Bringing Managers into Theories of Multimarket Competition: CEOs and the Determinants of Market Entry

Item Type Journal paper
Abstract

This study examines whether employment externalization, or the use of temporary and contract workers in organizations, is associated with weak psychological bonds between the internal workforce and organization. Specifically, the extent and length of such externalization would negatively relate to internal workers' trust in, commitment toward, and psychological contract with organizations. The premise for this argument is that internal workers may view externalization as an indicator of the organization's low-level commitment to them. Internal workers would reciprocate by decreasing their attachment to the organization. Externalization might also be seen as violating the psychological contract between employees and employers, since externalization is associated with slowed upward mobility and poor work support for internal workers. However, organizational actions that indicate commitment toward employees would mitigate such negative effects. I posit that externalization would be viewed less negatively both by workers who believe they have secure jobs, and by those who supervise and train others. These hypotheses were tested with data collected from 256 internal workers in three organizations. Results indicate that both the extent and length of externalization are negatively related to internal workers' attitudes, especially for those of internal workers with fewer supervisory responsibilities. However, contrary to the hypotheses, the relationship is also more negative for internal workers with high job security.
Multimarket (or multipoint) contact has been shown to deter aggressive actions by rivals toward each other, producing a situation of mutual forbearance among firms. To create this deterrent capability, however, firms must enter each others' markets, which is just the kind of action that the deterrent is supposed to limit. This study explores the questions: Under what conditions are firms likely to behave aggressively toward their multimarket rivals by entering their markets and when will they engage in mutual forbearance? We describe how the effect of multimarket contact on the market-entry moves of a firm changes as the level of contact a firm has with its rivals increases. We draw on competitive intelligence and decision-making theory to argue that the competitive advantages associated with multimarket contact are supplemented by the fact that a firm's multimarket competitors serve as a readily available model to reduce the uncertainty associated with market-entry decisions. We hypothesize that these factors lead firms to prefer, up to the point where forbearance concerns become paramount, to enter the markets in which their multipoint rivals already compete. We also argue that once multimarket contact levels reach the point where forbearance begins to operate, these levels also serve to stabilize the structure through better competitive intelligence, with the result that the propensity of a firm to enter into additional markets of its multimarket rivals declines. We then extend multimarket theory by focusing on the role of the CEO. Specifically, we argue that newer and longer-tenured CEOs are likely to face different influences on their preferences for particular competitive actions. We test hypotheses that link the likelihood that CEOs will abide by the mutual interdependencies that their firm's multimarket ties represent to their tenure in the CEO position. Our findings produce support for an inverted-U-shaped relationship between multipoint contact and market entry. We also find evidence that longer-tenured CEOs are guided by their firm's multimarket relationships. Newer CEOs, however, do not seem to adopt a forbearance approach toward their firm's multimarket competitors.
Our findings have important implications for multimarket theory. This study is among the first to examine the role of managers within a multimarket context. We show that it is not enough for a firm to be embedded within a multimarket structure, but that for a firm to benefit from its multimarket position, its managers must be aware of this positioning and free of other influences that could cause them to behave in ways that are inconsistent with it. Because our findings show that newer CEOs can direct their firms to act in ways that are inconsistent with their firm's multimarket position, we identify an area of potential competitive vulnerability for the firm.We present a view of trust in boundary spanners as explained by the extent of role autonomy, a multidimensional concept that reflects the discretion that agents have in interpreting and enacting their roles. We argue that, in a buyer-supplier context, purchasing managers will be trusted to a greater extent by supplier representatives when they are free from constraints that limit their ability to interpret their boundary-spanning roles. We conceptualize and measure three key components of role autonomy: Functional influence, tenure, and clan culture. Taken together, these components of role autonomy shape and define the purchasing manager's willingness and capacity to make and uphold commitments to supplier representatives. Role autonomy permits purchasing managers to engage in discretionary behaviors that allow supplier representatives to learn about their underlying motives and intentions. We test hypotheses linking the components of role autonomy to trust on a sample of 119 buyer-supplier relationships. We use a dyadic research design that combines data from purchasing managers and supplier representatives. The results suggest that granting purchasing managers greater autonomy enhances supplier representative trust in purchasing managers. By drawing attention to role autonomy as a feature of organizations that influences trust we highlight the importance of organizational context in contributing to a deeper understanding of trust.
To understand what determines knowledge flows into organizational subunits, the study reported here examines the relevance of the knowledge to the operations performed at the receiving subunit. This study analyzes inflows of knowledge from peers and supervising units into subunits of multinational corporations. It examines factors that affect the relevance of extra-unit knowledge to receiving subunits and explores empirically how these factors affect knowledge flows. The results show that knowledge travels along established ties from large knowledge bases into unspecialized, codified, locally responsive knowledge bases. The results are consistent with the view that relevance provides pathways through which new knowledge connects to prior knowledge.

Authors Murmann, Johann P.; Stephan, John; Boeker, Warren & Goodstein, Jerry
Journal or Publication Title Organization Science
Language English
Subjects business studies
HSG Classification contribution to scientific community
Refereed Yes
Date 1 August 2003
Publisher Informs
Volume 14
Number 4
Page Range 403-421
Number of Pages 18
ISSN 1047-7039
Publisher DOI 10.1287/orsc.14.4.403.17484
Official URL https://pubsonline.informs.org/doi/10.1287/orsc.14...
Contact Email Address peter.murmann@unisg.ch
Depositing User Michele K├Âlbener
Date Deposited 22 Oct 2018 12:18
Last Modified 22 Oct 2018 13:57
URI: https://www.alexandria.unisg.ch/publications/255424

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Murmann, Johann P.; Stephan, John; Boeker, Warren & Goodstein, Jerry (2003) Bringing Managers into Theories of Multimarket Competition: CEOs and the Determinants of Market Entry. Organization Science, 14 (4). 403-421. ISSN 1047-7039

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https://www.alexandria.unisg.ch/id/eprint/255424
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