Organizational slack, temporality, and ambidexterity shaping the innovative behaviors of small and medium-sized enterprises and family firms

Abstract

The challenges organizations are facing, often imposed by the environments in which they operate, are reaching new heights. It is known that innovation is imperative if an organization wants to thrive continually. Yet, how organizations cultivate their innovative capabilities in response is growing more complex and questions remain, specifically for small and medium-sized enterprises (SMEs) and family firms, given their resource limitations and unique organizational context. This dissertation is composed of two essays exploring such complexity by examining an intricate relationship between firms’ temporal cognition, strategic behaviors, and organizational resources shaping their innovative capabilities. Drawing from a theoretical extension of resource-based view (RBV) to resource orchestration theory (ROT), Essay 1 explores the relationships between SMEs’ organizational slack resources, ambidexterity, and innovativeness while in the midst of an economic downturn. This study proposed that SMEs’ organizational slack resources positively influence their innovativeness, and that organizational ambidexterity positively mediates such a relationship. With a public SME sample of 5,355 firm-year observations from 2008 to 2013, I used computer-aided text analysis (CATA) to analyze shareholder letters and Management Discussion & Analysis (MD&A) sections of 10K filings. Findings supported recoverable slack linking to innovativeness. Furthermore, SMEs’ ambidexterity is a partial mediator between recoverable slack and innovativeness. Essay 2 studies the relationship between a family firm’s long-term orientation (LTO) and relative-exploration orientation in the situation of family involvement (i.e., family management and ownership). I drew on the literature on LTO and socioemotional wealth (SEW) to theorize that there is a positive relationship between LTO and relative-exploration orientation and that there are contrasting moderating effects of restricted SEW priorities held by family managers versus extended SEW priorities held by family owners. Using CATA to test my research model, I content-analyzed shareholder letters pulling from a public family business sample of 959 firm-year observations from 2004 to 2013. Findings showed a positive relationship between LTO and relative-exploration orientation and a negative moderating effect of family management.