10 5465@amj 2019 0156

Academy of Management Journal
Keep Your Eye on the Ball or on the Field? Exploring the

Performance Implications of Executive Strategic Attention
Journal: Academy of Management Journal
Manuscript ID AMJ-2019-0156.R4
Manuscript Type: Revision
Managerial and organization cognition (General) < Managerial and

Organizational Cognition < Topic Areas, CEO/TMT decision making <
Keywords: Strategic Leadership and Governance < Strategic Management < Topic
Areas, Text/content analysis < Qualitative Orientation < Research
Methods
Scholars have highlighted executive attention as a vital organizational

resource. However, as prior studies have examined different facets of
attention, a theoretical tension has emerged as to whether attention to a
broader or narrower set of strategic issues better facilitates firm
performance. On the one hand, a narrower breadth of strategic attention
limits the risk of managerial cognitive overload. On the other hand, a
greater breadth of strategic attention helps managers avoid blind spots
and identify more or better opportunities. We argue that this balance
shifts based on the quantity and quality of opportunities available in the
Abstract:
market and on firms’ recently demonstrated ability to execute against
these opportunities effectively and efficiently. Using a novel text-analysis
tool that we develop, validate, and make available, we find support for
our arguments within a random sample of S&P 500 companies. We find
that broader strategic attention is associated with enhanced performance
in weaker opportunity environments, with firms using their resources
efficiently, or with firms’ failure to utilize their capabilities effectively. In
supplementary analyses, we also provide new insights into the
importance of following attention with subsequent organizational action.
Page 1 of 54 Academy of Management Journal
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5 Keep Your Eye on the Ball or on the Field? Exploring the
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7 Performance Implications of Executive Strategic Attention
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10 John C. Eklund
11 University of Southern California
12 701 Exposition Boulevard-HOH 431
13 Los Angeles. CA 90089
14 T: (213) 740-3779
15 jceklund@marshall.usc.edu
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18 Michael J. Mannor
19 University of Notre Dame
20 365 Mendoza College of Business
21 Notre Dame, IN 46556
22 T: (574) 631-3298; F: (574) 631-5255
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mikemannor@nd.edu
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49 SPECIAL THANKS
50 We thank Zeki Simsek, three anonymous reviewers, and the participants of the Organization and Strategy
51 Seminar at USC for helpful feedback in the development of this manuscript. In addition, Viva Bartkus
52 (Notre Dame), Jaeho Choi (Wharton), Craig Crossland (Notre Dame), Cindy Devers (Texas A&M),
53 Emilie Feldman (Wharton), Tim Hubbard (Notre Dame), Andreas Koenig (Passau), Gerry McNamara
54 (Michigan State), Mike Pfarrer (Georgia), and Dean Shepherd (Notre Dame) provided excellent guidance
55 in the development and validation of this research.
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Academy of Management Journal Page 2 of 54
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3 KEEP YOUR EYE ON THE BALL OR ON THE FIELD? EXPLORING THE
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5 PERFORMANCE IMPLICATIONS OF EXECUTIVE STRATEGIC ATTENTION
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8 ABSTRACT
9 Scholars have highlighted executive attention as a vital organizational resource. However, as
10 prior studies have examined different facets of attention, a theoretical tension has emerged as to
11 whether attention to a broader or narrower set of strategic issues better facilitates firm
12 performance. On the one hand, a narrower breadth of strategic attention limits the risk of
13
managerial cognitive overload. On the other hand, a greater breadth of strategic attention helps
14
15
managers avoid blind spots and identify more or better opportunities. We argue that this balance
16 shifts based on the quantity and quality of opportunities available in the market and on firms’
17 recently demonstrated ability to execute against these opportunities effectively and efficiently.
18 Using a novel text-analysis tool that we develop, validate, and make available, we find support
19 for our arguments within a random sample of S&P 500 companies. We find that broader strategic
20 attention is associated with enhanced performance in weaker opportunity environments, with
21
firms using their resources efficiently, or with firms’ failure to utilize their capabilities
22
23 effectively. In supplementary analyses, we also provide new insights into the importance of
24 following attention with subsequent organizational action.
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27 KEYWORDS: attention-based view, managerial cognition, strategy formulation, industry
28 environment, text-based analysis
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31 INTRODUCTION
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33 Scholars have convincingly argued that executive attention is a vital resource that shapes
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35 firm performance (e.g., Feldman, 2014; Ocasio, 1997; Ocasio & Joseph, 2018). Prior work has
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37 illustrated how executive attention influences key decisions, guides firms’ responses to external
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challenges, and impacts capability development (e.g., Kaplan, Murray, & Henderson, 2003;
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42 Tripsas & Gavetti, 2000). Given the importance of executive attention, a major question for
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44 leaders relates to how they should allocate their attention. Should they broaden their attention to
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avoid “missing out” on opportunities, or narrow their attention to ensure consideration and
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49 execution on issues at sufficient depth to drive superior performance?
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51 Leading scholars taking the attention-based view (ABV) have highlighted the benefits of
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53 narrowing executive attention to a limited, core set of issues (e.g., Ocasio, 1997; Ocasio &
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56 Joseph, 2005; Ocasio & Joseph, 2018). This view has also been echoed in the broader
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3 management literature, where leaders are encouraged to focus, focus, focus (e.g., Magretta,
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6 2011; Porter, 1996). In response to the rise of new business models and the fast pace of change in
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8 modern industries, however, research on managerial cognition has recently suggested that
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10 broader executive attention can also be beneficial because it enables firms to be more responsive
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and to identify new opportunities (e.g., Kaplan, 2011; Shepherd, Mcmullen, & Ocasio, 2017).
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15 Thus, ex ante it is unclear whether a greater breadth of strategic attention facilitates or hinders
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17 organizational performance. Further, the existing literature does not provide clear guidance as to
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the contingencies shaping the relationship between breadth of strategic attention and
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22 performance.
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24 As with any organizational resource, executive attention contains an element of scarcity.
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26 Given competing priorities, executives need to allocate their limited attention effectively as they
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29 would, for example, allocate capital (Sengul, Costa, & Gimeno, 2019). A wider breadth of
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31 strategic attention is akin to executives spreading capital more evenly across a greater number of
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33 investment opportunities, whereas a narrower breadth of strategic attention is akin to placing a
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few large capital bets on a limited number of investment opportunities. In this light, we define
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38 the breadth of strategic attention as both the number of strategic issues to which executives pay
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40 attention and the relative level of attention that executives give to each of these issues. It is
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important to understand the benefits and costs of a wider-versus-narrower breadth of strategic
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45 attention because, as with the allocation of capital, executive attention significantly influences
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47 firm performance. Unfortunately, our understanding of executive attention is far behind our
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49 understanding of capital allocation.
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52 In this paper, we provide new insight into the relationship between the breadth of
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54 strategic attention and organizational performance; we do so by developing and testing theory
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3 that explores a key trade-off at the center of the attention challenge facing executives. On the one
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6 hand, a narrower breadth of strategic attention limits the risk of cognitive overload and enables
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8 executives to rigorously examine and evaluate a limited set of issues (e.g., Funk, 2014). On the
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10 other hand, a wider breadth of strategic attention helps managers avoid blind spots and identify
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more or better opportunities (e.g., Danneels, 2003; Li, Maggitti, Smith, Tesluk, & Katila, 2013).
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15 In developing our theoretical framework, we focus on key contingencies that shape this trade-off
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17 by altering the upside potential or downside risks of opportunity identification or cognitive
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overload. Building on prior work (e.g., Eggers & Kaplan, 2009; Ocasio & Joseph, 2018), we
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22 suggest that executives should adjust the breadth of strategic attention to align with two key
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24 factors: the external opportunity landscape (the quantity and quality of opportunities available)
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26 and their firms’ recently demonstrated effectiveness and efficiency in converting opportunities
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29 into superior performance (i.e., their internal execution in the current opportunity landscape).
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31 This focus on two forms of alignment – creating effective matches between attention and
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33 external opportunities as well as between attention and internal capabilities/resources – provides
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a parsimonious but powerful framework for guiding executive attention.
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38 Based on this theoretical framework we argue that, when there are fewer or lower-quality
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40 opportunities available in a market, executives should cast their attention more broadly to
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identify a wider range of potential opportunities to improve performance. In this case, when
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45 executives confront a weaker opportunity environment (such as markets with low sales growth or
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47 poor industry profitability), we argue that the costs of cognitive overload associated with a wider
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49 breadth of strategic attention are outweighed by the benefits of being able to identify more or
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52 better opportunities. Similarly, we argue that if a firm is using its capabilities effectively, or if the
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54 firm is not using its resources efficiently, it benefits significantly from a narrower breadth of
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3 strategic attention. This is because the costs of additional cognitive overload are likely to
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6 outweigh the benefits of identifying other opportunities; the firm may start to execute on
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8 opportunities for which its capabilities are less well suited or its efficiency may further decline.
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10 To test our theory empirically we develop a new tool for rigorously assessing the breadth
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of strategic attention using public communications from top executives. Based on a random
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15 sample of 250 large US public firms over eight years, from 2008–2015, we show that executives
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17 vary widely in their breadth of strategic attention. Consistent with our theoretical arguments, the
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relationship between breadth of strategic attention and performance is negatively moderated by
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22 industry munificence and average industry profitability, such that a greater breadth of strategic
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24 attention has a more favorable impact on performance when firms face fewer or lower-quality
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26 opportunities in their external environment. We also find that firms’ recent prior performance
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29 negatively moderates the relationship between breadth of strategic attention and subsequent
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31 performance. Further, we observe that recently demonstrated efficiency of a firm’s utilization of
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33 its resources positively moderates the relationship between breadth of strategic attention and
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performance. In a post-hoc analyses, we also find that when an executive fails to align an
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38 increased breadth of strategic attention with an accompanying increased investment of resources,
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40 the firm’s performance suffers.
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With these findings, our work makes several contributions. First, our work theoretically
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45 illustrates a core tension that executives face when determining their breadth of strategic
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47 attention. We develop a framework to explain how executives can better manage this tension.
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49 This enables us to identify a coherent set of contingencies that together shape the relationship
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52 between the breadth of strategic attention and performance. We believe that this can serve as a
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54 foundation for future theoretical development. Second, we find that an increase in the breadth of
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3 strategic attention must be matched by a subsequent increase in other resources (e.g., capital or
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6 research and development) to have a positive impact on performance; this highlights a key
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8 mechanism linking the breadth of strategic attention and performance. Finally and empirically,
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10 we develop, validate, and make available a new tool that will allow scholars to more easily study
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the strategic attention of executives across a carefully vetted set of 13 different categories of
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15 strategic issues. We expect that this new and extensively validated tool will promote further
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17 growth in the study of the attention-based view and managerial cognition, as well as a deeper
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examination of each of the 13 component strategic issues.
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22 THEORY AND HYPOTHESES
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Attention as a Means to Identify and Exploit Opportunities
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25 The attention-based view (ABV) of the firm (Ocasio, 1997) has risen to become a
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prominent theory within the strategic management domain. Attention is one aspect of managerial
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30 cognition, which also consists of such elements as problem-solving, communication, and social
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32 cognition (Helfat & Peteraf, 2015). Executive attention is shaped through a variety of forces
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including firm history, industry norms, individual preferences, personality, and situational
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37 pressures. Such attention is guided by senior managers’ cognitive schema and is translated into
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39 greater organizational focus on specific areas over time (Ocasio, 2011). According to Ocasio
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41 (1997) attention is defined as:
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44 . . . the noticing, encoding, interpreting, and focusing of time and effort by organizational
45 decision makers on both (1) issues: the available repertoire of categories for making
46 sense of the environment; and (2) answers: the available repertoire of action
47 alternatives.
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49 The issues and answers to which senior managers pay attention are important as they
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52 strongly influence subsequent actions (e.g., Helfat & Peteraf, 2015; Kaplan, 2011; Ocasio &
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54 Joseph, 2018). Executives seek opportunities to improve firm performance and ways to capture
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3 opportunities. We describe the opportunities being sought as the “issues” to which they pay
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6 attention (Ocasio & Joseph, 2005). Thus, we describe the first key aspect of executive attention
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8 as “opportunity identification.” In ABV terms, these opportunities focus upon the “what” a firm
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10 should do to improve its performance.
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Managers also seek to identify how their firms can execute against these opportunities,
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15 which represent the “answers” element of attention in ABV terms. Ocasio and Joseph (2005)
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17 also describe these “answers” as initiatives or action alternatives. In this case, executives’
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attention is focused on assessing how their firms will capture the value associated with the
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22 opportunities that they have identified. Effectively, executives are paying attention to whether
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24 their firms have suitable answers to address the relevant opportunities. Thus, we describe the
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26 second key aspect of executive attention as “opportunity execution,” which is focused around
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29 “how” a firm should capture value from the opportunities to which executives pay attention.
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31 The complexities of managing large organizations mean that executives will
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33 simultaneously pay attention to a wide variety of opportunities (e.g., Cyert & March, 1963).
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Some executives may pay attention to many opportunities while others narrow their focus to a
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38 smaller number. In developing our theoretical arguments, we define the breadth of strategic
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40 attention as the range of opportunities to which senior managers pay attention and the relative
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frequency to which managers pay attention to these opportunities.
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45 An examination of the extant strategic management literature reveals different
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47 perspectives as to the relationship between the breadth of strategic attention and firm
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49 performance. This is perhaps not surprising as there is a clear trade-off associated with a greater
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52 breadth of strategic attention. On the one hand, a greater breadth of strategic attention helps
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54 executives consider more alternatives to avoid missing significant opportunities. Similarly,
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3 scholars have argued that when executives have a narrower focus, firms may not respond
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6 effectively to a changing external environment (e.g., Bock, Opsahl, George, & Gann, 2012;
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8 Eggers & Kaplan, 2009; Li et al., 2013; Tripsas & Gavetti, 2000). From this perspective, broader
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10 strategic attention can enable executives to assess a wider array of opportunities and enhance
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performance through more effective decision-making (e.g., Danneels, 2003; McDougall, Covin,
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15 Robinson, & Herron, 1994; Rerup, 2009).
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17 On the other hand, a greater breadth of strategic attention can push the cognitive abilities
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of executives who may become “overloaded” through trying to identify and execute a plethora of
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22 opportunities. From this perspective, the volume of information may simply be too large for the
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24 executive to process effectively and deliver superior performance (e.g., Funk, 2014). Ocasio and
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26 Joseph (2005) highlight that:
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29 Decision makers are also limited by their activity load or how much they can attend to at
30 a given point in time . . . Higher cognitive demands require the selective focusing of
31 attention on a limited set of issues and initiatives and a limited number of combinations
32 of those issues and initiatives.
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Further, Ocasio (1997) suggests that a lower breadth of strategic attention facilitates the
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37 “accuracy, speed, and sustained processing of information” to support performance. This builds
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39 on classic work that highlights how managers are prone to bounded rationality and unable to
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41 cognitively process a large breadth of opportunities (Simon, 1955; Simon, 1972).
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44 Thus, using a purely cognition-based perspective, an important trade-off for executives is
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46 between avoiding “blind spots” that may result in missed opportunities and overloading
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48 executives such that opportunities are not effectively converted into performance. Given these
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competing pressures, it is theoretically unclear whether a greater breadth of strategic attention is
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53 positively or negatively associated with a firm’s performance.
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55 We posit that the impact of breadth of strategic attention on performance is contingent on
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3 the external and internal environments that firms face. Specifically, we argue that executives
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6 should consider both the nature of the opportunity landscape they observe in the external
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8 environment and their firms’ recently demonstrated efficiency and effectiveness in converting
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10 opportunities into superior performance. We focus on how these two key contingencies shape the
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relationship between the breadth of strategic attention and organizational performance.
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15 Opportunity Identification
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17 In evaluating the availability of opportunities to a firm, we focus on a firm’s external
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19 environment. Specifically, a firm’s industry environment will shape the opportunities that the
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21 firm faces through such factors as the sales growth rate and the average margin potential
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available in a given market (McGahan & Porter, 1997; Porter, 1981, 2008). Therefore, we argue
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26 that the relationship between the breadth of strategic attention and organizational performance
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28 will be contingent on both the quantity and quality of opportunities available within a firm’s
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30 industry environment (e.g., Nadkarni & Barr, 2008).
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33 First, we focus on the quantity of available opportunities to which executives can pay
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35 attention. A market with a high quantity of available opportunities, such as an expanding market
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37 with munificent demand from customers, provides firms with many ways to capture value and
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40 enhance their performance (Ansoff, 1965). In effect, this is the idea that a rising tide can lift all
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42 boats. The challenge in environments rich in opportunities is in not identifying opportunities but
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44 in assessing and executing against them. In such environments, executives can fall into the trap
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of paying attention to a large number of opportunities because there are simply so many good
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49 options available. However, paying attention to many opportunities can lead to the “cognitive
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51 overload” we describe above, meaning that these opportunities are likely to be less effectively
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3 evaluated and executed, leading to reduced performance.1 Thus, we expect a greater breadth of
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6 strategic attention to be associated with a reduced performance in environments where there is a
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8 high quantity of available opportunities. In contrast, in markets with a low quantity of
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10 opportunities, executives are likely to need a greater breadth of strategic attention to find suitable
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opportunities in an environment of greater scarcity. This is likely to be the case in low-growth
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15 environments where there are few opportunities available to enable firms to grow the market. In
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17 such an environment, the challenge is to identify opportunities rather than to assess and execute
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them. Thus, a greater breadth of strategic attention increases the likelihood of finding scarce
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22 opportunities and as there are fewer opportunities to evaluate the costs of cognitive overload are
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24 diminished.
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26 In summary, we return to the core theoretical tension at the heart of this paper: in
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29 environments with a high quantity of available opportunities, the cost of cognitive overload
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31 outweighs the benefit of avoiding “blind spots,” thereby suggesting that a greater breadth of
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33 strategic attention is associated with reduced performance. In contrast, in environments with a
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low quantity of available opportunities, the benefits of being able to identify more opportunities
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38 outweigh the costs of cognitive overload, leading to a greater breadth of strategic attention being
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40 associated with enhanced performance. Thus:
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Hypothesis 1: The quantity of opportunities that a firm faces in its environment
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44 negatively moderates the relationship between the breadth of strategic attention and firm
45 performance, such that the relationship is more negative when a firm faces an
46 environment with a higher quantity of opportunities.
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48 Beyond the quantity of opportunities available, it is also important to consider the quality
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1 Our focus in this research is on executive attention, not on strategic actions by organizations. Thus, in our theorizing we direct
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our arguments toward the cognitive elements involved in translating broad or narrow strategic attention into performance for
55 firms facing different environmental conditions. However, there is also an important link between executive attention and
56 organizational action. We begin to examine that connection in our supplemental analysis and in Table 6.
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3 of available opportunities in a given market. We argue that, for environments that differ in the
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6 quality of opportunities available, executives will face a similar trade-off. For quality, we focus
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8 on items such as profitability of opportunities because firms are focused primarily on
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10 maximizing profitability. An environment may include a large quantity of opportunities but they
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could all be of low profitability, making it more challenging for a firm to enhance its
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15 performance.
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17 In environments where higher-quality opportunities are available, executives are more
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likely to experience the downside of a greater breadth of strategic attention. This is because
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22 paying attention to a broad array of opportunities that have strong profit potential will be
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24 cognitively demanding for executives. Further, because high-quality opportunities are readily
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26 available, executives can enhance firm performance more effectively by directing their limited
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29 attention toward evaluating and executing a small subset of opportunities, rather than by
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31 considering alternatives more broadly. As a result, executives who dilute their attention across a
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33 wider range of good opportunities, which emerge from the executives’ greater breadth of
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strategic attention, are less effective in evaluating and advancing individual opportunities. Thus,
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38 in an environment of readily available high-quality opportunities, the costs of cognitive overload
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40 outweigh the benefits of identifying better opportunities.
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In contrast, in environments where only lower-quality opportunities are available,
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45 executives are likely to experience the advantages of a greater breadth of strategic attention. This
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47 is because paying attention to a larger number of opportunities will increase the likelihood of
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49 executives finding those rarer, higher-quality opportunities in an environment where fewer
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52 opportunities exist. As a result, executives are more likely to find these limited, higher-quality
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54 opportunities, resulting in enhanced organizational performance. In an environment of lower-
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3 quality opportunities, the benefits of opportunity identification outweigh the costs of cognitive
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6 overload. Thus:
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8 Hypothesis 2: The quality of opportunities that a firm faces in its environment negatively
9 moderates the relationship between the breadth of strategic attention and firm
10 performance, such that the relationship is more negative when a firm faces an
11
environment with higher-quality opportunities.
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14 Opportunity Execution
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Our model of attention focuses on executives seeking opportunities to enhance their
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18 firm’s performance. For firms to realize opportunities and translate them into enhanced
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20 performance through successful execution, executives need to ensure that their firms respond to
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22 these opportunities with effective use of the firm’s capabilities and efficient utilization of its
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25 resources (Ocasio, 1997). The effectiveness and efficiency of a firm’s efforts can shift in
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27 environments over time, as new opportunities emerge and others fade. Thus, we examine how
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29 the recently demonstrated effectiveness of firms’ capabilities to convert on market opportunities
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influences the relationship between the breadth of strategic attention and firm performance.
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34 Relatedly, we investigate how the recent efficiency of a firm’s resource utilization also
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36 influences the relationship between breadth of strategic attention and firm performance.
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Executives need to ensure a suitable match between the opportunities pursued by their
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41 firms and their firms’ capabilities (Eggers & Kaplan, 2013). A poor fit between a firm’s
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43 capabilities and the opportunities it pursues is likely to lead to reduced performance (and thus
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45 would be evident in weaker recent financial performance). This point is illustrated by the
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48 examples of Polaroid and Kodak: managers within these firms focused on their firms’
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50 capabilities with respect to chemical film technology and manufacturing. They tried to force fit
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52 these capabilities into opportunities associated with digital photography and ultimately were
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unsuccessful (Tripsas & Gavetti, 2000; Wu, Wan, & Levinthal, 2014).
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3 For firms that have not found a good fit between their capabilities and their current
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6 opportunities, as demonstrated by their recent inability to convert market opportunities into
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8 robust performance, a greater breadth of strategic attention enables executives to evaluate a
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10 broader range of alternative opportunities. In doing so, executives increase the likelihood of
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finding opportunities that better fit their firms’ capabilities. If a firm has strong capabilities but
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15 has not applied them to the right opportunities, reduced performance may follow. For example,
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17 Netflix, despite strong capabilities in the distribution of DVDs and identification of customer
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preferences, initially performed poorly – reaching only 300,000 subscribers in 2000 – and
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22 offered themselves for sale to their rival, Blockbuster. However, by identifying a broad swathe of
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24 additional opportunities, Netflix was able to improve its performance. Thus, if firms are not
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26 currently using their capabilities effectively, the benefits of being able to identify new
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29 opportunities outweigh the costs of cognitive overload, because evaluating these additional
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31 opportunities can facilitate a better fit.
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33 For firms that have found a good fit between their capabilities and the opportunities they
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encounter in a given market (as demonstrated by their ability to convert such opportunities into
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38 robust performance in the last year), a greater breadth of strategic attention can have an adverse
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40 impact on performance. A greater breadth of strategic attention may result in executives’
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attention being shifted from opportunities that make good use of their firms’ capabilities to
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45 encompass other opportunities that make less effective use of their firms’ capabilities. From a
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47 cognition perspective, executives can become distracted from paying sufficient attention to their
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49 firms’ existing opportunities that are making good use of their firms’ capabilities. This is likely
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52 to lead to reduced effectiveness in executing on existing opportunities if, for example, a
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54 distracted executive makes mistakes. Illustrations abound of successful firms unsuccessfully
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3 applying their capabilities to new opportunities, thereby harming their overall performance.
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6 Northrop Grumman, a large defense contractor with strong capabilities in electronics, decided to
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8 pursue opportunities in shipbuilding in 2001; this divided attention adversely impacted their
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10 subsequent performance. Similarly, in the early 1980s, Colgate – a successful dental and
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personal care products company – decided to dedicate attention toward a new opportunity in the
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15 readymade meals market; the result was a subsequent flattening of revenues and net income.
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17 Hence, if firms are currently using their capabilities effectively, the benefits of being able to
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identify many opportunities can be outweighed by the costs of cognitive overload as executives
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22 struggle to dedicate sufficient attention toward the execution of existing opportunities while they
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24 simultaneously evaluate additional opportunities.
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26 Based on these arguments, the adage “if it ain’t broke, don’t fix it” is good advice. Firms
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29 that have strong matches between their capabilities and their opportunities, as evidenced by their
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31 recent effective performance, are not “broken”; an attempt to “fix” them through a greater
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33 breadth of strategic attention may lead to reduced performance. In contrast, firms that have not
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matched their capabilities to their existing opportunities should experience enhanced
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38 performance with a greater breadth of strategic attention. This may be counterintuitive for some,
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40 where the common advice is to focus if an organization is underperforming (e.g., Dawley,
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42
Hoffman, & Lamont, 2002). Our arguments suggest that effective current usage of firms’
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45 capabilities negatively moderates the primary relationship between the breadth of strategic
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47 attention and organizational performance. Thus, we hypothesize:
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49 Hypothesis 3: The current effectiveness of usage of a firm’s capabilities negatively
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51
moderates the relationship between the breadth of strategic attention and firm
52 performance, such that the relationship is more negative as a firm uses its capabilities
53 more effectively.
54
55 The relationship between the breadth of strategic attention and organizational
56
57
58
59
60
1
2
3 performance can also be moderated by the efficiency of a firm’s recent use of its resources. If a
4
5
6 firm is using its resources efficiently, such that the firm requires relatively limited additional
7
8 effort or asset investment to generate revenue, it has the potential to pursue more initiatives
9
10 simultaneously. Executives can afford to divert their attention away from existing opportunities
11
12
13
that are being executed with limited effort. Thus, executives will have more cognitive capacity to
14
15 identify and evaluate additional opportunities to enhance the firm’s performance. Hence, if a
16
17 firm is executing efficiently against its existing opportunities, the benefits of identifying and
18
19
evaluating more opportunities will outweigh the costs of cognitive overload as managers are less
20
21
22 likely to be over-stretched under these circumstances.
23
24 However, if a firm has not been using its resources efficiently, executive attention is
25
26 likely to be needed to identify ways to execute existing initiatives more efficiently. Diverting
27
28
29 attention to additional opportunities will take valuable executive attention away from addressing
30
31 existing efficiency issues and may lead to further declines in efficiency. Thus, if a firm is not
32
33 executing its opportunities efficiently, the costs of cognitive overload from trying to assess new
34
35
36
opportunities and to address efficiency issues in executing against existing opportunities can
37
38 more than outweigh the benefits of being able to identify additional opportunities.
39
40 Together, these arguments suggest that if firms are using their resources efficiently to
41
42
execute against their opportunities, they will deliver enhanced performance when executives
43
44
45 have a greater breadth of strategic attention. In contrast, firms that are not using their resources
46
47 efficiently will experience reduced performance when executives have a greater breadth of
48
49 strategic attention. Therefore, the efficient use of firms’ resources positively moderates the
50
51
52 primary relationship between breadth of strategic attention and organizational performance.
53
54 Thus, we hypothesize:
55
56
57
58
59
60
1
2
3 Hypothesis 4: The current efficiency of usage of a firm’s resources positively moderates
4
5
the relationship between the breadth of strategic attention and firm performance, such
6 that the relationship is more positive as a firm uses its resources more efficiently.
7
8 We summarize our theoretical framework in Figure 1.
9
10 ---------------------------- Insert Figure 1 about here -------------------------
11
12
13
RESEARCH METHODS
14 To test the hypotheses outlined above, the key challenge is to develop an appropriate
15
16
17 measure of the breadth of strategic attention that can be applied across a wide range of industries.
18
19 In creating this measure, we focus on large, publicly listed firms; these firms’ communications,
20
21 in the form of quarterly earnings call transcripts that can provide a consistent and reliable lens
22
23
into executive attention, are readily available. Such communications by firms to the investment
24
25
26 community provide an insight into the issues at the forefront of the attention of top management
27
28 teams (TMT), thereby enabling us to develop our measure (e.g., Washburn & Bromiley, 2014;
29
30 Wiersema & Zhang, 2011).
31
32
33 In line with previous studies (e.g., Kaplan, 2011; Ridge & Ingram, 2017) that examine
34
35 managerial communications such as letters to shareholders, our use of earnings call
36
37 communications assumes that the content in such calls reflects actual executive attention to
38
39
40 specific topics. Executives’ comments in such situations are carefully considered (Lee, Hwang,
41
42 & Chen, 2017) and are likely to reflect key strategies to which executives pay attention. The
43
44 finance and accounting literatures find that firms voluntarily disclose a significant amount of
45
46
information to securities analysts on quarterly earnings calls, and not just the information that
47
48
49 analysts want to hear (e.g., Brown, Hillegeist, & Lo, 2004; Frankel, Johnson, & Skinner, 1999;
50
51 Jorgensen & Wingender, 2004; Tasker, 1998). In fact, even though they are not required to do
52
53 so, executives tend to disclose more information if their firms’ financial statements are less
54
55
56 informative (Tasker, 1998). Thus, we argue that what executives communicate has real substance
57
58
59
60
1
2
3 and reflects the strategic issues to which they are paying attention. However, as with letters to
4
5
6 shareholders, executives may not disclose all strategies being considered, leaving us with simply
7
8 a useful proxy for true managerial attention.
9
10 Data and Sample
11
12 We analyze our hypotheses using a random sample of 250 S&P 500 companies over the
13
14 period 2008–2015. To choose firms randomly, we first generated a list of all S&P 500 firms in
15
16
17 2008.2 Consistent with prior research (e.g., McGahan & Porter, 1997; McNamara, Vaaler, &
18
19 Devers, 2003), we excluded banks. We then used a random-number generator to assign a random
20
21 value to each remaining firm, choosing the 250 highest values for inclusion in our sample. We
22
23
supplement the earnings call data with data from a variety of databases such as Compustat,
24
25
26 CRSP, Bordex, and IBES. We provide further specific details below on the precise database used
27
28 to construct each variable. The final sample consists of 1,373 firm-year observations over the
29
30 period 2009–2015, which is 627 less than the potential value of 2,000 (250 firms over eight
31
32
33 years); this is due to the use of several lagged variables, thereby eliminating the first year of data
34
35 from the main dataset, to a combination of missing values for key variables (e.g. missing call
36
37 transcripts), and to firms dropping out due to merger and acquisition activity.
38
39
40 Variables
41 Measurement of breadth of strategic attention. The variable Strategic breadth that we
42
43
44 develop is a Herfindahl measure that provides an indication of the breadth of strategic attention
45
46 across 13 categories of strategic issue. To develop the variable Strategic breadth, we collected
47
48 quarterly earnings call transcripts for the 250 sample firms over the period 2008–2015 from
49
50
51
52 2 The use of large, publicly listed firms within the S&P 500 to examine management phenomena is relatively well established
53 within the strategic management domain (e.g., Krause, Semadeni, & Withers, 2016; Mishina, Dykes, Block, & Pollock, 2010;
54 Wowak, Mannor, Arrfelt, & McNamara, 2016). Even within our sample of firms there is significant variation in their sizes, over
the period 2008-2015, as measured by the log of their annual revenues that range from 5.8 (> $300 M - Realty Income) to 13.0 (>
55 $400 B Wal-Mart). As we take a snapshot of S&P 500 companies in 2015, going back to 2008 at the start of the sample, some of
56 the firms are actually relatively small in size.
57
58
59
60
1
2
3 Seeking Alpha, yielding a total of 7,090 firm-analyst call events.
4
5
6 Developing such a variable represents a measurement challenge for two key reasons.
7
8 First, there is no definitive “lexicon” outlining categories of strategic issues available from which
9
10 to base any measure of breadth of strategic attention (e.g., Hambrick, 2004). These strategic
11
12
13
issues cover different categories of opportunity and initiative to which managers may pay
14
15 attention. Second, it is difficult to capture the strategic issues to which executives pay attention
16
17 as evidenced by their communications in quarterly earnings calls and subsequently to convert
18
19
this information into a measure of the breadth of strategic attention.
20
21
22 To guide our process, we follow the general approach to computer-aided text analysis
23
24 described by Short, Broberg, Cogliser, and Brigham (2010), McKenny, Short, and Payne (2013)
25
26 and Rhee, Ocasio, and Kim (2019). First, we focus on using inductive and deductive techniques
27
28
29 to develop a set of categories of strategic issue that we then validate with a group of leading
30
31 scholars. Second, for each category of strategic issue, we develop dictionaries of terms
32
33 associated with each relevant issue; we then validate these dictionaries with a large panel of
34
35
36
content experts. Third, we analyze the text of the set of analyst-call transcripts to develop our
37
38 measure of Strategic breadth. We expand on each of these three steps below. Further details on
39
40 how we develop our measure Strategic breadth are provided in the appendix.
41
42
First, to develop the categories of strategic issue, we draw upon three academic and
43
44
45 practitioner sources: the Strategic Management Journal (2012–2014), the McKinsey Quarterly
46
47 (2012–2014) and a survey of management consultants from leading strategy consulting firms.
48
49 Following multiple rounds of iteration we identified 256 unique strategy terms that fell into 10
50
51
52
53
54
55
56
57
58
59
60
1
2
3 categories of strategic issue. 3 To refine the strategic issue categories and agree on the description
4
5
6 of each strategic issue, five senior scholars from the U.S. and Europe were recruited to review
7
8 the 10 categories. Based on two rounds of feedback and revision with these scholars, we
9
10 expanded the set of strategic issues to a final set of 13 strategic issue categories.
11
12
13
Second, the next challenge involved using these 13 categories of strategic issue to
14
15 develop a specific measure of the breadth of strategic attention. Our approach involved analyzing
16
17 the text of firms’ quarterly earnings calls with analysts. To undertake this text analysis, a unique
18
19
linguistic dictionary was developed for each of the 13 strategic issue categories. Based on our
20
21
22 analyses of the three academic and practitioner sources, we identified 380 word roots or terms
23
24 across all 13 strategic issue categories. Using a new panel of management scholars from U.S.
25
26 business schools, we validated these dictionaries. In total, 36 scholars from 24 unique
27
28
29 universities evaluated the dictionaries. Each of the 13 dictionaries was evaluated by a group of
30
31 five to eight panelists, with an average of 5.6 evaluators per dictionary. This process ultimately
32
33 led to the elimination of 80 words, leaving 300 words across the 13 dictionaries, with a minimum
34
35
36
of 10 words and a maximum of 40 words per dictionary (Table 1).
37
38 -----------------------------Insert Table 1 about here --------------------------------------
39
40 Third, the creation of these 13 strategic issue dictionaries enabled the use of Linguistic
41
42
Inquiry and Word Count (LIWC) software to develop counts of the words associated with each
43
44
45 strategic issue within an earnings call transcript (e.g., Mannor, Wowak, Bartkus, &
46
47 Gomez‐Mejia, 2016; Pennebaker, Francis, & Booth, 2001; Pfarrer, Pollock, & Rindova, 2010).
48
49 Words pertaining to each strategic issue – both within the prepared statements by the top
50
51
52
53
54 3Note the lexicon that we use in developing our variable Strategic breadth. The raw data provides a set of strategy terms that we
55 ultimately condense to 13 strategic issues (which cover different types of opportunities); these issues are then used to develop a
56 measure of Strategic breadth, which is the key independent variable that we use to measure breadth of strategic attention.
57
58
59
60
1
2
3 management team at the start of the quarterly earnings call and within executives’ responses to
4
5
6 analyst questions – were analyzed. Any text pertaining to analysts’ questions and commentary
7
8 was excluded. The 13 strategic issue dictionaries and the LIWC dictionary files are provided in
9
10 the appendix and the online appendix.
11
12
13
The breadth of strategic attention can be seen as a form of diversification of executives’
14
15 attention. Accordingly, we develop a Herfindahl measure that uses the proportion of
16
17 words/phrases associated with each strategic issue in a quarterly earnings call. For firm i at time
18
19
t, Strategic breadth (sbi,t,) is then estimated using equation 1, where pi,k,t is the proportion of
20
21
22 words associated with strategy issue k, adjusted for the size of the relevant strategy issue
23
24 dictionary, at time t of firm i (prepared management comments and managerial responses only):
25
26 13
∑𝑘 = 1(𝑝𝑖,𝑘,𝑡)2
27 𝑠𝑏𝑖,𝑡 = 1 ― 2 (1)
28 (∑13𝑘 = 1𝑝𝑖,𝑘.𝑡)
29
30
31
Note, we subtract the typical Herfindahl measure from 1 so as to ensure larger values are
32
33 equivalent to a greater breadth of strategic attention. pi,k,t is estimated using equation 2:
34
35 300 𝑐𝑖,𝑘,𝑡
36
𝑝𝑖,𝑘,𝑡 = 13 𝑥 𝑛𝑘 𝑥 𝑞𝑖,𝑡
(2)
37
38 where ci,k,t is the count of words associated with a specific strategic issue, k, for firm i at time t in
39
40
the analyst-call transcript; qi,t is the total number of words in the relevant parts of the analyst-call
41
42
43 transcript for firm i at time t; and nk is the number of words in a specific dictionary associated
44
45 with strategic issue, k. Note that there are a total of 300 words in the 13 dictionaries, hence the
46
47 term 300/13. To convert the variable from a quarterly to an annual measure we calculated the
48
49
50 mean value over a fiscal year. This annual mean represents the variable Strategic breadth.4
51
52
53
4We undertook robustness analyses of our main results using a variant of the measure of Strategic breadth. We used the average
54
word percentages per fiscal year per strategy issue to develop an annual measure directly (as opposed to averaging the quarterly
55 values of strategic breadth). We obtained results similar to the main results presented in this paper using this alternative approach.
56 These results are presented in the online appendix.
57
58
59
60
1
2
3 Dependent variable. We measure the dependent variable, Performance, based on firms’
4
5
6 return on assets (ROA) using data from Compustat (winsorized at the 1% level).5
7
8 Moderators. We use four moderators to assess our four hypotheses. To test our
9
10 hypotheses (H1–2) that pertain to the quantity and quality of opportunities, we use industry
11
12
13
munificence and average industry ROA respectively to align with our theoretical focus on sales
14
15 growth and industry profit potential as indicators of opportunity quantity and quality. To test our
16
17 hypotheses (H3–4) that pertain to firms’ abilities to execute opportunities effectively and
18
19
efficiently, we examine 1-year lagged ROA (to assess firms’ recent effectiveness in converting
20
21
22 currently available opportunities into robust performance) and current assets turnover (to assess
23
24 the recent efficiency of firms in utilizing assets in the current market), respectively.
25
26 To estimate the quantity of opportunities available in the external environment
27
28
29 (Hypothesis 1), we use industry munificence (Munificence) as this provides a direct measure of
30
31 industry growth and an indication of the capacity available within an industry (Dess & Beard,
32
33 1984). We argue that if the sales/capacity of an industry is increasing there must be more
34
35
36
opportunities available for firms to enhance their respective performance. We estimate
37
38 Munificence at an industry level (4-digit GICS code) using the 5-year revenue growth of an
39
40 industry, as estimated through a regression of annual revenues versus year, divided by the mean
41
42
5-year value of revenues for firms within the relevant industry over the same time period.
43
44
45 To estimate the quality of opportunities available in the external environment
46
47 (Hypothesis 2), we use average industry ROA. This measure provides an indication of the
48
49 average profitability of the available opportunities within an industry at a point in time. If an
50
51
52 industry has higher levels of average profitability, the available opportunities will, typically,
53
54
55
56 5 We obtain similar results with a non-winsorized value as with as with industry-adjusted ROA.
57
58
59
60
1
2
3 enhance a firm’s subsequent performance more than the opportunities available in less profitable
4
5
6 industries enhance those industries. We consider opportunities with a greater positive impact on
7
8 a firm’s overall performance to be of higher quality. We estimate average industry ROA
9
10 (Average industry ROA) at the 4-digit GICS code level using the rolling 5-year average ROA for
11
12
13
all firms in each industry.
14
15 To estimate a firm’s ability to execute effectively on available opportunities (Hypothesis
16
17 3), we use the 1-year lagged value of a firm’s ROA (Lagged performance). In determining
18
19
whether a firm is effectively matching its capabilities to available opportunities, we argue that
20
21
22 managers will primarily focus on their firms’ recent performance. This is because managers can
23
24 observe their firms’ prior performance more readily than they can directly compare their firms’
25
26 capabilities with external opportunities.
27
28
29 To estimate a firm’s ability to execute efficiently on available opportunities (Hypothesis
30
31 4), we use a 1-year lagged value of a firm’s current assets turnover. Current assets turnover is
32
33 readily observable by managers and provides an indication of the efficiency of a firm’s usage of
34
35
36
its current assets such as cash. Firms that are less efficient in leveraging their current assets to
37
38 generate revenues are more likely to struggle when trying to execute across a broader array of
39
40 initiatives. We estimate current assets turnover (Current assets turnover) by dividing firm annual
41
42
revenues by average current assets in each relevant year and lagging the variable one year.
43
44
45 Control variables. The controls that we utilized in our analyses are described in Table 2.
46
47 ---------------------------- Insert Table 2 about here -------------------------
48
49 Analysis
50
51 The winsorized dependent variable ROA is continuous and normally distributed, thus
52
53 Ordinary Least Squares (OLS) regression analyses are used. The analyses are undertaken using
54
55
56 the one-year lagged values of Strategic breadth. As a robustness test, non-lagged values of
57
58
59
60
1
2
3 Strategic breadth are also examined. All firm-level and stock market controls are lagged one
4
5
6 year, except for Firm age and CEO tenure. The five industry-level variables (Munificence,
7
8 Dynamism, Industry concentration, Average industry ROA, and Average Industry R&D intensity)
9
10 are not lagged to reflect current market conditions. We leverage firm- and year-fixed effects to
11
12
13
control for time-invariant sources of firm heterogeneity and economy-wide shocks. Standard
14
15 errors are clustered at the firm level to account for non-independence of errors (Petersen, 2009).
16
17 We test our four hypotheses by examining the coefficients for the four interaction terms
18
19
between Strategic breadth and the four moderators (Munificence, Average industry ROA, Lagged
20
21
22 performance, and Current assets turnover). The variables Munificence, Average industry ROA,
23
24 Lagged performance, Current assets turnover, and Strategic breadth are mean centered to
25
26 facilitate interpretation of the interaction terms (e.g., Haans, Pieters, & He, 2015).
27
28
29 Strategic breadth is an endogenous choice, which leaves estimates for this coefficient
30
31 prone to omitted variable bias associated with unobserved variables that are correlated with the
32
33 regression error term and Strategic breadth. There is less of a concern of this bias with the
34
35
36
interaction terms of Strategic breadth and the four moderators (Nizalova & Murtazashvili, 2016).
37
38 However, as a robustness check we use an instrumental variable two-stage least squares (IV
39
40 2SLS) regression approach in which we instrument for Strategic breadth. The instrument that is
41
42
used is the lagged average number of words associated with management’s commentary and
43
44
45 response to analysts’ questions per quarterly analyst call (Word count) in a fiscal year.6 We
46
47 conduct split-sample regressions in which we examine sub-samples based on high and low
48
49 values of the relevant moderator and compare the coefficient of Strategic breadth across these
50
51
52
53
54 6In determining a suitable instrument for an endogenous independent variable, existing literature suggests that three criteria
55 should be met: relevance, exogeneity, and exclusion (Angrist & Pischke, 2008; Baiocchi, Cheng, & Small, 2014; Semadeni,
56 Withers, & Trevis Certo, 2014). We describe our work assessing these criteria in an online appendix.
57
58
59
60
1
2
3 split samples to avoid the need to develop two instruments.
4
5
6 RESULTS
7 Descriptive Analysis
8
9 ---------------------------- Insert Table 3 and Figures 2-3 about here -------------------------
10
11
Table 3 provides the summary statistics. As illustrated in Figure 2, the overall distribution
12
13
14 of Strategic breadth (mean = 0.83) is left-skewed with a longer tail of lower values. Executives
15
16 across firms vary significantly in the variety of strategic issues to which they pay attention, with
17
18 76 percent of the observed variance in Strategic breadth occurring between firms as opposed to
19
20
21 within firms. In addition, Strategic breadth demonstrates significant within-firm path
22
23 dependence over time (Figure 3a), including across CEO succession events.7 From an industry
24
25 perspective, we see evidence of fairly significant isomorphic pressures within industries, as
26
27
28
shown in Figure 3b. However, these pressures vary across different types of strategic issue,8 with
29
30 some strategic issues showing evidence of much more between-industry consistency than others.
31
32 Hypothesis Tests
33
34 Table 4 illustrates the analyses we conducted to test our four hypotheses. Initially we
35
36 conducted a Hausman test to determine whether firm-fixed effects and random-effects models
37
38
generated significantly different results (Wooldridge, 2010). These analyses suggest that we
39
40
41 reject the null hypothesis that there is no difference between models using firm-fixed effects and
42
43 random effects (p=0.000). Thus, all the main results that we describe include firm-fixed effects.
44
45
46
47
7 The mean value of Strategic breadth is relatively invariant over time (Figure 3a), suggesting significant path dependency. This
48
is further exhibited by high yearly serial correlation of strategic breadth with inter-year correlations of the variable being between
49 0.84 (focal year and 1-year lagged) and 0.71 (focal year and 4-year lagged). Further, we see evidence to suggest that there is
50 strong firm imprinting of firms’ strategic breadth as we see limited change following CEO succession events. The correlation
51 coefficient between Strategic breadth prior to a CEO change and post CEO change is 0.88.
52 8 Seven of the 13 strategy issues demonstrate significant variance across industries in the attention to these issues (defined by the
53 standard deviation of the average proportion of words mentioned per category across industries). For the other six strategy issues,
54 it appears that, across industries, executives pay similar attention to them. Customer-orientated and financial/risk management
strategic issues have the greatest variation across industries. Industries such as IT and healthcare place a greater emphasis on
55 innovation and capability development both in-house and through alliances. In contrast more mature industries such as industrials
56 and materials focus on low cost and internal organizational strategies. Further details are provided in our online appendix.
57
58
59
60
1
2
3 We also tested for potential issues with multi-collinearity through examination of Variance
4
5
6 Inflation Factors (VIFs). We found that the VIFs for all model coefficients were below the
7
8 recommended level of 10 (Hair, Anderson, Tatham, & Black, 1998). This suggests that the
9
10 analyses are not subject to significant multi-collinearity.
11
12
13
Model 1 in Table 4 includes just the control variables. Greater slack and SG&A are
14
15 associated with lower performance while greater performance is associated with lower (i.e.,
16
17 better) security analyst ratings. Model 2 contains all the key independent variables as well as
18
19
controls and we see that Munificence and Average industry ROA are positively associated with
20
21
22 Performance. Model 3 enables us to test Hypothesis 1 as it includes the interaction term
23
24 Strategic breadth x Munificence. We see support for Hypothesis 1 with the negative and
25
26 statistically significant coefficient associated with this interaction term. Similarly, we see support
27
28
29 for Hypotheses 2–4 in models 4–6 respectively due to the negative and statistically significant
30
31 coefficients for the interaction terms Strategic breadth x Average industry ROA and Strategic
32
33 breadth x Lagged performance and the positive, statistically significant coefficient for the
34
35
36
interaction term Strategic breadth x Working capital turnover. Model 7 is the fully saturated
37
38 model. All four hypotheses continue to be supported.
39
40 Table 5 illustrates the impact on Performance associated with a one standard deviation
41
42
increase of Strategic breadth for high (top decile) and low (lowest decile) values of each of the
43
44
45 four moderators. The impact ranges between 0.8 and 1.2% points on firms’ ROAs (sample mean
46
47 = 6.9%) for a one standard deviation change in Strategic breadth in moving from the bottom to
48
49 the top decile of the relevant moderator. Thus, it appears that significant shifts in strategic
50
51
52 attention will be associated with moderate swings in performance depending upon external
53
54 environmental conditions, firms’ abilities to match opportunities with capabilities, and how
55
56
57
58
59
60
1
2
3 efficiently firms are utilizing their resources.9
4
5
6 ---------------------------- Insert Tables 4 and 5 about here -------------------------
7
8 Supplementary Analyses
9
10 We undertook six additional analyses to test the robustness of our results, examine
11
12 alternative explanations to our arguments, and provide deeper insights into the nature of the
13
14 relationships indicated by our hypotheses. Four of these six supplemental analyses are provided
15
16
17 in the online appendix for this manuscript; they focus on the potential for a U-shape relationship
18
19 between performance and strategic breadth, on additional analyses that examine potential biases
20
21 in the analysis of strategic breadth as an endogenous variable, on analyses that examine
22
23
measurement variants of performance and strategic breadth, and on analyses that explore various
24
25
26 time frames for assessing prior performance windows. Two of our supplemental analyses are
27
28 presented here.
29
30 First, to further evaluate how the breadth of strategic attention and performance are
31
32
33 related, we examined the performance impact (at time t) of a change in Strategic breadth
34
35 (between t-2 and t-1) with a corresponding sequential change in resource allocation (between t-1
36
37 and t) across five key categories: advertising intensity, R&D intensity, SG&A proportion, capital
38
39
40 intensity, and property, plant & equipment ratio (Wowak et al., 2016). If firms do not follow an
41
42 increase in their breadth of strategic attention without a concomitant increase in resources, there
43
44 is a risk that existing resources will be spread too thin and that overall performance will suffer.
45
46
This is because a firm’s pursuit of its existing and new opportunities will be strained due to
47
48
49 insufficient resources. The results of these analyses are illustrated in Table 6.
50
51 The coefficients for the interaction term between the change in strategic breadth and the
52
53
54 9 We also conducted instrumental variable regressions using specifications without any interaction terms and found that the
55 coefficient for Strategic breadth was negative and statistically significant. This suggests that, on average, a greater breadth of
56 strategic attention is associated with reduced performance.
57
58
59
60
1
2
3 subsequent change in R&D intensity (Model 2) or capital intensity (Model 4) are positive and
4
5
6 statistically significant. This indicates that if an increase in Strategic breadth is followed by an
7
8 increase in R&D intensity or Capital intensity, performance will be enhanced. The greater the
9
10 increase in resource allocation for a fixed increase in Strategic breadth the greater the
11
12
13
improvement in performance. Ultimately, this implies that if a firm invests to support an increase
14
15 in Strategic breadth, its performance will increase. These relationships are illustrated graphically
16
17 in Figure 4. These results only apply for R&D and capital expenditures. For other forms of
18
19
expenditure, the impact of increasing these resources following an increase in the breadth of
20
21
22 managerial strategic attention does not appear to facilitate increased performance; such expenses
23
24 include: advertising; property, plant, & equipment (PPE); and selling, general, & administrative
25
26 (SG&A) expenses.
27
28
29 ---------------------------- Insert Table 6 & 7 and Figure 4 about here -------------------------
30
31 Second, to examine the trade-offs executives face when determining their breadth of
32
33 strategic attention, we conduct a series of analyses to examine how the moderating impact of
34
35
36
execution ability (as described in Hypotheses 3 and 4) can vary with external environmental
37
38 conditions. Focusing on the effectiveness of usage of capabilities, our arguments suggest that, if
39
40 firms use their capabilities effectively, a greater breadth of strategic attention is associated with
41
42
poorer performance; this is because the strong fit between capabilities and opportunities is likely
43
44
45 to weaken as the firm pursues less appropriate opportunities. Further, Hypotheses 1 and 2
46
47 suggest that a more favorable external environment is associated with a more negative
48
49 relationship between the breadth of strategic attention and performance. Thus, the combination
50
51
52 of a more favorable market environment and more effective capability usage should be
53
54 associated with a much more negative relationship between the breadth of strategic attention and
55
56
57
58
59
60
1
2
3 performance compared to this combination when effective firms face less favorable
4
5
6 environments. This is illustrated in Table 7 where, under high munificence conditions, the
7
8 coefficient of Strategic Breadth x Lagged Performance is more negative than the same
9
10 coefficient under low munificence conditions (-4.98 versus -0.79). Similarly, under strong
11
12
13
industry ROA conditions the coefficient of Strategic Breadth x Lagged Performance is more
14
15 negative than it is under weak industry ROA conditions (-1.83 versus -1.53), though the
16
17 difference is much smaller.
18
19
Moving to the efficiency of usage of firms’ resource bases, our arguments suggest that, if
20
21
22 firms use their resources efficiently, a greater breadth of strategic attention is associated with
23
24 enhanced performance. This is because managers are likely to have spare cognitive capacity with
25
26 which to pay attention to additional opportunities. Further, Hypotheses 1 and 2 suggest that a less
27
28
29 favorable external environment is associated with a less negative (more positive) relationship
30
31 between the breadth of strategic attention and performance. Thus, the combination of a less
32
33 favorable environment and more efficient resource usage should be associated with a much more
34
35
36
positive relationship between the breadth of strategic attention and performance as compared to
37
38 this relationship when efficient firms face more favorable environments. This is illustrated in
39
40 Table 7 where, under low munificence conditions, the coefficient of Strategic Breadth x Current
41
42
assets turnover is more positive than under high munificence conditions (0.093 versus 0.015);
43
44
45 due to the reduction in sample size, however, both coefficients are statistically insignificant.
46
47 Similarly, under weak industry ROA conditions, the coefficient of Strategic Breadth x Lagged
48
49 Performance is more positive than under strong industry ROA conditions (0.070 versus 0.024).
50
51
52 These results indicate how environmental conditions can enhance or mitigate the impact
53
54 of the effectiveness of capability usage and efficiency of resource usage on the relationship
55
56
57
58
59
60
1
2
3 between the breadth of strategic attention and performance. Favorable industry conditions can
4
5
6 enhance the negative moderation impact of the effectiveness of capability usage. Similarly, such
7
8 favorable conditions can mitigate the positive moderation impact of the efficiency of a firms’
9
10 resource utilization. The opposite is the case when industry conditions are less favorable.
11
12
13
DISCUSSION AND CONCLUSION
14 Leaders face an attention dilemma. On the one hand, a greater breadth of strategic
15
16
17 attention enables executives to identify more potential opportunities to improve their firm’s
18
19 performance (e.g., Kaplan, 2011). On the other hand, a greater breadth of strategic attention can
20
21 cause executives to suffer from cognitive overload and to be unable to convert opportunities into
22
23
performance (e.g., Ocasio & Joseph, 2018). The extant literature provides limited guidance
24
25
26 regarding the conditions under which a greater breadth of strategic attention can help or hinder
27
28 firm performance; some studies extol the benefits of narrower breadth (e.g., Porter, 1996) but
29
30 others suggest the benefits of greater breadth (e.g., Shepherd et al., 2017). It is important to
31
32
33 understand the benefits and costs of a greater and narrower breadth of strategic attention. As with
34
35 the allocation of capital, strategic attention has the potential to significantly impact a firm’s
36
37 performance, yet our understanding of attention is far behind that of capital allocation.
38
39
40 In this paper we show how, based on the external environment they face and on the
41
42 effectiveness and efficiency with which their firms are utilizing their capabilities and resources,
43
44 executives can manage this dilemma by shifting their breadth of strategic attention. We
45
46
theoretically argue and empirically find that the benefits of opportunity identification can
47
48
49 outweigh the costs of cognitive overload. This can happen when firms face external
50
51 environments with fewer or lower-quality opportunities, when they have recently struggled to
52
53 convert available market opportunities into performance, or when they are utilizing their
54
55
56 resources efficiently. Conversely, we also highlight the conditions under which the costs of
57
58
59
60
1
2
3 cognitive overload outweigh the benefits of opportunity identification.
4
5
6 Our results also suggest that executives face a series of trade-offs associated with their
7
8 breadth of strategic attention. For example, based on internal execution ability – whether firms
9
10 are highly efficient and effective, or poorly efficient and effective – it is unclear whether greater
11
12
13
or narrower breadth of strategic attention will deliver enhanced performance. These
14
15 circumstances represent extremes of execution ability but the trade-offs are similar. The trade-off
16
17 for strong performers is that a narrower breadth of strategic attention ensures ongoing effective
18
19
execution but may not take advantage of potential spare capacity to explore new opportunities. A
20
21
22 narrower breadth of strategic attention exposes firms to the risk of future core or routine
23
24 rigidities, potentially disabling their response to adverse environmental change (Gilbert, 2005;
25
26 Leonard-Barton, 1992). The trade-off for weak performers is that a narrower breadth of strategic
27
28
29 attention ensures that firms can improve their efficiency; however, to increase their effectiveness
30
31 such firms need to increase the breadth of their strategic attention to identify more suitable
32
33 opportunities.
34
35
36
Managers may also face a trade-off when their firms are in the “middle ground” of either
37
38 low efficiency/high effectiveness (learning) or high efficiency/low effectiveness
39
40 (underperforming). For a firm that is learning and in a favorable external environment (i.e. high
41
42
quality and quantity of opportunities), a lower breadth of strategic attention is more appropriate;
43
44
45 this enables such firms to improve their efficiency. However, in unfavorable environments (i.e.
46
47 low quality and quantity of opportunities), there is a trade-off between finding suitable
48
49 opportunities to improve a firm’s efficiency and maintaining effectiveness of usage of
50
51
52 capabilities. For an underperforming firm, different trade-offs come into play. For unfavorable
53
54 environments, a greater breadth of strategic attention is more appropriate as this enables such
55
56
57
58
59
60
1
2
3 firms to find better uses for their capabilities, thereby helping to improve effectiveness.
4
5
6 However, in favorable environments, there is a trade-off between limiting the number of
7
8 opportunities to which a manager pays attention and finding enough opportunities that enable the
9
10 firm to make better use of its capabilities and to exploit its existing efficiencies.
11
12
13
With these findings, our work contributes to the management literature in several key
14
15 ways. First, it contributes theoretically to the attention and cognition literatures by illustrating a
16
17 core tension that executives face in deciding how to direct their limited attention. Although a
18
19
greater breadth of strategic attention enables executives to identify more opportunities to enhance
20
21
22 firm performance, such breadth comes with the risk of cognitive overload. We provide new
23
24 guidance by showing that when executives better align their breadth of strategic attention and
25
26 their external and internal environments, their firms achieve better performance. This matching
27
28
29 of breadth of strategic attention to the external opportunity environment and internal capabilities
30
31 extends the theorizing of Eggers and Kaplan (2013). Our theoretical framework also helps to
32
33 reconcile prior studies that come to different conclusions as they have looked at different aspects
34
35
36
of the breadth of strategic attention and performance (e.g., Kaplan, 2011; Ocasio & Joseph,
37
38 2018; Porter, 1996; Shepherd et al., 2017).
39
40 Our theorizing and empirical results suggest that a greater breadth of strategic attention is
41
42
more beneficial in weaker economic environments. This is consistent with studies indicating
43
44
45 bursts of innovation during economically challenging periods (e.g., Field, 2003). In contrast, in
46
47 favorable markets, managers often fall into the trap of trying to pursue too many opportunities,
48
49 limiting value capture from any of them (Latham & Braun, 2009). With respect to recent prior
50
51
52 performance, our arguments run counter to research that highlights the benefits of attentional
53
54 focus for struggling firms (e.g., Magretta, 2011), but are more consistent with work (Cyert &
55
56
57
58
59
60
1
2
3 March, 1963) on the behavioral theory of the firm (BTOF). Both our theorizing and the BTOF
4
5
6 incorporate performance feedback loops as a mechanism for motivating strategic change, but we
7
8 diverge in the impetus for such feedback. In BTOF, the focus is on performance relative to
9
10 aspirations. In contrast, our work focuses on executives adjusting their breadth of strategic
11
12
13
attention to better align their firms’ capabilities and resources with the opportunities available,
14
15 depending on their firms’ recent performance. As such, our theoretical approach is narrower than
16
17 the BTOF framework but complementary, building on recent developments in the managerial
18
19
cognition literature (Eggers & Kaplan, 2013).
20
21
22 Our theoretical arguments and empirical results also illustrate a key distinction between
23
24 effectiveness and efficiency of usage of resources and capabilities. Recently demonstrated
25
26 success with existing capabilities provides evidence that a firm is pursuing the right
27
28
29 opportunities. However, resource utilization efficiency provides insight toward a different
30
31 question – do firms have the bandwidth to pursue additional opportunities? If firms are pursuing
32
33 the wrong opportunities, they should look for new opportunities. If firms are pursuing their
34
35
36
current opportunities efficiently, they have scope to undertake other opportunities. This poses an
37
38 interesting question for executives to consider when their firms are operating effectively and
39
40 efficiently. Should the executives broaden their attention to take advantage of spare capacity or
41
42
maintain/reduce their breadth of strategic attention to avoid worsening the fit between their
43
44
45 capabilities and external opportunities? This question provides an insight into the challenges
46
47 associated with firms’ diversification efforts. Excess resources provide an opportunity (Penrose,
48
49 1959) but using them can come with a significant cost (Campa & Kedia, 2002; Rajan, Servaes, &
50
51
52 Zingales, 2000; Villalonga, 2004).
53
54 In a second area of contribution to the management literature, our analyses illustrate that
55
56
57
58
59
60
1
2
3 firm performance tends to suffer unless managers allocate increased resources to support actions
4
5
6 associated with an increased breadth of strategic attention. Thus, “actions speak louder than
7
8 words” in that a greater breadth of strategic attention harms performance if attention is not
9
10 followed by action in the form of increased resource allocation. Our contribution to existing
11
12
13
work within the attention domain highlights the association of broader strategic attention with
14
15 enhanced performance when attention is accompanied by increased resource allocation. Prior
16
17 work has tended to focus on the link between attention and resource allocation but has not
18
19
extended this analysis to examine the implications for performance (e.g., Cho & Hambrick,
20
21
22 2006; Kaplan et al., 2003).
23
24 Finally, we develop, validate, and make available a new tool to allow scholars to more
25
26 easily study executive attention toward multiple strategic issues as opposed to a single issue,
27
28
29 which has been the primary focus of prior managerial cognition work (Kaplan, 2011). This tool
30
31 consists of 13 validated strategy issues (Table 1) and an associated set of dictionaries of terms for
32
33 each issue (see appendix and online appendix). This new tool enables scholars to better evaluate
34
35
36
managerial attention to a broad array of issues (e.g., Connelly, Tihanyi, Ketchen Jr, Carnes, &
37
38 Ferrier, 2017) and goes some way to answering the call of Ocasio, Laamanen, and Vaara (2018)
39
40 to use strategy vocabularies to examine managerial attention. Thus, in one of the few cross-
41
42
industry studies of managerial attention, we are able to provide unique insights into the breadth
43
44
45 of strategic attention of executives. We hope that the tools and insights that we develop in this
46
47 paper will promote further growth in the study of the attention-based view and a deeper
48
49 examination of each of the 13 strategic issues.
50
51
52 This research also has a number of limitations than can provide opportunities for future
53
54 research. First, we do not investigate the impact of time in significant depth. In our analysis of
55
56
57
58
59
60
1
2
3 Hypothesis 3, we find that firms’ recent performance (prior year only) – rather than their longer-
4
5
6 term prior performance – moderates the relationship between breadth of strategic attention and
7
8 performance. However, we do not examine whether a firm focuses on certain strategic issues in
9
10 the short term and on others in the longer term. Future work could probe this area by looking
11
12
13
over a more extended time period at firms where executives have adapted their breadth of
14
15 strategic attention appropriately and at firms where executives have not adapted. Future work
16
17 could also examine the differences among those strategic issues that are focused upon in shorter
18
19
and longer terms.
20
21
22 A second limitation concerns the variable Strategic breadth, which does not fully account
23
24 for what underlies the breadth of managerial attention. The same value of Strategic breadth can
25
26 be arrived at with different combinations of the 13 strategic issues. Further, some strategic issues
27
28
29 may form more coherent combinations than others (e.g., Kor & Leblebici, 2005). Future work
30
31 could examine how attention to different individual strategic issues or to combinations of
32
33 strategic issues – with, for example, greater or lesser coherence – can impact performance.
34
35
36
Finally, due to data limitations we are unable to obtain a precise breakdown of resource
37
38 allocation against the strategic issues to which managers pay attention. It would be insightful to
39
40 examine how resource allocation across specific strategic issues varies in accordance with
41
42
managerial attention.
43
44
45 Despite these and other limitations, our study offers new thinking, new tools, and new
46
47 findings to further advance the ABV and managerial cognition literatures. This study goes
48
49 beyond managerial attention to a single issue and examines how executives’ breadth of strategic
50
51
52 attention is associated with overall firm performance. We theoretically examine a core tension
53
54 managers face in determining their breadth of strategic attention and determine key
55
56
57
58
59
60
1
2
3 contingencies that can shape this tension. In doing so, our work demonstrates how executives can
4
5
6 improve performance by better matching their breadth of strategic attention with their landscape
7
8 of external opportunity and with their firms’ recently demonstrated ability to execute effectively
9
10 and efficiently on opportunities.
11
12
13
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1
2
3 Table 1: Categories of Strategic Issues Used to Measure Breadth of Strategic Attention
4
5 Strategy category Description # words Example dictionary
6 words
7 Alliance Partner Strategies that involve creating partnerships with other organizations with the explicit goal of helping the focal allianc*
8 Strategies (APS) organization meet its business goals. The emphasis is on joining with other firms (in contractual or non-contractual collaborat*
20
9 relationships) to acquire new capabilities, develop new products or services, or to provide access to new markets or joint-venture*
10 new customer groups.
11 Customer- Strategies directed toward customer issues that focus on maximizing value appropriation from customers. These customer exp*
12 Orientated strategies may involve targeting specific customer segments, creating higher levels of engagement with customers, or 31 consum*
Strategies (COS) meeting and exceeding customer needs by listening to the voice of the customer more effectively. market research
13
External Strategies focused on the effective management of an organization's external environment and key stakeholders, both government*
14
Stakeholder in times of stability and in times of crisis. These stakeholders can include political and regulatory entities, media*
15 21
Management infomediaries such as the media, industry associations, customer-interest groups, and NGOs as well as charitable and polic*
16 Strategies (STM) community groups.
17 Financial and Strategies that relate to how companies finance their operations, manage shareholders, and attempt to mitigate cash
18 Risk various types of financial risk faced by their businesses. Financial strategies involve debt, equity offerings, share capital*
40
19 Management buybacks, dividend policy, and related financial maneuvers. Financial strategies also involve funding of other debt*
20 Strategies (FRM) organizations for financial gain such as corporate venture capital.
21 Internal Strategies that involve developing effective organizational structures or governance mechanisms. These may include human capital
22 Organizational designing formal elements such as hiring, compensation, and development of the right staff. They may also include skills*
29
Orientated fostering more informal elements such as an appropriate internal culture and engaging and motivating employees. organizat*
23
Strategies (IOS)
24
Low Cost and Strategies that revolve around operational excellence, reducing cost, and the ability to generate more output from cost red*
25 Efficiency existing resources. These strategies may involve value chain optimization and make-or-buy decisions as well as more 19 effici*
26 Strategies (LCE) traditional productivity-orientated initiatives. This category is largely aligned with Porter's low-cost strategies. low cost
27 Mergers, Strategies focused on firm scope as well as inorganic growth. Inorganic growth involves the acquisition of other M&A*
28 Acquisitions, and firms, assets from other companies, or intellectual property. Firm scope decisions can involve internal diversification merger*
17
29 Firm Scope efforts, the sale of existing assets, or the spin-off of existing businesses through a range of different forms of spin-out*
30 Strategies (MAS) divestiture.
31 New Market Strategies that involve entering new markets. Strategies for entering new markets include expansion into new emerging mark*
32 Entry Strategies geographic territories, new distribution channels, and related market expansion strategies. 27 new channel
(NME)
33
34 Product Strategies that are focused around the ongoing development of demand for a firm’s existing products and services. brand*
Marketing These strategies focus primarily upon incremental product development, product re-positioning, pricing, sales force 19 market insig*
35 Strategies (PMS) optimization, and brand and traditional marketing/promotion (e.g. advertising) strategies. advert*
36
Resource and Strategies that involve developing specific resources and capabilities enabling a firm to enhance its competitive capabil*
37 Capability advantage. These strategies are undertaken through specific initiatives that include, but are not limited to, efforts to capability dev*
38 Development develop improved capabilities around knowledge creation, knowledge integration, decision-making, change 18 big data*
39 Strategies (RCD) management, digital and data management, the fostering of internal intrapreneurship, or the ability to leverage
40 outside expertise (such as open innovation efforts).
41
42
43
44
45
46
47
1
2
3 Strategy category Description # words Example dictionary
4 words
5 Social Strategies Strategies that involve a firm’s aim to go beyond the traditional profit motive and that are intended to achieve some CSR
6 (SOC) broader social goal. These social goals may involve poverty reduction, support for disadvantaged groups, ambitious 24 charit*
7 goals for humanity, education enhancement, and community development. environment*
8 Product Strategies focused on pioneering the development of novel products and services. The emphasis of such strategies innov*
9 Innovation may focus on basic applied science or on traditional forms of technological innovation. 25 R&D
10 Strategies (PIN) invent*
11 Business Model Strategies that focus on the development of new business models for creating value in markets. Business model business model*
Innovation innovations may include pioneering new customer value propositions, advancing new profit equations, or 10 platform*
12
Strategies (BMI) reconfiguring existing assets and/or capabilities to offer a product or service in a new way. profit model
13
14
15
16
17 Table 2: Moderators and Control Variable Details
18 Variable Description Supporting Reference/Source
19
20 Size log of firm revenues in millions Compustat
21 R&D intensity R&D expense/annual revenues Wowak et al. (2016)
22 Slack current assets minus liabilities (divided by 1,000 and winsorized at 1%) Voss, Sirdeshmukh, and Voss (2008)
23
Debt-equity total debt / total equity Compustat
24
25 Diversification Herfindahl of revenue proportions across 4-digit GICS codes Litov, Moreton, and Zenger (2012)
26 SG&A Selling, general and administration expenses as a % of annual revenue Wowak et al. (2016)
27 CEO tenure years in role BoardEx
28
29 Firm age years since founding of firm Sanders and Boivie (2004)
30 Earnings surprise Standardized Unexpected Earnings Surprise IBES
31 Rating lagged average analyst rating IBES
32
Analyst breadth breadth of strategic attention of securities’ analysts using Herfindahl measure LIWC
33
34 Analyst tone LIWC tone score for analyst questions Cohn, Mehl, and Pennebaker (2004)
35 Dynamism standard errors from munificence coefficients Dess and Beard (1984)
36 rolling five-year average of the sum of squared market shares for all the firms in the
37 Industry concentration sample in the relevant industry (GICS4) Dess and Beard (1984)
38 Average industry R&D
39 intensity rolling five-year average industry average R&D intensity Compustat
40 # words in each analyzed earnings call (management and questions) – used as
41 Word count instrumental variable in instrumental variable regression analyses only LIWC
42
43
44
45
46
47
1
2
3 Table 3: Descriptive Statistics
4 Variable Mean SD 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
5 1. Performance 0.069 0.059 1.00
6 2. Strategic breadth 0.828 0.038 0.26 1.00
7 3. Munificence 0.011 0.033 0.14 -0.02 1.00
8 4. Average industry ROA 0.047 0.022 0.19 0.09 0.37 1.00
9 5. Current assets turnover 3.007 1.773 -0.04 -0.24 0.10 -0.07 1.00
10 6. Size 9.217 1.105 0.06 -0.01 0.12 0.11 0.30 1.00
11 7. R&D intensity 0.037 0.060 0.13 0.39 0.05 0.30 -0.45 -0.15 1.00
12 8. Slack 2.276 4.897 0.15 0.22 0.07 0.21 -0.34 0.39 0.34 1.00
13 9. Debt-equity 1.191 13.719 -0.03 0.02 0.03 -0.03 -0.02 -0.01 -0.03 -0.01 1.00
14 10. Diversification 0.196 0.245 -0.07 -0.04 -0.10 -0.09 -0.06 0.14 -0.15 0.02 -0.01 1.00
15 11. SG&A 0.217 0.140 0.19 0.43 -0.10 0.15 -0.41 -0.23 0.58 0.16 -0.04 -0.15 1.00
16 12. CEO tenure 6.760 5.839 0.04 -0.02 0.03 -0.09 0.16 -0.07 -0.07 -0.07 0.02 0.03 -0.04 1.00
17 13. Firm age 37.761 25.648 -0.05 -0.16 -0.08 0.04 -0.03 0.41 -0.14 0.14 -0.04 0.33 -0.16 -0.09 1.00
18 14. Earnings surprise 1.161 2.434 0.02 0.06 -0.06 0.00 -0.09 -0.09 0.06 0.01 0.00 0.06 0.11 -0.02 -0.06 1.00
19 15. Rating 2.309 0.363 -0.13 -0.13 -0.13 0.01 0.05 -0.09 -0.06 -0.14 -0.01 -0.02 -0.01 -0.07 0.07 -0.01 1.00
20 16. Analyst breadth 0.740 0.075 0.24 0.44 0.03 0.17 -0.02 -0.01 0.15 0.10 -0.01 0.02 0.15 0.06 -0.16 0.04 -0.07 1.00
21 17. Analyst tone 69.623 12.572 -0.09 -0.05 -0.11 0.01 0.04 0.05 -0.13 -0.07 0.02 0.01 -0.10 -0.03 0.06 -0.04 -0.02 -0.04 1.00
22 18. Dynamism 0.016 0.013 -0.17 -0.39 0.03 0.07 -0.09 -0.04 -0.09 0.01 -0.03 0.05 -0.31 0.03 0.11 -0.09 -0.06 -0.09 -0.09 1.00
23 19. Industry concentration 0.043 0.026 0.11 0.11 -0.01 0.16 0.06 0.09 0.11 0.08 -0.06 -0.18 0.19 -0.11 0.04 -0.02 0.06 0.11 -0.09 -0.03 1.00
24 20. Average industry R&D intensity 0.027 0.044 0.15 0.39 0.03 0.31 -0.40 -0.08 0.78 0.38 -0.03 -0.10 0.45 -0.03 -0.05 0.07 -0.17 0.18 -0.14 -0.08 0.14 1.00
21. Word count 7123.58 1555.44 -0.01 0.27 0.07 -0.04 -0.05 0.11 0.12 0.14 0.00 0.05 0.17 -0.01 -0.00 -0.01 -0.11 0.17 -0.07 -0.12 0.08 0.10 1.00
25
26
Correlation coefficients above 0.053 and below -0.053 indicate significance at p < 0.05.
27
Correlation coefficients above 0.070 and below -0.070 indicate significance at p < 0.01.
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
1
2
3 Table 4: OLS Regression Analyses Testing Hypotheses 1-4
4 DV=Performance Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7
5 H1. Strategic breadth x -5.265** -4.427**
6 Munificence (0.865) (1.077)
7 H2. Strategic breadth x -8.610** -4.721+
8 Average industry ROA (2.731) (2.456)
H3. Strategic breadth x -2.352** -1.803**
9
Lagged performance (0.803) (0.686)
10 H4. Strategic breadth x 0.037+ 0.054*
11 Current assets turnover (0.021) (0.023)
12
13 Strategic breadth -0.032 -0.047 0.008 0.109 -0.168 -0.113
14 (0.070) (0.067) (0.068) (0.089) (0.109) (0.119)
Munificence 0.262** 0.185** 0.229** 0.261** 0.265** 0.184**
15
(0.066) (0.059) (0.065) (0.067) (0.066) (0.059)
16 Average industry ROA 0.391* 0.327* 0.374* 0.360* 0.404* 0.321*
17 (0.171) (0.166) (0.166) (0.160) (0.171) (0.155)
18 Lagged performance 0.071 0.067 0.067 0.079* 0.069 0.069*
19 (0.044) (0.042) (0.041) (0.035) (0.044) (0.033)
20 Current assets turnover 0.002 0.002 0.001 0.002 0.003 0.003
21 (0.003) (0.003) (0.003) (0.003) (0.003) (0.003)
Size -0.012 -0.018* -0.020** -0.020* -0.019* -0.017* -0.021**
22 (0.008) (0.008) (0.008) (0.008) (0.008) (0.008) (0.008)
23 R&D intensity 0.021 0.058 0.053 0.056 0.024 0.058 0.026
24 (0.030) (0.035) (0.036) (0.035) (0.037) (0.035) (0.038)
25 Slack -0.002* -0.001* -0.002** -0.002* -0.001* -0.001* -0.001*
26 (0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001)
27 Debt-equity -0.000 0.000 0.000+ 0.000 0.000 0.000 0.000*
(0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)
28
Diversification 0.010 0.006 0.003 0.003 0.006 0.007 0.002
29 (0.016) (0.015) (0.014) (0.015) (0.014) (0.015) (0.014)
30 SG&A -0.224** -0.166* -0.177* -0.163* -0.182* -0.161* -0.178*
31 (0.070) (0.077) (0.073) (0.079) (0.078) (0.077) (0.077)
32 CEO tenure 0.000 0.000 0.000 0.000 0.000 0.000 0.000
33 (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)
Firm age -0.001 0.001 0.002 0.001 0.001 0.001 0.001
34
(0.004) (0.004) (0.004) (0.004) (0.004) (0.004) (0.004)
35 Earnings surprise 0.000 0.000 0.000 0.001 0.000 0.001 0.000
36 (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)
37 Rating -0.027** -0.022** -0.023** -0.022** -0.020** -0.021** -0.021**
38 (0.006) (0.006) (0.006) (0.006) (0.006) (0.006) (0.006)
39 Analyst breadth 0.014 0.007 0.004 0.001 0.009 0.005 0.001
40 (0.020) (0.020) (0.021) (0.021) (0.020) (0.020) (0.020)
Analyst tone 0.000* 0.000 0.000 0.000 0.000 0.000 0.000
41 (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)
42 Dynamism -0.476+ -0.182 -0.209 -0.257 -0.188 -0.168 -0.230
43 (0.254) (0.257) (0.236) (0.254) (0.259) (0.257) (0.237)
44 Industry concentration 0.241 0.374 0.436 0.362 0.326 0.402 0.425
45 (0.421) (0.433) (0.422) (0.421) (0.432) (0.433) (0.416)
46 Average industry R&D intensity -0.712 -0.728 -0.501 -0.695 -0.777 -0.725 -0.552
(0.621) (0.619) (0.631) (0.620) (0.626) (0.625) (0.643)
47
Firm-Fixed Effects Y Y Y Y Y Y Y
48 Year-Fixed Effects Y Y Y Y Y Y Y
49 N 1,373 1,373 1,373 1,373 1,373 1,373 1,373
50 R2 0.101 0.151 0.183 0.164 0.164 0.153 0.200
51
52 Note: Standard errors (in parentheses) are clustered at the firm level.
53 Significance levels: + p < 0.10, * p < 0.05, ** p < 0.01
54
55
56
57
58
59
60
1
2
3 Table 5: Effect Sizes across Hypotheses 1-4 (Using Model 7 from Table 4)
4 Effect Size
5
Impact on Performance for one standard deviation increase in Strategic
6
breadth
7
8 Hypothesis 1 2 3 4
9 Moderator Munificence Average industry Lagged Current assets
10 ROA performance turnover
11 Lowest decile -0.026 0.017 0.014 1.243
12 moderator value
13 Absolute Effect +0.3% +0.2% +0.1% -0.7%
14 SD Performance 0.06 0.04 0.02 0.12
15
16 Highest decile 0.047 0.075 0.145 5.335
17 Moderator value
18 Absolute Effect -0.9% -0.8% -0.8% +0.1%
19 SD Performance 0.16 0.14 0.14 0.02
20
21 Difference 1.2% 1.0% 0.9% 0.8%
22
High vs Low
23
24
25
26 Table 6: OLS Regression Analyses Evaluating Impact of Resource Allocation following a
27 Change of a Firm’s Strategic breadth on Performance
28 DV= Performance Model 1 Model 2 Model 3 Model 4 Model 5
29 Δ Strategic Breadth -0.096 -0.060 -0.062 -0.058 -0.060
30 (0.064) (0.041) (0.041) (0.042) (0.044)
31 Δ Advertising Intensity -0.002
32 (0.001)
33 Δ Strategic Breadth x Δ Advertising Intensity -0.104
34 (0.081)
35 Δ R&D Intensity 0.001+
36 (0.0006)
37 Δ Strategic Breadth x Δ R&D Intensity 0.130*
38 (0.055)
39 Δ SG&A -0.000
40 (0.002)
41 Δ Strategic Breadth x Δ SG&A 0.077
42 (0.065)
43 Δ Capital Intensity -0.006*
44 (0.002)
Δ Strategic Breadth x Δ Capital Intensity 0.048*
45
(0.024)
46
Δ PPE Ratio 0.000
47
(0.001)
48 Δ Strategic Breadth x Δ PPE Ratio 0.050
49 (0.051)
50 Controls Y Y Y Y Y
51 Firm-Fixed Effects Y Y Y Y Y
52 Year-Fixed Effects Y Y Y Y Y
53 N 591 1,272 1,272 1,272 1,223
54 R2 0.104 0.146 0.146 0.153 0.148
55 Note: Standard errors (in parentheses) are clustered at the firm level.
56 Significance levels: + p < 0.10, * p < 0.05, ** p < 0.01
57
58
59
60
1
2
3 Table 7: Examination of How Industry Environment Can Enhance or Mitigate the Moderation Impact of Effectiveness of Usage
4 of Firms’ Capabilities and Efficiency of Usage of Firms’ Resources on the Relationship between Strategic breadth and
5 Performance
6
7 Munificence Average industry ROA Munificence Average industry ROA
8 DV=Performance
High Low High Low High Low High Low
9
10
11 Strategic Breadth x Lagged -4.976 -0.794 -1.833 -1.532
12 Performance (0.000) (0.641) (0.047) (0.306)
13
14
Strategic Breadth x Current 0.015 0.093 0.024 0.070
15
16 assets turnover (0.607) (0.285) (0.280) (0.052)
17
18 Strategic Breadth 0.108 0.094 0.017 0.108 -0.154 -0.178 -0.205 -0.196
19 (0.461) (0.377) (0.878) (0.354) (0.470) (0.534) (0.137) (0.148)
20
21 Controls Y Y Y Y Y Y Y Y
22
23 Firm-Fixed Effects Y Y Y Y Y Y Y Y
24 Year-Fixed Effects Y Y Y Y Y Y Y Y
25 N 339 443 843 746 514 317 843 741
26
R2 0.255 0.227 0.123 0.152 0.123 0.346 0.116 0.153
27
28
29 p-values in parentheses
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1
2
3 Figure 1: Summary of Theoretical Framework
4
5 The Four Moderators Tip the Balance
6
7
8
9
10 Lower Breadth of Strategic Higher Breadth of Strategic
11 Attention Mitigates Attention Enables More
12 Cognitive Overload Opportunities to be Identified
13
14 High Quantity of Opportunities Available Low
15 High Quality of Opportunities Available Low
16 High Effectiveness of Usage of Capabilities Low
17 Efficiency of Usage of Resources High
Low
18
19
20
21 Key
22
Opportunity Identification
Firm-level constructs
23 Quantity of Quality of
24
Industry-level constructs
Opportunities Available Opportunities Available
-
25
26
27
28
Breadth of Strategic
H1 - H2
Performance
-
29 Attention
30 H3 H4 +
31 Effectiveness of Usage Efficiency of Usage of
32
33 of Capabilities Resources
34
Opportunity Execution
35
36
37
38
39
40
41
42
43
44
45
46
47
1
2
3 Figure 2: Distribution of Strategic breadth across Sample of Firm-years (n=1,373)
4
10
5
6
Percentage of Observations
7
8
8
9
6
10
11
4
12
13
2
14
15 0
.65 .7 .75 .8 .85 .9
16 Strategic breadth
17
18
19
20
21
22 Figure 3: Variation of Strategic breadth (a) over Time (Average of All Firms in Sample) and
23
24
(b) Across Industry (Average over All Years) as Defined by 2-digit GICS Code (95%
25 Confidence Intervals Also Illustrated)
26
(a) (b)
.9
.9
27
28
Mean of Strategic breadth
Mean of Strategic breadth
.88
29
.85
30
.86
31
.8
32
.84
33
.75
34
.82
35
36
.7
.8
2009 2010 2011 2012 2013 2014 2015 10 15 20 25 30 35 40 45 50 55 60

37 Year 2-digit GICS code
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1
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3 Figure 4: Charts Illustrating the Relationship between the Change in Strategic breadth
4 (between t-2 and t-1) and Subsequent Performance (at Time Period, t) for Different Changes
5 in (a) R&D Intensity and (b) Capital intensity between Periods t-1 and t.
6
7
8 a b
9
.12
.1
10
11
.1
12
ROA (t)
.08
ROA (t)
.08
13
14
.06
.06
15
16
.04
17
.04
-.1 -.08 -.06 -.04 -.02 0 .02 .04 .06
Change in Strategic Breadth (t-2 to t-1) -.1 -.08 -.06 -.04 -.02 0 .02 .04 .06
18 Decrease R&D (t-1) Increase R&D (t-1) Change in Strategic Breadth (t-2 to t-1)
19 Decrease Capital Intensity (t-1) Increase Capital Intensity (t-1)
20
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1
2
3 APPENDIX: KEEP YOUR EYE ON THE BALL OR ON THE FIELD? EXPLORING
4
5 THE PERFORMANCE IMPLICATIONS OF EXECUTIVE STRATEGIC ATTENTION
6
7
Appendix 1: Measurement of Breadth of Strategic Attention.
8 In order to develop our key independent variable (Strategic breadth) we collected
9 quarterly earnings call transcripts for the 250 sample firms over the period 2008 – 2015 from
10
11
Seeking Alpha, yielding a total of 7090 firm-analyst call events. The variable Strategic breadth
12 that we develop is a Herfindahl measure that provides an indication of how broadly managerial
13 strategic attention is allocated across 13 categories of strategic issue.
14 Developing such a variable represents a measurement challenge for two key reasons.
15 First, there is no definitive “lexicon” outlining categories of strategic issues available from which
16 to base any measure of breadth of strategic attention (e.g., Hambrick, 2004). These strategic
17
issues cover different categories of opportunity and initiative to which managers may pay
18
19 attention. Second, it is difficult to capture the strategic issues to which executives pay attention
20 as evidenced by their communications in quarterly earnings calls and subsequently convert this
21 information into a measure of the breadth of strategic attention. To guide our process, we
22 followed the general approach to computer-aided text analysis described by Short, Broberg,
23 Cogliser, and Brigham (2010), McKenny, Short, and Payne (2013) and Rhee, Ocasio, and Kim
24 (2019). First, we focused on using inductive and deductive techniques to develop categories of
25
strategic issue and associated word dictionaries. Second, we validated the strategic issue category
26
27 structure and each dictionary with content experts.
28 To address the first challenge in creating a set of strategic issues, we draw upon three
29 academic and practitioner sources: the Strategic Management Journal (2012 – 2014), the
30 McKinsey Quarterly (2012 – 2014) and a survey of management consultants from leading
31 strategy consulting firms. For the Strategic Management Journal (SMJ) and McKinsey Quarterly
32 (MQ) sources, all articles were reviewed and all references captured to terms related to possible
33
34
unique strategies undertaken by firms to help achieve their pre-defined goals. This resulted in 38
35 unique strategy terms from SMJ and 152 unique terms from MQ. Via an online survey, a small
36 group (n = 12) of active management consultants from 6 leading strategy consulting firms were
37 asked to list up to 15 types of strategies that they would envisage CEOs communicating to
38 stakeholders through various media. This generated a total of 66 unique strategy terms.10 These
39 terms do not represent “grand strategies” but rather strategic opportunities they could pursue.
40
A bottom-up, inductive, and iterative approach was used to categorize the 256 strategy
41
42 terms collected from these three separate sources. Initially, a set of six broad strategic issues
43 emerged. However, a substantial proportion (>20 percent) of the 256 strategy terms that did not
44 fall into any of the six categories of strategic issue. Following two further sequential iterations of
45 defining strategic issues and then re-coding the 256 terms, an expanded set of 10 categories of
46 strategic issue was defined.
47 Five senior scholars from the U.S. and Europe were recruited to review these 10
48
categories of strategic issues to refine the strategic issues and agree on the description of each
49
50 strategic issue. Each scholar was a tenured and/or chaired professor at a different leading
51 business school and was presented with the full list of the 10 emergent strategic issues, along
52 with a detailed description of each strategic issue and some illustrative examples of associated
53
54 10Note the lexicon that we use in developing our variable Strategic breadth. The raw data provides a set of strategy terms that we
55 ultimately then condense down to 13 strategic issues (which cover different types of opportunities) that are then used to develop a
56 measure of Strategic breadth which is the key independent variable that we use to measure breadth of strategic attention.
57
58
59
60
1
2
3 strategy terms that had been inductively collected from the three data sources. Based on two
4
5
rounds of iterative feedback and revision with these scholars, the strategic issues and descriptions
6 were further expanded and adapted to a final set of 13 strategic issues to capture the range of
7 issues executives might address in their communications. All five scholars signed off on the final
8 set of strategic issues and their associated descriptions.
9 The next challenge involved using these 13 strategic issues to develop a specific measure
10 of the breadth of strategic attention. The approach that was followed involved analyzing the text
11
of firms’ quarterly earnings calls with analysts. In order to undertake this text analysis a unique
12
13
linguistic dictionary was developed for each of the 13 strategic issues. To develop a baseline set
14 of dictionaries, the 256 strategic terms captured when developing the list of strategy issues were
15 used. Initially the authors mapped these terms to each of the 13 strategic issues. The authors then
16 reviewed each dictionary to eliminate words or terms associated with each strategic issue that
17 were not strictly relevant or unique to that strategic issue. The authors also added further relevant
18 words or terms based on an additional review of the initial raw sources of information (i.e. SMJ,
19
MQ and consultant survey) and the use of a thesaurus to identify synonyms. The authors then
20
21 converted each word or term to its root to ensure all forms of the word would be captured in
22 subsequent text analysis. This resulted in 380 word roots or terms being included across all 13
23 dictionaries of strategic issues.
24 A new panel of management scholars from leading U.S. business schools was then
25 recruited to validate the words/terms associated with each of these 13 strategic issue dictionaries.
26 Each panelist was presented with all of the terms and word roots within a specific dictionary and
27
28
provided with the detailed description of the associated strategic issue. Through an online
29 survey, panelists were asked whether or not each word/term root was consistent with the
30 strategic issue associated with that dictionary. In total, 36 scholars from 24 unique universities
31 participated in this part of the validation. None of these scholars was involved in the previous
32 phase of validation. Nine of these were doctoral students in strategic management, the remaining
33 scholars were faculty members holding titles ranging from assistant professor to named
34
professor. Each scholar reviewed at least two separate dictionaries for different strategic issues,
35
36
allocated randomly. Each of the 13 dictionaries was evaluated by between five and eight
37 panelists, with an average of 5.6 evaluators per dictionary.
38 Following this review, words or terms in which at least 75 percent of the raters agreed
39 that it was in the correct strategic issue dictionary were automatically kept in the relevant
40 dictionary. This represented 244 (64 percent) of the words or terms across all 13 dictionaries.
41 Words with less than 50 percent agreement across raters were automatically dropped from
42
dictionaries (56 words). The authors then reviewed terms with agreement between 50 and 75
43
44 percent agreement (80 words), and came to a consensus conclusion about whether each word
45 should be included in a dictionary or discarded. This process led to the elimination a total of 80
46 words, leaving 300 words across the 13 dictionaries, with a minimum of 10 words and maximum
47 of 40 words (Table 1 – Main Paper).
48 The creation of these 13 strategic issue dictionaries enabled the use of Linguistic Inquiry
49 and Word Count (LIWC) software to develop counts of the words associated with each strategic
50
51
issue within an earnings call transcript (e.g., Mannor, Wowak, Bartkus, & Gomez‐Mejia, 2016;
52 Pennebaker, Francis, & Booth, 2001; Pfarrer, Pollock, & Rindova, 2010). Words pertaining to
53 each strategic issue within the prepared statements by the top management team at the start of the
54 quarterly earnings call as well as executives’ responses to analyst questions were analyzed. Any
55 text pertaining to analysts’ questions and commentary was excluded. The 13 strategic issue
56
57
58
59
60
1
2
3 dictionaries and the LIWC dictionary files are provided in the online appendix.
4
5
As described above, the breadth of strategic attention considers both the number of
6 strategic issues that are focused upon and the relative frequency of attention to these issues. To
7 develop a measure, we draw from the diversification literature (e.g., Litov, Moreton, & Zenger,
8 2012; Palepu, 1985). The breadth of strategic attention can be seen as a form of diversification of
9 executives’ attention. Typically, the diversification literature has used Herfindahl measures.
10 Accordingly, we develop a Herfindahl measure that uses the proportion of words/phrases
11
associated with each strategic issue in a quarterly-earnings call.
12
13
In developing the measure for Strategic breadth, we also adjust for the number of words
14 in each dictionary, as strategic issues that have larger dictionaries are likely to be mentioned
15 more frequently. For firm i at time t, Strategic breadth (sbi,t,) is then estimated using equation 1,
16 where pi,k,t is the proportion of words associated with strategy issue k, adjusted for the size of the
17 relevant strategy issue dictionary, at time t within the quarterly earnings call transcript of firm i
18 (prepared management comments and managerial responses only):
19 13
∑𝑘 = 1(𝑝𝑖,𝑘,𝑡)2
20 𝑠𝑏𝑖,𝑡 = 1 ― (1)
2
21 (∑13𝑘 = 1𝑝𝑖,𝑘.𝑡)
22
Note, we subtract the typical Herfindahl measure from 1 so as to ensure larger values are
23
24 equivalent to a greater strategic breadth of strategic attention. pi,k,t is estimated using equation 2:
300 𝑐𝑖,𝑘,𝑡
25 𝑝𝑖,𝑘,𝑡 = (2)
13 𝑥 𝑛𝑘 𝑥 𝑞𝑖,𝑡
26
27 where, ci,k,t is the count of words associated with a specific strategic issue, k, for firm i at time t
28 in the analyst call transcript (management prepared comments and responses only), qi,t is the total
29 number of words in the relevant parts of the analyst call transcript for firm i at time t, nk is the
30 number of words in a specific dictionary associated with strategic issue, k. Note that there are a
31 total of 300 words in the 13 dictionaries for each strategic issue hence the term 300/13. In order
32
to convert the variable from a quarterly to an annual measure we calculated the mean value over
33
34 a fiscal year. This annual mean represents the variable Strategic breadth.11
35 We note that Strategic breadth is a different concept to firm diversification or entropy or
36 whether firms may be categorized as specialists or generalists. These constructs refer to the
37 composition of a firm’s business in terms of the revenues from different business segments.
38 Instead, Strategic breadth refers to the range of issues to which executives pay attention. Firms
39 may be non-diversified however their executives may pay attention to a wide variety of strategic
40
issues. This difference in concepts is illustrated empirically by the fact that the correlations
41
42 between Strategic breadth and Diversification using a Herfindahl measure (p=0.14) and Entropy
43 (p=0.27) are statistically insignificant.
44
45
46
47
48
49
50
51
52
53
11We undertook robustness analyses of our main results using a variant of the measure of Strategic breadth. We used the average
54
word percentages per fiscal year per strategy issue to develop an annual measure directly (as opposed to averaging the quarterly
55 values of strategic breadth). We obtained similar results to the main results we present in this paper using this alternative
56 approach.
57
58
59
60
1
2
3 Appendix 2: Dictionaries associated with 13 strategy categories
4
5 1. Alliance 2. Customer-Orientated Strategies 3. External 4. Financial and Risk Management
6
Partner (COS) Stakeholder Strategies (FRM)
7
8 Strategies Management
9 (APS) Strategies
10 (STM)
11 1. affiliat* 1. client* 22. salesforce 1. communit* 1. audit 27. reinvest*
12 2. agreement with 2. consum* 23. service* 2. crisis manage* 2. balance sheet* 28. return*
13 3. allianc* 3. consumer 24. tailor* 3. crisis* 3. bond 29. revenue model
14
15
4. collaborat* behav* 25. user contrib* 4. disaster 4. budget* 30. risk manag*
16 5. confederat* 4. consumer 26. user experience* manage* 5. capital* 31. risk*
17 6. cooperat* report* 27. user orient* 5. EPA 6. cash 32. ROA*
18 7. coordinat* 5. customer 28. ux 6. EU 7. debenture* 33. ROE*
19 8. join* centric* 29. voice of the 7. FDA 8. debt* 34. ROI
20 9. Joint 6. customer engag* customer 8. federal* 9. defic* 35. securi*
21
10. joint-venture* 7. customer exp* 30. word of mouth 9. FTC 10. diversif* 36. shareholder
22
23 11. JV 8. customer focus* 31. word-of-mouth 10. government* 11. dividend* value*
24 12. link up 9. customer 11. investor* 12. earn* 37. tax*
25 13. linked up lifetime value 12. lawmak* 13. equity 38. VC*
26 14. linking up 10. customer need* 13. media* 14. financ* 39. venture capital*
27 15. pact 11. customer 14. owners* 15. fund* 40. yield
28 16. partner* recom* 15. polic* 16. hedg*
29
30
17. strategic 12. customer serv* 16. politic* 17. investor*
31 partner* 13. customer 17. press coverage* 18. leverag*
32 18. team up strategy 18. press mention* 19. liab*
33 19. teaming up 14. customer value* 19. regulat* 20. liquid*
34 20. working with 15. customer* 20. SEC 21. private equity*
35 16. customer-facing 21. stakehold* 22. profit equation
36 17. market research 23. profit model
37
38
18. net promoter 24. profitab*
39 19. NPS 25. Quarterly
40 20. patron 26. ratio*
41 21. personaliz*
42
43
44
45
46
47
1
2
3 5. Internal Organizational Orientated 6. Low Cost and 7. Mergers, 8. New Market Entry Strategies (NME)
4
5
Strategies (IOS) Efficiency Acquisitions,
6 Strategies and Firm Scope
7 (LCE) Strategies
8 (MAS)
9 1. ceo* 22. silo* 1. accelerated 1. acquis* 1. Asia* 23. new state
10 2. change manag* 23. skill develop* product dev* 2. aquir* 2. Brazil* 24. Oceani*
11
12
3. compens* 24. skills* 2. cost cut* 3. hostile 3. BRIC 25. penet*
13 4. cultur* 25. staff 3. cost red* 4. inorganic* 4. Chin* 26. region*
14 5. decision 26. structur* 4. cost* 5. M&A* 5. create new 27. Russia*
15 making* 27. successi* 5. economies of 6. merg* market*
16 6. decision- 28. talent* scope 7. merger* 6. developed
17 making* 29. train* 6. effici* 8. posion pill mark*
18 7. delayer* 7. expendit* 9. post-merger 7. developing
19
20
8. employee devel* 8. expens* integ* mark*
21 9. employee* 9. lean 10. scope 8. emerg*
22 10. executive* 10. low cost 11. spin off 9. emerging mark*
23 11. fair wage 11. low pric* 12. spin out* 10. enter
24 12. governan* 12. operational 13. spin* 11. entrance
25 13. human capital effic* 14. spin-off 12. entry
26
14. internal 13. operational 15. spin-out* 13. Europ*
27
28 communic* excellenc* 16. takeover 14. expan*
29 15. knowledge 14. optim* 17. vertical integrat* 15. geog*
30 manag* 15. outsourc* 16. India*
31 16. motivat* 16. productivit* 17. Internat*
32 17. organizat* 17. six sigma* 18. new business*
33 18. organizatonal 18. supply chain 19. new channel
34
35
design 19. time manag* 20. new countr*
36 19. recruit* 21. new industry
37 20. restructur* 22. new market*
38 21. salar*
39
40
41
42
43
44
45
46
47
1
2
3 9. Product 10. Resource and 11. Social 12. Product Innovation Strategies (PIN) 13. Business Model
4
5
Marketing Capability Strategies Innovation
6 Strategies Development (SOC) Strategies
7 (PMS) Strategies (BMI)
8 (RCD)
9 1. advert* 1. big data* 1. advocac* 1. accelerated 20. science 1. blue ocean
10 2. brand building 2. capabil* 2. charit* product dev* 21. scientif* 2. business model*
11
12
3. brand* 3. capability dev* 3. climate change 2. artificial 22. technol* 3. business-model*
13 4. commercial* 4. competenc* 4. communit* intelligenc* 23. technology 4. new business*
14 5. consumer 5. data min* 5. community dev* 3. bleeding edge platfo* 5. operating
15 behav* 6. decision 6. corporate social* 4. design thinking 24. test and learn model*
16 6. customiz* making* 7. CSR 5. design* 25. test* 6. platform*
17 7. developed 7. decision- 8. develop 6. develop* 7. profit equation
18 mark* making* communit* 7. experim* 8. profit model
19
20
8. developing 8. human capital 9. donat* 8. experiment* 9. revenue model
21 mark* 9. knowl* 10. environment* 9. idea* 10. sharing econom*
22 9. low pric* 10. knowledge 11. environmental 10. innov*
23 10. market insig* manag* 12. equality 11. invent*
24 11. market research 11. open innov* 13. fair wage 12. nanotech*
25 12. media* 12. R&D 14. green 13. open innov*
26
13. net promoter 13. research and 15. LGBT 14. pilot
27
28 14. personaliz* development 16. non-profit 15. product
29 15. press coverage* 14. resource 17. not for profit development
30 16. press mention* 15. resource 18. not-for-profit 16. R&D
31 17. tailor* allocation 19. philanth* 17. research and
32 18. word of mouth 16. skill develop* 20. poverty development
33 19. word-of-mouth 17. skills* 21. social issue* 18. reverse
34
35
18. test and learn 22. Social engineer*
36 Responsib* 19. revolut*
37 23. volunteer*
38 24. welfare
39
40
41
42
43
44
45
46
47
1
2
3 References
4
Hambrick, D. C. 2004. The disintegration of strategic management: It's time to consolidate our
5
6 gains: Sage Publications.
7 Litov, L. P., Moreton, P., & Zenger, T. R. 2012. Corporate strategy, analyst coverage, and the
8 uniqueness paradox. Management Science, 58(10): 1797-1815.
9 Mannor, M. J., Wowak, A. J., Bartkus, V. O., & Gomez‐Mejia, L. R. 2016. Heavy lies the crown?
10 How job anxiety affects top executive decision making in gain and loss contexts. Strategic
12
13
McKenny, A. F., Short, J. C., & Payne, G. T. 2013. Using computer-aided text analysis to elevate
14 constructs: An illustration using psychological capital. Organizational Research Methods,
15 16(1): 152-184.
16 Palepu, K. 1985. Diversification strategy, profit performance and the entropy measure. Strategic
17 management journal, 6(3): 239-255.
18 Pennebaker, J. W., Francis, M. E., & Booth, R. J. 2001. Linguistic inquiry and word count: LIWC
19
2001. Mahway: Lawrence Erlbaum Associates, 71(2001): 2001.
20
21 Pfarrer, M. D., Pollock, T. G., & Rindova, V. P. 2010. A tale of two assets: The effects of firm
22 reputation and celebrity on earnings surprises and investors' reactions. Academy of
24 Rhee, L., Ocasio, W., & Kim, T.-H. 2019. Performance Feedback in Hierarchical Business Groups:
25 The Cross-Level Effects of Cognitive Accessibility on R&D Search Behavior. Organization
26 Science, 30(1): 51-69.
27
Short, J. C., Broberg, J. C., Cogliser, C. C., & Brigham, K. H. 2010. Construct validation using
28
29 computer-aided text analysis (CATA) an illustration using entrepreneurial orientation.
30 Organizational Research Methods, 13(2): 320-347.
31
32
33
34
35
36 John Eklund (jceklund@marshall.usc.edu) is an assistant professor of strategy at the University of
37 Southern California. He received his PhD from the Wharton School. His research focuses on
38 understanding how organizational design and managerial attention can shape firms’ innovation and
39
40 broader outcomes.
41
42
Michael J. Mannor (mikemannor@nd.edu) is the John F. O'Shaughnessy Associate Professor of
43 Family Enterprise and Associate Dean for the MBA Program in the Mendoza College of Business at
44 the University of Notre Dame. He received his PhD from Michigan State University and studies
45 how top executive biases influence decision-making.
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Academy of Management Journal

Keep Your Eye on the Ball or on the Field? Exploring the

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Managerial and organization cognition (General) < Managerial and

Scholars have highlighted executive attention as a vital organizational

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