Group Polarization in Board Decisions about Strategic Change: Evidence from Chinese Publicly Listed Companies (2008–2018)
Ming Zhang, Xufei Ma, Weihong Chen, Hailin Lan

Abstract

Strategic management scholars have shown increasing interest in explaining strategic change from the perspective of cognitive bias. However, most studies focus on individual cognitive bias but pay little attention to group cognitive bias. This study introduces a typical group cognitive bias (group polarization) to explain strategic change decisions made by the board of directors. Following the theory of group polarization, we argue that, when the average prior strategic change experienced in performance decline by board directors is relatively high (or low), the focal strategic change in performance decline will become even higher (or lower). We further contend that the proportion of female directors and board versus CEO power as the contingencies can mitigate this group polarization effect. Our hypotheses were strongly supported by a longitudinal sample of Chinese publicly listed companies during 2008–2018. The study’s framework and findings contribute to the contextualization of social psychology research on group polarization in the study of board’s strategic decision-making.

Chinese Firms’ Acquisition of Innovation Capability from Overseas: Approaches by State- versus Private-Owned Firms
Majid Ghorbani, Zhenzhen Xie, Jun Jin, Fengbin Wang

Abstract

Through two in-depth case studies, we compare the approaches of a state-owned enterprise (SOE), Beijing Automotive Industries Holding Co., and a privately owned enterprise (POE), Geely, to acquire and absorb advanced technological knowledge to enhance their innovation capabilities. Each company acquired advanced knowledge from troubled famous Swedish automakers and upgraded their products technologically. Analyzing data mainly collected from secondary sources identifies major differences in approaches and actions at each acquisition step rooted in the type of ownership. We juxtapose these differences with insights from the literature on knowledge acquisition and research on firm ownership. Our findings show that the POE seeks the strategic goal of synergistic technology integration for better innovation and economic performance. In contrast, the SOE pursues national objectives with less regard for market success. This SOE focuses on an independent approach to knowledge absorption and development during their acquisition, whereas the POE emphasizes collaboration in innovation capacity development. This study provides insights into Chinese firms’ positioning on innovation development on the global stage, comparative capitalism, and the particular case of state capitalism in China.

Board Interlock Tenure and Firm Internationalization
Ziyan Zhu, Ziliang Deng

Abstract

To overcome liabilities of foreignness and outsidership during internationalization, board interlock is an effective conduit of foreign knowledge inflows and organizational learning that firms require. We focus on the time dimension of such influence and hypothesize that the tenure of board interlocks with firms with experience in outward foreign direct investment (OFDI) in a country promotes the OFDI decision of the focal firm to that particular country. However, such an effect diminishes as the tenure of interlock ties increases. Moreover, as an alternative knowledge source, OFDI knowledge from the focal firm’s neighboring region may weaken the baseline effect. Based on longitudinal data of listed firms in China, our empirical results support the hypotheses. This study enriches the literature on social network learning by identifying its temporal nature and the substitution between different knowledge sources. It also demonstrates the importance of rotating a firm’s board members, so that knowledge acquisition and learning remain fresh.

The Roles of Supply Networks and Board Interlocks in Firms’ Technological Entry and Exit: Evidence from the Chinese Automotive Industry
Rick Aalbers, Rongkang Ma

Abstract

In this research, we explore how supply networks and board interlocks – as distinct, yet parallel interorganizational networks – jointly influence firms’ entry into new technology domains and exit from old technology domains. Drawing from the perspectives of social networks and organizational learning we highlight the relevance of the interdependency between these networks for a firm’s technological entry and exit decisions. We argue that a firm that maintains a large number of supplier ties is more likely to enter new technology domains and exit from old technology domains instead. We further find empirical evidence that the degree centrality of a firm in its board interlock network strengthens these effects. Our theoretical arguments are supported through stochastic actor-based modeling analysis for the longitudinal and multilevel networks of 86 firms active in the Chinese automotive during 2011–2015. These findings inform the literature on interorganizational network dynamics as we insert relational pluralism to examine the complexities of organizational relationships as antecedents to a firms’ technological entry and exit. Finally, we imagine the implications of our analysis for management as they shed light on how multiple interorganizational relationships affect firms’ decisions on new technology entry and old technology exit.

Too Much of a Good Thing: Downsides of a Large Social Network and Moderating Effects of Political Skill
Yi Chen, Wai Fong Boh, Sze-Sze Wong, Jun Shao

Abstract

Existing research examining the curvilinear relationship between network centrality and performance tends to focus on the information recipients’ perspective. Focusing on the information providers’ perspective, our study draws upon social exchange theory to demonstrate that the advice-giving centrality-performance relationship for information providers has an inverse U-shape due to decreasing benefits and increasing costs of maintaining more advice-giving ties. We further show that increasing advice-giving centrality increases the likelihood that individuals would become a hindrance to coworkers, as they become bottlenecks impeding efficient workflow. However, our study demonstrates that political skill enables them to overcome the interpersonal challenges associated with high advice-giving centrality. Specifically, individuals with high political skills can better convert advice-giving ties to resources that could assist their cooperation with coworkers, reducing the hindrance they impose. Overall, we provide insights into the trade-off between the benefits and costs of advice-giving ties from a social exchange perspective and examine political skill as an important mitigator of the downsides of large advice-giving networks – a key area that has been hitherto largely unexplored.

Family Influence and Environmental Proactiveness of Family Firms in China: A Mixed Gamble Perspective
Bin Liu, Gongming Qian, Kevin Yuk-fai Au

Abstract

Built upon the mixed gamble perspective, we used a recent survey on Chinese family firms (FFs) and found that increased family influence lowers Chinese FF environmental proactiveness, as they show a peculiar tendency to take a financial view rather than a socioemotional wealth view. Moreover, we found that increased resource endowment attenuates this tendency, whereas provincial marketization strengthens it. However, entrepreneur reputation does not have a significant moderating effect. Overall, the study enriches an understanding of environmental proactiveness for FFs, organizational heterogeneity, and institutional differences. It also introduces new elements into the mixed gamble framework.

Containment Measures and Business Confidence in COVID Times: A Global Study
Paula Margaretic, Diego Finchelstein, Agustín Sotelo

Abstract

In this article, we take a global perspective to assess the impact of the exogenous COVID pandemic shock on business confidence. Through a quantitative analysis of 31 advanced and 12 emerging economies over the period from January 2018 to December 2020, we provide a novel investigation of a unique worldwide event, in contrast to the most frequent exogenous shocks, which typically have a more limited local or regional scope. We proxy business expectations with the business confidence indicator or BCI. First, we find that the containment measures for the COVID pandemic have negatively affected business confidence, with the compulsory policies having a greater negative effect on BCI than the voluntary ones. Second, we find positive spillover effects on the local BCIs from the containment measures implemented in neighboring countries. This suggests that business people are not against compulsory measures per se, but rather that they are less inclined to assume the costs of these. Third, we find that while the severity of containment measures has been greater in emerging countries, the negative impact on BCI of these containment measures has been larger in advanced economies.