Thinking about U: Theorizing and testing U- and inverted U-shaped relationships in strategy research

Research summary: U- and inverted U-shaped relationships are increasingly explored in strategy research, with 11 percent of all articles published in Strategic Management Journal (SMJ) in 2008-2012 investigating such quadratic relationships. Moreover, a movement towards introducing moderation to quadratic relationships has emerged. By reviewing 110 articles published in SMJ from 1980 to 2012, we identify several critical issues in theorizing and testing of these relationships for which current practice falls short. These include insufficient causal argumentation, incorrect testing, mixing up two different types of moderation, and not realizing that the curve can flip completely. For these and other issues, a guideline is provided which, when followed, may bring clarity to theoretical motivation and rigor to empirical testing. Managerial summary: Too much can be as bad as too little. Many relationships in strategic management follow an inverted U-shaped pattern, where moderate levels of a strategy lead to optimal performance. To gain deeper insights into the conventional wisdom that too much of a good thing can be harmful to performance, we discuss how such relationships can be better theorized and tested based on a review of articles exploring U-shaped relationships in Strategic Management Journal during 1980-2012. We identify several critical issues that require close attention and provide a guideline to further develop and validate this important managerial intuition.