Zhi Cao

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• Cao, Z., Jiang, F., & Wang, D. (2024). Performance Shortfalls, Response Directions, and Belief in the Effectiveness of Responses. Academy of Management Journal, 67(1), 178-207. doi:10.5465/amj.2021.0241
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  Problemistic search literature has long sought to understand which responses firms adopt when addressing performance shortfalls. Studies have typically considered certain responses and focused on established decision rules to examine search directions, thereby, implicitly assuming that all responses considered are workable solutions to performance shortfalls. Conversely, we argue that variations in decision-makers’ beliefs about the effectiveness of particular responses in improving firm performance play an important role. These beliefs, alongside evidence supporting them, determine which specific responses firms adopt. To test this argument, we focus on two types of search solutions represented by research and development (R&D) intensity and philanthropic donation intensity. Based on 2009–2018 data collected from publicly listed Chinese firms, we find that, when decision-makers agree on the effectiveness of R&D, the positive relationship between performance shortfalls and R&D intensity strengthens; whereas when they agree on the effectiveness of corporate social responsibility (CSR), the negative relationship between performance shortfalls and donation intensity weakens. The effects of shared beliefs on the effectiveness of R&D and CSR are stronger when they are supported by relevant evidence—that is, when there is a stronger correlation between R&D or CSR on the one hand and firm performance on the other.
• Li, M., Cao, Z., & Terjesen, S. (2024). Venture governance, CEO duality, and new venture performance. Strategic Entrepreneurship Journal, 18(Issue 2). doi:10.1002/sej.1495
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  Research summary: How a new venture improves performance when facing both principal and agency problems is an important yet understudied question. This study examines the effectiveness of CEO duality in mitigating the principal problem and enhancing entrepreneurial success. By granting more power to CEOs, CEO duality can alleviate the principal problem; however, CEO duality may simultaneously exacerbate CEOs' agency problems. Using manually collected panel data on 1403 newly established U.S. commercial banks, we find a positive relationship between CEO duality and new venture performance. The CEO duality–new venture performance relationship strengthens when CEOs are also founders of their firms and weakens when the share of corporate ownership reflects heavy investment by incumbent firms. Our findings highlight that venture governance needs to address principal and agency problems simultaneously. Managerial summary: Large corporations typically face agency problems due to the separation of ownership and control such that managers do not act in the best interests of owners. New ventures tend to experience fewer agency problems because owners/principals are also likely to be managers/agents. New ventures often face severe principal problems due to directors' potential conflict of interests such as investments in rival companies. Our study suggests that new ventures can mitigate principal problems by appointing a CEO as the chair of the board of directors. Our longitudinal analysis of new U.S. commercial banks finds that this dual CEO-chair structure leads to better performance. This relationship strengthens in the case of founder-CEOs and weakens among new banks co-founded by other large bank holding companies.
• Li, M., Cao, Z., & Terjesen, S. (2024). Venture governance, CEO duality, and new venture performance. Strategic Entrepreneurship Journal, n/a(n/a).
• Cao, Z., & Posen, H. (2023). When Does the Pre-entry Experience of New Entrants Improve Their Performance? A Meta-Analytical Investigation of Critical Moderators. Organization Science, 34(2). doi:10.1287/orsc.2022.1589
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  Although pre-entry experience is widely regarded as a critical asset that positively influences new entrant performance, empirical support is mixed. To address this inconsistency, we conduct a meta-analysis of the empirical findings in 272 papers. We draw theoretically on the organizational learning literature to argue that the pre-entry experience–new entrant performance relationship is contingent on the characteristics of pre-entry experience, the environmental context of the new entrant, and the interaction between the two. In particular, we examine the effects of two levels of pre-entry experience (firm and founder), four types of founder-level pre-entry experience (entrepreneurial, managerial, industry, and functional experience), and two types of environments (industry and institutional). The meta-analysis results show a significant and positive correlation between founder-level pre-entry experience and economic performance of 0.07. Likewise, the failure rates of spinouts and diversifying entrants are 11% lower than that of start-ups. The moderating analysis results show that the correlation of founder-level pre-entry experience and economic performance is lower in knowledge- or technology-intensive (KTI) industries and higher in low-KTI manufacturing and service industries. The correlation is also higher in institutional environments with high power distance and individualism. These findings provide compelling new evidence for the importance of pre-entry experience and advance our understanding of the boundary conditions on the pre-entry experience–new entrant performance relationship.
• Cao, Z., Jiang, F., & Wang, D. (2023). Performance Shortfalls, Response Directions, and Belief in the Effectiveness of Responses. Academy of Management Journal.
• Posen, H. E., Ross, J. M., Wu, B., Benigni, S., & Cao, Z. (2023). RECONCEPTUALIZING IMITATION: IMPLICATIONS FOR DYNAMIC CAPABILITIES, INNOVATION, AND COMPETITIVE ADVANTAGE. Academy of Management Annals, 17(Issue 1). doi:10.5465/annals.2021.0044
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  Strategic imitation occurs when a firm purposefully attempts to reproduce, in whole or in part, other firms’ products, processes, capabilities, technologies, structures, or decisions in its pursuit of competitive advantage. Imitation is a pervasive firm behavior, and the literature relating to imitation is growing rapidly. In the resource-based view, for example, imitation is core because it is assumed to undermine interfirm performance heterogeneity and erode leaders’ competitive advantage. We argue that work on imitation is circumscribed by a core set of assumptions: imitation is easy, weak firms imitate, uncertainty promotes imitation, and there is only one imitation strategy. We review the origins and implications of these assumptions in the extant literature, and, more importantly, expose a set of emerging counterassumptions. In light of these counterassumptions, we propose foundations for a new conceptual model of imitation that focuses on evolutionary dynamics. We suggest that imitation may be a key source of dynamic capabilities and innovation, and that it in turn gives rise to competitive advantage.
• Cao, Z., & Posen, H. E. (2022). When Does the Pre-entry Experience of New Entrants Improve Their Performance? A Meta-Analytical Investigation of Critical Moderators. Organization Science, 34(2), 613-636.
• Posen, H. E., Ross, J., Wu, B., Benigni, S., & Cao, Z. (2023). Reconceptualizing Imitation: Implications for Dynamic Capabilities, Innovation, and Competitive Advantage. Academy of Management Annals, 17(1), 74-112.