«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 ...»
Although prior research has focused on the evolution of cognition during innovation processes, our study reveals that the same processes can also elicit 32 Administrative Science Quarterly XX (2015) emotional reactions that cause the processes’ trajectory to diverge from the path predicted by purely cognitive accounts. A purely cognitive account might predict that distributed attention and frequent changes in MMs’ positions would enable the organization to collect more comprehensive information (with each MM focusing on his or her specialized segment) and integrate such information through communication channels (cf. Joseph and Ocasio, 2012) to avoid various types of myopia (cf. Levinthal and March, 1993). Instead, our findings showed how the emotions that emerged as the outcomes of these practices hindered the integration of attention, leading to temporal myopia. This suggests that future research could shed new light on organizational structures by examining the shared emotions they create for different groups. Even if the organization in aggregate had accurate information about the environment, and TMs made choices accordingly, diverse groups’ shared emotions could still influence the quality of information exchange.
Our study focused on what occurred in a traditional hierarchy, but we could think of other structural arrangements that might generate emotional reactions that harm organizational action and performance. For example, time-pacing and semi-structures (Brown and Eisenhardt, 1997) might, over time, inadvertently amplify MMs’ internal fear and reduce their external fear, thereby causing innovation underperformance. Time-pacing ‘‘creates a relentless sense of urgency’’ (Brown and Eisenhardt, 1997: 24–25) that, if left unmanaged at the emotional level, might translate into internally focused fear and short-termism. Likewise, the inherent ambiguity of semi-structures may exacerbate MMs’ focus on intra-organizational matters, as they strive to make sense of how and with whom they should exchange information. This excessive internal focus risks reducing the attention devoted to processing external threats, generating high internal fear and low external fear, which influence subsequent behavior.
Our data also suggest that employees such as MMs may seek to anticipate how future structural changes will affect their personal status and privileges, and this can trigger further emotional reactions that are not necessarily related to general business conditions. This suggests that some earlier ideas on the benefits of frequent structural change (e.g., Ethiraj and Levinthal, 2004; Teece,
2007) might need to be nuanced. For example, although simulation-based studies have suggested that frequent structural changes help avoid myopia in organizational attention (e.g., Siggelkow and Levinthal, 2005), our study reveals that these changes might also elicit high internal fear among MMs and cause harmful deceptive behavior.
Organizational structures could, moreover, influence MMs’ fears through formal hierarchy. Existing research has shown that people are particularly sensitive to the behavior of individuals of higher power and status (Kish-Gephart et al., 2009). Some of Nokia’s TMs expressed aggression toward MMs, and MMs shared stories about such instances widely. The emotional story sharing increased MMs’ internal fear toward all TMs as a powerful group. This suggests that one reason less-hierarchical structures might foster innovation (Burns and Stalker, 1961) is that more organic, egalitarian structures dampen the effects of hierarchy-based fear and the potentially harmful effects of morepowerful groups. When the power difference between TMs and MMs is perceived as modest, TMs’ aggression is less likely to amplify MMs’ internal fear and thus less likely to cause extreme protective behavior.
Vuori and Huy 33 MMs’ dependence on organizational status could also affect how strongly the aforementioned structural factors influence MMs’ internal fear. In Nokia’s case, MMs’ dependence on the status of their company was particularly high because Nokia was one of the few globally successful high-tech companies in small-population Finland. When MMs’ status is highly dependent on their organization, they are likely to be more sensitive to threats inside the organization, because those threats exert a more immediate effect on MMs’ perceived person–environment relationship; this increased sensitivity evokes emotional reactions (Lazarus, 1991). Central to such dependence is the relative weight given to organization-independent and organization-dependent factors in one’s status: greater personal achievements should increase a person’s independent status, whereas the high status of the organization should increase the effect of organizational membership on personal status. For example, a junior software engineer joining Google would enhance his or her personal status because of the company’s high profile, whereas a Nobel Prize winner making the same move would receive less of a reputational boost, as he or she already had significant personal achievements. Hence, once hired, the engineer would probably experience higher internal fear than the Nobel Prize winner. This suggests the intriguing hypothesis that organizations might consider retaining their longer-tenured, successful MMs not just because of their rich tacit knowledge (e.g., Droege and Hoobler, 2003) but also because they are less likely to experience high internal fear and are therefore more likely to communicate honestly about organizational reality to people in higher formal positions—in particular, to be the bearers of bad news.
Though our data suggest how the structural distribution of attention and hierarchy can lead to different types of shared fear among diverse groups, organizational structures could also induce fear in other ways. For example, organizational structures that encourage groups to compete with one another likely generate different shared emotions than structures that promote collaboration (cf. Ouchi, 1977). Likewise, functional and divisional structures expose groups to diverse groups of actors and interests inside and outside the organization and could thus generate different emotional reactions. Future research could investigate more comprehensively how various structural factors influence diverse groups’ emotions—both the discrete emotions that are experienced and the diverse targets of those emotions—and how these shared emotions subsequently influence organizational outcomes.
Integration of Attention Diverse types of structurally based fear beg a deeper discussion of how such fears influence the organizational processes that are presumed to make any particular structural arrangement effective. The attention-based view of the firm emphasizes the centrality of integration of attention. This view assumes that different groups first distribute organizational attention (Ocasio, 1997) and then bring their perspectives together to facilitate high-quality decisions. Joseph and Ocasio (2012: 644) noted that this can happen through ‘‘open and frank dialogue’’ when appropriate channels are present (see also Henderson and Clark, 1990). But our study suggests that TMs’ external and MMs’ internal fear can foster interaction patterns that amplify rather than integrate differences in perspective, even with regular formal and informal meetings to integrate attention.
34 Administrative Science Quarterly XX (2015) The communication channels within Nokia’s formal structure were supposed to highlight key information; however, both MMs’ and TMs’ shared emotions reduced the accuracy of the information exchanged and biased subsequent strategic decision making. TMs’ external fear led them to exert pressure on MMs without fully revealing the severity of the external threats and to interpret MMs’ messages in biased ways. MMs’ internal fear made them mislead TMs during their interactions.
The attention-based view of the firm has emphasized that organization members’ attention is influenced by various contextual and situational factors (Ocasio, 1997, 2011). This reveals the sequential and cyclical nature of attention, in that what people attend to first likely shapes what they attend to later (cf. Weick, 1979). Our study reveals how various types of fear could shape this cyclical process in TM–MM interactions and extends our understanding of situational attention in organizations. Shared emotions felt in one group could influence the attention of another group: TMs’ external fear can make them exert heavier pressure on MMs, which increases MMs’ attention to intraorganizational threats; and MMs’ high internal fear makes them communicate potential problems less openly to TMs, which reduces the attention TMs pay to those issues. Likewise, MMs’ internal fear can reduce their disposition to publicly criticize their peers, which can reduce TMs’ attention to potential weaknesses in open strategic debates. At Nokia, the outcome was that TMs’ understanding of what the organization was capable of increasingly diverged from MMs’ understanding, and this assessment gap contributed to Nokia’s temporal myopia and innovation underperformance. Hence a deeper understanding of how the integration of distributed attention occurs in organizations would require scholars to consider the shared emotions that diverse groups experience as a result of their distributed attention and how those emotions influence their motivation and ability to share their views.
Our study tentatively suggests that MMs fearing external competition directly—as opposed to fearing TMs as a proxy of the external environment— might lead to more functional communication patterns (see also Grove, 1996).
Though TMs might still exert excessive pressure on MMs, MMs’ external fear could function as a corrective, allowing them to pay sufficient attention to threats in the external environment. With moderate internal fear and moderately high external fear, MMs might resist mounting pressure from TMs more assertively and be honest about what they could realistically deliver in a given timeframe, forcing TMs to revise their expectations and take timely adjusting actions. Future research could investigate this hypothesis, explore whether it is possible to elicit salutary, adaptive external fear among MMs, and investigate the associated side effects on other stakeholder groups such as shareholders and customers.
One could also speculate that TMs’ high ability to regulate (e.g., Gross, 1998) their external fear might foster higher-quality interactions with MMs. In the Nokia case, TMs’ high external fear caused them to put too much pressure on MMs and dismiss MMs’ warnings. We wonder what might have happened if Nokia’s TMs had tempered their high external fear somewhat, freeing their cognitive resources to consider the wider consequences of their actions. Such regulation of fear might have enabled them to stay attuned to the external threat while forming a better understanding of Nokia’s internal context and to flexibly co-develop a more appropriate and timely corrective action plan with MMs.
Vuori and Huy 35 Our research on the effect of structurally based fear also contributes to research on managerial cognition by identifying social–emotional processes that influence TMs’ cognition. Even though the importance of managerial cognition has been well established (e.g., Tripsas and Gavetti, 2000), how intraorganizational processes shape TMs’ cognition remains insufficiently understood (Gavetti et al., 2012; Eggers and Kaplan, 2013). Previous research has mainly focused on the impact of managerial cognition (e.g., Kaplan, 2008) or individual-level factors that might explain biases (e.g., Wagner and Gooding, 1997). Our inductive process model advances a social–emotional interaction view by describing how emotion-laden TM–MM interactions influenced the content of information conveyed to TMs and shaped their cognition. TMs were not just passive recipients of information; they actively shaped what would be communicated to them by influencing their subordinates’ emotions both directly (through their directives) and indirectly (through structural choices). This suggests that one predictor of the accuracy of TMs’ mental models could be their ability to influence the quality of their interaction with MMs by managing their own and MMs’ emotions.
Limitations and Future Research Because it is a one-company case study, our proposed process model comes with limitations that represent opportunities for future research. We focused on a fast-moving high-tech industry in which complex software development played a central role. TMs in other industries might find it easier to observe how well their companies are developing innovations. Hence, structurally based fear might have a weaker effect on innovation processes in industries in which core production elements are more easily observable and understandable. Moreover, the speed of feedback loops could be important: how quickly do the harmful consequences of miscommunication materialize? In business organizations, a lie might go undetected for months. But in settings such as flight decks (Weick and Roberts, 1993), navy ships (Hutchins, 1995), and emergency wards (Rico et al., 2008), miscommunication would lead to immediate negative consequences, triggering strong emotional reactions. Hence emotional reactions likely motivate honest reporting about problems in these contexts.
No theory in management research could be expected to explain all of the variance observed, and we do not claim that fear was the only factor contributing to Nokia’s decline. We focused on explaining how fear emerged and influenced TMs’ and MMs’ interactions, contributing to temporal myopia that caused Nokia to lose the smartphone battle. We expect other scholars to suggest other plausible and complementary accounts of Nokia’s decline. Beyond economic and structural factors that have occupied a central place in the strategic management of organizations, however, our study illuminates the importance of shared emotions among various groups and their powerful impact on firms’ competitiveness.