No abstract

Research Summary Variance decomposition methods allow strategy scholars to identify key sources of heterogeneity in firm performance. However, most extant approaches produce estimates that depend on the order in which sources are considered, the ways they are nested, and which sources are treated as fixed or random effects. In this paper, we propose the use of an axiomatically justified, unique, and effective solution to this limitation: the “Shapley Value” approach. We show its effectiveness compared to extant methods using both simulated and real data, and use it to explore how the importance of business group effects varies with group diversification and internationalization in a large, representative sample of European firms. We thus demonstrate the method's superior accuracy and its usefulness in asking and answering new questions. Managerial Summary A key contribution of strategic management research to managerial practice is identifying drivers of firm performance that operate at firm, corporation, industry, and national levels. A branch of this research measures the relative importance of factors at these different levels in producing variation in firm performance, thus helping top managers focus efforts on aspects of their businesses most likely to yield performance differences. However, estimates produced by extant methods are sensitive to method used, and to modeling choices made. This paper proposes the use of the “Shapley Value” approach, which is free from such sensitivity, shows its effectiveness compared to extant methods, and uses it to explore how the importance of factors at the level of the business group varies with group diversification and internationalization.

No abstract

Research Summary We study the performance implications of dynamic environments for a leader's rivalry‐based imitation efforts in a setting with multiple rivals. We disentangle competitive interactions from environmental changes to show that a leader's simple rules to either imitate the closest rival in terms of attributes (her neighbor) or the closest rival in terms of rank (her challenger) can help to maintain the performance gap to her competitors. Using a computational model and an empirical test, we find that environmental changes alter the trade‐offs between imitation accuracy and the responsiveness to threats from distant rivals. Consequently, when environmental changes are infrequent and minor, neighbor imitation is more effective in maintaining the lead, whereas challenger imitation prevails as environmental changes become more frequent and substantial. Managerial Summary By showing that imitating a lower‐ranked rival can help a leader to stay ahead, recent research has overturned the common thinking that imitation is only useful for those trying to catch up with the leader. However, these insights come from contexts in which the leader has only one competitor. Can imitation also be effective for a leader competing against multiple rivals, and whom should the leader imitate? We find that imitation can indeed help the leader to maintain their lead against multiple rivals, but that the choice of imitation target matters and should take the competitive environment into account. In relatively stable environments, imitating your most similar rival works best, while imitating whoever is in second place is a more effective approach in changeable environments.

How firms capture value from their innovations has long interested strategy and innovation scholars. Prior work has focused on legal, economic, and social mechanisms for isolating knowledge from imitation as crucial to this process. Our contribution extends this stream of research by identifying how design choices about the way knowledge is manifested (e.g., into routines, blueprints, prototypes, or products) can inhibit a counterparty's ability to imitate knowledge relating to a focal innovation. We derive six theoretically distinct types of knowledge manifestation that can be used for these ends, consider their impacts on the awareness, motivation, and capability of a counterparty seeking to imitate the focal knowledge, and organize them into a novel two-dimensional conceptual framework for comparison. By doing so, we add design mechanisms to the strategic toolbox of isolating mechanisms available for capturing value from innovation. This addition opens up a new channel through which organizational choice endogenously shapes appropriability regimes and introduces knowledge manifestations as an important unit of analysis for understanding innovation strategy.