Factors in a firm’s external environment have a profound impact on a firm’s internal capabilities and decision-making prowess. Due to the inherent complexity of interacting factors, real-life phenomena often exhibit non-linear patterns. However, research in the Strategic Management realm often assumes a linear relationship between variables of interest. This dissertation addresses this gap in literature and focuses on the curvilinear relationship between external factors and strategic outcomes. Two critical areas are investigated to shed light on these complexities: the influence of complementary industry players and the impact of external stakeholders. The first essay examines the emergence of Contract Development & Manufacturing Organizations (CDMOs) in the biopharmaceutical industry and its effects on firms' innovation portfolios. Findings reveal an inverted U-shaped relationship between firms’ reliance on CDMOs and their capacity to generate destabilizing innovations. While initially providing flexibility and specialized resources, excessive outsourcing can erode firms’ capabilities, emphasizing the delicate balance between external collaboration and internal innovation. In the second essay, the focus shifts to the role of financial analysts as external stakeholders shaping corporate behavior. Analysis reveals a U-shaped relationship between analyst coverage and corporate misconduct, with the monitoring effect dominating at low levels of coverage and the pressure effect becoming stronger beyond a certain point. This underscores the need for contextual analysis and adaptive corporate governance strategies to mitigate misconduct risks. This dissertation underscores the importance of embracing non-linearity in strategic management research. By unraveling the mysteries of U-shaped relationships, this research contributes to advancing strategic management theory and practice, offering valuable insights for decision-makers seeking to thrive in dynamic business landscapes. / Business Administration/Strategic Management