Harvard Business School

This dissertation examines how individuals in the upper echelons of the organization – namely, the board of directors, CEO, and top management team – shape firm governance, strategy, and performance. This dissertation starts with a broad analysis of board effectiveness and then narrows in focus to one particular board responsibility (CEO succession planning), and then one particular type of CEO transition (leapfrog CEO succession) in the two subsequent chapters. Through this dissertation, I advance our understanding of how board directors and executives influence the organizations around them by developing insights into how boards and top management teams operate internally and integrating these insights into large-sample empirical analyses. The first chapter of this dissertation uses a large-sample survey to explore drivers of board effectiveness on three primary board responsibilities. This study emphasizes the role that internal board operations play in explaining directors’ perceptions of their boards’ effectiveness. The second chapter uses a mixed-methodology approach to examine one specific board responsibility: CEO succession planning. This study identifies the basic components of a board-level CEO succession plan and highlights the role of the CEO/board relationship and risk management processes in supporting these processes. The third chapter examines a specific type of CEO transition: leapfrog CEO succession. This study analyzes the environmental antecedents and performance consequences of appointing an internal candidate who is fast-tracked past more senior executives as CEO.

This dissertation consists of three essays. In Chapter 1, I study the beneficiaries of technology adoption in the workplace. I combine worker-level wage data with information on broadband adoption by Brazilian firms to estimate the effects of broadband on wages. Overall, wages increase 2.3 percent following broadband adoption. Consistent with the theory of biased technological change, wages increase the most for workers engaged in non-routine cognitive tasks and returns are negative for routine cognitive tasks. There is no effect of broadband adoption on wages for either routine or non-routine manual tasks. Additionally, I estimate the effect of broadband on selected quantiles of the within-firm wage distribution and find evidence that within-firm wage inequality increases following broadband adoption. Both new hires and the firm's existing employees benefit from broadband adoption, which indicates that broadband's effects are not driven only by better recruitment of new employees. Chapter 2 presents three main findings about the impact of mass shootings on gun policy in the United States. First, mass shootings evoke large policy responses. A single mass shooting leads to a 15 percent increase in the number of firearm-related bills introduced within a state in the following year. This effect increases with the number of fatalities. Second, mass shootings account for a small portion of all gun deaths, but have an outsized influence relative to other homicides. Our estimates suggest that the per death impact of mass shootings on bills introduced is about 80 times as large as the impact of individual gun homicides in non-mass shooting incidents. Third, when looking at enacted laws, the impact of mass shootings depends on the political party in power. A mass shooting increases the number of enacted laws that loosen gun restrictions by 75 percent in states with Republican-controlled legislatures. There is no statistically significant effect of mass shootings on laws enacted when there is a Democrat-controlled legislature. Chapter 3 directly studies the extent and drivers of internal labor markets in multi-business firms. Leveraging a rich employer-employee matched dataset from Brazil, we track all worker movements across firm units. We find that multi-business firms source a large share of their workers internally, especially managers and workers with more firm-specific experience. Redeployed workers earn a large wage premium over otherwise comparable workers hired through external labor markets. Geographic proximity and resource relatedness between establishments play an important role in facilitating redeployment. In contrast to prevailing views of internal labor markets as a means to avoid external labor market frictions, our findings are consistent with internal labor markets as conduits of knowledge.

A growing body of strategy and management literature emphasizes the importance of nonmarket strategy, not only as a stand-alone strategy but also as part of an integrated strategy in dealing with frequent regulatory change and political/regulatory actors and agencies. Nevertheless, many areas in non-market strategy remain unexplored. In particular, scant research has examined the nonmarket behaviors of foreign multinational enterprises (MNEs). Thus, in my dissertation, I examine various aspects of non-market strategies using U.S. federal lobbying and other related datasets. The first chapter with Jordan Siegel, explores institutional drivers of the lobbying of foreign multinational enterprises (MNEs). Particularly, we examine how different levels of corruption in the home country influence the political engagement of multinational enterprises. It has been generally assumed that lobbying and corruption are substitutes for each other. However, study results are counter-intuitive in that firms from countries that rank as suffering from higher levels of corruption are less likely to engage in lobbying after controlling for country characteristics, such as country competitiveness, economic ties between the U.S. and a focal foreign country. The second chapter with Shon Hiatt, we examine the role of agency embeddedness on administrative decision. While research has argued that agency embeddedness is unidirectional, benefiting government agencies, we propose that it can be bidirectional and that firms can use their interactions with state agencies to their advantage. Drawing upon political sociology and organizational community research, we argue that a firm’s geographic proximity to local government offices enhances the bidirectional nature of agency embeddedness, thereby enhancing greater rapport with agency officials and access to valuable information. Using government contract data from the United States Department of Defense, we find that spatial proximity between a local contracting office and a bidding firm increases the firm’s propensity to receive larger government contracts and that this effect varies depending on the level of decision-making discretion of the contracting officers. This study has theoretical and managerial implications for research on business-government relations, institutional theory, and organizations and communities. In the last chapter, I examine whether lobbying by foreign defense contractors leads to positive outcomes and the potential mechanism underlying this process, using U.S. Department of Defense (DoD) contract data and lobbying and campaign financing data that I compiled. Assuming that foreign MNEs are socially less inclusive and have weaker political capital than domestic firms do, the question arises as to how and why foreign MNEs engage in lobbying, which requires a great deal of political capital, and whether they can achieve non-market outcomes. In this paper, I show that foreign MNEs can purchase political capital through outside lobbyists, a practice that enables them to achieve better contract outcomes.

This dissertation explores themes surrounding digital innovation and its effects on industries and firm- and employee-level productivity. Using novel and often proprietary sources of data, I take an empirical approach to asking how digital technology has transformed entire industries (e.g. medical devices and medical care), as well as how employees interact with tasks (e.g. technology-enabled remote work and telemedical care), with a focus on unpacking mechanisms driving each result. In each of these chapters, I focus on phenomena with large-scale impacts, from the digital transformation of a 150 billion US dollar medical device industry in the US, to increased productivity at the US Patent and Trademark Office that could lead to 1.3 billion US dollar in value as a result of new patent approvals, to potentially saving 70,000 lives a year as a result of telemedical intervention in the intensive care sector in the US

Corporate strategy --- what activities a firm performs --- and location strategy --- where it performs them --- have mostly been studied separately. However, geographic proximity enables the exchange of goods, workers, and knowledge --- precisely the types of resource flows that also motivate internalizing activities inside firm boundaries. This dissertation presents three essays that explore the interdependence of corporate- and location strategy and its implications for location choice and firm performance. Chapter 1 studies the effects of geographic proximity between firms in the same industry on their survival. While in theory, co-location can enhance firm productivity, the existing empirical evidence is mixed. In this paper, I argue that proximity between firms affects their performance differently depending on whether they compete locally or in broader national markets. Using road upgrades in the context of Brazil as an exogenous shock to proximity between incumbent firms, I find that in locally traded industries, greater proximity leads to increased exit of the smallest firms and higher survival rates of the largest --- effects that are consistent with increased competition. Meanwhile in nationally traded industries, firms of all sizes see improved survival rates, consistent with increased agglomeration spillovers. The results shed light on contradictory findings in the literature and show how investments in transportation infrastructure, such as roads, intensify both competition and agglomeration forces. In contrast to the focus on stand-alone firms in Chapter 1, Chapter 2 studies the spatial organization of complex, multibusiness firms. While prior research has focused on how firms co-locate with others, here we focus on the geographic proximity between the different units of the firm itself. We propose and test the hypothesis that multibusiness firms exhibit ``internal agglomeration” --- a systematic co-location of their different plants --- and that this is driven by the desire to share resources within the firm. Using data on the location and corporate structure of a large sample of U.S. manufacturing firms, we find that internal agglomeration exists and is primarily related to the sharing of labor. The findings suggest that internal labor markets are potentially an important source of competitive advantage in multibusiness firms. Building on the findings of Chapter 2, Chapter 3 studies the extent and drivers of internal labor markets in multibusiness firms directly. Using a large sample of multi-business firms from Brazil and a rich employer-employee matched dataset, we track all internal worker movements across the firms' units. We find that multibusiness firms redeploy a large share of their workers internally, especially managers and workers with more firm-specific experience. Redeployed workers earn a large wage premium over otherwise comparable workers hired though external labor markets. Geographic proximity and resource relatedness between the firms’ plants facilitate redeployment. In contrast to prevailing views of internal labor markets as a means to avoid external labor market frictions, our findings are consistent with internal labor markets as conduits of knowledge. Taken together, the three chapters of the dissertation provide evidence that strategic decisions around a firm's product- and geographic boundaries are intimately related, and that resource sharing is implicated in both.

We are living in an age of unprecedented amounts of data. As information becomes more available and accessible, it provides new opportunities to evaluate and extend theories on how firms should – and how they do – use data to inform their strategy. It also raises a central question: as firms compete in an increasingly data-driven landscape, what enables (or hinders) them from realizing potential gains from data? This dissertation explores different ways in which firms use information and provides insights on three barriers they may face in realizing gains from data: managerial inattention that impedes awareness of even easily accessible competitor data, strong priors combined with weak incentives that lead to non-compliance with algorithmic recommendations even when they improve decisions, and multiple goals that hamper how employees process and learn from information. Chapter 1 studies how firms use easily accessible competitor information, through a field experiment run in collaboration with Yelp across 3,218 personal care businesses. I find that nearly half of the firms lack knowledge of their competitors’ pricing, a key strategic lever in this industry, even though this data is readily accessible and enables them to improve their own decisions once they are made aware. I find evidence consistent with the interpretation that this lack of awareness is driven by managerial inattention fueled by reliance on outdated knowledge. As competitor data becomes increasingly accessible in the digital age, these findings highlight the role that competitor awareness may play in how firms make decisions, and suggest that overcoming attentional barriers may be a key factor that enables firms to realize gains from data. Chapter 2 evaluates whether algorithms improve decision-making by partnering with Boston’s inspectional services department to compare different methods to prioritize restaurants to inspect: inspector discretion versus two algorithmic methods with different levels of sophistication. While gains from using algorithms are substantial, the greatest gains stem from using data to supplement inspectors’ priors rather than algorithmic sophistication. Yet despite these gains, inspectors are only half as likely to inspect restaurants based on algorithmic recommendations compared to those based on their own judgment. These findings suggest that incentives to ensure compliance may be more important than algorithmic sophistication, and that if algorithms are to be effective, mechanisms must be put in place to ensure implementers trust them more than their private information. Chapter 3 explores how the communication of multiple goals impacts employee performance and learning from information on best practices. I design and implement a field experiment across linemen in a large multinational energy company, varying whether employees are communicated a single goal (safety alone) or multiple goals (safety and efficiency) to pursue as they are evaluated on a core operational procedure. I find that although the two goals are unlikely to have a natural positive complementarity, employees show little evidence of tradeoffs, improving efficiency without reducing safety. I find suggestive evidence that this may be explained by employees being inside the productivity frontier. However, despite this absence of direct tradeoffs, communicating multiple goals appears to impede how employees process and learn from information on best practices, resulting in worse outcomes across both safety and efficiency. These findings suggest that there may be cases when communicating multiple goals leads to larger performance gains than focusing, and that when choosing to pursue multiple goals, organizations may need to consider whether employees are inside the frontier and whether the task involves learning beyond effort allocation. Taken together, these chapters suggest that despite the potential of data and algorithms to improve decision-making and inform strategy, their returns may be limited if organizations are not redesigned to make use of them.

This dissertation examines the strategic implications of opening firm boundaries. The first chapter examines how opening country borders and allowing firms to hire migrant inventors can foster innovations that are different from those of local inventors. The H-1B visa cap increase between 1999-2003 provides an exogenous increase in the ability of firms to hire migrants. Firms affected by this shock can hire more Chinese/Indian inventors and file more herbal patents. Such knowledge is subsequently recombined by local inventors. The second chapter examines how opening a company’s software intellectual property affects product market performance. I identify causal effects using community driven reverse-engineering events that exogenously open sourced parts of a company’s software. I find that open sourcing corporate software can lead to complement innovations that benefit product market sales. Furthermore, I find strategic implications of considering customer heterogeneity. Complement innovations attract a subset of technologically “savvy” users who inform and influence others’ purchase decisions. Thus, opening intellectual property may be more valuable in markets with greater levels of information imperfections. The third chapter examines innovations and collaborations between firms and other contributors in the Linux kernel, a large open source software project. I compare the source code structure before and after the emergence of the Android operating system and document changes in contributions and follow-on innovation. I find evidence consistent with a crowding out of non-corporate efforts from increased corporate contributions, specifically for general purpose files. Additionally, I find that corporate created files lead to less follow-on innovation and have more self-contributions.

Knowledge produced in a firm is a source of competitive advantage, as well as a currency which can be exchanged both inside the firm and with other firms. Patents are a key mechanism by which firms protect the new knowledge they produce: intellectual property rights enable a startup to enter a market, a sole inventor to create a firm in the absence of capital or customers, and a small multinational subsidiary to increase its significance in a large network of subsidiaries. This three-chapter dissertation analyzes how firms use knowledge they produce, specifically how multinational subsidiaries inventing technologies interact with their multinational headquarters and their local partners; how cutting-edge methods derived from machine learning and natural language processing can enable study of otherwise intractable problems in codifying and transferring knowledge; and how startups use patents strategically, with a focus on implications of intellectual property policy. This dissertation stands at the intersection of the fields of entrepreneurship, innovation, and machine learning. Chapter 1 introduces a model for the relationship between the multinational firm’s headquarters, its subsidiary, and the host country of the subsidiary. The model, loosely based on the gravity trade model and featuring a measure of knowledge distance introduced here, yields an answer to a longstanding topic in the multinational literature, namely whether a multinational subsidiary in a foreign country gravitates towards its host or continues the strategy of its headquarters. The findings include a relative shift in the influence of the headquarters and host country over the subsidiary as the subsidiary grows to closer to the host, as well as the result that a highly specialized skill temporary migration visa can increase influence of the headquarters over the subsidiary when utilized. The results are relevant for both multinational managers and governments hosting multinationals. Chapter 2 surveys key machine learning methods applied to management research, and dives especially into natural language processing applications. Applications include analyses of the patent corpus, topic modeling, and sentiment analysis. The perspectives in this chapter are relevant to the study of knowledge and broadly firm strategy, as tools from machine learning can create new measures of knowledge, transfers, and firm strategy; or improve existing ones. The third chapter analyzes a policy shock to startup firms as a window to studying the value of reducing uncertainty in the patent examination process. Startups especially benefit from granted IP rights, as often their IP is the basis for venture funding and market entry. As the duration of the examination process is uncertain, firms treated with accelerated patenting yield significantly improved outcomes. Methodologically, the paper also adds a matching algorithm based on natural language processing to standard econometric techniques.

This dissertation examines strategy and entrepreneurship in nascent industries. It is comprised of an introduction section and three chapters. The introduction section provides context for the dissertation and summarizes each of the three chapters. Chapter 1 examines how entrepreneurial firms compete in nascent industries by influencing their nonmarket environment. This qualitative study takes place in the context of the nascent personal genomics industry. Chapter 2 examines how entrepreneurial firms effectively engage in strategic reorientation without incurring penalties from key stakeholders. This qualitative study takes place in the context of a nascent “fintech” industry. Chapter 3 examines how some firms are able to persistently survive in weak and uncertain institutional environments. This qualitative study takes place in the context of emerging markets. Overall, this dissertation aims to develop, expand, and enrich knowledge on strategy and entrepreneurship in nascent industries, particularly concerning how firms navigate market and nonmarket uncertainty.

This dissertation explores the role of deeply embedded norms in shaping the experience of individuals when transitioning to new roles as well as the experience of organizations when changing organizational practices. I analyze norms that stem from one’s past occupation as well as cultural norms at a broader societal level. Findings suggest that understanding the lasting influence of these norms is crucial to accessing the challenges that individuals and organizations face in moments of transition and change. The first essay examines how norms internalized in a former occupation – namely, norms of how responsibility is conceived – shape the experience of individuals transitioning into a managerial role. This study compares the shifting responsibilities of supervisors coming from a high-reliability occupation, where small errors can lead to serious consequences, versus a low-reliability occupation, where such concerns do not exist. Drawing mainly on interviews with former Paris subway drivers (high-reliability) and station agents (low-reliability) now promoted to supervisors, we analyze the change in “responsibility” experienced during such a transition. For subway drivers, stepping up into a managerial role entails a certain loss of what we label “personal” responsibility. By contrast, former station agents reported no such loss. Overall, our findings shed light on how specific occupational backgrounds shape the experience of responsibility when moving up the hierarchy and why workers coming from high-reliability occupations might experience a “managerial blues.” The second essay examines how broad societal norms of social distinction, and the degree to which organizations internalize these norms, influence an organization’s ability to benefit from becoming less hierarchical. Social distinction is defined as the differences in status, prestige, and power that distinguish and distance groups of individuals from one and other. Using longitudinal survey data of organizational practices of firms located in France, I find that when the degree of social distinction within an organization is high, it will not reap productivity and performance benefits even when introducing less hierarchical practices. I supplement my quantitative analysis with interviews of employees working in different types of organizations in France. The interviews reveal the challenges that organizations face when implementing less hierarchical practices in the French cultural context and on the varying role that social distinction plays. The third essay explores how societal norms of egalitarianism influence whether organizations benefit from the adoption of pay-for-performance compensation schemes. In addition I examine how the egalitarian norms of a multinational’s country of origin come into play. Using both interviews and longitudinal survey data of organizational practices of firms located in France, a country where egalitarian commitment to resource distribution is culturally strong, I find that adopting collective bonuses is more beneficial than adopting individualized bonuses. I also find that foreign MNEs, particularly those from countries where egalitarian commitment is relatively low, benefit significantly less than French MNEs when implementing collective bonuses in France. Overall findings shed light on how the cultural norm of egalitarianism can influence the effectiveness of adopting certain compensation practices and how being a cultural outsider can impact an organization’s successful implementation of such practices.