Purpose Performance feedback can be constructed using firms’ own (historical) performance, or the performance of peers (social). Those two types of performance feedback can be consistent (both positive, both negative) or inconsistent (one positive, the other negative). The research on the impact of consistent versus inconsistent feedback has been inconclusive, suggesting that inconsistent feedback might lead to more intense or less intense responses, or no response. In this paper, we theorize and test how firms respond to (in)consistent performance feedback. Design/methodology/approach We test our hypotheses on a longitudinal sample of 2,819 private, high-growth firms in the US with 6,688 observations between the years 2007 and 2016. Our dataset comprises 25 different industries. We use topic modeling on textual data from firms’ web pages to capture portfolio expansion. Findings We find that consistent negative performance feedback strengthens portfolio expansion, but consistent positive feedback does not influence portfolio expansion. We also find that inconsistent performance feedback weakens portfolio expansion, but only with negative historical feedback and positive social feedback. Originality/value We contribute to the Behavioral Theory of the Firm by improving our understanding of mechanisms of feedback configurations. Specifically, we elaborate on the role of (in)consistent social feedback when firms respond to historical performance feedback. We also contribute to the theory by better understanding private firms’ responses to performance feedback.

The organizational response to performance feedback is a collective process in which groups of decision-makers face uncertainty about the future when making organizational decisions based on past performance feedback. Culture is an important variable to explain the context of collective decision processes, but it is not well understood by Organizational Performance Feedback Theory (PFT) research. The current internationalization trend of PFT research poses the question if empirical results are comparable across different cultural settings, and whether culture is a general condition of organizational performance feedback. We analyze the role of national culture as a proxy for collective interpretive processes that influence the organizational decision-making process in response to performance feedback, and we resolve some of the unexplained variances in the empirical results. We use a meta-analysis to understand if national culture poses a general condition for the organizational performance feedback process. We analyze the empirical results of 153 PFT studies covering organizations from 16 countries, and we examine the impact of four dimensions of national culture: uncertainty avoidance, performance orientation, future orientation, and institutional collectivism. We demonstrate that national culture is an important concept for PFT development.

The Performance Feedback Theory (PFT) proposes that organizations compare their performance to other organizations i.e., their social reference group and initiate responses based on this comparison. While social comparison represents a core element of the PFT, it is not well understood how organizations select social reference groups and how this selection may affect organizational responses (e.g., risk taking, change, innovation). We propose that the motives that organizations use to select their social reference groups impact their responses to performance feedback. Our meta-analysis of 99 empirical PFT studies focuses on two motives underlying the selection of social reference groups for performance feedback: self-assessment and self-improvement. While self-assessment through comparison requires the selection of a relevant set of referent organizations, self-improvement relies on the selection of the highest performing referent organizations. Our results show that organizational responses to performance feedback differ depending on which motive-based reference group is selected for comparison. These differences are more evident when performance is above aspirations. This finding has important implications for PFT researchers to predict organizational responses more precisely.

Managerial and organizational cognition is concerned with how managers and members in organizations make sense and structure information, how they interpret information, and how they structure their thinking. Managerial and organizational cognition stretches across multiple levels of the organization. This literature includes multiple levels of analysis. The first level of analysis is the individual, namely, the CEO, the top management team, middle managers, managers, other executives, employees. Another level of analysis is the group or team level, addressing questions of collective cognition within the organization. There is also the level of the organization, where cognition spans across the entire organization. Another level is the industry level, i.e., the cognition at the level of the industry. This article focuses on the level of individual cognition, group/team cognition, and organizational cognition. While also very interesting, industry cognition is outside of the scope of this article. At the individual level, different approaches referred to include Mental Representations and Cognitive Schemas, Cognitive Maps, Biases and Heuristics, Upper Echelons Theory, and Managerial Attention. At the group level, reference is made to different theories of Collective (Group-Level) Cognition. At the organizational level, relevant articles in the streams of literature on Organizational Learning and Sensemaking in Organizations are cited. The field of managerial and organizational cognition is large and draws on many different research traditions, such as behavioral and cognitive approaches. Since it is concerned with the study of cognition of decision-makers in organizations, this field is an applied one. Cognition is studied not only in organizations but also in the laboratory. This is complemented by archival approaches as well as conceptual work. An important challenge of this field is the question of how to elucidate cognition at the individual level and how to aggregate it to the organizational level. A simple aggregation of the individual cognition is inadequate. Researchers have proposed using proxies (e.g., demographic information of key decision-makers, such as CEOs and top management team members), computer simulations, field studies, and laboratory studies. Several technologies are increasingly being used and are particularly promising for the study of managerial and organizational cognition. For instance, functional magnetic resonance imaging (fMRI) will allow researchers to gain much deeper insights into the cognition of individuals, and machine learning will open new avenues for studying attention in organizations.

Organizational performance feedback theory (PFT) explains when and how organizations search, proposing that performing below an aspiration level is problematic and organizations increase search to solve this problem. Thus, organizational search is problemistic in nature which takes place in the vicinity of an organization’s own prior strategic actions that neighbor the problem. In this study, we expand organizational search within PFT with a competitive perspective by relaxing the assumption that search is only self-directed. We argue that search can also be peer-directed, i.e., firms search in the competitive space of their peers. Integrating competition to organizational search also raises another related and important question: do organizations move towards or away from the competition? Using a dataset of 9191 high-growth firms and a novel topic-modeling methodology, we find a match between an organization’s performance feedback input and search location: performance below self-based (historical) aspirations influences self-directed search and performance below peer-based (social) aspirations influences peer-directed search. Moreover, we find that when performance is above aspirations, both self- and peer-based aspirations influence self-directed search. We also identify which performance feedback inputs motivate organizations to move towards or away from peers. Our findings contribute to the BTOF, PFT and competitive strategy discourses.

In this study, we analyze the role of individual decision-makers in organizational decision-making that is described by the Carnegie perspective. In particular, building on the Behavioral Theory of the Firm, we analyze the influence of decision-makers on organizational responses to performance feedback. Managers in organizations can influence the performance feedback process through their individual experiences. Moreover, they are motivated and controlled by incentives, which is another mechanism by which organizational decision-making can be influenced by individuals. While the Carnegie perspective acknowledges that decision-makers interpret performance feedback and initiate organizational responses, individuals are not as closely integrated to the organizational performance feedback process as some other-mostly organizational-conditions. Recently, several intriguing empirical studies have addressed the role of experience and incentives in the performance feedback process. However, their cumulative effect remained impossible to assess. We meta-analytically review 205 BTOF studies to test our hypotheses on the influence of decision-makers' experience and incentives on organizational responses to performance feedback. We show that decision-makers' job experience and domain expertise influence organizational responses to performance below aspirations, while incentives and compensation become relevant when performance is above aspirations. These results highlight the importance of individual decision-makers in explaining variations in organizational performance feedback decisions, offering exciting venues for psychology scholars to contribute to the Carnegie perspective.

The performance feedback theory (PFT) proposes that organizations compare their performance to other organizations (i.e. their social reference group) and initiate responses based on this comparison. While social comparison represents a core element of the PFT, it is not well understood how organizations select social reference groups and how this selection may affect organizational responses (e.g. risk-taking, change, innovation). We propose that the motives that organizations use to select their social reference groups impact their responses to performance feedback. Our meta-analysis of 99 empirical PFT studies focuses on two motives underlying the selection of social reference groups for performance feedback: self-assessment and self-improvement. While self-assessment through comparison requires the selection of a relevant set of referent organizations, self-improvement relies on the selection of the highest performing referent organizations. Our results show that organizational responses to performance feedback differ depending on which motive-based reference group is selected for comparison. These differences are more evident when performance is above aspirations. This finding has important implications for PFT researchers to predict organizational responses more precisely.

Purpose When managers set aspirations for their firms, they typically compare their own firms' performance to past aspirations as well as to the performance of social reference groups. The authors explore how firm generic strategy affects managers' adaptation of firm aspirations in response to feedback from three social reference groups that vary in terms of breadth (population average, strategic group, and one direct rival). Design/methodology/approach The authors propose that firm generic strategy (low-cost or differentiation) functions as an organizational information filter through with managers interpret performance feedback. The authors test for whether generic strategy has a moderating effect on the influence of performance feedback from social reference groups. Findings Based on a longitudinal sample of US airlines, the study shows that all firms are influenced most strongly by their strategic groups. Low-cost and differentiation generic strategies differ in terms of which social reference group motivates a larger reaction when overperforming: low-cost firms are more influenced by the population average which is contributed to by the entire industry than are differentiating firms, while differentiating firms are more swayed by the narrow focus of their direct rivals than are low-cost firms. Originality/value Although firm strategy represents a core decision at the firm level, to the best of the authors’ knowledge, performance feedback research, surprisingly, has not yet integrated generic strategy into its models.

Purpose This study aims to elucidate reference points and organizational identity in letters to shareholders (LTSs) of publishing companies and develops propositions on their relation to strategic adaptation. This study examines how characteristics of reference points (number, temporality and specificity) and organizational identity (focus, discontinuity and distinctiveness) relate to strategic adaptation. This research advances performance feedback theory and behavioral strategy by presenting rich data on how managers use reference points. This study also theorizes on the role of organizational identity as an observation frame. Finally, this study informs managers on how they can adapt reference points and organizational identity to drive strategic adaptation in their organizations. Design/methodology/approach This paper uses text analysis of LTSs of eight companies in the global publishing industry over six years. The research design is an exploratory, comparative case study. Findings The authors present the findings of rich empirical data analysis of reference points and organizational ideology, develop a typology and propose three proposed relationships. This paper develops three propositions on how characteristics of reference points (number, temporality and specificity) and organizational identity (focus, discontinuity and distinctiveness) relate to strategic adaptation. Originality/value This study elucidates reference points that managers use when they make sense of performance feedback. This study further develops a typology of reference points and suggests propositions on how reference points and organizational identity relate to strategic adaptation. The novel linguistic approach to revealing reference points-in-use and the study of decision-making in its empirical context contribute to a better understanding of the micromechanims of decision-making that are central to behavioral strategy.

Although managers’ perceptions are core to the Performance Feedback Theory, few empirical studies measure managerial perceptions of their organization’s performance and theorize on the (in)consistency between perceptual and objective performance feedback. Based on longitudinal survey data of Canadian organizations, we examine how this (in)consistency affects the propensity for innovation in organizations. Our analysis broadly validates that inconsistency between the two types of feedback dampens innovation. Second, positive perceptions strengthen the relationship between positive objective performance feedback and innovation, leading to increased innovation, whereas negative perceptions strengthen the relationship between negative performance feedback and innovation, echoing the problemistic search hypothesis. We also find that perceptions moderate the effect of objective performance feedback differently in the social and historical dimensions as well above and below the aspiration thresholds.

We present a model of family firm performance that tests the notion that strategic decision comprehensiveness plays a pivotal role in family business decision quality and performance. With insights derived from upper echelons theory, our model further proposes that two key decision maker traits associated with an individual’s information-gathering process—risk-taking propensity and need for cognition—influence strategic decision comprehensiveness and have indirect effects on both study outcomes. Study results using a time-lagged sample of family firm leaders provide broad support for our proposed model and provide insight into the performance and decision-making heterogeneity present in family firms.

The Performance Feedback Theory (PFT) explains how organizational responses are motivated by organizational performance above and below aspirations. As such, it is formulated as an organization-level theory. However, numerous researchers directly or implicitly refer to individual-level theories and factors when developing empirical models or interpreting empirical results. Drawing on 114 empirical PFT studies, we address these incongruences and explore the empirical PFT literature to better understand the role of an individual-level perspective in explaining organizational performance feedback. Our review of the empirical PFT literature highlights the confusion about the role of the individual decision-maker in PFT models. We perform a meta-analysis to quantitatively separate effects of individual-level factors (and theories) from organizational-level factors (and theories) on organizational responses to performance feedback. We demonstrate that the effects of individual and organizational factors differ for performance above and below aspirations. We present empirical evidence suggesting the conceptual necessity for a multi-level theory (individual and organizational) to more precisely explain the organizational performance feedback process. This result provides an opportunity for future empirical studies to further explore specific individual-level factors and to extend the PFT.

Acknowledgements The material in the section labeled “Strategic Reality Two” has benefitted significantly from discussions between Rich Bettis and Gwen Lee of the Warrington School. We greatly appreciate her insightful help. We also acknowledge the effect of Songcui Hu, our long-time research partner who has inevitably influenced our thinking in many ways. We want to thank Isin Guler, Michelle Rogan, Ihsan Beezer, Robert Hill, and Anavir Shermon for useful comments on a preliminary outline of the paper before we began writing it. Finally, we thank the single referee for several very insightful comments that allowed us to substantially improve the paper.

It is common to view organizations as instruments to pursue collective goals. But beyond recognizing the presence of organizational goals, important questions relate to how these goals come about and drive organizational behavior. These questions are particularly relevant because organizations are typically characterized by the presence of multiple, and often conflicting, goals. Starting with the seminal work on the Behavioral Theory of the Firm, various lines of research have studied how organizations form goals, set aspirations as reference points for evaluating goal attainment, and change behavior and aspirations in response to performance feedback. Yet this work notwithstanding, many exciting questions remain for both theoretical and empirical research at various levels of analysis. For this symposium, we have assembled a set of (predominantly) younger scholars that are working on a variety of issues related to multiple goals and multiple aspirations, as well as two preeminent experts on the topic who will serve as discussants. The symposium pursues two broad objectives: One is to showcase and discuss four different projects that probe intriguing unresolved questions at different conceptual levels, relate to different discussions in the literature, and use different models and methodologies. The second objective is to stimulate a fruitful conversation about how future research can further improve our understanding of how organizations set and pursue multiple goals and aspirations. (In)consistent Performance Feedback and Locus of Search: Problem- Solving and Self-Enhancement Presenter: Evangelos Syrigos; LUISS Business School Presenter: Konstantinos Christos Kostopoulos; U. of Piraeus Presenter: Felix Meissner; U. of Zurich Presenter: Pino G. Audia; Dartmouth College Reference Points as Drivers of Strategic Adaptation: An Exploratory Study Presenter: Daniela Blettner; Simon Fraser U. Presenter: Simon Gollisch; U. of Applied Sciences Ansbach The Double-Edged Sword of Multiple Aspirations: Ambiguity Costs Versus Information Gains Presenter: Thorsten Wahle; LMU Munich Presenter: Dirk Martignoni; U. of Lugano The Effect of Intra-Organizational Comparisons on the Balance of Exploration and Exploitation Presenter: Oliver Baumann; U. of Southern Denmark Presenter: Daniel Newark; HEC Paris Presenter: Franziska Sump; U. of Southern Denmark

When adapting aspirations, managers compare their firm's performance to their own past aspirations and to performances of social reference groups. In this paper, we explore how firms adapt their aspirations in response to comparison with three social reference groups and argue that generic strategy functions as a filter in the process of interpreting performance feedback. In a longitudinal sample of U.S. airline companies, we show that low cost or differentiation strategy moderates the performance feedback process in that firms with a well-defined generic strategy are heavily influenced by their own performance feedback when underperforming and the social reference groups that most closely align with themselves when overperforming.

To develop theory on strategic adaptation, it is important to understand the process through which decision-makers respond to performance feedback. In recent years, there has been growing research on the adaptive mechanism underlying the interpretation of performance feedback. One crucial aspect on which prior research is largely silent pertains to length of time between receiving performance feedback and strategic adaptation, which in the context of our paper is undertaking the next project. Using a large longitudinal sample from the US feature film industry for the period 1998 to 2014, we examine how the feedback directors and producers receive on film-level financial performance and personal reputation impacts the pacing and timing of their future projects. We contribute to performance feedback theory by improving our understanding of the process of feedback interpretation in the context of multiple goals and its effect on the timing of strategic adaptation.

Performance feedback theory suggests that organizations adjust the intensity of search and change depending on performance relative to an aspiration level. The empirical literature consistently con...

Empirical studies on the behavioral theory of the firm have been mostly silent on the possibility that managerial perceptions of relative performance may diverge from the relative performance measured using objective firm performance metrics. Considering this presents an opportunity to deepen the literature on firm-level aspirations and the behavioral theory of the firm. Using organizational-level survey data we examine how the inconsistency between managerial perception of relative performance and actual relative performance, affects the propensity to launch innovative products or processes. Based on literature on managerial cognition, we also consider two types of social and historical inconsistencies – one, when perceptual performance is markedly above actual performance change, which we term as overestimation, and, two when perceptual performance change falls markedly below actual performance change, which we term as underestimation. In line with broader BTOF literature, the main results show that innovation propensity reduces more rapidly with performance feedback when social performance is negative than when it is positive. This supports the more generally accepted hypothesis that problemistic search is intensified under negative social performance. However, we also find that positive historical performance increases the propensity to innovate suggesting a reinforcement argument. The second set of findings pertain to inconsistency between perceived and actual relative performance. We find that both types of inconsistencies in social and historical performance reduce the propensity to innovate, except when historical performance is overestimated - when the propensity increases. These findings suggest that divergence between perceptions and actual relative performance confounds an organization due to multiple interpretations, and therefore dampens its responsiveness. However, our interaction analysis reveals that in the case of one type of inconsistency – underestimation -- this inertia is overcome with increases in actual social and historical performance such that when perceptions of performance is negative, increasing actual performance adds 'fuel to the fire' of problemistic search.