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Abstract: This research investigates the contingent influences on firms’ focus of attention to backward- versus forward-looking determinants of search behaviors. Although the impact of both forward- and backward-looking determinants on the risk-taking behavior of firms has been empirically manifested, no research to date has explored what external contingent factors make firms’ search behaviors more influenced by backward- versus forward-looking determinants. On this ground, this study aims to explore the conditions which make firms more forward- or backward-looking in regulating their search behaviors. Our results show that capital market development, bank-based financial systems, as formal institutional dimensions, and future orientation, as a national culture dimension, significantly moderate the impact of backward- and forward-looking determinants on firms’ search behaviors.
Knowledge Re-Combination, Short-Term Attention, and Firm Performance
Although re-combinatory capabilities are essential to innovation efforts, research increasingly points to the importance of managerial attention in understanding how resources and capabilities are used. Innovation is inherently uncertain, and managerial attention is a finite resource. Therefore different patterns of attention may have distinct effects on how a firm’s absorptive capacity and knowledge integration contribute to competitive performance. This paper provides an empirical test of the effects of re-combinatory capabilities and attention on firm performance. I find that firms with diverse knowledge integration are associated with higher levels of ROA, while short-term managerial attention is associated with lower levels of ROA. However, diverse knowledge re-combination can mitigate some of the negative effects of short-term attention.
Differential Media Attention to Startups and their Spillover Effects on Venture Capital Firms’ Fundraising
This study examines how media attention given to startups influences the investment decisions of funders, enabling venture capital firms to raise more funds if they identified and endorsed those startups in the past. Integrating communication literature on media effects and judgment-and-decision-making literature to organizational theories on spillover effects of attention, this study illuminates how simple heuristics based on familiarity and fluency may affect funders’ judgment. Using a large dataset of media accounts, this study sustains that the media’s selection criteria — particularly its focus on novelty and drama — sometimes result in spotlighting startups that happen to be newsworthy, leading funders to allocate more funds to venture capital firms that are perceptually associated with those newsworthy startups.
The Strategic Drivers of Proactive Investor Attention: Strategic Incongruence and the Lemons Problem in Strategies
Oklahoma State University Mary Benner,
University of Minnesota
Publicly-listed companies increasingly face pressures from the public equity market, including activist hedge funds who buy blocks of shares in a firm’s stock with the intent to intervene in the firm’s management. Despite the growing presence of activist investors, the nature of strategies that attract these investors is not well known. Based on the lemons problem in strategies, we argue that as companies’ strategies are incongruent with the expectations of market participants and therefore more difficult to understand, they are prone to public market dissent and likely to garner more attention from investors seeking involvement in management. Using a hand-collected proprietary database of SEC filings, we find that companies’ increasing levels of strategic incongruence tend to be positively associated with attracting proactive investor attention.