Kevin Zheng Zhou

The effects of strategic orientations on technology- and market-based breakthrough innovations

Does market orientation impede breakthrough innovation? To date, researchers have presented opposing arguments with respect to this important issue. To address this controversy, the authors conceptualize and empirically test a model that links different types of strategic orientations and market forces, through organizational learning, to breakthrough innovations and firm performance. The results show that a market orientation facilitates innovations that use advanced technology and offer greater benefits to mainstream customers (i.e., technology-based innovations) but inhibits innovations that target emerging market segments (i.e., market-based innovations). A technology orientation is beneficial to technology-based innovations but has no impact on market-based innovations, and an entrepreneurial orientation facilitates both types of breakthroughs. Different market forces (demand uncertainty, technology turbulence, and competitive intensity) exert significant influence on technology- and market-based innovations, and these two types of innovations affect firm performance differently. The results have significant implications for firm strategies to facilitate product innovations and achieve competitive advantages.

Alternative Origins to Interorganizational Trust: An Interdependence Perspective on the Shadow of the Past and the Shadow of the Future

Despite the widespread acceptance of trust as an informal governance institution, our understanding of its origins is nascent. Our review of the literature identified two distinct explanations: Trust emerges from either a shadow of the past (i.e., prior history) or a shadow of the future (i.e., expectations of continuity). In this paper we develop and empirically examine a third perspective: The potential interdependence of these two explanations. Our results strongly endorse this third perspective. We find that prior history does not directly affect trust; instead, the observed positive relationship between the two is mediated by expectations of continuity. Consistent with this result, analyses further show that a longer prior history makes the effect of continuity on trust much stronger than a shorter prior history. We interpret these findings as suggesting: (1) the criticality and centrality of a shadow of the future (i.e., a forward-looking calculus) in generating trust in interorganizational exchanges and (2) that a shadow of the past plays a facilitating, albeit indirect, role in trust building. Our conceptual model also extends the conventional use of the transaction cost logic to show how reciprocal investments in asset specificity and uncertainty drive expectations of continuity, and consequently, interorganizational trust. Our results also show, unexpectedly, that prior history has a direct negative effect on trust after specifying the mediating path of continuity. Our moderation analysis indicates when this effect occurs: When weak expectations of continuity exist, trust is lower for exchanges characterized by a longer prior history, suggesting a potential darkside of overembedded ties.

Examining the Conditional Limits of Relational Governance: Specialized Assets, Performance Ambiguity, and Long-Standing Ties

Despite recognition of the benefits of relational governance in inter-organizational exchanges, factors that may erode its value have received little examination. We extend the literature by asking whether self-interested opportunities and long-standing ties erode the positive association between relational governance and performance. Consistent with transaction cost and moral hazard logics, exchange hazards, particularly asset specificity and difficult performance measurement, dampen the positive association of relational governance and performance. We further find, consistent with recent inquiries into the dark side of embedded ties that the performance benefits associated with relational governance decline when parties rely on repeated partnerships.

A paradox of price–quality and market efficiency: a comparative study of the US and China markets

Abstract The price–quality schema rests on an assumption that price is credible information about product quality. However, the credibility of price information varies across different markets. In an inefficient market, consumers would believe in the price–quality relationship to a lesser extent because price information is less credible. Paradoxically, in such a market, sometimes consumers have to rely more on price to infer quality because other product information is less available. With a cross-national perspective, this study investigated the influences of market efficiency and consumer risk aversion on the price–quality schema between the China and the US markets. We found that due to the inefficient market environment, Chinese consumers possess a weaker price–quality schema than American consumers. Chinese consumers are more risk averse than their American counterparts. However, in China, risk-averse consumers are more likely to use price to infer product quality. Implications for global marketing are discussed, and directions for future research are suggested.

State Ownership and Firm Innovation in China: An Integrated View of Institutional and Efficiency Logics

Using two longitudinal panel datasets of Chinese manufacturing firms, we assess whether state ownership benefits or impedes firms’ innovation. We show that state ownership in an emerging economy enables a firm to obtain crucial R&D resources but makes the firm less efficient in using those resources to generate innovation, and we find that a minority state ownership is an optimal structure for innovation development in this context. Moreover, the inefficiency of state ownership in transforming R&D input into innovation output decreases when industrial competition is high, as well as for start-up firms. Our findings integrate the efficiency logic (agency theory), which views state ownership as detrimental to innovation, and institutional logic, which notes that governments in emerging economies have critical influences on regulatory policies and control over scarce resources. We discuss the implications of these findings for research on state ownership and firm innovation in emerging economies.

Is Product Imitation Good for Firm Performance? An Examination of Product Imitation Types and Contingency Factors

Despite the prevailing phenomenon of product imitation in transition economies, theoretical development of product imitation strategies still lags behind anecdotal evidence. The authors distinguish between pure imitation and creative imitation and examine their contingent effects on firm performance. They test hypotheses on data collected from multiple sources, including top and middle managers and archival financial data from 192 firms in China. The findings indicate that creative imitation has a stronger positive effect on financial performance (i.e., lagged return on assets) than pure imitation. Furthermore, pure imitation and creative imitation, when coupled with strong marketing capability, positively affect market performance (i.e., market share). Finally, compared with their local counterparts, foreign firms operating in China benefit less from pure and creative imitations in terms of financial performance.

Global brand expansion: how to select a market entry strategy.

When hotel firms expand internationally, they must determine the ownership strategy and the management strategy that will best maintain the firm’s competitive advantage. Those decisions are made separately from each other and depend on the expanding company’s own strengths and the strengths found in the local market. That interplay between the company’s strengths and local resources drives the type of partnership or affiliation arrangement that the company uses to enter the foreign market. The decision regarding who controls management and marketing, for instance, depends to a large extent on whether the expanding company can rely on local interests to maintain the firm’s customer service standards. If the firm does not use customer service as a competitive advantage, it can make more use of third-party interests to operate the hotel. If the hotel facility is itself a point of competitive advantage, the decision on the extent of equity investment by the firm rests on whether local interests have sufficient resources to build and maintain the property.

Strategic Orientation, Foreign Parent Control, and Differentiation Capability Building of International Joint Ventures in an Emerging Market

This article examines how strategic orientation and foreign parent control jointly affect differentiation capability building of international joint ventures (IJVs) in an emerging market. With a multisource data set of 156 IJVs in China, the authors find that technology and customer orientations have a positive effect on IJV differentiation capability and that such effects are contingent on foreign parent control. Technology orientation leads to stronger differentiation capability when foreign equity control is higher or operational control is greater. In contrast, customer orientation is more beneficial for differentiation capability building when foreign operational control is lower or social control is greater.

Technological Capability Growth and Performance Outcome: Foreign Versus Local Firms in China

This study examines the growth and performance impact of technological capability (TC) in China. The authors posit that foreign and local firms exhibit different TC growth patterns and that TC has differential performance effects for these two types of firms. From a multilevel analysis of five-year panel data of 448 technology-oriented firms, they find that, in general, foreign firms possess higher levels of TC, whereas local firms can develop their TC faster than foreign firms. Furthermore, compared with foreign firms, local firms experience a stronger performance return from their TC; however, foreign firms have a higher growth rate in the contribution of TC to their performance over time. Moreover, firms can develop TC faster in regions with better intellectual property protection, and TC exerts a stronger effect on performance when industrial uncertainty is higher.

Exploitation and Exploration in International Joint Ventures: Moderating Effects of Partner Control Imbalance and Product Similarity

International joint ventures (IJVs) need to exploit their existing resources as well as explore new capabilities to capture the potential in emerging markets. This study develops a contingent view, arguing that the efficacy of exploitation and exploration depends on the levels of control imbalance and product similarity between an IJVs foreign and local partners. A sample of 198 IJVs in China reveals that partner control imbalance has a U-shaped moderating effect on the relationship between exploitation and IJV new product performance but has an inverted U-shaped moderating effect on the effectiveness of exploration. Exploitation relates more strongly to IJV new product performance when partner product similarity is high, whereas exploration has a stronger impact on IJV new product performance at low levels of partner product similarity. These findings provide novel insights for IJVs to better manage exploitation and exploration in their new product development.