Essays on individuals and organizations

This dissertation focuses on the dynamics of innovative industries; specifically how individual choices and actions impact the performance, founding, and death of firms. While most research examining these outcomes focuses on the role of organizational factors—such as strategy, capabilities, or resources—firms ultimately consist of individuals with different preferences, abilities, and approaches to entrepreneurship and organizing. This work attempts to expand our understanding of firm and industry dynamics by looking to the role of the individuals who make up firms. As the performance of a growing number of firms and entrepreneurial ventures comes to depend on human capital, knowledge and creative work, there is increasing need to understand how these differences between individuals influences firms and industries. This dissertation consists of three essays exploring these relationships. The first essay, “People and Process, Suits and Innovators: Individuals and Firm Performance,” empirically untangles the contributions of organizations and individuals to firm performance. The results indicate that variation among individuals matters far more in organizational performance than is generally assumed. Surprisingly, the analysis also demonstrates that middle managers, rather than innovators, have a particularly large impact on firm performance. The second essay, “The Firm as a Potemkin Village,” uses qualitative research on firm founders in the computer game industry, as well as the theoretical implications of the previous papers, to examine the role of firms in industries where individuals are primarily responsible for firm performance. I suggest that firms are often created for reasons of legitimacy, rather than for performance alone. My third paper, “Not in Our Stars, But in Ourselves” examines the tension between socially-embedded and individual factors in the performance of new ventures. Through an examination of over 8,100 career spells and 167 new firms, I find significant effects from both genealogical and individual explanations of new venture performance. (Copies available exclusively from MIT Libraries, Rm. 14-0551, Cambridge, MA 02139-4307. Ph. 617-253-5668; Fax 617-253-1690.)