Who Changes Course? The Role of Domain Knowledge and Novel Framing in Making Technology Changes

Abstract

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.

When Experts Become Liabilities: Domain Experts on Boards and Organizational Failure

“…Research in related areas points to the possibility that an important but largely overlooked aspect of board composition may be the proportion of domain experts on a board, that is, the proportion of those directors whose primary professional experience is within the focal firm's industry and who are thus seen as possessing a high degree of competence in that domain (Evetts, Mieg, & Felt, 2006;Furr, Cavarretta, & Garg, 2012;Gerver & Bensman, 1954;Mieg, 2006). Recent research suggests that the proportion of domain experts in a strategic decision-making group can significantly shape Authors are listed in alphabetical order and contributed equally.…”

“…This paper was made possible through a research grant from IESE Business School. a firm's strategic direction and its responses to the environment (Furr et al, 2012), which other research in turn has shown to be key determinants of organizational survival chances (Dencker, Gruber, & Shah, 2009;Haveman, 1992). This potential link between the presence of domain experts in strategic decision-making groups, such as corporate boards (Forbes & Milliken, 1999), and organizational survival is important to understand not only because ensuring survival is a critical concern for organizations (Hambrick & D'Aveni, 1992;Mellahi & Wilkinson, 2004) but also because the proportion of domain experts is a readily observable dimension of board composition that organizations can directly influence when creating a board or selecting new directors (see Almandoz, 2012;Pfeffer, 1972).…”

“…Though a corporate board is likely to benefit from domain experts' collective knowledge of the focal industry (see Almandoz, 2012), research suggests that decision-making groups dominated by domain experts might also exhibit several harmful tendencies-such as cognitive entrenchment (Dane, 2010;Furr et al, 2012), overconfidence (Lin & Bier, 2008;Sniezek & Henry, 1989), and limited task conflict (Amason, 1996;Jehn, 1995)-that can detract from effective decision making and thus contribute to the risk of organizational failure (see Forbes & Milliken, 1999;Mellahi & Wilkinson, 2004). Given these conflicting possibilities, this study seeks to explore the relationship between the proportion of domain expert directors on a corporate board and the likelihood of organizational failure.…”

“…To address this question, we build on prior research on domain experts and decision-making groups (Forbes & Milliken, 1999;Furr et al, 2012) to develop the argument that the relationship between the proportion of domain experts on a board and the risk of organizational failure is contingent on the level of decision uncertainty (Elbanna & Child, 2007). We suggest that when decision uncertainty is greater, the potential negative characteristics of domain expert-heavy boards-cognitive entrenchment, overconfidence, and limited task conflictare more likely to be influential and undermine effective strategic decision making.…”

Is experience a useful resource for business model innovation?

“…In fact, "experienced decision-makers may be less likely to engage in counterfactual thinking" (Shepherd, Zacharakis, and Baron 2003, p. 382). This has also been observed in companies facing technological changes (Furr, Cavarretta, and Garg 2012) or disruptive business model innovation (Osiyevskyy and Dewald 2015). These authors distinguish between experience gained from working in the current industry (industry tenure) as opposed to exposure to other industries, and show how the first "could lead to cognitive rigidity, commitment to the status quo, and reluctance to making strategic changes" (Osiyevskyy and Dewald 2015, p. 66).…”