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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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In those forums, there was no way you would accuse someone of not telling the truth. [Culturally, it was not acceptable to] criticize someone else’s story in any way.... No one wanted to fight their battles in front of [the CEO] and others, because you knew that if you put someone [else] down, they’d put you down the first chance they got. (UMM#8, software) I should’ve been much, much more courageous. And I should’ve made a lot more noise, should’ve criticized people more directly.... I could’ve made more of an impact. And it would’ve been breaking the consensus atmosphere.... Nobody wanted to rock the boat, especially [among] the middle management [level].... I didn’t want to be labeled as a mean person who was constantly criticizing the hard work of others.... I should have been braver about rattling people’s cages. (MM#1) Beyond the key antecedents of fear described above, another reason for MMs’ fear toward their colleagues was that many MMs perceived that other MMs’ behaviors were self-centered and dysfunctional, using descriptions such as ‘‘focused only on self-interest and own career development’’ or ‘‘deceptive.’’ The MMs we interviewed further described how they felt threatened by these behaviors because they might harm the status and career progression of moreauthentic individuals. These reactions seem consistent with earlier research showing that perceptions of political behaviors generate primary appraisals of threat that elicit negative emotional states (e.g., Chang, Rosen, and Levy, 2009).

Prospective documentary data provided corroborating evidence of internal fear at Nokia. In a book written in 2008, a former Nokian described Nokia’s ‘‘atmosphere of fear’’ (Palmu-Joronen, 2009: 12). A news article from 2007 was entitled ‘‘Fear is driving Nokians to unionize’’ and described individuals’ fear of losing their jobs or being exploited (Taloussanomat, 2007a). A consultant’s report in 2007 (mentioned by the EVP of HR in Taloussanomat, 2007b) and a book written in 2009 by a former software and design director (Risku, 2010: 38, 61) both noted that a lack of courage was a particular problem at Nokia. Two Nokians’ personal notes written between 2005 and 2007 directly indicated that they had perceived others feeling fear; one indicated that he had personally felt fear. Several blog posts and online discussions that included Nokia MMs, IT professionals, and other observers close to Nokia also included statements that described or indicated fear (Finnsanity, 2007; Uusisuomi, 2008; Jarmostoor, 2009). Two confidential reports written near the end of our study period also indirectly indicated that MMs might feel fear toward TMs.

There were also several reports in the Finnish media in 2008 about a rumor that Nokia was threatening to relocate its headquarters from Finland if a law 20 Administrative Science Quarterly XX (2015) that would allow companies to read their employees’ e-mails was not passed (Wikipedia, 2015). The law became known as ‘‘Lex Nokia’’ (The Register, 2009). For many of our informants, this law symbolized the atmosphere of fear at Nokia (see also Murobbs, 2006, for related online discussions by Finnish IT professionals). Our informants also consistently noted that ‘‘no one was stupid enough’’ (MM#15, software) to mention their true feelings in e-mails because they suspected that the company was monitoring them.

MMs’ low external fear. Threat-rigidity theory would predict that when a competitor poses a threat, the whole organization responds to it with emotional arousal (cf. Staw, Sandelands, and Dutton, 1981). This did not happen at Nokia.

Although they deeply feared internal entities, most Nokia MMs experienced only modest external fear. A senior strategy consultant explained that Nokia’s MMs had little external fear that other firms were better because they believed

Nokia had superior capabilities relative to other organizations:

They [Nokia MMs] were overconfident in their own abilities. From a consultant’s point of view, it showed in how they treated [the consultant], whatever function you went into Nokia... to talk about, like, ‘‘Hey, have you thought about this issue like this?’’ Nokia has always been one of the most arrogant companies ever towards my colleagues, who were partners back then. It showed up in how everything was always perfect, you know, Nokians [thought that they] were the best in class. And they didn’t even want to hear how you could think about things differently. They just went into their cocoon and patted themselves on the back.

Software UMM#8 noted, retrospectively: ‘‘[TMs] should have created healthy dissatisfaction among people a lot faster.’’ As MMs’ attention was focused on intra-organizational factors, the manner in which they assessed competitors’ products seemed biased by what was perceived as relevant for Nokia. MMs downplayed the competitive gap by comparing Nokia’s future developments against competitors’ past products: ‘‘[Competitors’ products] were always compared to what we knew that we were doing next. There was not much to learn from.... In comparison to our [future products] they were no better’’ (MM#16). Many MMs also made comparisons along dimensions that favored Nokia’s products. For example, several MMs told us they had felt that ‘‘the iPhone was a bad phone; it didn’t even have 3G [radio technology]’’ (UMM#3, software). Some wondered whether ‘‘Apple paid magazine editors to sex up the iPhone in their fawning articles’’ because ‘‘they believed [that the iPhone hype] was undeserved, irrational’’ (Cord, 2014: 86). These quotes indicate that many Nokia MMs genuinely believed that their products were superior to Apple’s.

MMs remained aware of the macro measures of their company’s performance, but these measures—which again reflected the past rather than the present—also suggested that there was ‘‘nothing to worry about’’ (MM#3). As quarterly evaluations by the stock market were important for Nokia, positive market news strongly influenced MMs’ appraisals of external competition and calmed their external fears. As UMM#7 noted, ‘‘[We sold] the classic smartphones with old-fashioned keyboards in such goddamn huge numbers that some people questioned why we should even make touch-screen phones— ’we’re doing fine as it is.’’’ Vuori and Huy 21 TMs’ actions also contributed to MMs’ low external fear. TMs’ public rhetoric downplayed the threat of new entrants, including Apple and Google, to maintain confidence among employees and customers that Nokia would continue to prosper. For example, the CEO downplayed Google’s Android strategy publicly in November 2008: ‘‘We have had that [platform and applications] for 10 years. Definitely, we are ahead’’ (Symbian-Freak, 2008). Likewise, an EVP stated publicly that the iPhone is ‘‘an interesting product but it is lacking a few essential features, such as 3G, which would enable fast data connections’’ (Taloussanomat, 2007c).5 MMs’ dependence on organizational status. In addition to the primary antecedents of shared internal fear described above, many MMs’ dependence on high status inside the organization amplified the influence of those primary antecedents on MMs’ internal fear. Not surprisingly, many MMs attached high importance to their social status inside Nokia and thus perceived negative reactions from colleagues as personal threats. In addition, as many MMs lived in Finland, home to few globally successful high-tech companies, they could see no better job opportunity than being part of the industry world leader. Working

for Nokia conferred a prestigious external reputation or image. As our informants explained:

[Many people change jobs to advance in their careers, but] if you’ve been with Nokia, especially as the level of SVP, VP, or even a director, where the hell are you going, really? You’re going nowhere, so you circle around within the company. Unless you’re willing to move to the US or Asia, you have no [better] job opportunities.

(Senior strategy consultant) [Nokia’s status was so high that] if you had a Nokia business card, you could get a meeting with any CEO. Any CEO.... Everyone had good jobs; no one wanted to leave Nokia at that point.... Critique [of the company] was seen as negative; the mindset was that if you criticize what’s being done, then you’re not genuinely committed to it. (MM#17) For most MMs, Nokia membership was a central contributing factor to their personal status. But for a few other MMs, being part of Nokia was deemed less important. These rare MMs had already accumulated sufficient personal achievements and material resources to have a sense of individual autonomy and self-worth beyond what could be conferred by their organizational membership. They also experienced lower internal fear than their peers. For example, one software leader who had worked at Nokia for over 15 years, made A fourth reason behind MMs’ low external fear might have been their beliefs about their own superiority relative to the members of other organizations (cf. Hiller and Hambrick, 2005; Chatterjee and Hambrick, 2007). Even though our interview data did not directly indicate that Nokia MMs had these beliefs, two contextual factors could plausibly produce them (cf. Hayward and Hambrick, 1997). First, Nokia was for a long time among the most desired employers in Finland and therefore recruited only the ‘‘best of the best,’’ making it possible that Nokians saw themselves as superior to others. Second, Nokia’s long success and market power may have made others flatter Nokians in both business and private settings, reinforcing Nokians’ belief that they were better than others.

Note that we refer to MMs perceiving Nokia as a collective to be superior relative to other organizations but not to how individual MMs saw themselves relative to other MMs or TMs inside Nokia, who shared the same positive reinforcement from the outside and were also among the best of the best.

22 Administrative Science Quarterly XX (2015) groundbreaking innovations, and earned millions of euros was one of this select group. He was described by several informants as very direct in confronting TMs, and our interview with him confirmed this perception. But he was ‘‘completely sidelined’’ (UMM#6), and his views—as well as the views of the few other critical MMs—were dismissed during collective interaction processes.

Table B2 in Online Appendix B provides additional examples of individuals who were part of this critical group and how their views were dismissed. The table also includes more typical examples of MMs who had low to medium personal achievement at Nokia and felt high internal fear.

TM–MM Decoupling Interactions In combination, TMs’ external fear and MMs’ internal fear and low external fear produced an interaction pattern between these groups that increased the decoupling between TMs’ and MMs’ perceptions of how quickly Nokia could develop new software and introduce smartphones to match the iPhone. During these interactions, TMs, driven by external fear, exerted heavy pressure and imposed challenging demands on MMs. This pressure came over and above the high internal fear that MMs were already experiencing. Instead of pushing back, MMs generally acquiesced to TMs’ demands and continued reporting optimistic progress despite mounting implementation difficulties. Online Appendix table B3 provides additional data on these interactions.

TMs’ increasing pressure on MMs for fast performance. Based on the extant literature, we might expect top-level executives to appreciate the technological complexity involved in innovation processes (cf. Kaplan and Tripsas, 2008; Dougherty and Dunne, 2012) and therefore to be careful not to let their own impatience compromise product quality (cf. Brown and Eisenhardt, 1997).

But at Nokia we found the opposite pattern, which arose because a previously unacknowledged factor—shared external fear—influenced TMs’ behaviors.

Fearful that Nokia would lose its world dominance and post weak results in the next quarter, TMs tended to act urgently, an action tendency associated with fear (Lazarus, 1991), and put high pressure on product and software units to develop new, innovative products rapidly.

First, TMs put direct pressure on MMs to perform faster. One TM noted, ‘‘It was clear that we [TMs] feared the iPhone. So we told the middle managers that they had to deliver touch-phones quickly.’’ Another TM said, ‘‘The pressure we put on the [Symbian] software organization was insane, because the commercial realities were also pressing. You must have something to sell. And of course, when the pressure is on the R&D teams, really intensely, of course they feel that they don’t have enough time.’’ A high-level leader from the

MeeGo organization also reflected:

–  –  –

Beyond the verbal exhortations, TMs also applied pressure for faster performance by MMs through personnel selection. Although many MMs in the software groups accepted TMs’ requests, a few did push back, as Online Appendix table B2 shows. Predictably but not ideally, TMs favored MMs who provided reassuring reports, thus temporarily alleviating TMs’ external fear, and

sanctioned MMs whose accounts validated TMs’ external fear:

Question: Why didn’t you explain to TMs that software development would be compromised if you had to develop as many phones in the given time period as the TMs wanted?

UMM#9, software: Someone else always said yes [to unfeasible TM demands]. All I got was the information—that’s how it was. And then my responsibilities were cut.

Because there was always some lunatic who promised they’d do all these ten fine and wonderful things within the timeframe given by TMs... even though it wasn’t true at all [that it would be possible].... TMs trusted these people when they said it’s going to work out. They had blind faith. The management team... knew a lot of people—but they picked some young, fast-talking guy who said, ‘‘I have this little trick, I’ll fix this thing.’’ Nokia TMs further sated their appetite for optimistic news by favoring ‘‘new blood’’ who displayed a ‘‘can-do’’ attitude. TMs confirmed that they had stressed the need for new, typically younger staff, whom TMs perceived as having the new skills and motivation needed to develop Nokia’s capability. A TM told us that

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