Executive Links and Strategic Change: Is Unit-Spanning by Executives Associated with Market Entry and Exit?

Charles Williams, Bocconi University
Samina Karim, Boston University

Abstract

Firms frequently create executive links by sharing people between units to transfer and combine knowledge. These links, however, potentially strengthen social ties and cognitive filters that reduce the possibility of strategic change. Our analysis of medical firms finds that executive links between units, especially between business units and the corporate unit, are associated with reduced market entry and exit. This finding runs counter to the prevalent view that sharing of individuals is an effective way to spread and combine diverse knowledge such that it initiates change. It suggests that the cognitive and social commitments from shared executives may undermine the knowledge diffusion and transformation expected to arise from these links.