Srilata Zaheer

Overcoming the Liability of Foreignness

This study addressed the question of whether firms in a competitive, globally integrated environment face a “liability of foreignness” and to what extent either importing home-country organizational capabilities or copying the practices of successful local firms can help them overcome this liability. Predictions were tested with a paired sample of 24 foreign exchange trading rooms of major Western and Japanese banks in New York and Tokyo. Results support the existence of a liability of foreignness and the role of a firms administrative heritage in providing competitive advantage to its multinational subunits. They also highlight the difficulty firms face in copying organizational practices from other firms.

Organizational Legitimacy Under Conditions of Complexity: The Case of the Multinational Enterprise

We examine organizational legitimacy in the context of the multinational enterprise (MNE). After discussing three types of complexity (of the legitimating environment, the organization, and the process of legitimation) that MNEs typically face, we explore their effects on MNE legitimacy. In particular, we distinguish between the legitimacy of the MNE as a whole and that of its parts, and we develop propositions that include issues of internal versus external legitimacy and positive and negative legitimacy spillovers.

The dynamics of the liability of foreignness : A global study of survival in financial services

We study the impact of ‘foreignness’ on survival in interbank currency trading worldwide over the period 1974–93. In particular, we develop hypotheses on the behavior of the liability of foreignness over time, and on the consequences of evolving sources of firm‐level competitive advantage on this liability. We test these hypotheses on the population of 2667 market‐making trading rooms located in 47 countries worldwide that either existed in 1974 or entered the industry between 1974 and 1993. The results show that there is a liability of foreignness, and that it changes over time. Further, strategic and organizational factors such as the adoption of technology by these firms and their mode of internal control significantly influenced survival, as did location‐related factors such as the intensity of local and foreign competition.

Six Sigma: a goal-theoretic perspective

Abstract Six Sigma is a phenomenon that is gaining wide acceptance in industry, but lacks a theoretical underpinning and a basis for research other than “best practice” studies. Rigorous academic research of Six Sigma requires the formulation and identification of useful theories related to the phenomenon. Accordingly, this paper develops an understanding of the Six Sigma phenomena from a goal theoretic perspective. After reviewing the goal theory literature, these concepts, when applied to Six Sigma, suggest some propositions for future research. This paper can help serve as a foundation for developing scientific knowledge about Six Sigma.

Does It Matter Where Countries Are? Proximity to Knowledge, Markets and Resources, and MNE Location Choices

We suggest that the proximity of a country to other countries is a factor that affects its choice as a multinational enterprise (MNE) location. We introduce the concept of a countrys proximity to the global distribution of knowledge, markets, and resources, and frame this concept as a function of both geographic distance and the worldwide spatial distribution of these factors. We test our location model on a data set comprising 138,050 investments undertaken by U.S. MNEs worldwide. Our findings show that the proximity of a country to the rest of the world has a positive impact on MNEs choosing that country as a location. Proximity to the worlds knowledge and markets are stronger drivers of location choice than is proximity to the worlds resources, after accounting for the countrys own endowments. Larger firms are able to benefit more from remote locations than smaller firms are.

Wall Street vs. Main Street: Firm Strategies for Defending Legitimacy and Their Impact on Different Stakeholders

We assess the effect of firm strategies to defend legitimacy on two different stakeholder groups—the public (“Main Street”) and the investment community (“Wall Street”). We identify four types of firm strategies in response to challenges to their legitimacy—denial, defiance, decoupling, and accommodation— drawing from theory and from case studies of international outsourcing. We then develop and test hypotheses on the effectiveness of these strategies in defending legitimacy across these two stakeholder groups, using data from media reports and press releases on all 126 distinct accusations of the use of international sweatshops by U.S. firms from 1990 through 2002. We find that denial and defiance responses hinder the recovery of legitimacy on Main Street, and none of the responses has a positive effect on public perception, whereas Wall Street is unaffected by denial and defiance but views decoupling favorably. Main Street and Wall Street thus perceive firm actions to defend its legitimacy quite differently, suggesting that these worlds operate by separate moralities in which Main Street appears to privilege fairness as a core value, whereas Wall Street privileges profit.

Knowledge Retention and Personnel Mobility: The Nondisruptive Effects of Inflows of Experience

Firms often bring in personnel from rivals to gain tacit knowledge and skills. Personnel new to a firm may broaden the firms knowledge stock, but may not disrupt the firms ways of organizing. Instead, personnel inflows may contribute to the retention of a firms traditional ways of organizing. This study tracks the flow of personnel within and across organizational boundaries (intrafirm and interfirm flows) and geographic boundaries (local and cross-border flows) for multiunit banks operating in the Foreign Exchange Trade Industry from 1973--1993. We test how a firms retention activity responds to inflows of personnel from different sources (e.g., intrafirm, interfirm, local, and cross-border). The findings show that inflows of personnel from different sources increase a firms retention activity. Rather than adopting changes in behavior in response to an influx of personnel from within or across spatial boundaries, firms in the foreign exchange industry tend to retain their existing ways of organizing. Personnel inflows from a combination of sources, such as local intrafirm, cross-border intrafirm, local interfirm, and cross-border interfirm, also positively affect retention. By examining the differences in the magnitudes of these effects, we empirically show that considering different sources of personnel inflows in combination is worthwhile.

BREAKING THE SILOS: DISTRIBUTED KNOWLEDGE AND STRATEGIC RESPONSES TO VOLATILE EXCHANGE RATES

A model of effective decision-making in a situation of distributed knowledge is developed, drawing on three perspectives: the sociocognitive perspective, which focuses on framing issues; the economic perspective, which focuses on the role played by incentives in the integration of knowledge and decision-making authority; and the process perspective, which stresses the role of integrating mechanisms and of processes that either hinder or foster risk awareness and flexibility. The model is tested on a sample of managers from different functional areas of Fortune 500 firms, using strategic responses to exchange-rate volatility as the context. The results show that all three perspectives - framing, incentives and process - are significant in explaining the effectiveness of strategic responses to volatile exchange rates. The findings suggest that simultaneously addressing managerial mindsets, incentives and process may be crucial to generating effective strategic responses across functions.

The dynamics of knowledge flows: human capital mobility, knowledge retention and change

This empirical paper investigates the relationships between the amount of human capital that flows into a firm and two activities underlying a firm’s knowledge production, variation or change and knowledge retention. We track the flow of human capital within and across organizational and geographic space for all multi‐unit banks operating in the world foreign exchange trade industry from 1973 to 1993. The findings indicate that an increased reliance on past experience reduces how much human capital a firm imports in the future. This effect is moderated by a self‐reinforcing cycle of human capital inflow. Inflows of human capital also decline when a firm has recently adopted novel changes in its operations. The paper uses evolutionary thinking to define a model for intrafirm knowledge production.

REDUCING COGNITIVE BIAS IN ASSESSING COMBINATION POTENTIAL IN M&AS

Top managers rarely have an accurate inventory of the capabilities buried within their firms. Although there are many reasons for such partial knowledge, cognitive biases play an important role for its existence. We argue that managers’ cognitive biases could lead to lost opportunities and exposure to vulnerabilities as they engage in the complex cognitive tasks surrounding mergers and acquisitions. In this chapter, we propose a structured approach that managers can use to quickly assess the distribution of capabilities across merging firms to mitigate the impact of these biases. Strategic capability mapping (SCM) relies on an assessment of the distribution of capabilities, including where certain capabilities are located, their breadth and depth, and helps increase identification of potential complementarities and combination potential as well as reduce the merged firms exposure to vulnerabilities such as losing areas of undiscovered strength. A description of the process and examples of successful application are provided.