Can firm size and firm age moderate firm behavioral momentum?

Authors: Cheng-Li Tien; Hong-Jen Chiu; Chien-Nan Chen;

Journal: Chia Da Management Review. Dec. 2011, 31(2): 101-126.

Keywords: Routines;Organizational learning;Organizational inertia;Momentum effect;Evolutionary theory

Abstract:
This study extends research on firm behaviors and the influences of structural inertia, clarifying how a firm's behavioral momentum interacts with its size and age. Offering models predominantly based on evolutionary and inertia theories, this study tests hypotheses using data from 122 companies in U.S. high-technology sectors. Results indicate that a firm's response to its prior behaviors may involve organizational learning and unlearning, since firm behavioral momentum does not persist in some strategic dimensions (e.g., financial leverage). Contrary to conventional wisdom, firm size can significantly moderate momentum only on the dimension of plant and equipment (PE) newness, whereas firm age can moderate momentum on the dimensions of non-production overhead and advertising intensity. These findings provide researchers and business practitioners with evidence about firms' responses to their prior behaviors and the significance of firm size and firm age, according to a multi-dimensional perspective.