Abstract Research Summary Firms seeking competitive advantage need both internal fit and a distinctive market position, yet strategy research says little about how the search for the two is related. We develop a model of strategic search that integrates an NK landscape with differentiated Cournot competition, allowing a firm's position to shape both its internal fit and distinctiveness. We show that, under low complexity, competition constrains search, locking firms into resource configurations and creating a trade‐off between internal fit and distinctiveness. Conversely, under high‐complexity competition drives distant search, so that internal fit and distinctiveness go hand‐in‐hand. We further show that competitive lock‐in constrains search by early leaders, while distant search drives the emergence of new leaders, thus offering a search‐based theory of market disruption. Managerial Summary How does the search for operationally effective configurations of resources and capabilities affect the distinctiveness of a firm's offering, and vice versa? Our work suggests that the need for distinctiveness may constrain search close to rivals but also enable the discovery of effective configurations far away from them. In relatively simple environments, where firms tend to converge on the same relatively obvious configurations, the search for distinctiveness is constraining, but in more complex environments it may enable the discovery of superior configurations. Further, early leaders may be constrained in their search as rivals cluster around them, while early followers may benefit more from distant search, potentially leading to a disruption of the market as early success proves constraining.

In this study, we combine insights from the resource-based view (RBV) and organizational adaptation literature to examine under what conditions resource turnover is costly or beneficial to organizations. We employ a standard NK model in which firms develop, adapt, and exchange resources. We demonstrate that for different levels of resource complexity and resource interdependence, firms may benefit or suffer from resource turnover. In particular, we show that there are conditions under which industry leaders may benefit from losing resources to their followers and conditions under which both industry leaders and followers benefit from turnover, creating win-win situations with strong incentives to encourage resource mobility across firms. The theory and findings of our paper thus provide a synthesis of the RBV and organizational adaptation literature on the topic of resource mobility. Whereas the RBV has often provided a static characterization of resources by assuming heterogeneity a priori, we demonstrate that in settings where resource heterogeneity is driven by experimentation and search, losing a valuable resource does not necessarily give away a firm’s competitive advantage. More broadly, our study contributes to the literature on resource mobility by taking seriously the notion that organizations are more than the sum of their parts, potentially explaining why firms often have an ambivalent approach to resource turnover and losses.

Exogenous environmental turbulence produces a misfit between the organization and its environment. This can harm organizational performance. In contrast, shaping induces an endogenous form of environmental turbulence, leading to a better fit of the organization and its environment. This generally benefits organizations. We, however, look beyond this taken-for-granted belief about the benefits of shaping and highlight its dark side: The organization’s own beliefs render the alternatives perceived as less attractive and induce the organization to stick to slightly improving, yet inferior, alternatives. This leads to hazardous performance outcomes. We call this effect malaptation. Further, we show how this endogenous environmental turbulence operates through a different mechanism than exogenous environmental turbulence. With a modified n-armed bandit model we systematically examine the effects of shaping on organizational knowledge and performance. For this purpose, we introduce two dimensions of shaping: shaping depth and shaping scope.

In this paper, we study how competitive pressures shape organizational adaptation in complex environments with heterogeneous demand. To do so, we combine a standard NK simulation with a differentiated duopoly competition game to model firms simultaneously engaging in an internal search for superior technical proficiency and an external search for horizontally differentiated competitive positions. We show that such ‘strategic search’ limits innovation in low complexity environments, as firms sacrifice technical proficiency in order to differentiate from each other, but boosts it in high complexity environments, and examine the implications of this pattern for competitive advantage and consumer welfare. We also explore how these findings are moderated by the extent of demand heterogeneity, as well as asymmetric exposure to competition among firms. Our study integrates research on competitive positioning and organizational adaptation, contributing insights to organizational shaping, innovation, and competitive advantage.

The mental models held by managers -- their cognitive representations of the real word -- have an important effect on decision making and influence the way experiences are encoded. Mental models contain performance expectations of different actions, and higher-level beliefs of contingencies, i.e., whether prior experiences in one setting are applicable in other settings, a contingency model. While a growing literature has explored how first-order learning of performance expectations is affected by fixed contingency models that do not reflect reality correctly, relatively little is known how second-order learning with respect to the higher-level contingency model affects decision outcomes. Using a computer simulation built on prior theory and models of learning and cognition, we find that a simple mental model that is refined over time tends to lead to higher performance than a complex mental model that is simplified over time. Our findings suggest that the ubiquity of relatively simple mental models may not only be a reflection of cognitive limitations, but also an evolutionary advantageous outcome of a dynamic learning process.

Research Summary When organizational environments change, experience, and organizational beliefs are often devalued and may become an obstacle to organizational adaptation. The literature on unlearning suggests organizations can overcome this problem by unlearning. However, prior work focuses mostly on unlearning of what has worked in the past (success beliefs) and neglects unlearning of what did not work (failure beliefs). We examine the differences in unlearning these two types of beliefs and their implications for learning and adaptation under environmental change. Using a simulation model, we find that (a) the implications of unlearning success and failure beliefs exhibit fundamentally different temporal dynamics because their underlying mechanisms are different, (b) organizations can often gain more from unlearning failure beliefs, and (c) unlearning failure beliefs is the more robust strategy. Managerial Summary In our study, we investigate the implications of unlearning for an organization's ability to adapt to a (more or less) changing environment. We show that organizations should unlearn selectively because unlearning success beliefs (i.e., beliefs about what has worked in the past) have different implications from unlearning of failure beliefs (i.e., beliefs what has not worked in the past). Most importantly, our study suggests that organizations should focus on unlearning failure rather than success beliefs, in particular, given the difficulties of unlearning old (success) beliefs and the problems associated with knowing when old beliefs turned obsolete by environmental changes. In focusing on unlearning failure beliefs, organizations also pursue a less risky strategy than with unlearning success beliefs.

Existing research has identified two main rationales why organizations might seek to pivot their beliefs. First, organizations should pivot beliefs in response to environmental disruptions. Second, even if the environment is rather stable, organizations should pivot if performance is disappointing. Using a computational model, we examine the validity of these intuitively appealing arguments and identify their boundary conditions. We find, that while it is often advisable to pivot beliefs in response to disruptions, organizations should not seek to match the extent of belief pivots to the extent of environmental disruptions. We also find that it is not poorly performing organizations that benefit most from pivoting their beliefs but instead, organizations that perform very well but not optimally. We discuss the implications of our findings for the theories of disruption.

Organizations are often conceptualized as systems of interdependent choices that exhibit a core–periphery structure. Research is inconclusive, however, regarding whether organizations should focus their search efforts on their core or peripheral choices. In this paper, we seek to reconcile contradictory arguments and suggest that the efficacy of a search focus depends on the time horizon, environmental change, and how the core and periphery interact. In so doing, we demonstrate that the directionality of interdependence and whether interdependencies occur mostly within the core or between the core and periphery are key determinants of the implications of focus. We discuss the implications of our findings for various streams of research, including research on structural inertia and business model innovation.

It is common to view organizations as instruments to pursue collective goals. But beyond recognizing the presence of organizational goals, important questions relate to how these goals come about and drive organizational behavior. These questions are particularly relevant because organizations are typically characterized by the presence of multiple, and often conflicting, goals. Starting with the seminal work on the Behavioral Theory of the Firm, various lines of research have studied how organizations form goals, set aspirations as reference points for evaluating goal attainment, and change behavior and aspirations in response to performance feedback. Yet this work notwithstanding, many exciting questions remain for both theoretical and empirical research at various levels of analysis. For this symposium, we have assembled a set of (predominantly) younger scholars that are working on a variety of issues related to multiple goals and multiple aspirations, as well as two preeminent experts on the topic who will serve as discussants. The symposium pursues two broad objectives: One is to showcase and discuss four different projects that probe intriguing unresolved questions at different conceptual levels, relate to different discussions in the literature, and use different models and methodologies. The second objective is to stimulate a fruitful conversation about how future research can further improve our understanding of how organizations set and pursue multiple goals and aspirations. (In)consistent Performance Feedback and Locus of Search: Problem- Solving and Self-Enhancement Presenter: Evangelos Syrigos; LUISS Business School Presenter: Konstantinos Christos Kostopoulos; U. of Piraeus Presenter: Felix Meissner; U. of Zurich Presenter: Pino G. Audia; Dartmouth College Reference Points as Drivers of Strategic Adaptation: An Exploratory Study Presenter: Daniela Blettner; Simon Fraser U. Presenter: Simon Gollisch; U. of Applied Sciences Ansbach The Double-Edged Sword of Multiple Aspirations: Ambiguity Costs Versus Information Gains Presenter: Thorsten Wahle; LMU Munich Presenter: Dirk Martignoni; U. of Lugano The Effect of Intra-Organizational Comparisons on the Balance of Exploration and Exploitation Presenter: Oliver Baumann; U. of Southern Denmark Presenter: Daniel Newark; HEC Paris Presenter: Franziska Sump; U. of Southern Denmark

The notion that transparency forces organizations to eschew decoupling and embrace substantive adoption represents an important assumption in the corporate social responsibility (CSR) literature. Conversely, research on learning and social control has considered opacity-understood as a lack of transparency-to be conducive to substantive CSR adoption. These opposing viewpoints highlight a fundamental tension: Is transparency good or bad for substantive adoption? This paper resolves this tension by asking an alternative question: When is transparency good or bad, and why? We advance a dynamic perspective that conceives transparency and opacity as transitory phenomena, and we specify the boundary conditions for which either enduring or transitory forms of transparency and opacity further the substantive adoption of CSR. Our analyses reveal that, for circumstances under which the motivation of ceremonial adoption is hypocritical (rather than opportunistic) and where both substantive adoption and practice abandonment are difficult, the former can be maximized by first allowing organizations to adopt a CSR practice ceremonially under opacity ("bait"), and then prompting ceremonial adopters to become substantive adopters through a shift to transparency ("switch"). Specifying this bait-and-switch mechanism and its underlying contingencies reveals a hitherto unexplored, and potentially effective, pathway toward the institutionalization of CSR.

Decision makers engage in social comparison by sampling information on the performance of peers to reduce uncertainty about the outcome of strategic decisions. We investigate the impact of such information on search behavior and efficacy. Specifically, we discuss the pivotal role of the number of decision alternatives. Using a series of online experiments, we find that, while beneficial when facing only few decision alternatives, social comparison may impede the efficacy of search efforts when alternatives are many. For limited choice, we propose and find that social comparison informs decision makers on the choice set and thus helps them avoid searching too much or too little. Meanwhile, for abundant choice, social comparison has no such benefits and for certain cases even produces performance penalties by triggering over-exploration.

Knowledge-based views of the firm often emphasize the value of sharing and transferring practices within organizations, in particular if the practices to be shared are seen as best practices. Yet, discussions on such topics as technological progress and diffusion, patent applications, dominant designs and standards, or benchmarking, all share the implicit assumption that the first-best solution, or globally optimal practice, is rarely ever found. By implication, many of the practices that end up being transferred in organizational settings do not literally reflect the global optimum of their performance landscape, but only what is believed to be the best currently known alternative, at some point in time. In this paper, we ask how knowledge about a good, but not the best alternative affects the search and learning processes of human agents. Throughout a series of experiments, we find that when the potential gains of adopting the optimal solution are particularly high, knowledge endowments of second-best solutions will often lead to inferior strategies. Moreover, we find that in the face of additional knowledge endowments about the global optimum, agents will still fail to adapt their search strategies appropriately. Our results have important implications for agent search and knowledge utilization, in organizational contexts.

Replicating successful solutions to complex problems is an important strategy for organizational growth and performance improvement, but accurate replication is often difficult, if not impossible. In theoretical accounts, small replication errors are often depicted as valuable sources of variation. Empirical research, in contrast, has failed to identify such positive effects. We extend an existing model of replication to also explain when even small replication errors have negative long- run performance effects. We demonstrate that the error robustness of solutions, driven by the presence of complementarities, is the key structural driver: if there are strong positive complementarities, even small replication errors are negative while with less strong or negative complementarities, small errors are positive. We also revisit how complexity and the quality of the replication template moderate these effects. The results of our experiments with an NK performance landscape model have important implications for both theory and practice.

In this study, we combine insights from the resource-based view (RBV) and organizational adaptation literature to examine under what conditions resource turnover is costly or beneficial to organizations. We employ a standard NK model in which firms develop, adapt, and exchange resources. We demonstrate that for different levels resource complexity and resource interdependence, firms may benefit or suffer from resource turnover. We show that there are conditions under which industry leaders may benefit from losing resources to their followers and conditions under which both industry leaders and followers benefit from turnover, creating win-win situations with strong incentives to encourage resource mobility across firms. Our results have important implications for both the RBV and the organizational adaptation literature. As for the RBV, we demonstrate that in settings where local search is important losing a valuable resource does not necessarily give away a firm’s competitive advantage. As for the organi...

Research Summary: Imitation is a central construct in strategy theory because it is assumed to diminish inter‐firm performance heterogeneity within an industry. We revisit this assumption, which is premised on the logic that imitated practices act directly to make the imitator more similar to its target. This logic is incomplete because imitation also acts indirectly—via its effect on an imitator's post‐imitation experiential learning efforts through which it refines imitated practices and fills remaining knowledge gaps. We examine how an imitator's focus of attention during this post‐imitation experiential learning process impacts performance heterogeneity. Employing a computational model, we contrast the heterogeneity resulting from imitative entry with that from de novo (non‐imitative) entry and identify conditions under which imitation may increase, rather than decrease, inter‐firm performance heterogeneity.Managerial Summary: Imitation is commonly assumed to be a low‐risk strategy by which firms can narrow the performance gap to the market leader. This assumption is predicated on an understanding of imitation that neglects the impact of imitation on subsequent, post‐imitation, learning. Such learning serves to refine the imitated practices and fill remaining knowledge gaps. Our theory suggests that imitation is more risky than is typically assumed. Imitation leads to bifurcated performance outcomes. An imitator is more likely to: (a) catch up to the market leader, and (b) perform far worse than it would have without imitation. Key factors driving the riskiness of imitation are the observability of the market leader's practices and an imitator's decision regarding its focus of attention in post‐imitation learning.

There is much consensus that knowledge is an important and valuable asset in many industries. In the context of organizational choice and decision-making, knowledge is valuable because it allows firms to make informed and better choices. Both “positive knowledge”, i.e. knowing what does work and “negative knowledge”, i.e. knowing what does not work, can help improve organizational choices. Using an n-armed bandit model, we seek to answer the question when (and why) endowments with positive or negative knowledge become particular valuable starting points for learning processes. We identify conditions when positive is more valuable than negative knowledge (and vice versa). We also find that negative knowledge always has a positive value, why positive knowledge can have negative values. These findings have important implications for both theory and practice.

Neoclassical economic theory assumes that regulation negatively affects firm performance. Conversely, behavioral economists argue that well-designed regulation can have neutral or even positive firm-level effects. Yet, this perspective had little impact on management studies of firm responses to regulation. This is partly due to our limited understanding of the factors that make regulation “well-designed” and how they affect firm responses and performance. In this study, we complement the established economic criterion of regulatory efficiency with the ethical criterion of regulatory fairness, which has received little prior research attention. We use a performance landscape to model firms’ responses in different regulatory regimes and interpret the findings based on behavioral theory arguments. Our core insight is that unfair regulation can, under certain conditions, have surprisingly positive effects on firm performance. Based on our findings, we develop a more comprehensive and refined behavioral perspective of regulation explaining intra-industry heterogeneity in firm responses and performance.

Research summary: Mental models, reflecting interdependencies among managerial choice variables, are not always correctly specified. Mental models can be underspecified, missing interdependencies, or overspecified, containing nonexistent interdependencies. Using a simulation model, we find that under‐ and overspecification have opposite effects on exploration, and thereby, performance. The effects are also opposite, depending on whether a manager controls all choice variables. The mechanism underlying our results is a feedback loop: misspecified mental models influence managerial learning about the effectiveness of choices; this learning guides how the environment is explored, which in turn, affects which information will be generated for future learning. We explore implications of these results for strategic management and introduce the notion of “cognitive fit” between the mental model of the decision‐maker and the strategic environment.Managerial summary: Managers often rely on mental models to guide their decision‐making. These mental models, however, are often misspecified, that is, more or less complex than the situation managers are facing. Using a simulation model, we study the consequences of such misspecified mental models. We find that the performance implications of misspecified mental models crucially depend on whether the manager controls all choice variables. We identify situations in which simpler mental models are better than overly complex ones, and vice versa. Copyright © 2015 John Wiley & Sons, Ltd.

In many industries, organizations face the challenge of responding adequately to environmental discontinuities. Environmental discontinuities arsiging from technological innovation or regulatory shifts may render prior learnings from experience obsolete or even misleading - a discontinuity may turn old truths into new falsehoods. Prior research points to two ways organizations can respond to this challenge: explicitly unlearning these old truths or becoming more responsive and adaptable to more recent performance feedback at the expense of previously learned beliefs. Using an n-armed bandit model, we examine the implications of these two response strategies. We find that the more competence destroying discontinuities are, the less responsive organizations should be to recent performance feedback. We also find that organizations can only benefit from unlearning if the discontinuity is competence destroying (rather than competence enhancing) and if the organization correctly identifies the time of the discontinuity. These findings have important implications for theories of organizational adaptation and managerial practice.

Prior exploration–exploitation models of organizational learning generally neglect forgetting. This study models organizational learning with forgetting and derives some novel implications. Most noteworthy, our findings point out limits to the contention that promoting rapid learning undermines long-run knowledge. Slower learning is not always better. When agents are subject to forgetting, raising the rate of interpersonal learning often enhances the diversity of beliefs within an organization, as well as the number and range of aspects of the environment that organizational members come to know. The rate of learning that maximizes organizational knowledge or diversity varies with the rate of forgetting. Organizations need not sacrifice diversity as they gain knowledge. Analyses of our model indicate that knowledge and diversity are positively correlated across organizations. Implications of forgetting redirect theorists, empirical researchers, and managers toward alternatives to some conclusions from prior exploration–exploitation modeling studies.