The Quality of Attention Matters:

Behavioral Implications for

Organizational Ambidexterity
Leadership for a Digitally Driven World
and Growth
Jeesoo Kim
Paul Merage School of Business,
UC Irvine
Theoretical Background
Exploitation and exploration (Atuahene-Gima, 2005; Gupta et
al., 2006)

Exploitation
 Extends current knowledge, seeking greater efficiency and improvements to
enable incremental innovation

Exploitation
 Entails the development of new knowledge, experimenting to foster the
variation and novelty needed for more radical innovation
Theoretical Background
Managerial dilemma between exploitation and exploration
 Organizational ambidexterity
 Organizations drift toward exploitation
 Achieving ambidexterity comes through unbalancing to favor exploration (Eisenhardt et al.,
2010)
 However, from the managerial perspective
 As boundedly rational individuals, CEOs are driven to focus on what is current and tangible
at hand (Mintzberg, 1973)
 To the extent that they focus their attention on exploitation, they lose their attention to
exploration
How can they promote organizational exploration and thus
ultimately achieve ambidexterity although their attention to
exploration is inherently limited?
Theoretical Background
Paying more attention to exploration may be one predominant
answer in prior studies

Vigilant attention (Ocasio, 2011)

 sustain their attention over a period of time without increasing their attention
 sustaining attention is the way of improving the quality of attention (Weick & Sutcliffe, 2006)

no empirical studies that examine the relevance of the quality

of attention (or attentional vigilance) for organizational
outcomes
Model
Main effect
 The vigilance of CEO attention to exploration / exploitation is positively associated with
revenue growth rate

Moderator
CEO vigilance effect will be bigger when managers or organizations
are exploitation-oriented
 Managerial-level orientation toward exploitation
 CEO attention to exploitation: the vigilance effect gets larger when CEO pays more attention to exploitation

 Organizational-level orientation toward exploitation

 Ratio of R&D-related executives; the vigilance effect gets smaller when the ratio of R&D-related executives
increase
Model
Data and Measures
Sample
 Manufacturing firms in Fortune 500 (2008-2017)

Measures
 Attention to exploration and exploitation (Uotila et al., 2009)
 From earnings conference calls data
 Exploration; search, variation, risk taking, experimentation, play, flexibility, discovery,
innovation
 Exploitation; refinement, choice, production, efficiency, selection, implementation, execution
 Measuring Keyword frequency  e.g., attention to exploration
Data and Measures

Measures
 Attentional vigilance (Uotila et al., 2009)
 measure the extend to which the amount of attention to exploration fluctuates over time
 standard deviation of attention to exploration across the four quarters for a given year

 Ratio of R&D related executives

 Proportion of top management teams with R&D-related titles

 Revenue growth rate (Greve, 2008)

 ratio of the next period and current-period logged revenue
Data and Measures
Measures
 Control variables
 Firm-level variables
 Firm age; difference between the year t and the year when the firm was founded
 Firm size; natural log of total assets

 R&D intensity; R&D expenditures divided by sales

 R&D Dummy; R&D missing as zero
 ROA; net income divided by total assets

 Mergers and acquisitions (M&As); number of M&A transaction announcement

 New Products; number of new product launches
 Expansions; number of business expansion announcements (e.g., opening of new stores and plants, creating
a new subsidiary abroad, and earning product approval in foreign markets )
 Strategic Alliance; number of announcements containing the information related to creation and extension
of strategic alliances
Data and Measures
Measures

 CEO-level variables
 CEO age

 CEO tenure; the number of years in office

 CEO change; binary variable if a new CEO is appointed

 CEO option; value of the stock option pay that the CEO receives in million US dollars
 CEO compensation; total compensation value that CEO received during a year in million
US dollars
Causality
Possible endogeneity concerns
 Reverse causality
 Self-selection of firms

Possible remedies
Lagged dependent variables
Matching within each industry and comparing growth rate between firms
with high vigilance and low vigilance
 Finding cases with top 20% in vigilance
 Finding other cases from bottom 20% in vigilance within year (possibly, industry, too)
 Estimating the propensity of vigilance based other firm-level attributes
 Matching top 20% with bottom 20% that have similar propensities
 T-test to compare growth rates between top 20 vs bottom 20
Causality
Instrumental variable approach (e.g., CEO political ideologies?-the executives’
political donations for the ten years before they became CEOs; Chin et al.,
2013)

Relevance condition; a nonzero correlation between the endogenous variable

(attentional vigilance) and the instrument (CEO political ideologies)
CEOs’ degree of political liberalism positively affects their firms’ rate of new
product introductions (i.e., innovation propensity (Kashmiri & Mahajan, 2017)

Exclusion restriction; instrument (CEO political ideologies) is only indirectly

related to the outcome variable (revenue growth rate) through its effect on the
endogenous variable (Attentional vigilance)
 Questions?

Thank you so much for listening!

jeesoo.k@uci.edu