Cognition and Renewal: Comparing CEO and Organizational Effects on Incumbent Adaptation to Technical Change

Abstract

We investigate the conditions under which managerial cognition affects the timing of incumbent entry into a radical new technological market. We address this question using a longitudinal study of communications technology firms entering the fiber-optics product market. Using a hazard rate model, we investigate the relevance of cognition based on the direction of CEO attention. We find that attention toward the emerging technology and the affected industry is associated with faster entry, and attention to existing technologies is associated with slower progress. Second, we assess the extent to which the effect of cognition is dependent upon the levels of relevant organizational factors and find that CEO attention to the emerging technology may amplify the effects of industry orientation. Managerial cognition is important in understanding organizational outcomes, and considering both the direction of cognition and its interaction with organizational factors provides a more nuanced view of entry behavior. These results contribute to the literatures on incumbent response to technical change and new product development by suggesting that context-specific managerial cognition has a separate and important influence on the degree and direction of strategic renewal. We argue that managerial cognition is therefore a dynamic managerial capability that can shape adaptation by established firms.

Customer Co-Creation and Exploration of Emerging Technologies: The Mediating Role of Managerial Attention and Initiatives

“…In order to address our research questions, we focus on the important role played by senior managers in enabling their often-unprepared organizations to make an effective response to external forces (Eggers and Kaplan, 2009). Existing research on the drivers of exploration has focused largely on conditions of change which imply a certain degree of predictability, rather than abrupt and highly unpredictable revolutionary transformations such as those that follow the emergence of a new core technology (Lavie et al, 2010).…”

“…As a consequence, a number of persistent and relatively stable senior management related variables such as risk aversion (Lewin et al, 1999) and entrepreneurial style (Covin and Slevin, 1989), the design and composition of management teams (Smith and Tushman, 2005), and demographics and leadership skills (Jansen et al, 2009;Vera and Crossan, 2004) have been put forward as antecedents of exploratory behavior. Based on the argument that responding to a technological change requires an organization to embrace a challenging and often painful process of reorientation (Eggers and Kaplan, 2009), we develop a conceptual framework in which there is an emphasis on the role played by senior managers' cognition and initiatives in enabling exploration in such conditions. We would suggest that these managerial roles are being directly influenced by organizations' customer co-creation strategies and the involvement of customers in innovation processes.…”

Entrepreneurial Cognition

“…At the same time, it obstructs the detection of discontinuous changes. This idea is in line with Eggers and Kaplan's (2009) discovery that firms grow slower in a market that is radically new when managers focus on current technologies (high top-down attention allocation) as compared to focusing on emerging technologies (bottom-up attention allocation). Similarly, my (Dean) colleagues and I ) recently proposed that top managers' likelihood of detecting incremental change is greater when their attentional processing is more top down compared to when it is more bottom up.…”

“…While there are numerous possible reasons explaining why managers of incumbent firms have trouble recognizing and responding to strategically important discontinuous change (e.g., economic incentives (Christensen 1997), rigid routines , and/or poor competitive analysis systems (Zahra and Chaples 1993;)), scholars have recently begun focusing on the role managerial attention plays in this context (Eggers and Kaplan 2009;Kaplan 2008;Maula et al 2013). Attention refers to a non-specific and limited cognitive resource that is required for mental activities and differs across individuals and tasks (Kahneman 1973).…”

Attention and Entrepreneurial Cognition

“…While there are numerous possible reasons explaining why managers of incumbent firms have trouble recognizing and responding to strategically important discontinuous change (e.g., economic incentives (Christensen 1997), rigid routines (Levinthal and March 1993), and/or poor competitive analysis systems (Zahra and Chaples 1993;McMullen et al 2009)), scholars have recently begun focusing on the role managerial attention plays in this context (Eggers and Kaplan 2009;Kaplan 2008;Maula et al 2013). Attention refers to a non-specific and limited cognitive resource that is required for mental activities and differs across individuals and tasks (Kahneman 1973).…”