Divergent reactions to convergent strategies: Investor beliefs and analyst reactions during technological change

Organization Science

Volumn 24, Issue 2, 2013, Pages 378-394

  Benner, Mary J ^a   Ranganathan, Ram ^b  

^a UNIVERSITY OF MINNESOTA   (United States)

^b UNIVERSITY OF TEXAS AT AUSTIN   (United States)

Author keywords

Analysts; Industry convergence; Innovation; Institutional theory; Investor beliefs; Strategy; Technological change

Indexed keywords

EID: 84877647382     PISSN: 10477039     EISSN: 15265455     Source Type: Journal    
DOI: 10.1287/orsc.1120.0755     Document Type: Article

References (74)

1. Abernathy WJ, Utterback JM (1978) Patterns of industrial innovation. Tech. Rev. 80(7):40-47.
2. Agarwal R, Helfat CE (2009) Strategic renewal of organizations. Organ. Sci. 20(2):281-293.
3. Aghion P, Stein JC (2008) Growth versus margins: Destabilizing consequences of giving the stock market what it wants. J. Finance 63(3):1025-1058.
4. Amihud Y, Lev B (1981) Risk reduction as a managerial motive for conglomerate mergers. Bell J. Econom. 12(2):605-617.
5. Arthaud-Day ML, Certo ST, Dalton CM, Dalton DR (2006) A changing of the guard: Executive and director turnover following corporate financial restatements. Acad. Management J. 49(6):1119-1136.
6. Baik B, Farber DB, Petroni K (2009) Analysts' incentives and street earnings. J. Accounting Res. 47(1):45-69.
7. Barberis N, Shleifer A (2003) Style investing. J. Financial Econom. 68(2):161-199.
8. Barniv R, Hope O, Myring M, Thomas W (2009) Do analysts practice what they preach and should investors listen? Effects of recent regulations. Accounting Rev. 84(4):1015-1040.
9. Benner MJ (2007) The incumbent discount: Stock market categories and response to radical technological change. Acad. Management Rev. 32(3):703-720.
10. Benner MJ (2010) Securities analysts and incumbent response to radical technological change: Evidence from digital photography and Internet telephony. Organ. Sci. 21(1):42-62.
11. Benner MJ, Tushman M (2002) Process management and technological innovation: A longitudinal study of the photography and paint industries. Admin. Sci. Quart. 47(4):676-706.
12. Benner MJ, Ranganathan R (2012) Offsetting illegitimacy? How pressures from securities analysts influence incumbents in the face of new technologies. Acad. Management J. 55(1):213-233.
13. Beunza D, Garud R (2007) Calculators, lemmings, or frame-makers? The intermediary role of securities analysts. Sociol. Rev. 55(Supplement S2):13-39.
14. Bilotti RA, Lynch M, Swinburne B (2003) Looking into the future. Report (July 2), Morgan Stanley, New York.
15. Bilotti RA, Lynch M, Swinburne B (2004) Revised 2004-08 forecast and 3 valuation scenarios. Report (February 26), Morgan Stanley, New York.
16. Bilotti RA, Swinburne B, Gober D (2005) Capital expenditures may rise in near-term as Comcast takes offensive. Report (October 21), Morgan Stanley, New York.
17. Boni L, Womack K (2002) Wall Street's credibility problem: Misaligned incentives and dubious fixes? Litan RE, Herring R, eds. Brookings-Wharton Papers on Financial Services (Brookings Institution Press, Washington, DC), 93-128.
18. Bradshaw MT (2004) How do analysts use their earnings forecasts in generating stock recommendations? Accounting Rev. 79(1):25-50.
19. Brusoni S, Prencipe A, Pavitt K (2001) Knowledge specialization, organizational coupling, and the boundaries of the firm: Why do firms know more than they make? Admin. Sci. Quart. 46(4):597-621.
20. Bushee BJ (1998) The influence of institutional investors on myopic R&D investment behavior. Accounting Rev. 73(3):305-333.
21. Collis DJ, Bane PW, Bradley SP (1997) Winner and losers-Industry structure in the converging world of telecommunications, computing, and entertainment. Yoffie DB, ed. Competing in the Age of Digital Convergence (Harvard Business School Press, Boston), 159-200.
22. Crockett RO (2007) A cable company people don't hate: How Cox is keeping customers happy and stealing business from the phone giants. Business Week (May 28):73.
23. Dacin T, Goldstein J, Scott WR (2002) Institutional theory and institutional change: Introduction to the special research forum. Acad. Management J. 45(1):45-56.
24. Das S, Levine CB, Sivaramakrishnan K (1998) Earnings predictability and bias in analysts' earnings forecasts. Accounting Rev. 73(2):277-294.
25. De Franco G, Lu H, Vasvari FP (2007) Wealth transfer effects of analysts' misleading behavior. J. Accounting Res. 45(1):71-110. Drukker D (2003) Testing for serial correlation in linear panel-data models. Stata J. 3(2):168-177.
26. Drukker D (2003) Testing for serial correlation in linear panel-data models. Stata J. 3(2):168-177.
27. Ertimur Y, Muslu V, Zhang F (2011) Why are recommendations optimistic? Evidence from analysts' coverage initiations. Rev. Accounting Stud. 16(4):679-718.
28. Fernandez B (2007) Comcast shares slide 11 pct. Philadelphia Inquirer (October 26):CITY-D-01.
29. Flannery S, Smyth R, Yau J (2005a) Taking share in wireless; line loss up sharply. Report (October 27), Morgan Stanley, New York.
30. Flannery S, Smyth R, Yau J (2005b) Trimming estimates as pressures build. Report (September 15), Morgan Stanley, New York.
31. Flannery S, Baez J, Enright P, McKeown M (2003) SBC to DISH satellite service. Report (July 21), Morgan Stanley, New York.
32. Fung A (2007) Verizon's big bet on fiber finally yields dividends. Crain's New York Business (October 7) http://www.crainsnewyork.com/article/20071007/SUB/71006041.
33. Greenstein S, Khanna T (1997) What does industry convergence mean? Yoffie DB, ed. Competing in the Age of Digital Convergence (Harvard Business School Press, Boston), 201-226.
34. Greenwood R, Suddaby R, Hinings CR (2002) Theorizing change: The role of professional associations in the transformation of institutional fields. Acad. Management J. 45(1):58-80.
35. Hall B, Jaffe A, Trajtenberg M (2005) Market value and patent citations: A first look. RAND J. Econom. 36(1):16-38.
36. Helfat C, Lieberman M (2002) The birth of capabilities: Market entry and the importance of pre-history. Indust. Corporate Change 11(4):725-760.
37. Jegadeesh N, Kim J, Krische S, Lee C (2004) Analyzing the analysts: When do recommendations add value? J. Finance 59(3):1083-1124.
38. Kahn C, Winton A (1998) Ownership structure, speculation, and shareholder intervention. J. Finance 53(1):99-129.
39. Khessina OM, Carroll GR (2008) Product demography of de novo and de alio firms in the optical disk drive industry, 1983-1999. Organ. Sci. 19(1):25-38.
40. Klepper S, Simons K (2000) Dominance by birthright: Entry of prior radio producers and competitive ramifications in the U.S. television receiver industry. Strategic Management J. 21(10/11):997-1016.
41. Kotha S, Nair A (1995) Strategy and environment as determinants of performance: Evidence from the Japanese machine tool industry. Strategic Management J. 16(7):497-518.
42. Lavie D (2006) Capability reconfiguration: An analysis of incumbent responses to technological change. Acad. Management Rev. 31(1):153-174.
43. Lee GK (2007) The significance of network resources in the race to enter emerging product markets: The convergence of telephony communications and computer networking, 1989-2001. Strategic Management J. 28(1):17-37.
44. Litov L, Moreton P, Zenger T (2011) Corporate strategy, analyst coverage, and the uniqueness paradox. Working paper, Washington University in St. Louis, St. Louis.
45. Lounsbury M, Rao H (2004) Sources of durability and change in market classifications: A study of the reconstitution of product categories in the American mutual fund industry, 1944-1985. Soc. Forces 82(3):969-999.
46. Maritan CA (2001) Capital investment as investing in organization capabilities: An empirically grounded process model. Acad. Management J. 44(3):513-531.
47. McWilliams A, Siegel D (1997) Event studies in management research: Theoretical and empirical issues. Acad. Management J. 40(3):626-657.
48. Miller G, Chapple C (2008) Valuation is too compelling to ignore. Report (February 12), Deutsche Bank, Frankfurt am Main, Germany.
49. Miller K, Bromiley P (1990) Strategic risk and corporate performance: An analysis of alternative risk measures. Acad. Management J. 33(4):756-779.
50. Mitchell W (1991) Dual clocks: Entry order influences on incumbent and newcomer market share and survival when specialized assets retain their value. Strategic Management J. 12(2):85-100.
51. Mitchelson DD, Peven B (2004) $90/mo CVC triple-play sets pricing bar lower. Report (June 22), Deutsche Bank, Frankfurt am Main, Germany.
52. Mola S, Guidolin M (2009) Affiliated mutual funds and analyst optimism. J. Financial Econom. 93(1):108-137.
53. Ocasio W (1997) Towards an attention-based view of the firm. Strategic Management J. 18(S1):187-206.
54. Qian H (2009) Time variation in analyst optimism: An investor sentiment explanation. J. Behav. Finance 10(3):182-193.
55. Rao H, Sivakumar K (1999) Institutional sources of boundaryspanning structures: The establishment of investor relations departments in the Fortune 500 industrials. Organ. Sci. 10(1):27-42.
56. Schipper K (1991) Analysts' forecasts. Accounting Horizons 5(4):105-121.
57. Shvets V, Kieley A (2005a) 1Q05 results: Calm waters. Report (April 21), Deutsche Bank, Frankfurt am Main, Germany.
58. Shvets V, Kieley A (2005b) Finally a bit more than just VZ Wireless. Report (October 27), Deutsche Bank, Frankfurt am Main, Germany.
59. Sine W, Haveman H, Tolbert P (2005) Risky business? Entrepreneurship in the new independent power sector. Admin. Sci. Quart. 50(2):200-232.
60. Sood A, Tellis GJ (2008) Do innovations really payoff? Total stock market returns to innovation. Marketing Sci. 28(3):442-456.
61. Srinivasan R, Haunschild P, Grewal R (2007) Vicarious learning in new product introductions in the early years of a converging market. Management Sci. 53(1):16-28.
62. Sull DN, Tedlow RS, Rosenbloom RS (1997) Managerial commitments and technology change in the U.S. tire industry. Indust. Corporate Change 6(2):461-500.
63. Teece D (1986) Profiting from technological innovation: Implications for integration, collaboration, licensing, and public policy. Res. Policy 15(6):285-305.
64. Tripsas M (2009) Technology, identity, and inertia through the lens of "The Digital Photography Company." Organ. Sci. 20(2):440-461.
65. Tushman ML, Anderson P (1986) Technological discontinuities and organizational environments. Admin. Sci. Quart. 31(3):439-465.
66. Westphal JD, Bednar MK (2008) The pacification of institutional investors. Admin. Sci. Quart. 53(1):29-72.
67. Westphal JD, Clement MB (2008) Sociopolitical dynamics in relations between top managers and security analysts: Favor rendering, reciprocity, and analyst stock recommendations. Acad. Management J. 51(5):873-897.
68. Westphal JD, Graebner ME (2010) A matter of appearances: How corporate leaders manage the impressions of financial analysts about the conduct of their boards. Acad. Management J. 53(1):15-44.
69. Wiersema MF, Zhang Y (2011) CEO dismissal: The role of investment analysts. Strategtic Management J. 32(11):1161-1182.
70. Woolridge JR, Snow CC (1990) Stock market reaction to strategic investment decisions. Strategic Management J. 11(5):353-363.
71. Yoffie DB (1997) Competing in the Age of Digital Convergence (Harvard Business School Press, Boston).
72. Zuckerman EW (1999) The categorical imperative: Securities analysts and the illegitimacy discount. Amer. J. Sociol. 104(5):1398-1438.
73. Zuckerman EW (2000) Focusing the corporate product: Securities analysts and de-diversification. Admin. Sci. Quart. 45(3):591-619.
74. Zuckerman EW, Rao H (2004) Shrewd, crude, or simply deluded? Comovement and the Internet stock phenomenon. Indust. Corporate Change 13(1):171-212.