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Toast to fear: Marketplace paranoia and its impact on firm's strategic outcomes

Avinash Malshe, University of Nebraska - Lincoln


The focus of this dissertation was to (1) conceptualize the notion of marketplace paranoia and understand its antecedents, (2) investigate (a) whether and (b) through which alternate mechanisms paranoia can differentially affect firm's strategic outcomes and what those outcomes are, and (3) understand whether firm's mindfulness, transformational leadership and interdepartmental connectedness can regulate (moderate) the effects of paranoia within the firm. ^ We used a discovery oriented approach. The data came from interviews with 23 managers from diverse industries and a national mail survey of top marketing executives from manufacturing firms, who were prescreened to insure their knowledgeability and involvement. The unit of analysis was the firm. ^ The results validate our conceptualization of paranoia, which affirms that firms operate with suspicious vigilance and guardedness (paranoia) in the market. Paranoia was also shown to be empirically distinct from market orientation. We also found that firms' strategic intent, previous traumatic challenge, and competitive intensity in the market can trigger marketplace paranoia. ^ Marketplace paranoia enhanced firm's Absorptive capacity and also gave rise to cognitive rigidity within the firm. It suggests that paranoia is a very potent tool and that the paranoid organizations, in addition to its beneficial effects need to be aware of its potential downside. ^ We did not find support for the moderating effects. Hence no conjecture can be made about which factors can regulate the effects of paranoia within firm. However, we found that highly connected firms may not benefit from high levels of paranoia as much as those firms that have low connectedness. Evidence suggested that firm's mindfulness and transformational leadership could supplement marketplace paranoia in enhancing the firm's ACAP and alleviate its negative effects by reducing the firm's cognitive rigidity. ^ We found that firms with superior ACAP were better able to (1) conceptualize the future needs of their customers (2) capitalize on future market opportunities, (3) perform better, (4) be strategically adaptive, (5) innovate, and (6) be customer oriented. Cognitive rigidity negatively affected the first three outcomes only. ^

Subject Area

Business Administration, Marketing|Business Administration, Management

Recommended Citation

Malshe, Avinash, "Toast to fear: Marketplace paranoia and its impact on firm's strategic outcomes" (2005). ETD collection for University of Nebraska - Lincoln. AAI3186869.