Similarity Judgments in Strategy Formulation: Role, Process and Implications

Farjoun, Moshe; Lai, Linda

doi:10.1002/(sici)1097-0266(199704)18:4<255::aid-smj875>3.3.co;2-a

Cited by 16 publications

(19 citation statements)

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“…Yet negative transfer of learned behavior can occur when the tasks are in fact distinct, so that irrelevant knowledge might be wrongly applied, yielding poor results (Novick, ). The negative transfer effect has been investigated in various organizational contexts (Farjoun and Lai, ), such as the study of mergers and acquisitions (Finkelstein and Haleblian, ; Haleblian and Finkelstein, ), international expansion (O'Grady and Lane, ), and alliance portfolios (Lavie and Miller, ). It has not been empirically investigated by prior research on diversification, which was mostly concerned with inter‐industry diversification, wherein the firm's businesses are sufficiently distinctive so that managers are unlikely to make unwarranted analogies across businesses.…”

Section: Theory and Hypothesesmentioning

confidence: 99%

“…The more diverse these products, the more observable are their differences. At a high level of product diversity, managers can more easily realize the distinct features of diverse products, make necessary adjustments, and learn how to overcome problems of misapplied resources and practices (Farjoun and Lai, ; Novick, ). Thus, as the level of intra‐industry product diversity increases, the firm is likely to avoid successfully some of the liabilities of negative transfer.…”

Section: Theory and Hypothesesmentioning

confidence: 99%

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Intra‐industry diversification and firm performance

Zahavi

Lavie

2013

Strategic Management Journal

124

120

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We study how intra‐industry product diversity affects firm performance by analyzing the implications of expanding a firm's product line within its core business. We conjecture that increases in product diversity initially undermine performance because of negative transfer effects but then improve it due to economies of scope. We further theorize that this U‐shaped effect of product diversity becomes more pronounced as the firm increases the intensity of its technology investment, yet is likely to be attenuated by the firm's accumulated experience with intra‐industry diversification. Data on 156 U.S.‐based software firms operating from 1990 to 2001 furnish support for these conjectures. Our study advances emerging research on intra‐industry diversification by underscoring some of its contingent performance effects. Copyright © 2013 John Wiley & Sons, Ltd.

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Section: Theory and Hypothesesmentioning

confidence: 99%

Section: Theory and Hypothesesmentioning

confidence: 99%

Intra‐industry diversification and firm performance

Zahavi

Lavie

2013

Strategic Management Journal

124

120

View full text Add to dashboard Cite

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“…The concept of thematic similarity has hardly found its way into the business literature, even though similarity (or ‘fit’) plays an important role in a wide range of fields in business research, ranging from marketing to strategy formulation and innovation (e.g., Park, Milberg & Lawson, ; Dawar, ; Farjoun & Lai, ; Bijmolt et al., ; Goldenberg & Mazursky, ). An important field where thematic similarity plays a role is idea development.…”

Section: Introductionmentioning

confidence: 99%

Thematic Ideation – Antecedents and Consequences of Individuals’ Thematic Similarity Recognition

Froehlich

Hoegl

2012

Creat Innov Manage

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Work on thematic thinking, an individual's preference for basing decisions and cognitive processes on thematic similarity, has been developed recently. These preferences also build the basis for idea generation (thematic ideation) and evaluation processes. Research results indicate that there are inter‐individual differences in these preferences. We apply these findings from the field of cognition to the business context and theoretically develop and empirically test a set of antecedents and consequences of thematic thinking. Results indicate that experience and positive affect are positively related to thematic thinking. The consequences that were examined, adaptation and creativity, showed relations which were reverse to the ones hypothesized based on related prior literature. Counter‐intuitively, adaptation is positively related to thematic thinking, while creativity is negatively related. We discuss theoretical and managerial implications and highlight avenues for future research on thematic thinking.

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“…First, since each study relied on survey data, it was assumed that managerial assessment of relatedness underlies strategic decisions, and hence that managerial perceptions of relatedness can be used as input for a given relatedness measures. However, the ambiguous nature of similarity judgments (Farjoun and Lai, ) implies that managers can have varying degrees of confidence in their own assessments of the nature of similarity between business units, which implies an inadequate understanding of the actual interrelationships between businesses (Pehrsson, ). Second, the limitations of survey‐based measures usually include low response rates (e.g.…”

Section: Established Measures Of Relatednessmentioning

confidence: 99%

Capturing Relatedness: Comprehensive Measures based on Secondary Data

Nocker

Bowen

Stadler

et al. 2015

British J of Management

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This paper presents new measures of technological and customer-side relatedness constructed from widely available secondary data. Relatedness is a concept central to predicting the existence and nature of a relationship between corporate diversification and firmperformance. Yet, finding appropriate measures has been an ongoing struggle. The widely used SIC-based entropy measure has low construct validity, and survey-based measures are hard to replicate across firms and industries and over time. The measures we develop significantly outperform established measures in explaining variation in firm performance across firms and over time, and both sources of relatedness are found to be independent and significant explanations of firm performance.

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Similarity Judgments in Strategy Formulation: Role, Process and Implications

Cited by 16 publications

References 0 publications

Intra‐industry diversification and firm performance

Intra‐industry diversification and firm performance

Thematic Ideation – Antecedents and Consequences of Individuals’ Thematic Similarity Recognition

Capturing Relatedness: Comprehensive Measures based on Secondary Data

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