Research

Abstract: The collection and use of personal data is a key driver of value creation by digital firms; however, it is simultaneously affected by data privacy concerns, which have emerged as an important strategic and public policy issue. Although prior research has examined many immediate impacts of data privacy protections on firms, their consequences for the fundamental economics of firms—such as their ability to scale—have remained largely unexplored. Scaling is vital for digital firms because it typically underpins their core business model and has follow-on implications for key corporate strategies, such as diversification. The current paper uses the enactment of the General Data Protection Regulation (GDPR) in Europe as a quasi-experiment to examine the effects of stronger privacy protections on the scaling of digital firms, and, in turn, on firm scope. Difference-in-differences estimates indicate large decreases in scaling associated with the GDPR’s stronger privacy protections, and similarly substantial follow-on impacts on firm scope. These findings have significant implications for the research literatures on data privacy, firm scaling, and diversification.

Abstract: This paper examines how the scaling needs of startups affect their likelihood of acquiring other startups. While scaling research has identified key internal enablers of scaling within the firm, the role of acquisitions in scaling remains underexplored. Meanwhile, despite extensive research on acquisitions by large, established firms, the phenomenon of startups acquiring other startups has received little scholarly attention. Bridging these two strands of literature, this paper posits that scaling constraints experienced by startups increase their likelihood of undertaking acquisitions. Acquisitions may serve as a solution for unlocking scaling by allowing startups to quickly broaden their market appeal and to rekindle the scale economies of their resource bundles. This effect is further amplified for startups with a lower degree of market differentiation and for those funded by more scaling-oriented lead venture capitalists (VCs). Leveraging an exogeneous change in scaling constrains imposed by the General Data Protection Regulation (GDPR) as a quasi-experiment, this paper finds empirical support for the proposed hypotheses and mechanisms. The quantitative analyses are further supplemented by qualitative interviews. This paper contributes to our understanding of managing the dynamics of scaling and the use of acquisitions by startups to mitigate scaling constraints. Additionally, it sheds light on the growing phenomenon of startups acquiring other startups by highlighting scaling needs as a key driver of these acquisitions. 

Abstract: This study examines how knowledge interdependence, in combination with environmental contingencies, influences firm innovation. Using the U.S. pharmaceutical industry as an empirical setting, we find that firms’ knowledge interdependence is positively associated with innovation, as it can generate synergistic effects and facilitate the reuse of their existing knowledge. However, the positive relationship becomes negative when firms experience regulation-induced product shocks (e.g., drug withdrawals and black box warnings), owing to substantial adjustment costs and high technological uncertainty associated with those shocks. The findings highlight that knowledge interdependence is a double-edged sword for firm innovation, and its implications for innovation depend on environmental contingencies requiring adjustments to their knowledge bases. 

Abstract: Understanding the drivers of firms’ responses to technological shocks is of broad interest to management scholars in many areas of research, including organizational adaptation, strategic renewal, redeployment, disruptive innovation, and competitive dynamics. Although prior research has advanced several theories to examine organizational adaptation to technological shocks, these studies have typically focused on a single theoretical lens to examine firms’ responses to them. Consequently, extant research provides limited systematic understanding about the complex interdependent sources of inertia that affect firms’ responses to technological shocks. We address this research gap by developing a cogent and integrative theoretical framework—the C.O.P.E. framework—which highlights the interplay of cognitive, organizational, political, and economic factors as critical sources that shape firms’ responses to technological shocks. The C.O.P.E. framework thus provides an integrative multi-lens perspective and advances the extant literature by reducing blind spots and bringing to the foreground often neglected interdependencies across C.O.P.E. factors. Further, it also provides insights for adjacent literatures like dynamic capabilities and sets forth a rich research agenda on the complex multi-dimensional problem of firm adaptation to technological shocks.