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«Abstract We conducted a qualitative study of Nokia to understand its rapid downfall over the 2005–2010 period from its position as a world-dominant ...»

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Administrative Science Quarterly

1–43

Distributed Attention Ó The Author(s) 2015

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and Shared Emotions sagepub.com/

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in the Innovation DOI: 10.1177/0001839215606951

asq.sagepub.com

Process: How Nokia

Lost the Smartphone

Battle

Timo O. Vuori1 and Quy N. Huy2

Abstract

We conducted a qualitative study of Nokia to understand its rapid downfall over the 2005–2010 period from its position as a world-dominant and innovative technology organization. We found that top and middle managers’ shared emotions during the smartphone innovation process caused cycles of behaviors that harmed both the process and its outcome. Together, organizational attention structures and historical factors generated various types of shared fear among top and middle managers. Top managers were afraid of external competitors and shareholders, while middle managers were mainly afraid of internal groups, including superiors and peers. Top managers’ externally focused fear led them to exert pressure on middle managers without fully revealing the severity of the external threats and to interpret middle managers’ communications in biased ways. Middle managers’ internally focused fear reduced their tendency to share negative information with top managers, leading top managers to develop an overly optimistic perception of their organization’s technological capabilities and neglect long-term investments in developing innovation. Our study contributes to the attention-based view of the firm by describing how distributed attention structures influence shared emotions and how such shared emotions can hinder the subsequent integration of attention, influencing innovation processes and outcomes and resulting in temporal myopia—a focus on short-term product innovation at the expense of long-term innovation development.

Keywords: innovation process, shared emotion, cognition, attention-based view of the firm, smartphone, temporal myopia Innovation requires highly effective information sharing between various organizational groups. For example, top managers are expected to translate prioritized Department of Industrial Engineering and Management and Department of Management Studies, Aalto University INSEAD, Singapore 2 Administrative Science Quarterly XX (2015) strategic themes into actionable goals for middle management, while the latter are expected to coordinate with each other and report upwards on the progress of implementation to enable corrective actions (e.g., March and Simon, 1958;

Ethiraj and Levinthal, 2004). Such integration of attention between organizational groups (Joseph and Ocasio, 2012) is important for innovation because of interdependencies relating to a host of factors, including diverse units’ tasks, technologies, organizational capabilities, and changing market expectations (e.g., Garud, Tuertscher, and Van de Ven, 2013).

Prior scholars have studied the innovation process and the related communication and integration of attention mainly from structural (e.g., Henderson and Clark, 1990; Ocasio, 1997, 2011) and cognitive perspectives (e.g., Gavetti et al., 2012; Eggers and Kaplan, 2013), but these theoretical perspectives do not fully explain why various organizational groups often find it hard to integrate their knowledge through communication. Though the generation of structural channels to enable interaction between groups such as top and middle managers might foster comprehensive information sharing between them (Joseph and Ocasio, 2012), the mere existence of such channels may not be sufficient, as people may still avoid bringing up sensitive issues or refuse to listen to others during their interaction episodes. Several case studies have described the challenges of companies using various structural arrangements and have alluded to the persistence of poor mutual understanding between top and middle managers in the innovation process (Leonard-Barton, 1992; Tripsas and Gavetti, 2000; Repenning and Sterman, 2002; Gilbert, 2005). In a recent noteworthy example, President Obama said, ‘‘I would not have launched Healthcare.gov if I had known it wasn’t going to work’’ (The Verge, 2013), while many managers in his administration seemed to have been long aware of the platform’s technical problems (Economist, 2013;

Washington Post, 2013). Research has also shown that middle managers’ understandings often evolve to be quite different from top managers’ perceptions and intentions (Balogun and Johnson, 2004; Huy, Corley, and Kraatz, 2014).

In addition to being influenced by structures and cognition, intergroup communication processes could be influenced by emotions, which have remained underexamined in research on organizational innovation (see Garud, ˇnik, and Zhou, 2014, for Tuertscher, and Van de Ven, 2013; Anderson, Potoc reviews). To the extent that the innovation process or its outcomes can have major consequences for people’s well-being, various groups participating in innovation may experience strong emotions (cf. Lazarus, 1991; Elfenbein, 2007). Basic research has shown that emotions influence people’s choices and behaviors (e.g., Izard, 2009; Phelps, Lempert, and Sokol-Hessner, 2014).

Emotions also influence social processes in substantial ways (e.g., Hareli and Rafaeli, 2008; Niedenthal and Brauer, 2012), and scholars have found that emotions can significantly influence organization members’ thinking and behavior related to strategy implementation (Huy, 2011; Huy, Corley, and Kraatz, 2014).





Furthermore, emotions often come to be shared within organizational groups because group members attend to similar things and share their emotions socially (e.g., Elfenbein, 2014; Menges and Kilduff, 2015). At the same time, there could be intergroup differences, as each group is primarily focused on its own task and well-being (e.g., Cyert and March, 1963; Ocasio, 1997). Shared emotions could thus provide a complementary mechanism for understanding how organizational groups communicate, coordinate, and act during the innovation process, influencing its outcomes.

Vuori and Huy 3 One of the dominant lenses for organizational innovation has its origins in the Carnegie School (e.g., Simon, 1947; March and Simon, 1958), which in many ways has sought to answer the question, ‘‘Given that individuals are boundedly rational, how should we design organizations?’’ A key insight has been that organizations need both specialization (leading to differentiation) and integration. Specialization is needed because no individual can handle everything, while integration is needed to combine different viewpoints (see also Ocasio, 1997; Joseph and Ocasio, 2012). Different levels of differentiation and integration seem to lead to varying problems. For example, as specialization increases, employees and managers have to escalate more issues further upward, which can slow down innovation (Burns and Stalker, 1961). And when communication channels are optimized for the refinement of current products, various units may fail to integrate their views during the design of radically new products (Henderson and Clark, 1990), while others may not see a critical need for them (Christensen and Bower, 1996).

Unfortunately, the theoretical mechanisms underlying the structural– cognitive perspective have remained decoupled from emotions. Scholars have analyzed organizations as systems whose elements process information in an affect-free way and have remained largely indifferent to how various organization members might feel differently about the information they use or react to it in different ways (see Gavetti et al., 2012, for a review). Yet emotions could become relevant to the extent that people see the serious implications of the information they are processing, which triggers emotions when those implications have personal relevance for them (e.g., Lazarus, 1991). As innovation often has significant personal relevance, participants in the innovation process could experience strong emotions in regard to the information they process and could also influence each other’s emotions as they grapple with various important situations (cf. Hareli and Rafaeli, 2008). Even though many works have hinted that emotional reactions might influence people’s behavior inside structural communication channels during the innovation process (e.g., Burns and Stalker, 1961; Fang, Kim, and Milliken, 2013; Reitzig and Maciejovsky, 2014), very few, if any, empirical field studies have examined how various groups’ emotions emerge during the innovation process and what the impacts are. Hence a deeper and more holistic understanding of the innovation process would require a joint investigation of how both emotional reactions and bounded rationality influence the innovation process and its outcomes.

We carried out an inductive study of Nokia’s failure to produce a nextgeneration smartphone in response to Apple’s iPhone. This case allowed us to develop a deeper understanding of the emergence of shared emotions during the innovation process and their influence on innovation because it represents an extreme case for theory building. Rapid changes in Nokia’s competitive environment put severe pressure on firm members and amplified their emotions, making the influence of those emotions particularly salient.

INNOVATION AND EMOTION

We follow Elfenbein (2007: 315) in viewing emotion as a process that ‘‘begins with a focal individual who is exposed to an eliciting stimulus, registers the stimulus for its meaning, and experiences a feeling state and physiological changes, with downstream consequences for attitudes, behaviors, and 4 Administrative Science Quarterly XX (2015) cognitions, as well as facial expressions and other emotionally expressive cues.’’ A distinguishing characteristic of emotions is that they have a target, which is a crucial element because the action tendencies associated with emotions relate to the target of the emotion (e.g., Russell, 2003; Damasio and Carvalho, 2013).

For example, fear can make people either get a vaccination or avoid one, depending on whether the target of their fear is the disease to be prevented or potential harmful side effects of the vaccination itself. Hence, to understand how emotions might influence the innovation process, it is important to investigate the target of the emotion in addition to observing whether the emotion is present.

Emotions activate action tendencies rather than fixed actions (Ellsworth and Scherer, 2003). For example, fear can lead to increased heart and respiratory rates, freeze or flight behaviors, and ‘‘attentional behaviors,’’ leading to attention to the cause (Damasio and Carvalho, 2013: 145; see also Lazarus, 1991;

Ellsworth and Scherer, 2003). Action tendencies’ main purpose is to help the individual achieve a favorable person–environment relationship in the particular situation (Lazarus, 1991; see also Damasio and Carvalho, 2013). By directing attention to the particular target that triggers the emotion, emotion facilitates actions that address that particular target, while also temporarily reducing attention to other matters. Even though emotional reactions are usually adaptive, they sometimes cause people to prefer small short-term benefits over large long-term benefits (e.g., Phelps, Lempert, and Sokol-Hessner, 2014) or to take actions that avoid tolerable short-term harm but risk causing catastrophic long-term consequences (e.g., Kahneman, 2011: Part 4).

The emotion that people experience toward a particular target depends on how they perceive that target’s implications for themselves (e.g., Ellsworth and Scherer, 2003; Russell, 2003; Izard, 2009). The target need not be physically present: recalled and imagined targets can also trigger emotion, as can

Abstract

concepts such as money and power (e.g., Ellsworth and Scherer, 2003; Damasio and Carvalho, 2013). Appraisal theories of emotion suggest that people appraise specific dimensions in a target that determine the emotion they come to experience (Ellsworth and Scherer, 2003). Lazarus (1991) suggested that the appraisal process has two stages: a primary and secondary stage. For example, people are likely to experience fear when their primary appraisal suggests potential harm to their wellbeing and their secondary appraisal suggests that the outcome of the situation is uncertain or beyond their control. Even though emotion theories do not fully agree on the details of the process through which people come to experience emotions, there is enough alignment that appraisal theories give us an effective tool for understanding and inferring how and why people experience emotions during the innovation process (see also Elfenbein, 2007, 2014; Menges and Kilduff, 2015).

Emotional states can be fleeting, such as the fear triggered by a sudden loud noise, or longer lasting, such as the fear of terrorism (e.g., Izard, 2009). When an emotion is said to be longer lasting, it usually refers to people experiencing the same emotion multiple times toward the same target over a long period, repeating the appraisal process continuously until the situation is resolved (Ellsworth and Scherer, 2003). In organizational settings, emotional states that recur consistently over time are likely to have a more systematic effect on the innovation process than occasional fleeting emotions: though the former have an iterative, cumulative influence, the latter may be too rare to form accumulating patterns and may also have partly opposing influences that cancel each other out when emotions fluctuate.

Vuori and Huy 5 Fear, Threat Rigidity, and Shared Emotions during the Innovation Process The innovation process can be laden with emotion in part because of the uncertain, prospective, yet highly consequential nature of the innovation journey.

Innovators are trying to create things that do not yet exist by leveraging technological components of uncertain market potential. Because of this prospective orientation, future-oriented emotions such as hope and fear (Baumgartner, Pieters, and Bagozzi, 2008) are particularly likely to arise. Negative emotions tend to command more attention than positive ones because they evolved to help people ensure their survival, or at least avoid harm (Baumeister et al., 2001). As a result, fear—as a future-oriented negative basic emotion—could play a critical role in the innovation process (see Baumgartner, Pieters, and Bagozzi, 2008;



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