Our purpose is to clarify the microfoundations of performance in dynamic environments. A key premise is that the microfoundational link from organization, strategy, and dynamic capabilities to performance centers on how leaders manage the fundamental tension between efficiency and flexibility. We develop several insights. First, regarding structure, we highlight that organizations often drift toward efficiency, and so balancing efficiency and flexibility comes, counterintuitively, through unbalancing to favor flexibility. Second, we argue that environmental dynamism, rather than being simply stable or dynamic, is a multidimensional construct with dimensions that uniquely influence the importance and ease of balancing efficiency and flexibility. Third, we outline how executives balance efficiency and flexibility through cognitively sophisticated, single solutions rather than by simply holding contradictions. Overall, we go beyond the caricature of new organizational forms as obsessed with fluidity and the simplistic view of routines as the microfoundation of performance. Rather, we contribute a more accurate view of how leaders effectively balance between efficiency and flexibility by emphasizing heuristics-based “strategies of simple rules,” multiple environmental realities, and higher-order “expert” cognition. Together, these insights seek to add needed precision to the microfoundations of performance in dynamic environments.

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Entrants in new industries pursue distinct technologies in hopes of winning the technology competition and achieving sustainable competitive advantage. We draw on the complementary assets framework to predict entrants' technology choices in an emerging industry. Evidence from the global solar photovoltaic industry supports our arguments that entrants are more likely to choose technologies with higher technical performance and for which key complementary assets are available in the ecosystem. However, diversifying entrants are more likely to trade off superior performance for complementary asset availability whereas start‐up entrants are more likely to trade off complementary asset availability for superior performance. This difference is largely due to diversifying entrants with pre‐entry capabilities related to the industry. The study offers a novel illustration of how complementarities and competition shape entry strategies. Copyright © 2013 John Wiley & Sons, Ltd.

The foundations of established firms are laid when, early in life, venture executives explore dynamic landscapes in search of opportunities. During this search, the executive team processes information that might signal the need to change, and their cognitive flexibility in processing this information affects the likelihood of such changes. While executive backgrounds affect this information processing, current literature does not identify how executive backgrounds impact the extent of change a firm undertakes. Therefore, we compare the effects of teams dominated by domain insiders, domain outsiders, and complementary teams (blending insiders and outsiders) on the likelihood of different degrees of technology change. In an examination of the population of U.S. solar photovoltaic manufacturing ventures from 1992 to 2007, we find that teams with extra‐domain expertise, particularly at the CEO level, undertake more significant technology change. By contrast, intra‐domain expertise has an inertial effect on change: even when combined in complementary team configurations, domain expertise reduces chances of significant technology change. These findings expand the discussion of types and antecedents of organization change, top management team composition, and the psychological foundations of strategy. Copyright © 2012 Strategic Management Society.

Research summary Digital transformation is a dominant theme in the global economy, but what it means for established companies remains perplexing for both academics and practitioners. As digital erases familiar geographic, industrial, and organizational boundaries, it has led to simplistic characterizations such as “digital changes everything.” Yet while digital changes some things, others remain the same. Here, we identify three core tensions at the heart of digital transformation—products vs platforms, firms vs ecosystems, and people vs tools—and describe their underlying economics, driving forces, and countervailing forces. These tensions frame a concrete discussion of strategic alternatives for global companies. Overall, we emphasize that digital transformation is not an objective state, but rather a strategic choice by executives from an array of alternatives. Managerial summary Digital transformation is a dominant theme in the global economy, but what it means remains perplexing for executives and academics. Pundits claim that “digital changes everything” and that leaders must “disrupt or be disrupted,” but is this really true for established companies serving robust customer needs on the global stage? Understanding what digital transformation means can be challenging as it breaks down familiar geographic, industrial, and organizational boundaries, creating new opportunities and threats. In this paper, we explore three key tensions at the heart of digital transformation—products vs platforms, firms vs ecosystems, and people vs tools—and enumerate their enabling and constraining forces. Building on these concrete constructs provides effective foundations for formulating digital transformation strategy.