Strategizing with others' misperceptions of luck in extreme performances

Research suggests that people tend to be fooled by randomness and mistake luck for skill, particularly when evaluating extreme performances. I argue that these predictable mistakes can be translated into a source of competitive advantage: informed managers can exploit others’ misperceptions of luck, such as by arbitraging in strategic factor markets. I then discuss limits to this arbitrage strategy due to social constraints: stakeholders may not be able to accurately evaluate performances and may disapprove atypical strategic activities, suggesting that only strategists who are less sensitive to this “lemon problem” can take advantage of the resulting arbitrage opportunities. I conclude with a flowchart about when strategists should pursue this alternative source of strategic opportunity that turns the well- known biases on their head

Divestitures

This article provides an introduction to divestitures and the research streams that examine these deals. Divestitures are defined as the removal of one or more of a company’s lines of business via selloff or spinoff. In this article, we describe how research on divestitures has evolved in the finance and strategy literatures, and we explain how to design and conduct empirical research studies on this topic. We also discuss the implications of divestitures for organization design, and outline some directions for future research in this domain

Time and Space in Strategy Discourse: Implications for Intertemporal Choice

Research Summary: When describing the future, executives draw analogies between time and space (“we’re on the right path,” “the deadline is approaching”). These analogies shape how executives construe the future and influence attitudes to action with long-term benefits but short-term costs. Ego-moving frames (“we are approaching the future”) prompt a focus on the present whereas time-moving frames (“the future is approaching”) underscores the advent of the future as inevitable. Ultimately, action that prioritizes long-term returns depends both on how executives conceive of the future and whether they believe they can engender favorable outcomes. This balance between recognizing the inevitability of the future (time-moving frame) and the capacity to shape outcomes (control beliefs) stands in contrast to the more agentic forms of discourse that are dominant in strategy. Managerial Summary: Executives often prioritize maximizing immediate returns over investing to build a long-term competitive advantage. How they think about the future offers one explanation for this short-termism. This paper distinguishes two ways of framing the future with implications for decision-making. Are we approaching the future (the ego-moving frame), or is it approaching us (the time-moving frame)? As long as executives have confidence in their ability to achieve forecasted results, they focus on long-term returns in their decision-making when they recognize the advent of the future as inevitable (the time-moving frame). In contrast, though executives often use the ego-moving frame to show that they are active agents, they weigh future returns less heavily when framing the future in this way

Nudge: Manager as Choice Architect

In this paper I discuss the role of manager as choice architect. The notion of nudging and choice architecture has received significant interest in law, economics and public policy. But the behavioral insights from this literature also have important implications for managers, HR professionals and organizations. In essence, employees are consumers of choice and are constantly confronted with a large array and interface of options, and this interface can be designed so as to maximize individual welfare and organizational outcomes. I first discuss the theoretical foundations of the nudge idea and then highlight how managers can design effective choice architectures for the management of human capital. By way of illustration, I specifically focus on four practical areas: 1) nudge hiring, 2) nudge training and development, 3) nudge human capital and organization, and 4) nudge strategy and innovation. Throughout the paper I also point out comparative differences in decision making between contexts (e.g., consumer choice versus decision making in organizations), including implied debates, and also highlight novel opportunities for future research in management and strategy. I particularly focus on the possibilities associated with nudges and choice architectures at the nexus of organizations, crowds and aggregate decision making

Does having women on boards create value? The impact of societal perceptions and corporate governance in emerging markets

Many governments seek to impose gender equality on boards, but the consequences of doing so are not clear and could harm firms and economies.We shed light on this topic by conceptualizing the relationships as firm- and board-specific and embedded within specific contexts. The theory is developed with reference to emerging markets, and tested on Malaysian firms.We find that female directors create value for some firms and decrease it for others.The impact varies across different performance indicators, firms’ ownership, and boards’ structure.The findings call for nuanced responses in relation to women’s nominations from both governments and firms

THE IMPACT OF FEMALE DIRECTOR ON DIVIDEND PAYOUT: CONTINGENT ON CONTROL-OWNERSHIP WEDGE

This research looks into the impact of female directors on dividend payment policies. From 2016 to 2020, the study used a sample of 170 non-financial enterprises listed on the Borsa Istanbul (BIST). The study used the Board Female Membership (BFM). Meanwhile, control wedge ownership was used as a moderating variable. A control variable, including return on equity, was also employed (ROE). The study's dependent variable was the dividend per share, which represented the company's dividend payout policy. The female board membership was strongly linked with the dividend policy in the regression analysis. Furthermore, we add to the current research on the link between dividend payments and firm ownership by demonstrating that for control-ownership wedge companies, female directors have a greater influence on dividend payouts

Why do firms fail to engage diversity? A behavioral strategy perspective

The persistent failure of organizations to engage diversity—to employ a diverse workforce and fully realize its potential—is puzzling, as it creates labor-market inefficiencies and untapped opportunities. Addressing this puzzle from a behavioral strategy as arbitrage perspective, this paper argues that attractive opportunities tend to be protected by strong behavioral and social limits to arbitrage. I outline four limits—cognizing, searching, reconfiguring, and legitimizing (CSRL)—that deter firms from sensing, seizing, integrating, and justifying valuable diversity. The case of Moneyball is used to illustrate how these CSRL limits prevented mispriced human resources from being arbitraged away sooner, with implications for engaging cognitive diversity that go beyond sports. This perspective describes why behavioral failures as arbitrage opportunities can persist and prescribes strategists, as contrarian theorists, a framework for formulating relevant behavioral and social problems to solve in order to search for and exploit these untapped opportunities

Divergent Reactions to Convergent Strategies: Investor Beliefs and Analyst Reactions During Technological Change

An important outcome of technological change is industry “convergence,” as a new technology spurs competition between established firms from different industries. We study the reactions of securities analysts, as important sources of institutional pressures for firms, to the similar product/market strategies undertaken by firms from different prior industries responding to industry convergence. Our empirical setting is the convergence between the wireline telecommunications and cable television industries in the period following the advent of voice over Internet protocol technology. Controlling for firm financial performance and capabilities, we find that analysts were consistently more positive toward the cable firms than toward the wireline telecom firms. Our findings further show that this divergence in reactions arises from differences in existing investor expectations and preferences concerning how firms create value; stocks owned by investors with a greater preference for growth receive more positive reactions than those owned by investors with a greater preference for margins. However, this divergence in reactions shrinks over time as convergence unfolds and as investors shift their shareholdings in response to misalignment between their preferences and firms\u27 strategic changes. Reactions from analysts—reflecting inertial expectations of investors—may persist for a time despite changes to firms\u27 strategies, thus creating challenges for some firms in responding to technological change and industry convergence while legitimating and enabling similar responses from their competitors