Thought Leadership At UC Davis Graduate School Of Management: Professor Greta Hsu On Category Constraints

For nearly two decades, Greta Hsu has been teaching and studying market categorization processes, organizational identity, and industry evolutionary dynamics at the Graduate School of Management at UC Davis. An expert in organizational behavior, Hsu has devoted years exploring the role categories play in our lives, from books and movies to cigarettes and Hollywood movies. Hsu has found that categories often place constraints on expectations, performance and stakeholder reactions.

Through her research, Hsu develops understanding of how market categories are socially constructed, how they are used and strategically manipulated by market actors, and how they shape market evolution and competitive dynamics. Her work includes studies of industry dynamics in the cannabis, e-cigarette, wine, film, book publishing, global fashion, and high-tech industries. She has published in journals such as Administrative Science Quarterly, Organization Science, Strategic Management Journal, American Sociological Review, and the British Medical Journal.

She has taught several graduate-level courses, including Individual & Group Dynamics, Managing People in High-Performance Organizations, Strategy and Structure, and People Analytics. Hsu is also an associate editor at Administrative Science Quarterly and co-editor of Research in Organizational Behavior. She was formerly a department editor and associate editor at Management Science, senior editor at Organization Science, and co-editor of the Culture and Economic Life book series at Stanford University Press.

Hsu came to Davis in 2004 after earning three degrees at Stanford University: a bachelor’s in sociology, a master’s degree in statistics, and finally a PhD in organizational behavior from the Stanford Graduate School of Business.

In this wide-ranging conversation, part of the Thought Leadership Series at UC Davis Graduate School of Management, she looks back on her career and the insights she has developed. Hsu is interviewed by former Businessweek Executive Editor and Poets&Quants Editor-in-Chief John A. Byrne.

John A. Byrne: So the first thing I want to know is why you become an academic? Did you have a role model who inspired you? What is it about the field that turns you on?

Greta Hsu: I started doing research when I was an undergrad at Stanford, majoring in sociology. I was just the student who liked to work, so I worked a lot. I worked at the faculty dining club at Swanson’s and I discovered that you can actually make money doing research as someone’s research assistant. And I just thought, well, that’s a really fun job to do. 

So I started working for sociology professors and two of the professors had joint appointments in the sociology department and the business school. It was called the Stanford Project On Emerging Companies, and we would go around interviewing founders and CEOs of startups about the organizational blueprint they had in mind.

We asked lots of questions: “When you created the company, what were you thinking this was going to be? Were you mostly focused on the product? Were you focused on the technology or were you focused on organization building?” It turns out a lot of startup entrepreneurs don’t think about the organization, but they still have this blueprint in their head. Maybe one of the dominant ones in Silicon Valley is peer-based hiring, strong attachment. We’re all strongly committed, and there’s other ones that may be more autocratic or more bureaucratic. And so they mapped these different blueprints and then followed the organizations and looked such outcomes as the growth speed to an Initial Public Offering (IPO), the company’s market capitalization after going public, and failure because some of these organizations failed. It was really great project to be a part of.

Byrne: Definitely.

Hsu: At some point I think they had 40 people working on it. It was this massive endeavor, and I just got into it and stuck with it. By my senior year, I was interviewing the CEOs and the founders of many of these companies, and I just found it to be fascinating to talk to people about what they originally had in mind and how that changed. 

After that, I just decided I wanted to become an academic and do the same thing, conducting research. That was the context that really drew me in. And since then I’ve gotten to know other contexts, but that was the first one, and I think it was a great start to getting involved.

Byrne: Then you focused your dissertation on Hollywood feature film projects.

Hsu: Everyone feels like they really know the film industry. It’s something that you can universally talk to people about. They can see the implications of it. I was looking at film projects that attempt to draw a general audience, something that’s bridging lots of different demographics. So maybe there’s some action in a film and romance mystery. The film maker is trying to bring  together different genres and as a result, trying to reach a very broad audience versus a narrower, specialized one. I looked at how those movies performed in terms box office revenues as well as critical appeal. How are they rated by critics and everyday film goers?

Byrne: What did you discover?

Hsu: I found that there is this tradeoff, which organizational theory has explored,  and it’s called the Jack Of All Trades tradeoff, which is in Masters of None. So if you’re trying to be everything, you can draw in a bigger audience, but those audience members on average rate you lower. They have less of this positive experience from the movie. And when we think about it from a category standpoint, which is what I specialize in, each genre has certain expectations and themes you need to hit. If I really am a connoisseur of horror, then I want to see certain plots and characters. When I start mixing together genres that can either be really interesting and novel or I’m going to come away feeling like I didn’t quite get what I wanted. They can do quite well but on average we find that generalists tend to underperform.

That principle had already been in the OB literature for a while. But no one had really tested that assumption that if we’re controlling for all these other things, the specialist does reliably outperform the generalist. What I found was more interesting and maybe novel at the time. One of the main reasons the generalist doesn’t do as well is because people don’t understand what the generalist is trying to be. 

When I modeled it, it’s like generalism—not necessarily bad, but there’s a conceptual and identity confusion that leads people to not understand it and not fully enjoy the product or the organization.

Byrne: I imagine that a specialist has already found his or her audience as well, and the audience has found him or her.

Hsu: Right. And specialists have probably found it easier to clearly convey what they’re doing because there’s much less ambiguity. The generalists  are trying to bridge different themes, and so it’s a bit harder to clearly convey what that is.

Byrne: And then there are people who obviously would transcend these categories, like a Steven Spielberg, a George Lucas, or a Martin Scorsese?

Hsu: Yeah. When you’re approaching that veteran, that star status, you can be more free to experiment. People are more likely to give you the benefit of the doubt, and they’re likely to appreciate what you are bringing to the screen. Those directors also are so experienced, they’re probably actually producing something that is incredibly innovative and captivating to an audience.

Byrne: You’ve run far afield from your dissertation work many years ago, and over the 19 years that you’ve been at UC Davis, you’ve done a lot of different projects. What to you is your most meaningful?

Hsu: I think my most meaningful one was a project that I did with a researcher at Northeastern University named Stine Grodal. We were studying the tobacco industry, and in particular the evolution of the light cigarette category. It doesn’t exist today, but it was a category that the tobacco companies had built up as a way to address increasing health concerns over the 70s, 80s and early 90s. 

We had access to lots of behind-the-scenes archival documents as a result of all the litigation that had been made public, so we could  really understand how the tobacco companies were thinking about the creation of this category and how strategic they were. 

As categories become more established, they become more constraining.Stakeholders develop really strong expectations about what this category should be once it’s become a taken-for-granted part of our lives. 

When light cigarettes were first coming out, they were very new, so the companies had to do a lot to explain what is a light cigarette? What does it mean to be light? Here are the scientific components, here are the ways in which they differ. They would show lots of data to give it this legitimacy. Once the category started taking off, people just assumed that a light cigarette was healthier for you, that it had less tobacco and less nicotine. What we found, though, is that as the category became more established, these nicotine levels started to crop up.

And in fact, particularly for nicotine, which is the essential ingredient to keep people addicted, nicotine was cropping up into what we call the full flavor cigarette territory, even as there was more and more government and medical scrutiny of cigarettes. But there was almost a protective shield that happened because people assumed light cigarettes were healthier. So the companies could keep increasing the addictive components of it in part because of the way that we respond to categories. For me, it was most satisfying to dig in to understand this puzzle and how these companies were able to take advantage of light cigarettes and really hook people who were worried about health, worried about addiction. It was a study on how categories play a role in that dynamic.

Byrne: Fascinating. Essentially you’re saying that the tobacco companies were manipulating the market. Is that controversial or at the time was it?

Hsu: If I were in a business school that really wanted to have a set of topics that were purely about business and corporate interests, I think it would be a little bit more controversial within my organization to be doing this kind of research. Davis is a very open place, and I am an organizational sociologist. That’s how I identify, more than a business scholar. And so I don’t think it was that controversial. We know that the tobacco industry is very marketing savvy.

So this was just one aspect of the industry. They were very explicit about it to themselves, which I think maybe not all industries were that aware of the dynamics.