Top Management’s Attention to Discontinuous Technological Change: Corporate Venture Capital as an Alert Mechanism

Organization Science, Forthcoming

42 Pages Posted: 26 May 2012

See all articles by Markku V. J. Maula

Markku V. J. Maula

Aalto University, Dept. of Industrial Engineering and Management, Institute of Strategy

Thomas Keil

University of Zurich - Department of Business Administration

Shaker A. Zahra

University of Minnesota - Twin Cities - Carlson School of Management

Date Written: May 21, 2012

Abstract

Technological discontinuities pose serious challenges to top managers’ attention. These discontinuities, which often occur at the fringes of an industry, are usually driven by innovative and, often, venture capital-backed start-ups creating new products and transforming existing industries in ways that are difficult for incumbent managers to understand against the backdrop of their existing cognitive schemata. However, failing to appreciate and embrace successful technological discontinuities might endanger incumbents’ very existence. Extending the attention-based view, we explore whether and how interorganizational relationships guide top managers’ attention either to or away from technological discontinuities. We propose that homophilous relationships (e.g., alliances with industry peers) should exhibit a negative relationship with incumbents’ timely attention to technological discontinuities, whereas heterophilous relationships (e.g., with venture capitalists as a result of co-investments) should exhibit a positive relationship. Furthermore, we hypothesize that the status of the partners strengthens the effect of homophilous and heterophilous relationships with the timely attention of top managers to technological discontinuities. Based on a longitudinal study of the incumbents in four information and communications technology industry sectors, we find that heterophilous ties through corporate venture capital (CVC) co-investing with high-status venture capital firms exhibit a strong positive relationship with timely attention. CVC, when it connects senior management to high-status venture capitalists (VCs) through co-investments, has a special role in directing top managers’ attention to technological discontinuities and ensuing business opportunities. Implications for the understanding of the role of interorganizational ties as structural determinants of top managers’ attention are discussed.

Keywords: attention, corporate venture capital, homophily, heterophily, status, technological discontinuity

JEL Classification: O32, G24, M13

Suggested Citation

Maula, Markku V. J. and Keil, Thomas and Zahra, Shaker A., Top Management’s Attention to Discontinuous Technological Change: Corporate Venture Capital as an Alert Mechanism (May 21, 2012). Organization Science, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2066528

Markku V. J. Maula (Contact Author)

Aalto University, Dept. of Industrial Engineering and Management, Institute of Strategy ( email )

PO Box 15500
FI-00076 AALTO
Espoo
Finland

HOME PAGE: http://users.tkk.fi/u/mmaula/

Thomas Keil

University of Zurich - Department of Business Administration ( email )

Seilergraben 53
Zurich, CH-8001
Switzerland

HOME PAGE: http://www.business.uzh.ch/professorships/international-management/team/keil.html

Shaker A. Zahra

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

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