Mooweon Rhee

The Liability of Good Reputation: A Study of Product Recalls in the U.S. Automobile Industry

In this paper, we explore opposing theoretical claims about how organizational reputation affects market reactions to product defects. On the one hand, good reputation could be a disadvantage because expectations about product quality are more likely to be violated by defects in highly reputed products. On the other hand, a good reputation could be an advantage because of strong inertial effects on reputation orderings. We empirically test these competing hypotheses using data on product recalls in the U.S. automobile industry from 1975 to 1999. Our results support for the idea that reputation can be an organizational liability in that highly reputed firms suffer more market penalty as a result of their product recalls. We also propose that the reputational effects are moderated by two important factors: substitutability and generalism/specialism. Our results show that having few substitutes with an equivalent level of reputation, or a focused product identity stemming from specialism, buffers the negative market reactions to product recalls. We conclude with a discussion on the implications of these results for institutional, reputation, and status theories.

Contextual Factors Surrounding Reputation Damage With Potential Implications for Reputation Repair

We explore the contextual factors surrounding reputation damage and their potential implications for reputation repair. We propose a model that examines how (1) the multidimensional property of reputation, (2) organizational age, (3) the diversity of market segments served by the organization, and (4) third parties influence a firms perceived capability to cope with a reputation-damaging event and the external visibility of the event, which, in turn, determine the difficulty of the firms reputation-repairing activities.

The Role of Volition in Organizational Learning: The Case of Automotive Product Recalls

What is the role of volition in organizational learning? Do firms learn better in response to internal procedures or external mandates? Existing literature provides conflicting answers to this question, with some theories suggesting that volition is important for learning because autonomy increases commitment and problem analyses, whereas external mandates tend to produce defensive reactions that are not coupled to the organization in any useful way. Yet, other theories suggest that mandate is important for learning because external pressures act as jolts that help overcome organizational inertia, resulting in deep exploration of problems to prevent future surprises. We investigate this issue in the context of automakers learning from voluntary versus involuntary product recalls. Using data on all recalls experienced by automakers that sold passenger cars in the United States during the 1966-1999 period, we follow the learning-curve tradition in investigating the effects of voluntary and involuntary recalls on subsequent recall rates. We find that voluntary recalls result in more learning than mandated recalls when learning is measured as a reduction in subsequent involuntary recalls. This effect is at least partly because of shallower learning processes that result from involuntary recalls. The effect of volition, however, is different for generalist and specialist automakers. The results of this study suggest an important, yet understudied, determinant of the rate and effectiveness of learning--volition. The results also add to our knowledge of the different learning processes of generalist and specialist organizations.

Exploration and exploitation: internal variety and environmental dynamism

This article proposes that specific features of environmental dynamism and the notion of internal variety should be taken into consideration in response to caveats in prior research on choice or balance between exploration and exploitation and its implications for organizational performance. The study extends Marchs exploration—exploitation model by (1) conceptualizing and varying two dimensions — amplitude and frequency — of environmental dynamism and (2) articulating the notion of internal variety in an organization. Results from the simulation models show how a combination of organizational practices shapes internal variety, which in turn influences an organizations level of knowledge over time amid a changing environment.The studys findings suggest that the level of internal variety, along with the mechanisms by which each practice influences internal variety, affect adaptations of organizational knowledge. Managing internal variety through a combination of strong complementary practices, rather than anchoring on moderate levels of those practices, can achieve the balance between exploration and exploitation.

Revisiting knowledge transfer: Effects of knowledge characteristics on organizational effort for knowledge transfer

This study analyzes the effects of knowledge characteristics on the extent of organizational effort for knowledge transfer. In this paper, three knowledge characteristics that affect organizational behavior for knowledge transfer are identified based on knowledge-based views and organizational learning theory: tacitness, difficulty, and the importance of knowledge. We establish three hypotheses on the effects of these three knowledge characteristics on the extent of effort for knowledge transfer (i.e., the frequency of contact with knowledge source), and provide empirical tests employing the dataset from project teams in a multinational consulting firm via the OLS model. Results show that tacitness, difficulty, and importance have positive effects on the frequency of contact with knowledge sources. This implies that firms exert more effort to acquire the knowledge when the knowledge is tacit, difficult, or important.

Confidence in Imitation: Niche-Width Strategy in the UK Automobile Industry

Our study examines the imitation behavior of UK automobile manufacturers from 1894 to 1981 and supports previous studies on interorganizational imitation by showing that manufacturers tend to imitate other manufacturers that are similar. We also find that the degree of confidence manufacturers have in their imitating behavior affects the intensity of that behavior, where an organizations confidence is determined by the variance of the routines used by its reference group and the number of firms in the reference group. Our results show that (1) manufacturers whose reference groups showed large variance in niche-width changes during the previous year are less likely to imitate (the mean of) those changes, (2) manufacturers who have large reference groups are more likely to imitate the changes, and (3) the negative effect of variance on the imitating behavior is strengthened as the number of reference organizations increases.

Confucian Capitalism and the Paradox of Closure and Structural Holes in East Asian Firms

A long-standing debate has taken place in the organizational sociology and social network literatures about the relative advantages of network closure versus structural holes in the generation of social capital. There is recent evidence that these advantages differ across cultures and between East Asia and the West in particular, but existing network models are unable to explain why or address cultural variation in general. This paper seeks to provide a solution by integrating a culture-embedded rational model of action into the social network model of structure, using this not only to re-examine the closure versus structural hole debate, but also to tie it to the literature on Confucian capitalism and the ‘East Asian Model’ of the firm. We argue that this integrated approach allows us to systematically analyse the relationship between culture and behaviour in networks and, more specifically, to explain why closure has been a more powerful source of productivity in East Asia than the West.

Does Reputation Contribute to Reducing Organizational Errors? A Learning Approach

In this study I examine the effect of a firms reputation for product quality on its effort in learning to reduce its product defect rate. Theoretical ideas on the motivation of learning associated with social aspiration levels and the self-serving bias combined with social categorization suggest that poor quality reputation firms are more likely than their counterparts with a good reputation to attend to potential product defects and consequently reduce their defect rate. However, a stream of research on the motivation of learning stemming from historical aspiration levels and slack search leads to a different argument: a reputation for good quality is more likely to provide firms with a motivation to avoid product defects. I build upon these two competing arguments and hypothesize that stronger motives for learning exist in situations where firms have either a weak or strong reputation for product quality. My study of product recalls in the US automotive industry highlights an inverted U-shaped relationship, indicating the liability of an intermediate reputation in reducing product defects.

The effects of firm reputation and status on interorganizational network structure

In this article, we explore the differential effects of a firm’s reputation and status on its interorganizational network. We hypothesize that due to its stable, unitary, and relational characteristics, status has a stronger influence on partner selection than reputation, which is less stable, multidimensional, and based more on perceptions of product quality and financial performance. Results from our analyses of the director networks of the 300 largest US firms from 1985 to 1993 confirm that across multiple measures of network characteristics, it is status that is the stronger predictor. In particular, high-status firms have networks that are higher in partner quality but are less diverse and contain fewer opportunities to bridge structural holes than the networks of high-reputation firms. These results contribute to our understanding of the different effects of reputation and status on firm behavior by emphasizing the importance of studying both together in order to understand the effects of either. They also contribute to work on interorganizational networks by demonstrating how structure emerges primarily as a function of focal firm status.

Experience in Different Institutional Environments and Foreign Subsidiary Ownership Structure

Research has offered that one of the key advantages of multinational enterprises (MNEs) is the ability to learn from a diverse collection of environments. However the internationalization process model literature linking organizational experience to foreign subsidiary ownership structure has emphasized the role of related or market-specific experience, without fully considering the role of experience across a heterogeneous collection of markets. The current study seeks to bridge this gap and improve our understanding of the generalizability and influencing factors of the internationalization process model by considering how prior focal-market experience and heterogeneity in host-market experience across an MNE’s operations influence subsequent decisions on foreign subsidiary ownership structures. In the empirical context of Japanese automotive firms, the results suggest that when MNEs (a) have greater levels of experience in a focal host country or (b) have experienced a greater variety of regulatory differences across their multinational operations, they are more likely to pursue majority-owned structures in the face of less transparent regulatory environments. Our results also suggest that MNEs with greater levels of both focal host-country experience and variance in environments experienced across their operations, have less confidence in their experience in a focal host country, and are even less likely to pursue majority-ownership structures in the face of less transparent regulatory environments.