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Why Are Firms Rigid? A General Framework and Empirical Tests

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Listed:
  • Rui J. P. de Figueiredo

    (Haas School of Business and Department of Political Science, University of California, Berkeley, Berkeley, California 94720)

  • Evan Rawley

    (Columbia Business School, Columbia University, New York, New York 10027)

  • Christopher I. Rider

    (McDonough School of Business, Georgetown University, Washington, DC 20057)

Abstract

We present a general framework for understanding why firms are slow to make major strategic changes in a wide range of empirical settings. We then apply this framework to investigate, more specifically, the relationship between firm age and scope in hedge funds. Our empirical analyses demonstrate that younger hedge funds outperform older hedge funds both before and after the launch of a new fund. Based on our framework, these results suggest that age-based rigidity in hedge funds is more attributable to internal political frictions that influence project selection than to constraints associated with exchange partners or implementation costs. We conclude by discussing how our framework can be used to identify the dominant source of rigidity in other contexts.

Suggested Citation

  • Rui J. P. de Figueiredo & Evan Rawley & Christopher I. Rider, 2015. "Why Are Firms Rigid? A General Framework and Empirical Tests," Organization Science, INFORMS, vol. 26(5), pages 1502-1519, October.
    • Handle: RePEc:inm:ororsc:v:26:y:2015:i:5:p:1502-1519
    DOI: 10.1287/orsc.2015.0998
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    References listed on IDEAS

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    6. Agapova, Elena & Baranov, Nikolay & E. Bykova & Dmitrieva, Maya & Lobov, Artem, 2014. "Modern Problems of Development of State Contract in Russian Economy," Published Papers r90212, Russian Presidential Academy of National Economy and Public Administration.
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