Research

Abstract: The collection and use of personal data are important drivers of value creation by digital firms; however, they are also subject to data privacy concerns. We examine the impacts of data privacy protections on the core value creating economics of digital firms, represented by their ability to scale, and the follow-on consequences for firms’ corporate scope. Leveraging the enactment of the General Data Protection Regulation (GDPR) in Europe as a quasi-experiment and comparing its effects on matched samples of affected and unaffected U.S. public firms, our 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 important 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 undertaking acquisitions. 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 acquisitions by startups has received little scholarly attention. Bridging these two strands of literature, this paper posits that startups are more likely to undertake acquisitions when they experience scaling constraints. Startups leverage acquisitions as a strategic tool to quickly build capabilities that enable them to augment existing offerings and/or enlarge the scalable elements of their resource bundles, thus unlocking scaling constraints. The effect of scaling constraints on acquisitions is further amplified for startups funded by venture capitalists (VCs) with a stronger scaling preference and for those with a lower degree of market differentiation. 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 when and how acquisitions are used by startups in the scaling process and highlights the role of scaling constraints in shaping their scaling trajectory. Additionally, it sheds light on the growing phenomenon of startups as acquirers by highlighting the need to unlock scaling constraints 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.