foundations of strategy 2nd edition pdf download

Scholars increasingly seek to proffer microfoundations for macro management theory, notably strategic management theory. These microfoundations naturally revolve around human resources. We argue that proper microfoundations for strategic management theory must recognize that the management of motivation is first and foremost a matter of the management of cognitions of organizational members, an insight that we found in goal-framing theory, an emerging perspective based on cognitive science, behavioral economics, and social psychology. Building on this insight, we argue that a key reason why strategic goals matter to firm performance - that is, firm-level value creation and value capture and sustained competitive heterogeneity - is that such goals influence value creation rooted in employee motivations. Unfolding this idea allows us to generate new insight in the relations between value creation, strategic leadership and strategic goals.

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SYMPOSIUM

MICROFOUNDATIONS FOR STRATEGY:

A GOAL-FRAMING PERSPECTIVE ON THE DRIVERS

OF VALUE CREATION

NICOLAI J. FOSS

Copenhagen Business School and Norwegian School of Economics

SIEGWART LINDENBERG

University of Groningen and Tilburg Institute for Behavioral Economics Research

Scholars increasingly seek to proffer microfoundations for macro management theory,

notably strategic management theory. These microfoundations naturally revolve

around human resources. We argue that proper microfoundations for strategic man-

agement theory must recognize that the management of motivation is first and foremost

a matter of the management of cognitions of organizational members, an insight we

found in goal-framing theory, an emerging perspective based on cognitive science,

behavioral economics, and social psychology. Building on this insight, we argue that a

key reason why strategic goals matter to firm performance—that is, firm-level value

creation and value capture and sustained competitive heterogeneity—is that such

goals influence value creation rooted in employee motivations. Unfolding this idea

allows us to generate new insight into the relations among value creation, strategic

leadership, and strategic goals.

Strategic management is concerned with the

creation, identification, and exploitation of those

sources of competitive heterogeneity that result in

high levels of appropriable value creation. Yet

many of the causal linkages between the strategic

management process and value creation are un-

clear. In particular, how do strategic goals affect

value creation? One hypothesis is that such goals

mainly steer the cognition and actions of the top

management team. Another is that strategic goals

affect the very functioning of the firm in the sense

that they influence its internal governance and the

cognition and motivation of organizational mem-

bers, not just the top management. In this article we

make the case that strategic goals matter in this

broader sense. Understanding how this works re-

quires attention to microfoundations—specifically,

to microfoundations that highlight the (inter-

twined) motivation and cognitions of individuals

(rather than, say, routines; but see Winter, 2013).

It is increasingly recognized that the microfoun-

dations of strategic management matter greatly to

the questions that scholars in the field can raise,

address, and answer (Abell, Felin, & Foss, 2008;

Van de Ven, 2013). Much of the concern with mi-

crofoundations revolves around human resources,

often argued to be the "key ingredient to organiza-

tional success and failure" (Baron & Kreps, 1999,

p. 4). Accordingly, research highlights the cogni-

tions (Gavetti, 2005) and, more often, motivations

of those human resources (Coff, 1999; Gottschalg &

Zollo, 2007).

Along with several of the other contributors to

this symposium (in particular, Felin & Barney,

2013), we argue that strategic management theory is

in need of better microfoundations. We take it as a

given that such microfoundations must involve in-

dividuals. Indeed, while individuals have been

highlighted in recent microfoundational research

in macro management theory, mainly strategic

management, we are concerned that extant research

is dichotomized. Specifically, such research starts

either from purely cognitive foundations (Gavetti,

2005; Powell, Lovallo, & Fox, 2011, p. 1370; Teece,

娀The Academy of Management Perspectives

2013, Vol. 27, No. 2, 85–102.

http://dx.doi.org/10.5465/amp.2012.0103

written permission. Users may print, download, or email articles for individual use only.

2007) or from purely motivational foundations

(e.g., Abell et al., 2008; Gottschalg & Zollo, 2007;

Nickerson & Zenger, 2008; Wang & Barney, 2008).

However, a crucial insight that has emerged from

cognitive (social) psychology over the past 20 years

is that cognitive and motivational processes are so

strongly intertwined that they must be considered

simultaneously and as closely interacting (Kruglan-

ski, Shah, Friedman, Fishbach, Chun, & Sleeth-

Keppler, 2002).

We argue that proper microfoundations for stra-

tegic management theory should recognize the fun-

damentally intertwined nature of cognition and

motivation: The management of motivation is first

and foremost a matter of the management of over-

arching goals that link cognition and motivation.

Building on this insight, we argue that a key reason

why strategic goals matter to firm performance—

that is, firm-level value creation and value capture

and sustained competitive heterogeneity—is that

such goals influence the overarching goals of mem-

bers of the organization and thereby the value cre-

ation rooted in employee motivations (an idea al-

ready hinted at in Barney and Griffin, 1992; Hamel

and Prahalad, 1989; Kay, 2010; and Birkinshaw,

2012). The purpose of this article is to work out the

logic of this link.

We specifically show that goal-framing theory

(Lindenberg & Foss, 2011)—an emerging perspec-

tive based on cognitive science, behavioral eco-

nomics, and social psychology (e.g., Förster, Liber-

man, & Higgins, 2005; Gollwitzer & Bargh, 1996;

Kruglanski & Köpetz, 2009)—has the unique capac-

ity to address this link (Foss, 2011). We show that

the microfoundations provided by goal-framing

theory allow us to address and answer key strategy

questions in a novel manner—in particular, how

strategic goals influence firm performance. Goal-

framing theory deals with overarching goals that

influence large clusters of subgoals. Specifically,

the theory states that the overarching goal most

conducive to value creation is one that promotes a

motivation for joint production, whereby organiza-

tional members are motivated to engage in joint

productive endeavors in which they choose their

actions regarding joint goals and exert intelligent

effort to reach joint goals (Lindenberg & Foss,

2011). However, such a normative goal frame can

easily be sidelined by other overarching goals that

are explicitly or implicitly expressed in the strate-

gic management process of the firm. The crucial

mechanism is that overarching goals of employees

are subject to a top-down contagion process by

overarching goals from top management.

The motivation that is most conducive to value

creation is not mobilized by overarching goals that

make blatant reference to the maximization of prof-

its or shareholder value, exactly—we will argue—

because such strategic goals prompt employees to

adopt goal frames that are not conducive to joint

production motivation. Rather, profit, shareholder

value, and market share must not be pursued as the

major explicit strategic goal but obliquely because

of more socially oriented goals (cf. Birkinshaw,

2012; Kay, 2010).

In sum, in building our argument about the im-

pact of the strategic management process on the

contribution of human resources to value creation,

we draw on recent developments in cognitive sci-

ence, social psychology, and behavioral economics

that "provide new opportunities for merging psy-

chology and strategy" (Powell et al., 2011, p. 1370),

going beyond the dichotomization between the cog-

nitive and the motivational dimensions in extant

microfoundational research. We develop novel im-

plications for key strategy issues from goal-framing

theory. Our theory relates to established insights

particularly in the resource-based view (Barney,

1986, 1991; Foss, 2011; Kogut & Zander, 1996), but

uniquely points to the importance of the role of

overarching goals in establishing joint production

motivation as the instrument for creating maximum

value. Relatedly, we briefly discuss the huge diffi-

culties of sustaining joint production motivation

over time, which is based on the precariousness of

the normative goal frame and its tendency to give

way to competitive goal frames, as a key reason for

the decline of competitive advantages.

PSYCHOLOGICAL FOUNDATIONS OF

STRATEGIC MANAGEMENT:

GOAL-FRAMING THEORY

Beyond Behavioral Microfoundations

Research has increasingly emphasized that

sound microfoundations are important to the de-

velopment of strategic management theory. Tradi-

tionally, the microfoundations of strategic manage-

ment theory have been located in economics (i.e.,

industrial organization, organizational economics,

and financial economics; e.g., Abell et al., 2008;

Chatain & Zemsky, 2011; Coff, 1997, 1999; Lipp-

man & Rumelt, 2003; Wang & Barney, 2008), but

there are familiar limits to the explanatory leverage

86 May The Academy of Management Perspectives

of standard economics. Thus, scholars increasingly

look for microfoundations for strategy in psychol-

ogy. For example, how the heuristics of strategic

decision making emerge from experience (Bingham

& Eisenhardt, 2011) and how firm-level identifica-

tion processes influence competitive dynamics

(Livengood & Reger, 2010) are difficult to analyze

on a deep level solely from an economics perspec-

tive (which is not to say that such insights neces-

sarily escape economic modeling, e.g., Camerer &

Lovallo, 1999).

Thus, strategic management scholars have long

made use of psychology research (Hodgkinson &

Sparrow, 2002), most notably behavioral decision

theory as embodied in Cyert and March (1963) and

reflected in the emergence of the "behavioral strat-

egy" field (Bromiley, 2005; Gavetti, Levinthal, &

Ocasio, 2007; Powell et al., 2011), as well as in

cognitive perspectives (e.g., Porac & Thomas, 1990;

Weick, 1995) and notions such as attention alloca-

tion, escalation, learning myopia, and so on

(Bromiley, 2005). And yet, the editors of a special

issue of Strategic Management Journal on the "psy-

chological foundations of strategic management"

observed that "strategic management theory lacks

adequate psychological groundings," and they con-

cluded that "until strategy theory builds stronger

foundations in psychology, it will struggle to ex-

plain the facts of firm performance" (Powell et al.,

2011, p. 1370) (see also Greve, 2013). The key prob-

lem, they argue, is inadequate paradigm develop-

ment in "behavioral strategy"—that is, the merger

of cognitive and social psychology with strategic

management theory and practice. Strikingly, how-

ever, motivational issues are not mentioned in their

overview of "behavioral strategy."

The behavioral approach to strategy has not gone

uncontested. For example, Felin and Foss (2011)

criticized its philosophical foundations, arguing

that despite the stated interest in developing a more

realistic view of decision making, the behavioral

approach derives fundamentally from behaviorist

psychology and works with the same impoverished

view of decision making. Our point of departure is

different: Behavioral strategy is not sufficient be-

cause it says too little about motivation. Specifi-

cally, behavioral theory focuses all attention on

cognitive issues, such as perception, framing, expe-

riential and vocational learning, and heuristics.

However, a key theme in psychology research over

the past two decades is that cognition and motiva-

tion are strongly intertwined—so strongly inter-

twined, in fact, that often they are not meaningfully

separable (Kruglanski, 1999).

Behavioral strategy typically emphasizes search

heuristics, attention, memory, and so on as drivers

of management decisions and firm behavior. Be-

havioral strategy's starting point in bounded ratio-

nality is entirely warranted. A fundamental charac-

teristic of cognitive processes is indeed their

selectivity: Attention is selective; memory is selec-

tive; concepts and chunks of knowledge are at any

given moment only selectively accessible. Selectiv-

ity comes about by the twin process of activating

some aspects and inhibiting others (cf. Shah, Fried-

man, & Kruglanski, 2002). This creates important

differences regarding how individuals look at a sit-

uation, the key point in behavioral strategy. How-

ever, the link between these cognitive effects and

motivational effects is brought about by overarch-

ing goals. The dynamics of overarching goals com-

bines cognitive and motivational processes in their

relation to the environment, and thus the dynamics

of these goals should be the core aspect of micro-

foundations for strategic management. Goal-fram-

ing theory specifies how these links come about.

Goal-Framing Theory

A key finding of recent social psychological re-

search is that individuals act very differently in

terms of their strategy choice (defect or cooperate)

depending on cues in the environment. For exam-

ple, the very same prisoner's dilemma can carry the

label "Community game" or "Wall Street game,"

and this cue makes a big difference for the strategy

people choose (Liberman, Samuels, & Ross, 2004;

see also Pillutla & Chen, 1999). Experimental game

theory has produced very similar findings (e.g.,

Camerer, 2003). A cogent explanation for such

strong effects of cues is that they affect the relative

weight of activated overarching goals (see Keizer,

Lindenberg, & Steg, 2008; Lindenberg, 2012), as

specified in goal-framing theory (Lindenberg,

2008). Goal-framing theory is all about the fact that

a particular overarching goal can govern large sets

of subgoals and thereby change what preferences

are salient, which even affects the kind of con-

straints that are being perceived. Let us briefly take

a closer look at how this works.

Goal-framing theory distinguishes between three

overarching goals. There is the overarching hedo-

nic goal, which expresses the desire to improve (or

preserve) the way one feels right now, related to

one's need fulfillment; there is the overarching gain

2013 87 Foss and Lindenberg

goal, which expresses the desire to improve (or

preserve) one's resources; and there is the over-

arching normative goal, which expresses the desire

to act appropriately in the service of a collective

entity, such as an organization or a group. When

one of these three goals is focal, it captures so many

of the cognitive and motivational processes that it

truly "frames" the situation. Thus, these overarch-

ing goals govern what we attend to (Posner & Pe-

tersen, 1990), what alternatives we consider, and

what knowledge we draw on (Förster et al., 2005;

Gollwitzer & Bargh, 1996; Kruglanski & Köpetz,

2009). In turn, these cognitive processes have an

impact on motivation by inhibiting other goals

(Shah et al., 2002), by influencing what we like and

dislike (Ferguson & Bargh, 2004), and by governing

the expectations about what other people will do

and the criteria that are used to judge goal realiza-

tion or failure (Carver & Scheier, 1990).

Goals need to be activated (or "focal"), notably by

situational cues, to influence behavior. A goal

frame denotes an overarching goal (together with

the integrated cognitive/motivational processes

that are driven by this goal) when it is more

strongly activated than the other two overarching

goals. For example, organizational members who

are in a gain goal frame and whose specific goal

within this frame is to improve their status in the

organization will be particularly alert to informa-

tion about opportunities for improving status. The

relevant causal knowledge they activate is what

pertains to reaching this goal; they will be oriented

toward the longer term, and are likely to focus on

behavioral alternatives that advance their status po-

sition to various degrees. Opportunities pertaining

to other high-level goals (such as "behaving appro-

priately" in the service of joint production) are

likely to be more or less ignored unless they over-

lap with opportunities for the status goal.

A goal frame does not completely inhibit the

other two overarching goals. Rather, it pushes these

other goals to the background to various degrees.

More often than not, motivations are therefore

mixed, and it depends on the relative strength of

the foreground and background goals what the final

effect will be. Cues in the environment will heavily

influence the relative weight, thereby creating

shifts in cognitions and motivations. However, due

to a different a priori strength of the overarching

goals, it takes stronger cues to increase the weight

of a normative goal frame than for the hedonic goal

frame (with the gain goal frame in between). This

makes evolutionary sense: From an evolutionary

point of view, the group is there for the adaptive

advantage of the individual and not the other way

around. Thus the goal frame pertaining to a group

orientation is a priori the weakest and thus highly

precarious. The hedonic goal frame pertaining to

the satisfaction of needs here and now is a priori

the strongest, and the goal frame pertaining to re-

sources is in between.

The important additional point for the micro-

foundations of strategic management is that the

most potent cues in the environment that affect the

relative strength of a goal frame are the signals of

goal frames of other people, especially of those in

higher positions (Aarts, Gollwitzer, & Hassin, 2004;

Keizer, Lindenberg, & Steg, 2008, 2011). This cre-

ates a strong top-down contagious process of goal

frames (Lindenberg & Foss, 2011) that is enhanced

by horizontal contagion because each employee's

goal frame becomes a cue that affects the others'

goal frames, creating a strong tendency for goal

frames to spread in a group. Because the normative

goal frame is highly precarious and because power

relations are highly asymmetrical (i.e., top-down),

employees watch out for signals that reveal the goal

frame of the management (Lindenberg, 2000;

Takeuchi, Chen, & Lepak, 2009). If higher-ups

clearly signal that they are in a normative goal

frame, it will greatly help to stabilize this goal

frame in subordinates (Brown, Treviño, & Harrison,

2005; Mühlau & Lindenberg, 2003). By the same

token, signals that higher-ups are not in a norma-

tive goal frame will weaken this goal frame in

subordinates.

GOAL FRAMING, JOINT PRODUCTION

MOTIVATION, AND VALUE CREATION

Joint Production Motivation

Different goal frames are associated with differ-

ent levels of value creation in firms because differ-

ent goal frames are associated with mobilizing mo-

tivation for very different goals. In particular, we

argue that the normative goal frame is associated

with the highest levels of value creation. The rea-

son is that this goal frame, and it alone, can moti-

vate organizational members to engage in truly col-

Note that while goals can displace each other, they

do not necessarily conflict. Different goals can be com-

patible, although only one goal can be in the cognitive

foreground. More on this can be found in Lindenberg and

Foss (2011).

88 May The Academy of Management Perspectives

laborative activities, what Lindenberg and Foss

(2011) called joint production motivation. Organi-

zational members can recognize a joint endeavor

and see themselves as part of this endeavor, each

with his or her own role and responsibilities, in-

volving a sharing of cognitions about the relevant

tasks, interdependencies, timing, and possible ob-

stacles to smooth coordination. This leads them to

exert intelligent and adaptive efforts that result in

productivity gains and innovativeness.

Why is joint production motivation so impor-

tant? In the strategy literature Lippman and Rumelt

(2003) modeled firms as bundles of complemen-

tary, cospecialized resources. They argued that

the "heart of business management and strategy

concerns the creation, evaluation, manipulation,

administration, and deployment of unpriced spe-

cialized resource combinations" (2003, p. 1083;

emphasis in original). While choosing new re-

sources and discovering novel ways of combining

resources are important avenues to superior perfor-

mance, it is a major point of our argument that at

the heart of specialized resource combinations is

the motivation of human resources in the bundle

(Baron & Kreps, 1999; Gottschalg & Zollo, 2007;

Lindenberg & Foss, 2011). Strategy thus has to fo-

cus first and foremost on this motivation for the

realization of whatever higher strategic goal is cho-

sen. We will argue that there is a special motivation

that may characterize interacting resources in a

bundle and that strategy should focus on activating

and increasing this motivation in the service of

achieving superior firm performance.

Another word for Lippman and Rumelt's re-

source bundles is "teams" (Alchian, 1984). Teams

are a basic form of human cooperation with an

impressive evolutionary past. Firms are indeed or-

ganized around teams of strongly complementary

human resources (Lepak & Snell, 1999; Lippman &

Rumelt, 2003), and several literatures in manage-

ment and economics research are taken up with

teams.

However, none of these literatures explic-

itly recognizes a key recent finding of evolutionary

anthropology: namely, that human beings are espe-

cially equipped with cognitive and motivational

faculties that are specifically geared to team-based

cooperation (i.e., motivation for joint production)

and that this is a special source of motivation that

created the adaptive advantages of humans cooper-

ating in groups. Joint production involves hetero-

geneous but complementary resources, a high de-

gree of task and outcome interdependence, and the

potential for super-additive outcomes (as in Al-

chian & Demsetz, 1972). According to what become

known as the "social brain hypothesis," the most

potent human brain power (the neocortex) evolved

as a "social brain" to allow human beings to realize

the adaptive advantages that stem from coopera-

tion in larger groups involving joint production

(Dunbar, 2003). The brain apparently contains a

hardwired ability to recognize a situation as one of

joint production, and to trigger motivational and

cognitive faculties that are specialized to facilitate

joint production (cf. Sebanz, Bekkering, & Knoblich,

2006).

Haidt (2012, Chapter 10) adopted the imagery of

a "hive switch," which refers to the activation of a

special (human) motivation that is specifically

geared to the pursuit of team or group goals. How-

ever, the hive terminology is potentially misleading

as it also implies an imagery of mindless, ant-like

individuals. Indeed, empirical research shows that

members of a team perceive the environment dif-

ferently than do those taking independent action,

and generate shared representations of actions and

tasks in terms of joint goals. They exert intelligent

effort to cognitively coordinate temporal and spa-

tial aspects of cooperation and to correctly antici-

pate goal-related actions from others (Sebanz et al.,

2006). In other words, they are willing to induce

and assist others to do their bit (Tomasello, Carpen-

ter, Call, Behne, & Moll, 2005).

In ambiguous situations, group members will not

wait to be instructed but rather will search actively

for ways to serve the group goal(s) (De Dreu,

Nijstad, & Van Knippenberg, 2008), and they are

heedful of their and others' contributions to the

The economics of the firm literature offers two very

different understandings of the nature of teams. One

derives from Alchian and Demsetz's (1972) basic charac-

terization of team production. The other derives from

Marschak and Radner's (1972) characterization of a team

as a group of agents with a common goal that can be

achieved only by an appropriate combination and coor-

dination of the individual activities of the group mem-

bers. Both contributions have given rise to much subse-

quent work. See Foss and Lindenberg (2012) for a more

extensive discussion.

Of course, the social brain is also involved in decep-

tion and in detection of deception (Epley, Caruso, &

Bazerman, 2006). Because of that, the normative goal

frame is important, not just the ability to put oneself into

the shoes of others. In fact, reactive egoism is most likely

when an individual is already in a gain goal frame.

2013 89 Foss and Lindenberg

collective goals (Weick & Rob, 1993). Given the

right social and cultural circumstances (Henrich et

al., 2001), a special kind of motivation that contains

all these ingredients is activated, namely "joint pro-

duction motivation." Because extant research on

teams does not recognize joint production motiva-

tion, it sidesteps "some of the most interesting...

questions about teams, including: What are the

sources of the economic surpluses in team produc-

tion, and how can they best be harnessed and di-

rected?" (Blair & Stout, 1999, pp. 267–268).

Value Creation From a Goal-Framing Perspective

The consideration of joint production motivation

changes the way one may look at value creation in

firms. Strategic management is conventionally

taken to be about the creation and appropriation of

value, specifically creating and appropriating more

value than the competition (i.e., superior financial

performance) on a sustained basis (Peteraf & Bar-

ney, 2003). While the yardstick for financial perfor-

mance is reasonably clear (e.g., average industry

profitability), what is the yardstick against which

we measure value creation? Strategy scholars who

have addressed this question have typically taken

an economics perspective and defined the maxi-

mum conceivable level of value creation as the

relevant yardstick. Thus, Lippman and Rumelt

(2003, p. 1082) in their focus on coalitions of re-

sources defined "strategic equilibrium as the state

in which all possible resource transfers that create

value have taken place." Foss and Foss (2005) fo-

cused on how the reduction of transaction costs

increases value creation, and argued that the rele-

vant yardstick is a state of zero transaction costs,

implying maximum value creation. Such states are

what economists call "first-best" states.

Note, however, that such efficiency yardsticks

are defined relative to given preferences. In stan-

dard microeconomics, preferences stay put: People

know exactly what they like and how much they

like it relative to other things, and the relevant

ranking does not change over time. (Or, if changes

of preferences take place, they are not caused by

economic factors.) In the world of standard micro-

economics, top management's changing strategic

goals or exercising transformational leadership

may have behavioral consequences at lower levels

of the organization (e.g., because of the informa-

tional content of such a change, e.g., Hermalin,

1998), but these behavioral consequences are not

(and cannot be) driven by preference changes of

organizational members. Accordingly, leaders can

influence the actions chosen by organizational

members—their work/leisure trade-offs, their be-

havioral persistence, their problem-solving inten-

sity, their exercise of sophisticated helping behav-

iors, and so on—only by changing their constraints.

By implication, the assumed stability of prefer-

ences represents a brake on value creation. It also

represents a constraint on what can meaningfully

be said about the impact of strategic goals on the

motivation of organizational members. The funda-

mental problem is that (given) preference is part of

a logic of trade-offs that tends to suppress or trivi-

alize the processes that lead to preference order-

ings. In contrast, goal-framing theory builds on a

logic of means-ends relationships, where changing

overarching goals implies changing entire sets of

situationally salient preferences. Preferences and

constraints thus interact. In terms of goal-framing

theory, standard microeconomics assumes that in-

dividuals are always and everywhere in the gain

goal frame. Thus, it is not just that preferences are

stable but also that they have a specific content—

that is, individuals (always and everywhere) seek

to pursue their own individual interests.

That in-

dividuals entertain such interests is uncontrover-

sial, and economics has made impressive headway

based on its single-minded examination of the

many ramifications of individuals pursuing their

own goals and intentions. Thus, agency theory and

mechanism design theory have yielded much im-

portant insight into how harmonizing collective

and individual goals can be (partially) brought

about by interest alignment through incentives

and/or supervision. However, such alignment usu-

ally requires very significant monitoring effort (of

input and/or output performance), and because of

the costliness of monitoring, it is inherently imper-

fect, thus severely limiting the actual alignment of

interests (Lindenberg, 2013). By contrast, because

of normative goal frames and joint production mo-

tivation, there is a different way to link the indi-

vidual employee to organizational goals: Individu-

als may also choose actions in terms of what serves

collective goals. Standard microeconomics rules

To be sure, (behavioral) economics is by no means

inconsistent with the notion that decisions can be driven

by self-esteem, excitement, fairness, and so on. However,

these are modeled as extra determinants of utility that are

not dependent on the context. In contrast, goal-framing

theory points out that the salience of various goals, such

as pursuing fairness, is context-dependent.

90 May The Academy of Management Perspectives

this out, because the team is only a context for the

realization of the agent's individual goals. The en-

tire process of deliberating upon and choosing ac-

tions in terms of group goals is thus ignored as a

source of value creation.

In sum, the notion of first-best value creation

imported from standard microeconomics assumes

that organizational members are always in a gain

goal frame (Foss & Lindenberg, 2012). The intro-

duction of the normative goal frame and its support

of joint production motivation change this: The

first-best in a situation where organizational mem-

bers are in a normative goal frame is different—

specifically, higher—relative to what it is when

organizational members are in a gain goal frame.

Because of the difficulty of establishing and main-

taining a normative goal frame and joint production

motivation, the additional economic surplus that is

caused by the motivational force of a collective

orientation accrues in the longer run. Interest align-

ment (with all its limitations) often seems a first-

best solution when one takes a short-term perspec-

tive. In this perspective, not just the longer-term

advantages of joint production motivation are ne-

glected, but so too are the costs of using interest

alignment (Lindenberg, 2013). What, more specifi-

cally, are the sources of this additional economic

surplus stemming from joint production motivation?

Joint production motivation has beneficial organ-

ization-level consequences that either directly or

indirectly translate into higher value creation, be-

cause they affect the tasks that organizational mem-

bers are willing to engage in, how much effort they

will put into these tasks, and how they coordinate

their actions. Empirical research links the norma-

tive goal frame to prosocial behaviors, such as

spontaneous sharing of knowledge (De Dreu et al.,

2008), which in turn may positively affect work

productivity and innovation performance (Tsai,

2001). The heedful interrelating discussed by

Weick and Rob (1993), and found to assist coordi-

nation in ambiguous situations (Weick & Rob,

1993) and to promote innovation performance

(Dougherty & Takacs, 2004), results from joint pro-

duction motivation. As the normative goal frame

implies a partial suspension of moral hazard/op-

portunism, it reduces the need for costly control

mechanisms (Podsakoff & MacKenzie, 1997).

Coordination costs are reduced because joint pro-

duction motivation implies that organizational

members generate shared representations of actions

and tasks in terms of joint goals, reducing the need

for planning and formalization. Individual efforts

are channeled toward the realization of common

goals. Because individuals who are in a normative

goal frame engage in fundamentally prosocial ac-

tivities that they do not engage in when in the gain

goal frame (and may choose higher levels of effort),

the first-best under joint production motivation is

higher than the first-best identified by standard

microeconomics. Because standard microeconom-

ics assumes that individuals are always in the gain

goal frame, it is simply too pessimistic with respect

to what can be achieved by human cooperation and

at the same time too optimistic about what can be

achieved using incentives to help align individual

and organizational goals.

In general, economics-

based strategic management therefore underesti-

mates the upside of what firms can do in terms of

value creation, because it neglects the normative

goal frame and joint production motivation.

This underestimation of cooperative potential is

confounded by a systematic neglect of the costs of

failures to achieve interest alignment by incentives

(in terms of indicator behavior, apathy, and sabo-

tage; see Lindenberg, 2013). This neglect derives to

a large extent from the fact that microeconomics

has no room for the workings of the hedonic goal

frame. Hedonic goals are directed at improving

how one feels at a particular moment, such as seek-

ing direct improvement in self-esteem, seeking ex-

citement, avoiding unpleasant effort, and reacting

to perceived unfairness (such as sabotage and tak-

ing revenge). The criteria for success in a hedonic

goal frame relate to improvements in the way one

feels, not the way things function. The considerable

power of this goal frame vis-à-vis rival goal frames

derives from its direct link to basic needs and emo-

tions (Ryan, Huta, & Deci, 2008).

An organization in which members take a myo-

pic perspective and are predominantly hedonically

This is seen clearly by Alchian and Woodward (1988,

p. 77), who in a review of Williamson (1985) concluded

that "it is important to recognize the forces of ethics,

etiquette, and 'proper, correct, reasonable, moral, etc.'

standards of conduct in controlling business relation-

ships." While they may have the language to describe

what is seemingly so important, they admitted that "we

don't know enough about how such 'moral' forces oper-

ate to say more than that they exist and should not be

ignored in seeking an understanding of how the eco-

nomic institutions of capitalism, or any other -ism,

evolve and operate....Whatever the emotive language,

'decent' behavior saves resources and enables greater

welfare."

2013 91 Foss and Lindenberg

oriented is not conducive to value creation (cf.

Lindenberg, 2004): Investments in human capital

are not undertaken, helping behaviors do not

thrive, and rewards that are not directly linked to

efforts may be useless. Such myopic behaviors may

arise even if incentives are geared to supporting a

gain goal frame. For example, Postrel and Rumelt

(1992) documented cases in which, even despite

high-powered incentives, firms had to resort to in-

tense monitoring to hinder the consequences of

employees adopting hedonic goal frames. For these

reasons, the hedonic goal frame is the goal frame

that is associated with the lowest level of value

creation.

Figure 1 depicts how goal frames and value cre-

ation are related (for the two kinds of human re-

sources, x

and x

, interacting in a team, but gen-

eralizable to n human resources). The key

questions raised by the figure are how firms can

reach the level of value creation associated with the

goal frame, and, once reached, how firms can main-

tain this level of value creation.

STRATEGIC CONCERNS: LINKING JOINT

PRODUCTION MOTIVATION, GOVERNANCE,

AND STRATEGIC GOALS

There are two interrelated avenues by which stra-

tegic management can affect the motivation for

joint production and thereby bring about high lev-

els of appropriable value creation. One is the direct

way: by making the internal governance structure

for joint production motivation a core concern for

strategy. The other way is indirect: adopting an

oblique approach to strategic opportunities (Birkin-

shaw, 2012; Kay, 2010)—that is opportunities that

increase appropriable value creation (Denrell,

Fang, & Winter, 2003). However, these two ap-

proaches may support each other: A governance

structure that supports joint production motivation

is positively or negatively affected by strategic

goals of the firm. Only oblique (and typically proso-

cial) strategic goals will support a governance

structure for joint production motivation. More-

over, we argue, both ways are interrelated with

leadership style, which gives leadership style a

central place in strategy (see Figure 2). In the re-

mainder of the article, we will unfold the logic that

generated Figure 2.

The Internal Governance Structure

as Strategic Concern

As stated, goal frames have a strong tendency to

spread in a group. The more employees see others

committed to joint production, the stronger their

own commitment. For example, to the degree to

which others have positive feelings about their

jobs, employees are more willing to use intelligent

effort in terms of innovativeness (Shipton, West,

Parkes, Dawson, & Patterson, 2006). Similarly, re-

ceiving positive relational signals from others in

the daily interaction on the shop floor fosters send-

ing positive relational signals and increases overall

performance (Colquitt, 2004; Tabibnia, Satpute, &

Lieberman, 2008). Conversely, colleagues who

FIGURE 1

Value Creation Frontiers and Goal Frames

FIGURE 2

The Key Concerns for Strategic Management

Based on Goal-Framing Theory

Transformational

leadership style

Governance

structure for

joint production

motivation

Oblique

approach to

strategic

opportunities

Joint production

motivation

High levels of

appropriable value

creation

92 May The Academy of Management Perspectives

clearly show that they work for their own goals

(gain or hedonic), rather than for company goals,

can drag many others to their side.

Colleagues have a weaker contagion effect than

higher-ups. As already mentioned, the normative

goal frame is highly precarious and power relations

are highly asymmetrical (i.e., top-down), and be-

cause of this, employees watch out for signals that

reveal the goal frame of the management (Mühlau &

Lindenberg, 2003; Takeuchi et al., 2009). If higher-

ups clearly signal that they are in a normative goal

frame, it will greatly help to stabilize this goal

frame in subordinates (Brown et al., 2005; Mühlau

& Lindenberg, 2003). By the same token, signals

that higher-ups are not in a normative goal frame

will weaken this goal frame in subordinates. For

example, in a vignette study, Keizer, Lindenberg,

and Steg (2011) showed that when higher-ups use

company money for their private purposes, em-

ployees are less inclined to keep to their own work

rules. In short, such "goal contagion" effects (Aarts

et al., 2004) can strongly influence the stability of

the normative goal frame in both positive and neg-

ative directions. This also limits the ability of man-

agement to use the language of cooperation, joint

production, and solidarity as a means to get indi-

viduals to work for company goals without believ-

ably signaling that they are in a normative goal

frame. Signaling such a normative goal frame is

inherently difficult. Because of the difference in

power and in stakes with regard to company prof-

its, employees don't easily trust higher-ups, which

makes relational signals from the top very costly

and easily distorted. Therefore, management sig-

naling of a normative goal frame needs support

from other structures (cf. also Foss, Reinholdt, Ped-

ersen, & Stea, 2013).

In previous work (Lindenberg & Foss, 2011), we

have identified the organizational preconditions

for the activation of a normative goal frame that is

conducive to joint production motivation. For rea-

sons of space, we only briefly summarize these

preconditions. First, members of an organization

must perceive their various interdependencies re-

garding joint production (through the team and task

structure). Thus, employees must understand that

tasks and teams are designed for the achievement

and maintenance of joint production. The clearer

the common goals, the various roles in which indi-

viduals help to reach these goals, and the func-

tional connections of tasks and goals between dif-

ferent levels of the firm, the easier it is for

employees to develop and sustain a motivation for

joint production. Second, even if common goals are

specified in the task and team design, they must

still be embedded in a shared sense of common

direction and affect on the level of the firm. This

will also help prevent subunit egoism. A suitable

means for achieving a common direction is a vision

and mission statement, consensually supported by

top management, that focuses on a common pur-

pose (Ashforth & Johnson, 2001) rather than oper-

ational goals that are appropriate for the task and

team structure.

Third, reward structures must be calibrated so

that they provide direct support for the normative

goal frame (i.e., individual rewards should be ex-

plicitly recognitions for contributions to joint pro-

duction, and team rewards for contributions to

high-level goals). This also holds for indirect sup-

port by keeping the gain goal frame in the back-

ground strong enough to stall excessive group pres-

sure and conformism. In addition to noncontingent

rewards linked to position, employees also need to

be rewarded individually in a contingent manner to

maintain the motivation to engage in certain activ-

ities. But contingent gain rewards, such as status

advancement and money, must remain modest, be-

cause they can foster a gain goal frame, just as

contingent hedonic rewards, such as especially en-

joyable tasks and better offices, can foster a hedonic

goal frame. When rewards get too strong, they can

undermine the normative goal frame, and intelli-

gent effort will be selectively driven by what leads

to personal rewards (hedonic or gain) rather than

by contribution to the realization of common goals.

Fourth, authority should be legitimized regarding

the functional prerequisites for joint production, by

linking it to superior insight on what is needed for

the realization of common goals, rather than based

on fiat and contractual clauses.

Gain-Related Strategic Goals and

the Importance of Obliquity

Goal-framing theory explicitly addresses high-

level (strategic) goals. But true to the importance of

motivation for joint production, it focuses on the

implications of such high-level goals for motiva-

tion. The key to understanding how this works is

the vertical contagion effect. Thus, if firms adopt

goals that stress seeking to continually seize profit

opportunities (as in Avon Products' "We will de-

liver superior returns to our shareholders by tire-

lessly pursuing new growth opportunities"), this

sends a signal down through the organization that

2013 93 Foss and Lindenberg

top management is in a gain goal frame. Due to the

contagion effect of overarching goals, this means

that the gain goal fame will spread throughout the

organization. Thus, if gains are explicitly addressed

as the key strategic goal, this makes it difficult, if

not impossible, to maintain a governance structure

that supports joint production motivation.

Therefore, goal-framing theory would maintain

that even though firms have to make profits, gain-

related strategic goals should not get center stage

(Lindenberg, 2013). They should be approached

obliquely. This point has also been picked up re-

cently by popular management books that have

made the case for "oblique" strategic goals (explic-

itly in Birkinshaw, 2012; Kay, 2010). There, the

arguments for this oblique approach remain some-

what fuzzy. As Birkinshaw (2012, p. 124) noted,

obliquity is "not an easy concept to come to grips

with," and it is not well established in the research

literature in strategic management (in fact, as far as

we can tell, there has been no attention to the

concept or the underlying ideas in the research

literature).

Scholars who have examined the impact of stra-

tegic goals on the internal workings of the firm have

provided part of the answer by emphasizing that

organizational goals serve the functions of provid-

ing direction, facilitating planning, and assisting in

the process of evaluating and controlling perfor-

mance (Barney & Griffin, 1992). The potential mo-

tivating role of strategic goals frequently emerges in

such discussions.

For example, Hamel and Prahal-

ad's (1989, p. 64) discussion of strategic intent

linked this construct to an "active management

process that includes focusing the organization's

attention on the essence of winning, motivating

people by communicating the value of the target,

leaving room for individual and team contributions

[and] sustaining enthusiasm by providing new op-

erational definitions as circumstances change." But

lacking microfoundations that deal with the inte-

gration of cognition and motivation through over-

arching goals, the possibility and importance of

obliquity have not been theorized. Goal-framing

theory can give a clear underpinning of the impor-

tance of obliquity with regard to gain goals, and, as

we will see shortly, some of the world's best known

corporations seem to have arrived at the same

point. Let us look at this link between strategy and

obliquity in more detail.

Strategic goals exist at different levels, from mis-

sion and vision statements at the highest strategic

level to operational goals at the business-unit level

to the goals set for individual organizational mem-

bers. In this discussion, we focus on the high-level

strategic goals that define aspirations and direc-

tions for the firm as a whole, but the arguments are

meant to apply equally to strategic goals nested in

lower levels. High-level strategic goals of the organ-

ization are the embedding for lower-level strategic

goals and thus influence the weight of goal frames

inside the firm, thereby indirectly affecting the mo-

tivation for joint production. Such goals have a

double function. Overarching goals are highly con-

tagious, especially when they are imbued with sta-

tus. Because the normative goal frame is a priori

weaker than the gain goal frame, the former will be

easily displaced by the latter. In this way high-level

goals will have a trickle effect through all levels of

the organization, if it is known that management

("status") stands behind these goals.

But high-level strategic goals also have another

important function: They help or hinder coordi-

nated action and the use and sharing of knowledge,

depending on how they affect the employees' un-

derstanding of higher-level goals. For example, in-

creasing market share as a strategic goal pushes a

gain goal frame. That alone makes it difficult to

maintain a normative goal frame for joint produc-

tion motivation. But such a goal also makes it dif-

ficult for employees to know how their tasks relate

to those of others, not giving them a sense of why

and how they matter (see Anand, Ward, Tatikonda,

& Schilling, 2009; Montgomery, 2008). This too,

frustrates the realization and maintenance of joint

production motivation.

High-level strategic goals refer either directly to

gain (profit or market share, shareholder value, etc.)

or to a substantive mission in terms of societal

goals. In both versions, these goals that define the

aspirations of firms are quite abstract and not very

operational. But they are directional, providing

purpose, and that is their strategic function, as

Montgomery pointed out: "Sitting at the hub of the

strategy wheel, purpose aligns all the functional

pieces and draws the company into a logically con-

sistent whole. Well understood, it serves as both a

constraint on activity and a guide to behavior"

(2008, p. 56).

There is also work on the motivational ramifications

of employee involvement in strategic planning (e.g.,

Ketokivi & Castaner, 2004), but this is distinct from our

focus here on the motivational implications of strategic

goals (i.e., outcomes of planning processes).

94 May The Academy of Management Perspectives

For example, compare the mission statement of

the Cooper Tire & Rubber Company with that of

IKEA. "The purpose of the Cooper Tire & Rubber

Company is to earn money for its shareholders and

increase the value of their investment. We will do

that through growing the company, controlling as-

sets and properly structuring the balance sheet,

thereby increasing EPS, cash flow, and return on

invested capital." This mission is clearly directed

at gain, and it will push a gain goal frame in its

employees. In addition, it does not help employees

to define their own role, to understand their pur-

pose in the organization. This contrasts with

IKEA's mission statement, which is to "offer a wide

range of home furnishing items of good design and

function, excellent quality and durability, at prices

so low that the majority of people can afford to buy

them." This mission statement can serve collective

identification with firm goals (thus supporting a

normative goal frame), and it helps the individual

employee to give direction to his or her own role in

realizing the collective goals.

Similarly, LEGO's mission is "to help children

develop their creativity and learning skills through

constructive play." This goal is both easy to iden-

tify with (thus supporting a collective orientation

to the firm's goal) and concrete enough to give each

employee a sense of what it is that needs to be done

(Lindenberg & Foss, 2011). High-level strategic

goals can also be explicitly linked to goals of the

employees. For example, the pharmaceutical com-

pany Eisai explicitly states that "it is most impor-

tant that we know and share the feelings of the

patients, their joys, anger, sadness, and happiness.

The essence of Eisai is our pursuit of the 'Eisai

way,' which is realized through the exercise of

strong entrepreneurship by each employee" (in

Spender & Strong, 2012, p. 18).

The Strategic Importance of Leadership Style

For both ways to influence the motivation for

joint production (governance structure and obliq-

uity with regard to gain goals), there is likely to be

a symbiotic relationship with leadership style,

which imbues leadership style with strategic im-

portance. First, there is the top-down contagion

process that gives considerable weight to the over-

arching goals of leaders for affecting the goal frames

of the employees. Thus, for obliquity to work, the

leadership must be seen as supporting these high-

level goals in daily practice. Second, leadership

can actively encourage identification with the or-

ganization and foster the preconditions for employ-

ees to be motivated to take individual responsibil-

ity for reaching collective goals. In the literature,

such leadership has been identified as transforma-

tional (Grant, 2012; Judge & Piccolo, 2004; Kirkpat-

rick & Locke, 1996).

Overall, this literature asserts that (strategic)

leaders motivate followers/employees by commu-

nicating compelling visions, typically in the con-

text of stressing collective identities and strongly

held core human values that can motivate followers

to switch from gain goal frames to normative goal

frames (Shamir, House, & Arthur, 1993). Thus, from

the point of view of goal-framing theory, transfor-

mational leaders need to capture motivating as-

pects of the high-level goals and use them to steer

identification processes so that they provide direct

support for the normative goal frame by embedding

common goals (Van Knippenberg, 2000) and pro-

viding links to values (Thompson & Bunderson,

2003). Because the normative goal frame is linked

to a supra-individual entity, there must be particu-

lar emphasis on what organizational members have

in common, what binds them, together with the

creation and maintenance of positive affect con-

nected to what organizational members have in

common (Bollen & Hoyle, 1990; Liberman et al.,

2004; Zaccaro & McCoy, 1988).

Grant (2012, p. 458) noted that findings in the

transformational leadership literature have been

mixed, with "inconsistent effects of transforma-

tional leadership on followers' performance"

emerging in laboratory as well as field experiments.

A possible reason is that leaders may fail to take

steps "to ensure that the vision is not simply rhet-

oric" (Kirkpatrick & Locke, 1996, p. 37). Indeed,

goal-framing theory suggests that strategic "as if "

relational campaigns that actually try only to create

the appearance of relational concern and concern

for individual improvement will not be effective for

long and will ultimately drive out normative goal

frames in favor of gain or hedonic goal frames

(Greenberg, 1990; Miller, 2001). Of course, leaders

also have a transactional role of control, but that

should be embedded in the transformational ap-

proach. This means that control too needs to be

approached obliquely.

Grant (2012) suggested that transformational

leadership is most effective with respect to moti-

vating followers when leaders lead by example and

engage in direct contact with followers. Goal-fram-

ing theory supports this idea by pointing to the

precariousness of the normative goal frame and the

2013 95 Foss and Lindenberg

fact that employees are highly sensitive to signals

that can reveal what goal frame the management is

in (Mühlau & Lindenberg, 2003; Six & Sorge, 2008;

Takeuchi et al., 2009). What Grant called "benefi-

ciary contact," for example, when leaders visibly

work with organizational members ("beneficia-

ries") in a manner oriented toward joint produc-

tion, can signal the normative goal frame of leaders

and show organizational members that strategic

goals are indeed geared toward joint production

and underpinned by prosocial visions that make a

difference to stakeholders. Because of the conta-

gion effects on the stability of the normative goal

frame, seeing that strategic leaders, in special com-

munal events, show affective and consensual com-

mitment to a cause and the related vision/mission,

and seeing that many other employees experience

this simultaneously, creates affective communality

among organizational members (see Islam & Zy-

phur, 2009; Trice & Beyer, 1984). In short, there is

need for a transactional role of control, but it is of

strategic importance that the leadership actually

"live" their strategic goals that keep gain goals

oblique.

CONCLUSIONS

From the point of view of pragmatic management

research, microfoundations matter—not so much

because microfoundations are philosophically the

right thing to do, but because they furnish substan-

tive implications for theory building that truly mat-

ter to practitioners. This insight is not new, but

until now, microfoundations for strategic manage-

ment have separated the cognitive and motiva-

tional dimensions and neglected their crucial inter-

connection in the dynamics of overarching goals.

To be sure, the investigation of the effects of heu-

ristics and biases on the behavior of top-manage-

ment teams (Powell et al., 2011) is a worthwhile

endeavor, as is the integration of motivation re-

search with strategic management (Coff, 1997; Os-

terloh & Frey, 2000). However, consistent with im-

portant recent research in experimental economics,

social psychology, and cognitive science, goal-

framing theory argues that cognitive and motiva-

tional microfoundations are strongly intertwined,

and that both dimensions should be taken into

account—and that this makes a substantive differ-

ence in theory development in strategic manage-

ment. Specifically, goal-framing theory allows us to

cast the fundamental strategic management issues

of value creation and strategic goals in a new light

and to explore their interrelations (cf. Figures 1

and 2).

On the basis of goal-framing theory one can thus

argue that the heart of value creation in firms lies in

the motivation for joint production for all involved.

No matter what the firm wants to achieve, optimal

value creation will always crucially depend on

eliciting a motivation among employees that is di-

rected at common goals, such that organizational

members are motivated to choose their actions in

terms of joint goals and exert intelligent effort to

reach joint goals (Lindenberg & Foss, 2011). Liter-

atures on human resource management (e.g., Rous-

seau & Wade-Benzoni, 1994) and goal setting (e.g.,

Locke & Latham, 2002) often address the strategic

importance of employee motivation, but they focus

not on joint production motivation but rather on

the dyadic link of the individual to the organiza-

tion. For example, Rousseau and Wade-Benzoni

(1994) argued that human resources practices are

key ways to implement strategies. Different prac-

tices implement different psychological contracts,

and the motivation of an employee is closely re-

lated to her interpretation of promises and commit-

ments issued by the organization. However, this

literature remains fundamentally dyadic in its ori-

entation; it is the relationship between the individ-

ual organizational member and the organization

that is in focus.

In traditional microeconomic approaches to

strategy, the joint production motivation has also

been neglected, as have the costs of failing to align

interests with incentives. Yet, from a strategic man-

agement point of view, it is exactly the motivation

for joint production that is crucial for optimal value

creation. Accordingly, we have argued that the core

strategic concern is to create a governance structure

that can bring about and maintain a high level of

joint production motivation among all members of

the organization. One way to do this is to make the

governance structure itself a key strategic concern

(for more detail, see Lindenberg & Foss, 2011).

For the strategy field, another influence on the

motivation for joint production is possibly less ob-

vious but just as important: the influence of high-

level strategic goals on motivation. Because of their

obvious centrality, high-level strategic goals have

been extensively discussed from multiple perspec-

tives. For example, agency theorists have discussed

the extent to which the goals of the firm are aligned

with those of shareholders (Jensen & Meckling,

1976), resource-based theorists see the goals of the

96 May The Academy of Management Perspectives

firm as constrained by the resource portfolio of the

firm (Wernerfelt, 1984), positioning theory ex-

plains how goals are constrained by external com-

petitive forces (Porter, 1980), competitive dynam-

ics theory emphasizes how environmental changes

influence changes in strategic goals (Audia, Locke,

& Smith, 2000), strategy process theories explain

how goals may emerge from lower echelons in the

organization (Burgelman, 1994) or reflect changing

levels of aspiration (Shinkle, 2012) or reference

points (Fiegenbaum, Hart, & Schendel, 1996,

p. 222), and strategic leadership theorists examine

how goals are influenced by the discretion pos-

sessed by strategic managers (Finkelstein & Ham-

brick, 1996). However, whether, how, and why

strategic goals have to deal with obliquity is gener-

ally not addressed in the strategic management

literature.

As has become clear from the point of view of

goal-framing theory, with regard to high-level stra-

tegic goals, strategic management involves a funda-

mental squaring-of-the-circle operation: On one

hand the overall aim is indeed to maximize appro-

priable value creation relative to the competition.

This seems to require a competitive and economiz-

ing mindset associated with the gain goal frame. By

contrast, because of promoting such a mindset in-

ternally (via the operation of the vertical goal con-

tagion mechanism), organizational members adopt

the gain goal frame, which is associated with a

lower level of value creation than the normative

goal frame. This implies that the successful maxi-

mization of net returns requires an oblique strate-

gy—that is, one that stresses explicit goals that can

support the normative goal frame, which in turn is

conducive to joint production motivation and aids

a governance structure that is supportive of joint

product motivation.

A good example of a successful oblique approach

is the Swedish bank Svenska Handelsbanken. Kro-

ner (2011) showed that the bank's strategic goal of

higher return on equity than the average of its peers

is pursued in a rather oblique way and is supported

by an internal organization that is conducive to

joint production. Thus, Handelsbanken's culture

stresses employees being "self-directed and entre-

preneurial" (p. 93) with a high degree of account-

ability; the task structure is simple and highly

transparent (p. 96), and "Handelsbanken does not

award bonuses" (p. 98). This internal organization

supports the "bank's visceral dislike for risk-taking,

its focus on concentrating on customer satisfaction

over profits, and its emphasis on long-term orien-

tation" (p. 99). Svenska Handelsbanken has been

consistently successful in pursuing its strategic

goal in this oblique way, placing it among the top

25 banks in Europe.

This success of Handelsbanken is a testament to

yet another strategic concern derivable from goal-

framing theory: the importance of transformational

leadership. Such leadership is important in making

strategic gain goals oblique, in creating common

purpose, and in maintaining a governance structure

that is supportive of joint production motivation.

The three strategic concerns suggested here (gover-

nance, oblique gain goals, and transformational

leadership) take time and a long-term perspective

to develop and might well constitute the heart of

the complex and path-dependent resources high-

lighted by the resource-based perspective (Bar-

ney, 1991).

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Nicolai J. Foss (Njf.smg@cbs.dk) is Professor of Strategy

and Organization at the Copenhagen Business School

(CBS), Department Head, Department of Strategic Man-

agement and Globalization at CBS, and Professor of

Knowledge-based Value Creation at The Norwegian

School of Economics. He is a member of the Academia

Europaea, and received his Ph.D. from CBS. His interests

lie in the theoretical and empirical aspects of microfoun-

dations for strategic management theory, and in the in-

tersection of organizational economics and strategic

management.

2013 101 Foss and Lindenberg

Siegwart Lindenberg (s.m.lindenberg@rug.nl) is Profes-

sor of Cognitive Sociology in the Department of Sociol-

ogy and the Interuniversity Center for Social Science

Theory and Methodology (ICS) at the University of Gro-

ningen and at the Tilburg Institute for Behavioral Eco-

nomics Research (TIBER) at Tilburg University (Nether-

lands). He received his Ph.D. from Harvard University,

and is a member of the Royal Netherlands Academy of

Arts and Sciences. His interests lie in the development,

test, and application of theories of joint production and

governance based on social rationality, with a focus on

the influence of the social environment on norms, (non)co-

operative behavior, and self-regulation.

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... Transformational leadership has become one of the most established theories of leadership in the current literature (Dinh et al., 2014). It has been considered one of the most performance influencing leadership styles (Foss and Lindenberg, 2013;Judge and Piccol, 2004) and an important factor of organizational change adaptation (Moorman and Day, 2016;Sirmon et al., 2007;Teece, 2007). Through transformational leadership, leaders motivate their subordinates to identify with the goals and interests of the firm and encourage them to perform beyond expectations (Pieterse et al., 2009). ...

... From this perspective, transformational leadership is considered pivotal in raising contextual ambidexterity (Floyd and Lane, 2000;Gibson and EJIM . Transformational leaders encourage proactive exploration and exploitation of new ideas (Foss and Lindenberg, 2013). Consequently, transformational leadership firms effectively detect shifts in market trends and customers' preferences and respond to the changes through mobilizing resources according to opportunities identified through adaptive marketing capability (Day, 2011;Teece, 2007). ...

... It consequently promotes an open, creative and experimentations-based climate for exploiting and exploring market knowledge acquired through adaptive marketing capability (Mu et al., 2018;Teece, 2007). Thus, transformational leadership provides a supportive culture for proactively gathering, distributing and responding to market information (Foss and Lindenberg, 2013;Judge and Piccol, 2004), facilitates and motivates employees and fosters the organizational context to simultaneously exploit and explore new opportunities Raisch and Birkinshaw, 2008) identified through adaptive marketing capability (Day, 2011;Mu et al., 2018;Teece, 2007). ...

Purpose – This study aims to offer and validate an integrated marketing capability-product innovations framework. Particularly, it aims to examine the role of adaptive marketing capability in enabling market ambidexterity and incremental as well as radical product innovation. Also it intends to investigate the moderating role of transformational leadership between adaptive marketing capability and market ambidexterity. Design/methodology/approach – Manufacturing firms in Pakistan, an emerging economy, are taken as the context for this study. A designed survey questionnaire is used for data collection. Partial least square technique is employed to empirically validate and test the hypothesized model with a sample of 192 manufacturing firms. Particularly, the two-stage approach in SmartPLS is used to validate measurement models, and structural equation modeling technique is used to test the proposed hypothesis. Findings – The findings not only confirm that adaptive marketing capability is instrumental to both incremental and radical product innovations but also reveal that adaptive marketing capability serves an important antecedent to market ambidexterity shedding new lights on its mediating role in the relationship of adaptive marketing capability with incremental and radical product innovations. Moreover, the results find that the effectiveness of adaptive marketing capability to support market ambidexterity may involve a possible trade-off between exploitation and exploration when the leaders exhibit a low or high level of transformational leadership behavior. Originality/value – This study contributes to outside-in strategic perspective and contextual ambidexterity literature by revealing the role of adaptive marketing capability as an important enabler of market ambidexterity which, in turn, allows the firm to simultaneously introduce incremental and radical product innovations. In this way, this study advances the current understanding of the antecedents and consequences of contextual ambidexterity. Also, this study provides insight into the types of capabilities needed for the firm's contextual and employees' behavioral adaptation to simultaneously manage exploitation and exploration within the same business unit which was lacking in the previous literature. Further, this study also offers a novel understanding of the conditional role of transformational leadership between adaptive marketing capability and market ambidexterity.

... Within an organizational context, the strategic goals and corresponding management practices of a firm are important factors that shape the overarching goals of employees (Foss & Lindenberg, 2013;Lindenberg & Foss, 2011). ...

... As employees' goal, frames at work are subject to a contagion process by the strategic goals and management practices of the employing organization (Foss & Lindenberg, 2013), it can be assumed that EMP affects employees' EA (Pellegrini, Rizzi, & Frey, 2018). The congruence between employees' EA and a commitment to environmental protection by the employing organization in turn predicts the green-person-organization fit (Hicklenton et al., 2019). ...

... The present study contributes to this debate by highlighting beneficial employee-level reactions to EMP. The current results support the proposition that organizational practices interact with the normative goals and beliefs of employees (Aguilera, Rupp, Williams, & Ganapathi, 2007;Foss & Lindenberg, 2013) and the empirical verification of the mediating role of employees' EA has shed light on a thus far overlooked mechanism across different levels of analysis. ...

Hans Jaich

The fundamental research question in the present study is whether perceived environmental management practices relate to employees' organizational identification. Specifically, it is hypothesized that this relationship is mediated by employees' environmental attitudes. The corresponding research model adopts a multi‐theoretical approach that combines two different theoretical lenses. Goal‐framing theory is introduced to predict whether perceived environmental management practices affect employees' environmental attitudes, while green‐person‐organization fit is applied to explain the relationship between employees' environmental attitudes and organizational identification. The research model was tested using a cross‐sectional research design with data from 206 employees from tourist service companies in Germany. The results, which largely support the research model, shed light on a thus far unexplored mechanism that mediates individual reactions to organizational practices and contrasts the more established proposition that employees first identify with their organization before they develop attitudes that are in accordance with corresponding ingroup norms. Implications for both research and practice are discussed.

... The goals set by the managers with the forethought capability function as the joint production motivation, improve the organizational performance (Lindenberg & Foss, 2011) and serve as the guidelines for value-creation (Foss & Lindenberg, 2013). The goals set by the firms about the future have positive effects on the psychology of firm managers (Locke & Latham, 1990b). ...

... The effects of self-efficacy capability on organizational operation, decision making process and organizational performance were examined in previous studies (Bandura, 1988a;Wood & Bandura, 1989a;1989b). Moreover, in previous studies, the phenomena of goal-setting and motivation which were among the sub-functions of selfefficacy capability were addressed within the context of microfoundations of strategic management (Lindenberg & Foss, 2011;Foss & Lindenberg, 2013). However, in these studies, the phenomena of goal-setting and motivation were not evaluated within the context of Social Cognitive Theory, rather in the framework of Goal-framing Theory. ...

Mehmet Bagis

The aim of this study is to address the following question: "How does Social Cognitive Theory contribute to the microfoundations of dynamic capabilities?" Benefiting from the concepts of Social Cognitive Theory, namely, symbolizing capability, forethought capability, vicarious learning capability, self-regulatory capability and self-reflective capability, the study suggested a conceptual model for the microfoundations of dynamic capabilities. Thus, it was put forward that the managers and employees with self-capabilities had effect on the collective organizational capabilities of the firm. Moreover, it was deduced that the individual capabilities which Social Cognitive Theory set forth in relation to human nature would suggest explanations on the building (learning), coordination (integration) and reconfiguration (transformation) phenomena of dynamic capabilities.

... threat and opportunity from a new resource combination) or opposing tasks and logics of resource deployment (Eggers and Kaplan 2013;Jay 2013). The benefit is a wider range of alternative ways of recombining resources, which is central to coordination flexibility (Foss and Lindenberg 2013). Moreover, duality-accepting the tension in or challenges of resource combination-enables managers to think about what rules to break (Kaplan and Vakili 2015) and thus constitutes coordination flexibility. ...

... Second, coordination flexibility requires novel linkages between resources (Evans and Davis 2005). Holism becomes particularly helpful because a firm is encouraged to develop multiple ways of deploying and reconfiguring resources or eliminating bottlenecks in resource recombination (Uhlenbruck et al. 2003); the firm can also discover the interdependency of and acknowledge the complex interplay between irrelevant resources (Foss and Lindenberg 2013). Third, dynamism allows senior managers to understand how to modify important aspects of reconfiguring and orchestrating resources at different times (i.e. ...

Feifei Jiang
Donghan Wang
Zelong Wei

This study examines the underlying mechanisms through which Yin-Yang cognition, an Eastern philosophy of paradoxical cognition, affects firm ambidexterity. Based on strategic cognition theory, this research identifies strategic flexibility as a mediator. Moreover, we also identify three fundamental characteristics of Yin-Yang cognition based on an Eastern philosophy. Using a sample of 206 manufacturing firms in China to test our model, we find that two types of strategic flexibility (resource flexibility and coordination flexibility) are important channels through which Yin-Yang cognition influences organizational ambidexterity. We describe how these findings offer several theoretical and managerial implications.

... The understanding of motivation, cognitive limitations, opportunism and incentives for generating the knowledge spillovers (West and Bogers, 2017) on individuals' openness remains scarcely investigated by scholars Randhawa et al., 2019;Salter et al., 2015;West and Bogers, 2017). Moreover, previous literature underlines the importance of the processes and structures that shape OI routines and capabilities (Bogers et al., 2018;Felin et al., 2012;Foss and Lindenberg, 2013). For example, Randhawa et al. (2019) found that the quality of an OI capability is dependent on the efficacy of supervisory-level managers. ...

Purpose In this paper, the authors argue that multicultural skills and relational leadership act as enablers for open innovation, and thereby examine the process through which teams can utilize multicultural skills to support the development of relational leadership and knowledge sourcing and sharing (KSS) through individual interaction and relationship building. The authors address the following research question: How does relational leadership enable open innovation (OI) among employees with multicultural skills? Design/methodology/approach This paper applies a multi-level approach (team and individual level) and builds on interviews with 20 employees, middle and senior managers with multicultural experiences, working in open innovation environments. Findings The authors' findings shed light on the process through which social exchange relationships among team members (e.g. R&D teams) and knowledge exchange partners are enhanced by the use of multicultural skills and support the development of relational leadership to facilitate KSS and ultimately OI. The decision for participants to collaborate and source and share knowledge is motivated by individual reward (such as establishing network or long-lasting contacts), skill acquisition (such as learning or personal growth in decision-making) and a sense of reciprocity and drive for group gain. The authors encourage greater human resource (HR) manager support for relational leadership and the development and use of multicultural skills to promote KSS. Research limitations/implications Despite the value of our findings, this paper is not without limitations. The authors explained that the focus of this study design was on the work activities of the participants and their skill development and not specific projects or organizations. It was outside the scope of this study to examine variations across organizations and individuals as the authors wanted to focus on multicultural skills and relational leadership as enablers for OI. The authors recommend that future studies extend our research by unpacking how various boundary conditions including relational leadership and multicultural skills impact KSS and OI over the life cycle of innovation teams within large multinational organizations, across countries and ethnicities. Practical implications The study's findings provide managers with improved understandings of how to enable an individual's willingness and readiness to source and share knowledge through multicultural skills and relational leadership. Managers need to ensure that human resource management (HRM) practices celebrate multicultural skills and support relational leadership in innovation teams. The authors suggest managers engaged in OI consider the components of social exchange as described by Meeker (1971) and utilize reciprocity, group gain, rationality and status consistency to support the emergence relational leadership and KSS in innovation teams. Originality/value In this paper, the authors contribute to the dearth of literature on the boundary conditions for OI by examining the role of relational leadership and characteristics/skills of the workforce, namely multicultural skills and contribute to the scarce research on the role of employees with multicultural skills and their impact on OI and present multicultural skills/experiences and relational leadership as enablers for OI.

... It must be also taken into consideration that middle manager's perceptions of top manager's leadership and inclusion practices enable the combination of cognitive and motivational dimensions, something so far relatively neglected by the strategy microfoundations approach (Foss & Lindenberg, 2013). Information and knowledge are not properties of organisations (Nelson & Winter, 1982), but rather of the individuals that are parts of them (Felin & Hesterly, 2007). ...

Objective: We used the microfoundations lens to contribute to studies on the interaction between top and middle managers, as well as to studies on the cognitive effets of strategy implementation.Methodology: Empirical evidence result from a survey conducted with 104 middle managers of a large size telecommunications company operating in Brazil.Originality: Making use of traditional and contemporary literature and in opposition to simplified assumptions about managers'interfaces, we revealed the relevance of managerial interactions and their idiosyncratic and inimitable nature.Results: Our analyses revealed that a combination of micro adaptation practices by middle managers and their perceptions regarding top manager's participative leadership positively influenced the way implementation is cognitively realised. Such effects are even more pronounced when the two groups of managers experience a good relationship.Theoretical contributions: The survey, in pointing to microfoundational aspects that contribute to strategy implementation, opens up possibilities for future studies based on this theoretical perspective. It also contributes to the practice, by elucidating aspects, both behavioural and cognitive, susceptible to management and to improvements in the implementation processes.

Randall E. Westgren
Peter Foreman

We argue for a new microfoundational approach to organizational identity to replace common vertical theory-borrowing from individual identity theory. Organizational identity becomes either an individualistic account of member representations of the group identity held together by other-regarding cognitive structures or a group-level account where jointly understood identity is tied to joint goals and agency as we-intentionality. Organizational identity is linked to collective action through intentionality. For large organizations, jointly held identity is crucial to guide individual action on

Mr
Theuns Pelser

South African mining organisations are facing numerous challenges: decreasing commodity prices, policy uncertainty, rising input costs and increasing stakeholder expectations. In order to successfully address these challenges, each mining organisation needs to respond in a unified, aligned way. This study determined the degree of perceived organisational alignment among managers within South African based mining organisations and uncover the key enablers of organisational alignment. Data was collected from 286 managers from a selection of all the major South African mining commodity sectors on their perceptions of the degree of organisational alignment as well as on the enablers of organisational alignment. Applying structural equation modelling, five of the eleven organisational alignment enabling factors indicated a unique influence of practical importance on perceived organisational alignment. Three data-model fit tests confirmed that the pattern of variances and covariance in the data was consistent with the hypothesised framework of organisational alignment specified in this study. The outcomes and practical value of this study were the following: a conceptual framework of organisational alignment; a validated and reliable measurement instrument of perceived organisational alignment and its enabling factors; and a range of recommendations on how South African mining organisations may improve organisational alignment.

Purpose Prior research has reported the indirect implications of firm's dynamic capabilities on their competitive firm performance. Our attention now turns to open innovation since it has been confirmed to be an influential factor contributing to the superior performance of technological firms. So far there has been little research on assessing the relationship between a firm's dynamic capabilities as an antecedent of the competitive performance of the firm or investigations into the mediating role of open innovation in this relationship. Design/methodology/approach Drawing on the theory of dynamic capabilities, we developed a framework as a way to better understand the role of open innovation, which could then help to better explain the relationship between firms' dynamics capabilities and their competitive firm performance. Based on the empirical data of 465 firms operating in innovative and non-innovative industries, we employed structural equation modelling (SEM) to examine the research hypotheses and the path relationships in the proposed model. Findings The SEM analysis revealed that a firm's dynamic capabilities significantly impact its open innovation performance and that open innovation, consequently, impacts the competitive performance of the firm. Moreover, the results show that the path between dynamic capabilities and competitive firm performance is partially mediated through open innovation. Practical implications The findings provide practical implications and draw managerial attention to the importance of: (1) investing in innovation, (2) engaging customers in the innovation process and (3) maintaining innovation management excellence as significant antecedent factors in increasing competitive firm performance. Originality/value Considering the lack of empirical research in the literature on the links between dynamic capabilities and open innovation, this paper contributes to the dynamic capabilities and open innovation literature by confirming that open innovation not only mediates the relationship between these two aspects but also strengthens the effect the dynamic capabilities have on competitive firm performance. Besides, due to the significant impact of dynamic capabilities on open innovation, dynamic capabilities might be regarded as an antecedent of open innovation.

Michael C. Jensen
William H. Meckling

This paper integrates elements from the theory of agency, the theory of property rights and the theory of finance to develop a theory of the ownership structure of the firm. We define the concept of agency costs, show its relationship to the 'separation and control' issue, investigate the nature of the agency costs generated by the existence of debt and outside equity, demonstrate who bears the costs and why, and investigate the Pareto optimality of their existence. We also provide a new definition of the firm, and show how our analysis of the factors influencing the creation and issuance of debt and equity claims is a special case of the supply side of the completeness of markets problem.

HC Wang
Jay B. Barney

We argue that the risk associated with the value of a firm's core resources has an impact on employee decisions to make firm-specific investments. independent of the threat of opportunism that might exist in a particular exchange. We further explore mechanisms firms may adopt to mitigate the employee incentive problem stemming from the risk associated with core resource value. These arguments shed new light on resource-based theories of corporate diversification.

J.Y. Shah
Ronald S. Friedman
Arie W Kruglanski

Six studies explore the role of goal shielding in self-regulation:by examining how the activation of focal goals to which the individual is committed inhibits the accessibility, of alternative goals. Consistent evidence was found for such goal shielding, and a number of its moderators were identified: Individuals' level of commitment to the focal goal, their degree of anxiety and depression, their need for cognitive closure, and differences in their goal-related tenacity. Moreover, inhibition of alternative goals was found to be, more pronounced when they serve the same overarching purpose as the focal goal, but lessened when the alternative goals facilitate focal goal attainment. Finally; goal shielding was shown to have beneficial consequences for goal pursuit and attainment.

Posted by: serafinaserafinastortze0272907.blogspot.com

Source: https://www.researchgate.net/publication/256054292_Micro-Foundations_for_Strategy_A_Goal-Framing_Perspective_on_the_Drivers_of_Value_Creation

foundations of strategy 2nd edition pdf download

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