows that can facilitate the creation of inventions. We explore these mechanisms using a novel data set of firms’ sourcing decisions within the pharmaceutical industry between 1996 and 2015. We find that firms with decentralized R&D designs replenish their pipelines with a higher proportion of externally sourced inventions than do firms with centralized designs. This difference is found to be mainly attributed to external sourcing via licensing and for inventions of moderate novelty. This study offers an important contribution to the question of how firms organize for innovation, highlighting the relationship between internal R&D organization design and the external sourcing of inventions. In so doing, it illustrates that the choice of organization design in terms of centralization or decentralization can shape a firm’s locus of innovation.

This study considers the nascent period of industry change when the prevalent business model is being threatened by a new model, but there is significant uncertainty with respect to whether and when the new model will dominate. We focus on the challenge of incumbents pursuing both models simultaneously during the nascent period, and the implications on their firms’ valuations. Our theory is premised on the adjustment costs incurred by incumbents associated with the sharing of resources across business models and the conflict between managers vying for limited resources. While firms’ assets and competitive environments are key drivers of their value, we argue that they also impact adjustment costs. Evidence from the U.S. electric utility industry, which is undergoing a change from a centralized to a decentralized model, offers strong support for our arguments. The greater the level of incumbents’ assets that are specific to the existing model, and the greater the level of competition that they face, the lower are their firms’ valuations when investing in the new model relative to when investing in the existing model. Hence, ironically, those incumbents potentially most threatened by the change seem to be least rewarded for their efforts to renew themselves. However, pursuing the new model via alliances can help mitigate adjustment costs. The study uncovers the challenges that incumbents face as they pursue the new model in tandem with the existing dominant model, and helps explain why some incumbents may successfully navigate the changing industry landscape while others may stumble.