Introduction
A vibrant stream of research has highlighted the critical impact of collaborative network relationships on organizational innovation outputs (Ahuja, Reference Ahuja2000; Khanna & Guler, Reference Khanna and Guler2022; Schilling & Phelps, Reference Schilling and Phelps2007). Collaborative network relationships are viewed as inter-organizational pipes for resource transfer and knowledge sharing, and organizations are primarily inclined to rely on these referrals to evaluate resource reliability and the competencies of potential partners (Kilduff & Brass, Reference Kilduff and Brass2010; Wang & Hu, Reference Wang and Hu2020). Consequently, organizations may actively establish collaborative ties with their partners' partners and ultimately form densely connected communities. Collaboration networks exhibit a typical community structure, showing distinct and relevant substructures characterized by thematically homogeneous and spatially heterogeneous community groups (Sytch & Tatarynowicz, Reference Sytch and Tatarynowicz2014; Wang & Yang, Reference Wang and Yang2019). Specifically, network communities are dense, overlapping structural groups within a network. Organizations in the same community connect more to each other than to those outside the community.
Network bridging ties are nonredundant relationships that interlink organizations in different network communities (Sytch, Tatarynowicz, & Gulati, Reference Sytch, Tatarynowicz and Gulati2012), which deliver complementary resources and enable the diffusion of innovations among diverse systems. Bridging ties occupy a critical position in collaboration networks and yield essential ramifications and insights for organizational innovation outputs. However, given the distinctive value of bridging ties in collaboration networks (Arya & Lin, Reference Arya and Lin2007; McEvily, Jaffee, & Tortoriello, Reference McEvily, Jaffee and Tortoriello2012), extant research has overlooked the determinants of the establishment of new bridging ties. Theoretically, collaboration networks even evolve in the absence of disruptive external events, and these changes have implications for the accrual of advantages (Ahuja, Soda, & Zaheer, Reference Ahuja, Soda and Zaheer2012). This line of research indicates that network structures cannot be taken for granted and makes suggestions for their origin and persistence (Kavusan & Frankort, Reference Kavusan and Frankort2019; Wang, Nie, Guo, & Liu, Reference Wang, Nie, Guo and Liu2024). Accordingly, network members may form new bridging ties in light of their tendency for certain interests (Hanaki, Nakajima, & Ogura, Reference Hanaki, Nakajima and Ogura2010), and the inquiry to investigate the underlying mechanisms becomes relevant.
Exploring the determinants of the formation of new bridging ties in collaboration networks is of vital importance. The first reason pertains to the phenomenon of such heterogeneity in organizations' formation of new bridging ties in collaboration networks. Scholars have made significant progress in exploring the tangible benefits of bridging ties (McEvily, Soda, & Tortoriello, Reference McEvily, Soda and Tortoriello2014; Wang & Yang, Reference Wang and Yang2019). It is essential to explore why some organizations bridge across network communities more than do other peers. The second reason pertains to the theoretical origin that accounts for the systematic variation in organizations' preferences for forming new bridging ties. The extant research warrants a deeper understanding of the determinants that aggravate or alleviate organizations' propensity to form new bridging ties.
Prior research has suggested that incentives and opportunities embedded in existing network structures are essential driving forces for the formation of new bridging ties in collaboration networks (Shipilov & Li, Reference Shipilov and Li2008; Sytch et al., Reference Sytch, Tatarynowicz and Gulati2012). The microdynamics of such actions primarily manifests in two facets: nodal assortativity-driven factors (e.g., homophily and prominence attraction) and tie pattern-driven factors (e.g., referral and inter-organizational routines). In summary, this body of research indicates that value-creation incentives and the availability of new bridging contacts constitute two crucial mechanisms for explaining the formation of new bridging ties. Notably, the extant research has conceptualized decision-makers as value maximizers who make decisions regarding the formation of new bridging ties on the basis of a reasonable assessment of internal and external contingencies. However, decision-makers are more appropriately viewed as boundedly rational and thus rely on behavioral heuristics when making decisions about the formation of new bridging ties in collaboration networks. Despite the compelling evidence that performance feedback can affect a firm's collaboration activities (Baum, Rowley, Shipilov, & Chuang, Reference Baum, Rowley, Shipilov and Chuang2005; Kavusan & Frankort, Reference Kavusan and Frankort2019), we have little insights into how such factors may affect a firm's strategic decision to enter new relationships that connect partners from other communities.
Therefore, we investigate why some organizations bridge across network communities more or less through the lens of the behavioral theory of the firm (Cyert & March, Reference Cyert and March1963). The behavioral theory of the firm is rooted in the notion that decision-makers are boundedly rational and that performance feedback may account for a firm's strategic choices regarding the formation of new bridging ties (Baum et al., Reference Baum, Rowley, Shipilov and Chuang2005). The underlying argument is that innovation-related performance feedback affects a firm's preferences regarding value creation with collaborative partners, and value creation is mainly derived from the resource endowments and synergies of a firm's network configuration. In such cases, the focal firm searches for feasible solutions to accommodate preferences for value creation by adjusting network bridging ties that interlink organizations in different network communities and constitute crucial pipelines for nonredundant resource transfer.
We further argue that decisions regarding the formation of new bridging ties in response to innovation performance feedback are bounded by CEOs' experience. Due to the inherent uncertainties and complexity involved, negotiating and forming new bridging ties is a managerially challenging and costly task (Schotter, Mudambi, Doz, & Gaur, Reference Schotter, Mudambi, Doz and Gaur2017), and behavioral consequences largely depend on the top management team, especially the CEO (Bromiley & Rau, Reference Bromiley and Rau2016). Drawing on insights from the attention-based view (Ocasio, Reference Ocasio1997), CEOs' experiences substantially shape their managerial cognition and have a lingering effect on their managerial style (Bi, Xie, & Sheng, Reference Bi, Xie and Sheng2022). Furthermore, CEOs' cognition directly affects the allocation of their managerial attention and, consequently, behavioral preferences regarding the establishment of new bridging ties. Hence, we highlight the critical role of CEOs' experience in directing their distinct responses when establishing new bridging ties.
Our theoretical contributions are threefold. First, we shed new light on the determinants of the formation of new bridging ties that connect distinct network communities. We incorporate the mechanisms of the behavioral theory of the firm to provide a more comprehensive and fine-grained behavioral model for the formation of new bridging ties. Second, we add to the growing literature on collaboration networks that relates to evolution mechanisms and foster a deeper understanding of the genesis and dynamics of collaboration networks from the perspective of the network community. The formation of new bridging ties led by behavioral factors highlights the fundamental role of microlevel behaviors in rebuilding macrolevel structures (Kim, Wennberg, & Croidieu, Reference Kim, Wennberg and Croidieu2016). Third, our study advances a novel view that CEOs' experience constitutes a critical contingency factor that determines how performance feedback affects the formation of new bridging ties. We add another layer to understanding the heterogeneity in firms' responses to performance feedback and advocate for the need to contextualize the pivotal role of CEOs' experience in strategic choices regarding collaboration activities.
Theoretical Background and Hypotheses Development
Collaboration Network Community and Bridging Ties
Embeddedness theory suggests that organizations are embedded in highly diverse manners that link them to various sets of organizations, thereby delivering distinct opportunities and constraints (Garud, Hardy, & Maguire, Reference Garud, Hardy and Maguire2007). Accordingly, the potential of organizations to identify and leverage innovative opportunities through their collaboration networks varies (Schilling & Phelps, Reference Schilling and Phelps2007). Collaboration networks are not homogeneous and show distinct substructures characterized by thematically homogeneous and spatially heterogeneous community groups (Wang & Yang, Reference Wang and Yang2019). Bridging ties that connect different communities convey competitive advantages based on the notion that innovation rests on the recombination of resources and knowledge across organizational boundaries. As such, bridging ties provide the firm with salient merits and thus foster a promise of value creation by establishing new bridging ties.
In contrast to bridging ties in other contexts, our research defines bridging ties based on the network community structure. For instance, bridging ties among members in project teams indicate that a member connects others with diverse and heterogeneous backgrounds (Tiwana, Reference Tiwana2008). McEvily and Zaheer (Reference McEvily and Zaheer1999) defined bridging ties as those that link a firm to contacts in professional, economic, and social circles not otherwise accessible to the firm. In other words, bridging ties are similar to ‘weak ties' (Granovetter, Reference Granovetter1973) and ‘structural holes' (Burt, Reference Burt1980) and, thus, feature geographic dispersion, infrequency of interaction, and high nonredundancy. To summarize, our research focuses on establishing new contacts that span distinct network communities aimed at collaboration rather than ties that span unconnected individuals or firms with noncollaborative claims.
Above-aspiration Innovation Performance
According to the behavioral theory of the firm (Cyert & March, Reference Cyert and March1963), when firms are performing better than expected, they are more willing to engage in slack search and initiative experimentation with challenging projects with high potential pay-offs (Baum et al., Reference Baum, Rowley, Shipilov and Chuang2005). Persistent positive innovation performance discrepancies allow access to additional knowledge resources (Kavusan & Frankort, Reference Kavusan and Frankort2019; Kotiloglu, Chen, & Lechler, Reference Kotiloglu, Chen and Lechler2021), which increase a firm's motivation for competitive value creation by establishing collaborative relationships with heterogeneous partners in other communities (Wang & Yang, Reference Wang and Yang2019). The reason is that bridging partnerships can enable the dynamic flow of heterogeneous and novel resources that determine the organizational ability to deliver innovative outputs (Padula, Reference Padula2008). New bridging ties can create possibilities for novel syntheses of diversified solutions from multiple specialized areas, eventually leading to a significant boost in innovation (McEvily et al., Reference McEvily, Jaffee and Tortoriello2012). Moreover, positive innovation performance discrepancies increase the firm's possibility of attaining additional resources at a lower cost by enhancing its attractiveness to partners (Duysters & Lokshin, Reference Duysters and Lokshin2011; Wang et al., Reference Wang, Nie, Guo and Liu2024). Therefore, outperforming firms have better opportunities to form new bridging ties to utilize technological endowments effectively.
Superior innovation performance also cultivates managers' confidence in addressing risks and inspires them to pursue promising goals previously deemed too risky (Martínez-Noya & García-Canal, Reference Martínez-Noya and García-Canal2021). In such cases, positive innovation performance discrepancies act as a buffer against losing the positive track, and managers are more open to entering into new bridging ties to seek salient advantages for knowledge recombination and a more tremendous promise of value creation (Sytch et al., Reference Sytch, Tatarynowicz and Gulati2012). Managers perceive that their initiatives are proven excellent and have the confidence and motivation to try more challenging tasks by allying with nonlocal partners of other communities. Additionally, they are less concerned over the risks of nonlocal exploratory actions because the greater gains obtained from new bridging ties are more beneficial through an emphasis on the recombination of resources and knowledge across community boundaries (Le Gallo & Plunket, Reference Le Gallo and Plunket2020).
Overall, we expect that the further a firm's innovation performance is above its aspirations, the larger the share of new bridging ties. Therefore, we propose the following hypothesis:
Hypothesis 1 (H1): The magnitude of a firm's outperformance relative to its aspirations has a positive effect on the share of new bridging ties.
Below-aspiration Innovation Performance
The behavioral theory of the firm posits that firms' strategic decisions are guided by aspirations and are triggered to conduct a problematic search to find solutions when performance falls short of aspirations (Cyert & March, Reference Cyert and March1963). Typically, the discrepancy related to negative attainment indicates a low match between a firm's accessible resources and the technological track in which it operates (Kavusan & Frankort, Reference Kavusan and Frankort2019). Hence, we speculate that negative innovation performance discrepancies encourage firms to actively form new bridging ties to reverse a declining performance trend, as these ties can broaden the repertoire of available solutions and increase the likelihood of inventions emerging from the combination of previously isolated perspectives from disconnected communities (Tiwana, Reference Tiwana2008).
In contrast, a local search may ease knowledge integration but lower the likelihood of innovation because of the association with redundant perspectives, knowledge, and capabilities in the same community (Duysters & Lokshin, Reference Duysters and Lokshin2011). Therefore, partners from different communities serve as ports of access to potentially nonredundant bodies of specialized resources and knowledge (Wang & Yang, Reference Wang and Yang2019), and bridging ties are a typical source of a firm's heterogeneity in perusing more enriching innovation outputs and competitive capabilities (Sytch & Tatarynowicz, Reference Sytch and Tatarynowicz2014). Hence, we expect that underperforming firms are likely to increase the proposition of new bridging ties to leverage cross-boundary value from novel resources and address performance shortfalls.
Nevertheless, we predict that underperformance may also trigger threat rigidity and decrease the tendency for bridging across network communities. The threat-rigidity theory suggests that underperforming firms are likely to view the persistent negative consequence of their critical interests as a threat (Staw, Sandelands, & Dutton, Reference Staw, Sandelands and Dutton1981), and firms are unlikely to thrive without innovation in the high-tech industry. In addition, threat rigidity leads to diminishing long-term strategic commitments to fulfill short-term efficiencies (Shi, Connelly, & Cirik, Reference Shi, Connelly and Cirik2018), and the threat elicits two critical strategic response mechanisms. The first pertains to the information processing restriction, which narrows the field of attention for reaching nonlocal partners in other communities under stressful situations (Wang et al., Reference Wang, Nie, Guo and Liu2024). As such, underperforming firms are more likely to lower their flexibility in new channels and reduce the motivation for forming new bridging ties. The second pertains to the constriction of control, such that underperforming firms are prone to experiment with fewer trails beyond the community boundary and concentrate resources on previously knowledgeable paths and highly proximal actions (Connelly & Shi, Reference Connelly and Shi2022). Notably, we argue that the marginal effect of decreasing the tendency to form new bridging ties is likely to increase because the threatening effect tends to escalate rapidly with the magnitude of innovation underperformance, resulting in an exponential curve (Ref & Shapira, Reference Ref and Shapira2017).
Our synthesized argument is developed by explicitly and jointly considering these two countervailing forces (i.e., positive and negative effects). Specifically, the positive effect of the magnitude of underperformance on the share of new bridging ties linearly increases, while the negative effect of the magnitude of underperformance tends to escalate rapidly, resulting in an exponential curve. In such cases, subtracting the positive and negative effects gives rise to an inverted U-shaped relationship between the independent variable and the outcome (Haans, Pieters, & He, Reference Haans, Pieters and He2016). Therefore, an inverted U-shaped relationship between the magnitude of underperformance and the share of new bridging ties is predicted. Hence, we formulate the following hypothesis:
Hypothesis 2 (H2): The magnitude of a firm's underperformance relative to its aspirations has an inverted U-shaped relationship with the share of new bridging ties.
Moderating Role of CEOs' Academic and Political Experience
Due to its inherent uncertainties and complexity, negotiating and forming new bridging ties is a managerially challenging and costly task (Schotter et al., Reference Schotter, Mudambi, Doz and Gaur2017), and behavioral consequences largely depend on the top management team, especially the CEO (Bromiley & Rau, Reference Bromiley and Rau2016; Carpenter, Geletkanycz, & Sanders, Reference Carpenter, Geletkanycz and Sanders2004). CEOs play a significant role in formulating firms' strategies and initiating changes; they hold a partially personalized perspective rooted in their experience, and their experience substantially shapes their managerial cognition (Bi et al., Reference Bi, Xie and Sheng2022). Subsequently, CEOs' cognition directly affects the allocation of their managerial attention and, consequently, behavioral preferences in terms of the establishment of new bridging ties. Drawing on insights from the attention-based view (Ocasio, Reference Ocasio1997), we incorporate the critical role of CEOs' experience into the performance feedback model to examine firm search behaviors.
In an emerging economy such as China, the description of its historical trajectory involves changes in institutional logics that reflect the mixture and competition of state and market logic (Jia, Hhuang, & Zhang, Reference Jia, Hhuang and Zhang2019). In China's transition economy, CEOs' academic and political experience has been crucial for strategic decision-making regarding corporate innovation strategies. On the one hand, during China's transition to the free market system, CEOs' academic experience is tightly linked to the firm's innovation awareness and orientation and inarguably affects decision-making preferences in terms of innovation strategy. On the other hand, government agencies still control essential resources and influence economic policies. CEOs' political ties or political experience may substitute for and remedy detrimental institutional influences, internalizing as exceptional assets of the firm. Therefore, we investigate the contingent roles of CEOs' academic and political experience.
Moderating role of CEOs' academic experience
CEOs' academic experience markedly influences their values and beliefs, which deliver an explorative cognitive pattern (Shao, Zhao, Wang, & Jiang, Reference Shao, Zhao, Wang and Jiang2020). As such, when CEOs seek new progressive initiatives in an underpressure state, academic experience enables them to comprehend novel opportunities and initiate more risky solutions than peers without such a background when performing above aspirations. Furthermore, CEOs with academic backgrounds are more aware of the importance of inter-organizational collaboration for innovation. To further reinforce competitive advantages with superior innovation performance, they are more motivated than firms led by CEOs without such a background in establishing new bridging ties (Chin, Hambrick, & Treviño, Reference Chin, Hambrick and Treviño2013).
When performing above aspirations, CEOs with academic backgrounds are more confident and skillful in accelerating new bridging ties due to their perceptions of the latest technological trends (Zhong, Ren, & Song, Reference Zhong, Ren and Song2023). Academic credentials signal CEOs' unobserved attributes, such as motivation, perseverance, and social capital (Joh & Jung, Reference Joh and Jung2016). CEOs' academic experience is part of a firm's human capital and partly determines its competitive advantage (Cho, Jung, Kwak, Lee, & Yoo, Reference Cho, Jung, Kwak, Lee and Yoo2017). CEOs with academic experience are more likely to possess state-of-the-art technological knowledge (Carpenter et al., Reference Carpenter, Geletkanycz and Sanders2004) and have broader strategic views and more comprehensive understandings of collaboration across different communities (Al-Tabbaa & Ankrah, Reference Al-Tabbaa and Ankrah2019; Shao et al., Reference Shao, Zhao, Wang and Jiang2020). Therefore, when confronting positive performance discrepancies, CEOs with academic experience are more confident than firms led by CEOs without such a background in addressing the risks that may arise in the process of a nonlocal search and are more motivated to establish new bridging ties. Formally:
Hypothesis 3 (H3): CEOs' academic experience strengthens the positive relationship between the magnitude of a firm's outperformance relative to its aspirations and the share of new bridging ties.
Given a particular magnitude of underperformance, CEOs with academic experience are deemed more capable of handling stressful situations. When performing below aspirations, academic experience enables CEOs to ease information processing restrictions because academic rigor empowers CEOs to collect reliable information from all angles to reduce information asymmetry (Zhong et al., Reference Zhong, Ren and Song2023). Academic experience is closely related to professional discipline, and CEOs with academic experience hold greater cognitive complexity, allowing them to recognize and manipulate complex information when facing unpredictable and unknown risks (Colombo & Piva, Reference Colombo and Piva2012). CEOs with academic experience also have a more rigorously thoughtful thinking style to address threats than their nonacademic counterparts (Ma, Zhang, Zhong, & Zhou, Reference Ma, Zhang, Zhong and Zhou2020).
Additionally, CEOs with academic experience are more inclined to build a supportive organizational environment to promote information flow and optimize information processing efficiency than those without such experience (Shao et al., Reference Shao, Zhao, Wang and Jiang2020). The academic experience of CEOs also enables the formulation of sound and scientific internal control rules to shape high-quality corporate governance in stressful situations (Zhuang, Chang, & Lee, Reference Zhuang, Chang and Lee2018). Hence, by leveraging superior internal control rules, CEOs with academic experience can release the constriction of control and are more capable of addressing problems encountered when launching new relationships with nonlocal partners of other communities.
Due to the curvilinearity of the negative effect on the share of new bridging ties originating from threat rigidity, the CEO's academic experience reduces the curvilinearity of the inverted U-shaped relationship between the magnitude of a firm's underperformance relative to its aspirations and the share of new bridging ties, flattening the shape. Thus, we predict the following:
Hypothesis 4 (H4): CEOs' academic experience flattens the inverted U-shaped effect of the magnitude of a firm's underperformance relative to its aspirations on the share of new bridging ties.
Moderating role of CEOs' political experience
Political experience plays a critical role in emerging economies because government and societal influences are more substantial in emerging economies than in developed economies (Hoskisson, Eden, Lau, & Wright, Reference Hoskisson, Eden, Lau and Wright2000). In this vein, political experience acts as an efficient enabler to reduce uncertainty and substitute for formal institutional support. As a particular form of social capital, political connections can serve as valid signals to external partners in other communities of firms' ability to cope with institutional voids in future development (Wu, Li, & Li, Reference Wu, Li and Li2013), and the effectiveness of signaling is more vital in manifesting its intrinsic value when performing above aspirations (Chan, Wang, & Wei, Reference Chan, Wang and Wei2004). As such, CEOs' political experience can enrich outperforming firms' opportunities to form new bridging ties by further enhancing their attractiveness to external partners.
Additionally, the primary advantage of CEOs with political experience is the privileged access and utilization of government-controlled resources (Bi et al., Reference Bi, Xie and Sheng2022). CEOs with political experience always attempt to shape government policy in ways favorable to their firms (Jean, Sinkovics, & Zagelmeyer, Reference Jean, Sinkovics and Zagelmeyer2018). In this line of reasoning, political connections increase the firm's legitimacy and reinforce CEOs' perceptions and confidence in managing risks and uncertainties when facing positive innovation performance discrepancies (Zhuang et al., Reference Zhuang, Chang and Lee2018). Therefore, when receiving positive performance feedback, CEOs with political connections who have traditionally benefited from preferential treatment from the government (e.g., supporting policies and subsidies) are more likely to enhance their motivation to establish new bridging ties. Therefore, we propose the following hypothesis:
Hypothesis 5 (H5): CEOs' political experience strengthens the positive relationship between the magnitude of a firm's outperformance relative to its aspirations on the share of new bridging ties.
We further expect that the inverted U-shaped effect of the magnitude of a firm's underperformance relative to its aspirations on the share of new bridging ties flatten as CEOs' political experience increases, which is induced by weakening threat-rigidity effects. As firms' innovation fell below the aspiration level, CEOs' political experience facilitates reducing information processing constraints and enriching the flexibility of control. Specifically, CEOs with political experience are more familiar with explicit and implicit political-related rules and processes than those without such a background (Carpenter et al., Reference Carpenter, Geletkanycz and Sanders2004; Chin et al., Reference Chin, Hambrick and Treviño2013). As such, they are likely to have a better understanding of potential disputes in the collaboration process and sustain a flexible information processing flow under threatening situations (Connelly & Shi, Reference Connelly and Shi2022), which implies that political experience can serve as a valid facilitator of relational governance and knowledge appropriation.
Moreover, CEOs with political experience are always more proficient at handling regulations and policy-related issues than are their nonpolitical counterparts (Wu et al., Reference Wu, Li and Li2013). Hence, they are more capable of reducing information asymmetry and the constraints of operational agendas because of the intrinsic resources derived from political connections at different governmental agency levels (Zhuang et al., Reference Zhuang, Chang and Lee2018).
Concerning the curvilinearity of the negative effect on the share of new bridging ties, we suppose that CEOs' political experience lessens the curvilinearity of the inverted U-shaped relationship between the magnitude of a firm's underperformance relative to its aspirations and the share of new bridging ties, flattening the shape. Formally:
Hypothesis 6 (H6): CEOs' political experience flattens the inverted U-shaped effect of the magnitude of a firm's underperformance relative to its aspirations on the share of new bridging ties.
Methods
Setting and Data Collection
We test our hypotheses using a sample of Chinese publicly listed firmsFootnote 1 in the pharmaceutical industry from 2010 to 2020. This time period is particularly significant due to the passing of the third amendment to China's Patent Law in December 2008, which came into effect in October 2009 and involved the adoption of the so-called absolute novelty standard applied internationally. Our time window ends in 2020 as the fourth amendment to China's Patent Law came into effect in June 2021. The relatively stable institutional landscape and policy on patents throughout the observation period allows us to examine the behavioral factors that alter a firm's propensity to bridge across network communities.
The pharmaceutical industry is considered an appropriate setting for collaboration-related research (Cui, Yang, & Vertinsky, Reference Cui, Yang and Vertinsky2018; Filiou & Massini, Reference Filiou and Massini2018; Melnychuk, Schultz, & Wirsich, Reference Melnychuk, Schultz and Wirsich2021) and provides a solid foundation for testing the effect of innovation performance feedback on the establishment of new bridging ties. First, firms in the pharmaceutical industry manifest extensive collaboration activities and strategically accelerate their innovation processes through fruitful collaboration relationships (Bouncken, Reference Bouncken2015; Guler & Nerkar, Reference Guler and Nerkar2012). Second, firms in this industry are more inclined to patent their inventions to protect their intellectual property rights (Wang et al., Reference Wang, Nie, Guo and Liu2024).
We constructed our dataset by considering multiple sources. First, our main data sources were the China Stock Market Accounting Research (CSMAR)Footnote 2 and WIND databases.Footnote 3 These databases provide trustworthy and comprehensive information on publicly listed firms, such as investment information (e.g., R&D investments and ownership), financial information (e.g., assets and profits), and executives' personal information (e.g., gender and age). Second, we retrieved patent information from the China National Intellectual Property Administration (CNIPAFootnote 4). Thereafter, we screened and duplicated the retrieved data and matched the detailed patent data with Chinese publicly listed firms following the procedures proposed by Boeing, Mueller, and Sandner (Reference Boeing, Mueller and Sandner2016).
Additionally, we tracked a firm's collaborative activities and built collaboration networks in the pharmaceutical industry through joint patents. The empirical samples consisted of firms that appeared in a community during the previous five years and in the subsequent observation year. Moreover, we adopted a five-year rolling window to construct the collaboration network (i.e., 2010–2014, 2016–2020), which has been commonly used in collaboration network research (Guo, Yang, Wang, Zhang, & Wang, Reference Guo, Yang, Wang, Zhang and Wang2021; Wang et al., Reference Wang, Nie, Guo and Liu2024). Ultimately, we obtained an unbalanced panel dataset of 1,058 year-firm observations involving 149 publicly listed firms.
Variables
Dependent variable
New bridging ties refer to the total count of new bridging ties formed by the focal firm. Unlike a local tie connecting firms in the same community, a bridging tie connects firms in different communities (Sytch et al., Reference Sytch, Tatarynowicz and Gulati2012). We started with community detection of the evolving collaboration networks to specifically identify new bridging ties. The community detection process aims to partition a collaboration network into multiple communities to help reveal their latent functions and has been extensively studied and broadly applied to many real-world network problems (Newman, Reference Newman2006). While no solid method exists for the community detection of collaboration networks based on a firm's attributes (Fortunato & Newman, Reference Fortunato and Newman2022), we adopted the community detection algorithm with a statistical goodness-of-split index proposed by Newman (Reference Newman2006). The abovementioned index refers to the network modularity Q, which can be described as:
where M is the total number of ties, e rr is the number of ties in the r th community, and [e rr] is the number of ties in the random network.
We estimated the network modularity for all 11 collaboration networks from 2010 to 2020 to test the robustness of community division. Accordingly, the minimal network modularity was 0.43, and the average network modularity was 0.68, which indicates that community division is robust in all involved networks. The average number of firms in each community for all annual networks was 4.6. Consequently, we derived the number of new bridging ties for each firm in the collaboration network (Sytch et al., Reference Sytch, Tatarynowicz and Gulati2012), and the share of new bridging ties is measured as the proportion of all newly established ties accounted for by new bridging ties.
Independent variables
We relied on innovation performance to measure the independent variables in our empirical setting. Innovation outputs of the pharmaceutical industry are typically far away from products and customers due to a longer R&D and experimentation cycle (Cui et al., Reference Cui, Yang and Vertinsky2018). Innovation-related goals are deemed to draw more attention from executives, and maintaining innovation performance on the right track becomes the priority issue in their strategic agenda (Martínez & García, Reference Martínez-Noya and García-Canal2021). Prior studies have verified that patent-based measures are appropriate proxies of innovation outputs (Hagedoorn & Cloodt, Reference Hagedoorn and Cloodt2003; Moon, Di Benedetto, & Kim, Reference Moon, Di Benedetto and Kim2022); therefore, we measured innovation performance and aspirations based on a firm's successful patent applications.
Performance relative to aspiration was measured based on the comparison between a firm's innovation performance and its aspiration level in the same period. According to the procedure proposed by Cyert and March (Reference Cyert and March1963), a firm's aspiration level A it can be measured as a mixture of historical level HAit and social aspiration level SAit.
A firm's historical aspiration level was calculated as an exponentially weighted average of past values of historical innovation performance, and the measurement is shown as follows:
where P it−1 refers to firm i's innovation performance in year t−1, and HAit refers to firm i's historical aspiration in year t. The parameters α and β were defined by the procedure proposed by Joseph and Gaba (Reference Joseph and Gaba2015), yielding values of α = 0.4, β = 0.6.
Additionally, a firm's social aspiration level can be measured by the average innovation performance of a reference group. The formula is shown as follows:
where P jt refers to the innovation performance of other firms in the reference group, and Nt is the number of those firms in year t. The reference group includes all firms in the pharmaceutical industry (excluding the focal firm).
Moreover, we split the independent variables into two subcategories to bifurcate the sample based on the comparison between a firm's innovation performance and its aspiration level. The spline function was adopted to measure these variables (Baum et al., Reference Baum, Rowley, Shipilov and Chuang2005). Specifically, performance-aspiration (>0) (i.e., P it–A it) equals 0 when the performance is at or below the aspiration level and equals performance-aspiration when the performance is above the aspiration level. In a similar vein, performance-aspiration (<0) equals 0 when the performance is at or above the aspiration level and equals performance-aspiration when the performance is below the aspiration level. For simplicity and convenience of calculation, the values of performance-aspiration (<0) were reversed-coded (i.e., multiplied by (−1)) so that larger values represent more significant performance shortfalls.
Moderating variables
CEOs' academic experience was measured as a dummy variable indicating whether the CEO has worked in a research institution, conducted researched in an association, or taught at a university (Cho et al., Reference Cho, Jung, Kwak, Lee and Yoo2017; Zhong et al., Reference Zhong, Ren and Song2023). CEOs' political experience was measured as a dummy variable indicating whether the CEO worked as an official in the local or central government, industrial bureau, or military (Bi et al., Reference Bi, Xie and Sheng2022). To verify the moderating effects, we adopted a mean-centering approach on the independent variables before multiplication to alleviate the potential multicollinearity problem.
Control variables
We included a fine-grained set of control variables to account for alternative explanations. At the firm level, we controlled for firm age as the age of a firm in a given year and R&D expenditure as the natural logarithm of a firm's R&D expenditures (in million RMB). We also controlled for state ownership (i.e., dummy variable, 1 for a state-owned firm and 0 for a non-state-owned firm). To control for the potential effects of financial performance on a firm's propensity toward establishing bridging ties, we added potential slack as the ratio of a firm's equity to debt and return on assets (ROA). We split ROA into financial performance above aspirations and financial performance below aspirations, just as we did for innovation performance (Gaba & Bhattacharya, Reference Gaba and Bhattacharya2012). We further controlled for firm-specific uncertainty as the standardized monthly volatility of a firm's stock, which is measured by calculating the standard deviation across the firm's monthly stock closing prices and dividing it by their average (Kavusan & Frankort, Reference Kavusan and Frankort2019).
At the network level, we controlled for the existing ties that the firm maintained in the last period and the firm's eigenvector centrality within the whole network to control for its status and attractiveness among potential partners (Jiang, Xia, Devers, & Shen, Reference Jiang, Xia, Devers and Shen2021). In addition, we controlled for CEOs' characteristics that may affect corporate innovation strategies (He, Huang, & Yang, Reference He, Huang and Yang2021), such as CEO duality (i.e., dummy variable, 1 for yes and 0 for no) and CEO gender (i.e., dummy variable, 1 for male and 0 for female). The definitions of the key variables are shown in Table 1.
Table 1. Definition of key variables
Statistical Analysis
We employed a panel data fixed-effects model on firms to perform our estimations. Firm fixed-effects models capture within-firm differences, in contrast to OLS models. This model eliminates time-invariant components that could taint our estimates by accounting for unobserved heterogeneity in firm quality. Furthermore, firm fixed-effects models are also used to mitigate endogeneity problems caused by unobserved variables that may be simultaneously linked with both dependent and independent variables. The independent and control variables were also lagged one year to control for endogeneity, and we resorted to robust standard errors to account for autocorrelation and heteroscedasticity.
Results
Table 2 provides the means, standard deviations, and corrections for all variables. A thorough examination of the variance inflation factor (VIF) indicates that all values fall within the permissible limit of 10, which implies that multicollinearity is unlikely to be of concern (Powers & Mcdougall, Reference Powers and McDougall2005).
Table 2. Descriptive statistics and bivariate correlation
Notes: *significant at 0.05; **significant at 0.01; ***significant at 0.001.
Table 3 reports the estimation results of the fixed-effects models. Model 1 is the baseline model and includes only control variables. The effects of performance-aspiration (>0) and performance-aspiration (<0) are added to Model 2. The interaction effects of CEOs' academic experience and political experience are separately added to Models 3 and 4.
Table 3. Effect of innovation performance feedback on the share of bridging ties
Notes: Robust standard errors in brackets. Firm and year effects are controlled. *p < 0.05, **p < 0.01, ***p < 0.001.
H1 predicts that the magnitude of a firm's outperformance relative to its aspirations has a positive effect on the share of new bridging ties. As shown by the results of Model 2 of Table 3, the coefficient is positive and significant (β1 = 9.628, p < 0.001), supporting H1.
H2 predicts that the magnitude of a firm's underperformance relative to its aspirations has an inverted U-shaped relationship with the share of new bridging ties. As indicated by the results of Model 2 of Table 3, the coefficient of the magnitude of a firm's underperformance relative to its aspirations is positive and significant (β2 = 27.381, p < 0.001), where its squared term is negative and significant (β3 = −2.613, p < 0.001). Furthermore, Lind and Mehlum (Reference Lind and Mehlum2010) test showed that the inflection point is 5.24, the slope at the low end is 27.38, and the slope at the high end is −14.42. The overall test (t = 9.75, p < 0.001) indicates that the magnitude of a firm's underperformance relative to its aspiration level has an inverted U-shaped relationship with the share of new bridging ties (Haans et al., Reference Haans, Pieters and He2016). Therefore, H2 is supported.
H3 predicts that CEOs' academic experience strengthens the positive relationship between the magnitude of a firm's outperformance relative to its aspirations and the share of new bridging ties. For the results of Model 3 of Table 3, the coefficient for the interaction term of the magnitude of a firm's outperformance relative to its aspirations and CEOs' academic experience is positive and significant (β4 = 2.275, p < 0.05). Therefore, H3 is supported (see Figure 1).
Figure 1. The moderating role of CEOs’ academic experience when performing above the aspiration level
In H4, we predict that CEOs' academic experience flattens the inverted U-shaped effect of the magnitude of a firm's underperformance relative to its aspirations on the share of new bridging ties. As indicated by the results of Model 3 in Table 3, the coefficient for the interaction term of the magnitude of a firm's underperformance relative to its aspirations' squared term and CEOs' academic experience is not significant (β6 = 0.532, p > 0.05). Hence, H4 is not supported.
In H5, we predict that CEOs' political experience strengthens the positive relationship between the magnitude of a firm's outperformance relative to its aspirations on the share of new bridging ties. For the results of Model 4 in Table 3, the coefficient is positive and significant (β7 = 2.140, p < 0.001). Thus, H5 is supported (see Figure 2).
Figure 2. The moderating role of CEOs’ political experience when performing above the aspiration level
In H6, we predict that CEOs' political experience flattens the inverted U-shaped effect of the magnitude of a firm's underperformance relative to its aspirations on the share of new bridging ties. As indicated by the results of Model 4 in Table 3, the coefficient for the interaction term of the magnitude of a firm's underperformance relative to its aspirations and CEOs' political experience is negative and significant (β8 = −6.535, p < 0.01), and the coefficient for the interaction term of its squared term and CEOs' political experience is positive and significant (β9 = 0.975, p < 0.01). Therefore, H6 is supported (see Figure 3).
Figure 3. The moderating role of CEOs’ political experience when performing below the aspiration level
We performed additional robustness tests to validate the reliability of the findings. First, we re-estimated our models by running the fixed-effect regression models with the Driscoll–Kraay estimator because Driscoll–Kraay standard errors are well calibrated when cross-sectional dependence is present (Driscoll & Kraay, Reference Driscoll and Kraay1998). The regression results were largely consistent with previous findings, and we provided these findings in Table 4 (Models 5, 6, and 7). Second, we undertook supplementary analyses to examine the robustness of the findings using an alternative measure for aspirations for innovation performance. We computed the weighted average of historical and social aspirations by identifying the optimal weighting using parameters that generate the best model fit. We re-estimated specifications based on the value of α as 0.3 to assess the sensitivity of our results to the updating parameter. The results, presented in Table 4 (Models 8, 9, and 10), were almost identical to those of the original analysis.
Table 4. Results of robustness checks
Notes: Robust standard errors in brackets. Firm and year effects are controlled. *p < 0.05, **p < 0.01, ***p < 0.001.
Discussion
Drawing on the behavioral theory of the firm, we conceptualized a behavioral theory of the formation of new bridging ties that connect different network communities and verified the effect of innovation performance feedback on the establishment of new bridging ties. In addition, we argued that decisions regarding the formation of new bridging ties in response to innovation performance feedback are bounded by CEOs' experience. The results indicate that the magnitude of a firm's outperformance relative to its aspirations has a positive effect on the share of new bridging ties, while the magnitude of a firm's underperformance relative to its aspirations has an inverted U-shaped relationship with the share of new bridging ties. CEOs' academic and political experience strengthens the positive relationship between the magnitude of a firm's outperformance relative to its aspirations and the share of new bridging ties. CEOs' political experience flattens the inverted U-shaped effect of the magnitude of a firm's underperformance relative to its aspirations on the share of new bridging ties.
Theoretical Contributions
In this study, we make three theoretical contributions. First, we shed new light on the determinants of the formation of new bridging ties that connect distinct network communities. Prior research has conceptualized decision-makers as value maximizers, and they make decisions regarding the formation of new bridging ties based on a reasonable assessment of internal and external contingencies (Shipilov & Li, Reference Shipilov and Li2008; Sytch et al., Reference Sytch, Tatarynowicz and Gulati2012). However, we contend that decision-makers are more appropriately viewed as boundedly rational and, thus, rely on behavioral heuristics when making decisions about establishing new bridging ties (Baum et al., Reference Baum, Rowley, Shipilov and Chuang2005; Kavusan & Frankort, Reference Kavusan and Frankort2019). As such, we incorporate the mechanisms of the behavioral theory of the firm to provide a more comprehensive and fine-grained behavioral model of the formation of new bridging ties. In addition, we contribute to the ongoing debate on the ways in which distinct theories (e.g., the behavioral theory of the firm and the threat-rigidity theory) could be useful for explaining the nature of organizational responses to performance shortfalls (Connelly & Shi, Reference Connelly and Shi2022; Martínez-Noya & García-Canal, Reference Martínez-Noya and García-Canal2021; Wang et al., Reference Wang, Nie, Guo and Liu2024). Our findings reconcile the effects of problematic search and threat rigidity by highlighting the shifting-focus model of risk-taking on interpreting underperformance relative to aspirations (Ref & Shapira, Reference Ref and Shapira2017).
Second, we add to the growing literature on collaboration networks relating to evolution mechanisms and foster a deeper understanding of the genesis and dynamics of collaboration networks from the perspective of the network community. Our findings echo prior notions that collaboration networks are not intrinsically unstable and fragile (Ahuja et al., Reference Ahuja, Soda and Zaheer2012; Chen, Mehra, Tasselli, & Borgatti, Reference Chen, Mehra, Tasselli and Borgatti2022a). The formation of new bridging ties led by behavioral factors highlights the fundamental role of microlevel behaviors in rebuilding macrolevel structures (Kim et al., Reference Kim, Wennberg and Croidieu2016; Sytch et al., Reference Sytch, Tatarynowicz and Gulati2012). In knowledge-intensive industries (e.g., the pharmaceutical industry), firms' competitiveness and survival hinge on their access to novel resources and knowledge. Hence, their innovation performance feedback increases or decreases the likelihood of forming new bridging ties. Additionally, prior research has delivered a comprehensive analysis of the mechanism of tie formation at the global network and ego network levels (Balachandran & Hernandez, Reference Balachandran and Hernandez2018; Lavie, Reference Lavie2006; Liang & Liu, Reference Liang and Liu2018). Our arguments on the formation of ties that connect distinct network communities offer a novel set of insights into this line of study by reconciling the tension between cohesive network communities and heterogeneous intercommunity connections. Notably, our findings demonstrate how a single firm ties together cohesive network communities into a more complex system that possesses a more distinctive set of available resources. As such, we facilitate future endeavors aimed at exploring the multilevel dynamics of how collaboration networks arise and evolve.
Third, we advance a novel view that CEO experience constitutes a critical contingency factor that determines how performance feedback affects the formation of new bridging ties. The extant literature has explored why firms adopt different innovation strategies in response to innovation performance feedback and the factors that influence their distinct choices (Kavusan & Frankort, Reference Kavusan and Frankort2019; Kotiloglu et al., Reference Kotiloglu, Chen and Lechler2021; Martínez-Noya & García-Canal, Reference Martínez-Noya and García-Canal2021; Wang et al., Reference Wang, Nie, Guo and Liu2024). Our findings suggest that such behavioral consequences largely depend on CEOs' cognition (Bromiley & Rau, Reference Bromiley and Rau2016; He et al., Reference He, Huang and Yang2021), and the cognitive angle enriches this stream of research by incorporating the critical role of CEOs' experience into the performance feedback model to examine firm search behaviors. As such, in this study, we respond to recent calls for performance feedback research on the situational effects of CEOs (Chen, Zhong, & Lv, Reference Chen, Zhong and Lv2022b; Schumacher, Keck, & Tang, Reference Schumacher, Keck and Tang2020). Notably, by delving into the moderating roles of CEOs' academic and political experience, we add another layer to the understanding of the heterogeneity in firms' responses to performance feedback and advocate for the need to contextualize the pivotal role of CEOs' experience in strategic choices regarding collaboration activities.
Our findings also possess crucial practical implications. A firm's innovation-related goals can affect its search behaviors in a similar manner with how its financial goals affect its search behaviors. Innovation performance feedback is an explicit signal that affects decision-makers' choices on the direction and extent of any future initiatives to establish new bridging ties. It is thus essential for decision-makers to comprehensively discern how the interpretation of innovation performance feedback and the subsequent strategic choices are affected by CEOs' academic and political experience. As such, by recognizing the underlying mechanisms of such behavioral responses, decision-makers are more likely to make sound strategic choices regarding the establishment of new collaborative ties with other communities.
Limitations and Future Research Directions
Several limitations could become interesting avenues for future research. First, we restrict the sample to the pharmaceutical industry, where collaboration-oriented choices are salient for executives' attention. However, our arguments may not hold for firms in other traditional high-tech industries or start-ups. Hence, future research might expand the sample to encompass innovative start-ups or other traditional high-tech manufacturing industries (e.g., the computer industry). Second, we construct aspiration levels as a mixture of historical and social aspirations. Nevertheless, a promising avenue for future research is to enrich this research stream by investigating how inconsistent performance feedback or the duration of performance feedback may affect the establishment of new bridging ties. Third, we explore the contingent role of managerial cognition by focusing on CEOs' experience. Nevertheless, it would also be interesting to consider a more systematic framework to theorize the effects of managerial cognition in shaping a firm's responses to performance feedback. For instance, future research might expand a cross-level framework to investigate how factors at the executive, firm, and industry levels interact to shape managerial attention and ultimately direct responses to performance feedback.
Data availability statement
The data that support the findings of this study are openly available in Open Science Framework at https://osf.io/zhw97/
Funding
This work is supported by the National Natural Science Foundation of China (72101274; 72271143), General Program of Humanities and Social Sciences Research of Ministry of Education of China (22YJC630134), Shandong Provincial Natural Science Foundation (ZR2023QG095), Shandong Social Science Planning Project (24DGLJ21).
Yafei Nie ([email protected]) is a PhD student at the School of Management, Northwestern Polytechnical University, Xi'an, China. Her research interests focus on knowledge management. She has published in international journals, such as Advanced Engineering Informatics, International Journal of Human–Computer Interaction, and Scientometrics, among others.
Jingbei Wang ([email protected]) is an Assistant Professor at the School of Management, Shandong University, Jinan, China. His current research interests include technological innovation management, complex networks, and social network analyses. He has published in international journals, such as Technological Forecasting and Social Change, Asia Pacific Journal of Management, and Scientometrics, among others.
