When Does a Firm Have Faster Speed Despite Inferior Capability? Disintegrating Capability and Incentive Effects When Examining Firm Speed

Abstract

Firm speed has long been a construct of interest among managers and researchers. Although both a firm’s capabilities and incentives to be fast determine observed firm speed, practitioners and academic scholars have typically focused on the capability mechanism alone. However, the omission of incentives in understanding firm speed can lead to mistaking faster firm speed for superior firm capability. To address this shortcoming, we develop a theoretical framework considering both capabilities and incentives simultaneously to examine faster firm speed. Our developed framework allows us to discern whether superior capabilities or greater incentives lead to a faster speed. We also show how to apply our framework to empirical analysis by analyzing actual firm data in the Liquefied Natural Gas industry from 1996 to 2007. In this way, the current paper contributes to the literature on firm speed by providing a theoretical framework that enables a more nuanced understanding of firm speed.