The Effects of Attention Structures and Organizational Attention on Financial Performance

Attention based view proposed by Ocasio (1997) was extended on Simon’s earlier work of organizational attention, providing detailed description of how organization’s concrete and contextual structures drive decision maker’s attention focus and its flow. Ocasio (1997) added two fundamental constructs for the situated attention and organizational behavior explanation which are attention structures and communication and procedural channels.

Attention Structures

Attention based theories states that firms’ attention structure plays a crucial role in organizational search activities, which is a critical aspect of organizational learning process to solve problems and adapt to changing environmental opportunities. Thus driving decision makers to allocate resources, time and effort to develop solutions where their attention resides. There are two types of organizational search: local search implies firms relying on closely related knowledge to their preexisting knowledge bases, while distant search reflects intentional effort moving away from current capabilities and accessing novel knowledge outside organizational boundaries. Such search helps to generate values ordering based on relevance and provide decision makers with a set of interests shaping their environmental sense making. Attention structure can be partially imposed on the organization by its environment, adopted consciously within the organization and learned through experience learning.

Most research on the ABV remains primarily structural based on Ocasio’s (1997) model, where attention structure of the firm has four regulators working together to explain how firms regulate attention to the actions of the internal and external environment and how issues, answers, and decision-makers are allocated to structures of communication channels to respond to environmental stimuli, generating strategic changes and adaptation.

• Rules of the game constitute assumptions, norms, values and incentives reflecting the prevalent logic of the firm (competitors and competitive factors), and its social and cultural situatedness in relation to its environment.
• Firm’s attention structure is affected by the specific skills, beliefs, and values that various players with authority bring into the organization whether internal players (CEO, middle management, unions, workers, specialists, etc.) or external players (customers, suppliers, press, consultants, etc.).
• Players may influence attention structure or regulate linkages between procedural and communication channels yielding organizational attention.
• Structural players’ positions moderate their functions and orientations and provide differentiated attention to different aspects of the firm’s environment.
• Firm may utilize its resources and capabilities to yield a competitive advantage (valuable, rare, inimitable and non-substitutability.

Based on ABV prior work, two critical aspects of attention structure are to be considered specialization and integration of attention. Both affect a unit’s ability to engage in distant and local search by shaping how problems are perceived and addressed.

Specialization / Differentiation

It is defined as the selective focus of attention on new issues within a unit. No individual can handle everything, leading to differentiation. Thus, it involves separating distinct elements and cultivating unique aspects of each. Herein firms focus on a limited number of problems based on the notion that attention is a limited organizational resource and therefore can respond quickly to new feedback information. However, it can increase the potential for myopic search at the expense of the overall firm.

Integration / Coupling

It is defined as the joint attention given to the same issues by different units, thus helping in combining different viewpoints. This can be achieved through vertical coupling: shared attention of issues between headquarters and firm’s constituent units, and horizontal coupling; shared attention of issues between divisions or functions. Thus, emphasizing synergies, linkages and shared attention to similar issues, capturing cognitive similarities between business units. Herein interactions create a shared dialogue and information exchange, while simultaneously improving coordination.

Centrality of attention integration assumes that first different groups distribute organizational attention and then views and perspectives are brought together to develop high quality decisions. Thus, organizations should be designed to incorporate both specialization and integration. However, it is worth noting that distributed attention structures influencing shared emotions, can hinder subsequent attention integration, thus influencing innovation outcomes and resulting in temporal myopia; focusing on short term product innovation at the expense of long-term innovation development (Joseph & Wilson, 2018). On the other hand, tight coupling help business units respond using a broader range of technologies, expanding its novel problem solving approaches to incorporate knowledge from different units, leading to new novel combinations of components and shifting the balance of search from exploitative to explorative activities.

Blending the right mix of integration and differentiation can help promote ambidexterity and address the paradoxical tension between exploitation and exploration.

Exploration is promoted by organic structures and autonomy, while exploitation is related to mechanistic structures, path dependence and routinization. Rather than developing a fixed balance of the two, organizations need to determine the nature of balance that they want to achieve. Specifically, identification of the antecedents to be integrated and those to be differentiated can help firms devise better strategies for dealing with ambidexterity. This is further confirmed by Vuori and Huy (2016) qualitative research, on Nokia failure explained previously tackling how attention structures influence shared emotions that might obstruct organizational attention.