Conform or Rebel: When Does Keeping to the Rules Enhance Firm Performance?

Abstract

This paper examines whether there are economic rewards to mimicking strategic actions of other firms. The strategic behaviour we study is the formation of technology collaborations with MNEs by Indian firms. We argue that conforming to the behaviour of other firms has differential performance effects across different classes of firms and suggest that the benefits of conformity accrue more to small than large firms. To test this, we measured each Indian firm's conformity to the average tendency of other similar firms to collaborate with an MNE and then regressed its performance on conformity. Results were consistent with our expectations that small firms gain more from conformity than do their larger counterparts.