scholarly journals Performance Feedback Theory

2021 ◽  
Keyword(s):  
Decision Maker ◽  
Performance Feedback ◽  
Theory Of The Firm ◽  
Performance Measure ◽  
Behavioral Theory ◽  
Theory Approach ◽  
Aspiration Level ◽  
Actual Performance ◽  
Aspiration Levels ◽  
Wide Range

Performance Feedback Theory (PFT) is a scholarly field that examines how organizations respond to feedback on their performance. Other keywords used by researchers in this area include “adaptive aspirations,” “attainment discrepancy,” “organizational learning from performance feedback,” “performance aspiration,” or a more generic label like a “behavioral theory/approach/perspective.” The origin of PFT can be found in the Carnegie School approach. PFT explicitly and predominantly positions itself as part of the “Behavioral Theory of the Firm” (BTOF). PFT shares many of the same foundational ideas and continues to be influenced by other strands of BTOF scholarship. The main concepts in this theory are performance feedback, aspiration levels, and responses or responsiveness. Aspiration level refers to the minimum level of performance deemed satisfactory by a decision maker, and, thus, it serves as the benchmark against which to evaluate performance. Two types of aspiration levels are common: historical ones, which are based on the organization’s own prior performance, and social ones, which are based on the performance of comparable peer organizations, usually all other firms active in a focal firm’s industry. The comparison of actual performance with aspiration levels constitutes performance feedback. Depending on whether performance feedback is favorable, i.e., exceeds a particular aspiration level being examined, PFT predicts different responses and levels of responsiveness. Commonly, predictions and findings indicate responses that diverge from previous firm actions and greater responsiveness in any area of firm activity where performance is below the aspiration level. Such responses includes a wide range of strategic and operational choices, such as new market entry, investment in fixed assets, research and development (R&D) spending, innovation adoption, and so on. In fact, as PFT continues to develop and gain in popularity, the range of firm and decision maker behaviors linked to performance feedback has greatly increased. While consensus is widespread on the core of the theory, PFT scholarship is still developing. Discussions are ongoing on the extent to which its main predictions apply universally, irrespective of the type of organization examined, the performance measure used, and the type of aspiration level considered. Specifically, research efforts are examining what boundary conditions limit the applicability of PFT’s predictions and which contingencies modify them and, thus, should be included as moderators in PFT models.

scholarly journals Problematic search, slack search and institutional logic in corporate R&D strategy: An empirical analysis of Taiwanese electronics firms

2013 ◽  
Vol 19 (6) ◽  
pp. 659-678 ◽  
Author(s):  
Lin-Hua Lu ◽  
Shih-Chieh Fang
Keyword(s):  
Performance Feedback ◽  
Stock Exchange ◽  
Theory Of The Firm ◽  
Business Group ◽  
Behavioral Theory ◽  
Institutional Logic ◽  
Taiwan Stock Exchange ◽  
Positive Performance ◽  
Theoretical Predictions ◽  
D Investment

AbstractThis study focuses on firms’ search behavior with regard to corporate R&D investment. Building on Cyert and March's (1963) behavioral theory of the firm, we develop specific hypotheses about how firms adjust their R&D investment in response to performance discrepancies, and how this adjustment varies for two types of slack resources. Moreover, by utilizing institutional logic, we also hypothesized that the firms’ search behaviors in response to performance feedback may differ between business-group affiliated and unaffiliated firms. Empirical evidence from panel data coving 274 Taiwanese electronics firms listed on the Taiwan Stock Exchange over the period 1999–2008 is consistent with our theoretical predictions. In particular, we find that firms will increase R&D investment when they faced discrepancies in performance, but will decrease R&D spending when close to bankruptcy. Moreover, our results show that unabsorbed and absorbed slack have different impacts, positively and negatively affecting R&D investment, respectively. In addition, we find that both business group-affiliated and unaffiliated firms will increase R&D investment in response to negative performance feedback, but only business group-affiliated firms will increase R&D activity when facing positive performance feedback. Furthermore, we also find that only business group-affiliated firms have a greater inclination to invest in R&D when there is unabsorbed slack. Our findings extend the claims of behavioral theory in newly industrialized economies, and identify the important factors that need to be considered in future studies.

scholarly journals The role of performance feedback consistency in aspiration level adaptation: Evidence from a European grocery retailer

2019 ◽  
Vol 45 (1) ◽  
pp. 18-29
Author(s):  
Burak Cem Konduk
Keyword(s):  
Performance Feedback ◽  
High Performance ◽  
Past Research ◽  
Aspiration Level ◽  
Performance Targets ◽  
Aspiration Levels ◽  
Organizational Attention ◽  
And Performance ◽  
The Impact

This study investigates whether and how the impact of drivers of aspiration levels changes across the cases of consistent and inconsistent performance feedback within the context of a retailer. Analysis of internal corporate data shows that while past aspiration level and performance–aspiration gap positively influence the current aspiration level in the case of inconsistent feedback, performance feedback consistency changes only the impact of performance relative to peers. This study replicates past research in a different industry and country due to limited empirical evidence, introduces real-world complexity into aspiration theory, pinpoints performance–aspiration gap as the primary performance feedback, introduces a new sign for the impact of performance relative to peers, and reconciles its previously detected mixed impact. The findings suggest that organizational attention has an inward focus in the case of inconsistent feedback. The results also point out that leaders can trigger change through a performance outcome that lags behind the corresponding aspiration level rather than the performance of peers and eventually move their organizations toward high performance targets by starting with feasible rather than stretch goals.

scholarly journals Understanding Heterogeneity in the Performance Feedback – Organizational Responsiveness Relationship: A Meta-Analysis

2019 ◽  
Author(s):  
Hugo Verver ◽  
Marino van Zelst ◽  
Gerardus Johannes Maria Lucas ◽  
Marius Meeus
Keyword(s):  
Organizational Performance ◽  
Performance Feedback ◽  
Performance Indicator ◽  
Meta Analysis ◽  
Theory Of The Firm ◽  
Effect Sizes ◽  
Organizational Responsiveness ◽  
Aspiration Levels ◽  
And Performance ◽  
Indicator Type

Organizational performance feedback theory (PFT), which is derived from the Behavioral Theory of the Firm, has emerged as a key perspective guiding studies investigating how performance relative to aspiration levels (i.e., performance feedback) influences organizational responsiveness. While the PFT literature refers to a core prediction - performance below aspirations induces more responsiveness than performance above aspirations does - empirical evidence reveals considerable conflicting findings. In line with contested issues in the current PFT literature, we propose a series of research questions and more refined predictions, which we elated to specific dimensions of performance feedback (valence, type of aspiration level and performance indicator), type of responsiveness (search versus change), and organizational characteristics (age, form of ownership, and industry). We test these refinements with various meta-analytic approaches, based on 263 effect sizes extracted from 156 studies. Our results demonstrate that the way in which performance feedback influences organizational responsiveness is sensitive to the factors we based our predictions on, with meta-analyzed effect sizes ranging from -0.106 to 0.055. Our findings help to systematically distinguish patterns in the heterogeneity associated with the performance feedback-responsiveness relationship. These results support our contention that more refined explanations, measures, and models of organizational performance feedback are needed.

Curvilinearity in the performance feedback and R&D relationship

2019 ◽  
Vol 13 (1) ◽  
pp. 1-14
Author(s):  
Michal Jirásek
Keyword(s):  
Performance Feedback ◽  
Fixed Effects ◽  
Design Methodology ◽  
Theory Of The Firm ◽  
Panel Data Models ◽  
Search Activity ◽  
Industrial Firms ◽  
Content Type ◽  
Aspiration Levels ◽  
Measure Of Performance

Purpose The question of how the firm responds to performance feedback forms the backbone of the behavioral theory of the firm. Although the literature works with goals aspirations and additional determinants of a firm’s search activity – proximity to bankruptcy and slack resources – the majority of the empirical research assumes the firm’s response to performance feedback to be linear with a spline at the aspiration level. The purpose of this paper is to study possible curvilinear properties of performance feedback itself that may yield insight on the behavior of firms responding differently from the theory’s predictions. Design/methodology/approach The research uses data from exchange-listed German industrial firms followed from 2001 to 2015. It evaluates hypotheses using historical aspiration models with ROA as a measure of performance and with a spline specification. The fixed-effects panel data models serve as an estimation technique. Findings The research supports an inverted U-shape relationship between performance feedback and research and development (R&D) intensity for firms below their aspiration levels, and a U-shape relationship for firms above their aspiration levels. Originality/value The research is one of the first to directly study curvilinearity in performance feedback relationships. Arguably, there is no such a study directly focusing on a firm’s search as represented by R&D, despite the fact, that R&D forms the backbone of performance feedback research. Also, the population of German industrial firms is new in the literature.

scholarly journals Back to basics: Behavioral theory and internationalization

2020 ◽  
Author(s):  
Irina Surdu ◽  
Henrich R. Greve ◽  
Gabriel R. G. Benito
Keyword(s):  
International Business ◽  
Firm Growth ◽  
Theory Of The Firm ◽  
International Market ◽  
Learning By Doing ◽  
Behavioral Theory ◽  
Starting Point ◽  
Aspiration Levels ◽  
Firm Internationalization ◽  
Multi Mode

AbstractInternational business (IB) scholars’ over-reliance on a select few theories leaves our understanding of firm internationalization incomplete. The behavioral theory of the firm (BTF) can offer new insights and can be used to model a broad range of firm actions. We focus on the three basic BTF components: problemistic search, learning by doing, and vicarious learning. These components help us understand why firm behaviors are more dynamic and heterogeneous than other theories allow. BTF, with its emphasis on how firms assess performance according to aspiration levels, selectively learn and update routines, and selectively incorporate the learning of others, is better suited to examine the diversity and change increasingly observed in internationalization decisions. We explain why scholars should move beyond “dynamizing” static theories and show BTF’s applicability to behaviors involving change such as multi-mode market entries and market re-entries. BTF also helps examine the decision to internationalize in the first place, nascent firm internationalization, location choices, international market adaptation, and headquarter–subsidiary relationships. We encourage IB scholars to use theories that can handle the complexity increasingly associated with modern firm growth, and propose BTF as a promising starting point.

Performance Aspirations and Corporate Tax Avoidance

2021 ◽  
Vol 8 (2) ◽  
pp. 40-58
Author(s):  
Timbate Lukas
Keyword(s):  
Theory Of The Firm ◽  
Tax Avoidance ◽  
Aspiration Level ◽  
Corporate Tax ◽  
Subsequent Period ◽  
Aspiration Levels ◽  
Significant Difference ◽  
Using Data ◽  
Performance Discrepancy ◽  
Avoidance Level

The current study examines whether performance discrepancy from the aspiration level affects corporate tax avoidance. Prior studies show that performance discrepancies from the aspiration level significantly affect firms' behavior; thus, it is important to examine whether such discrepancies affect corporate tax avoidance. Based on the behavioral theory of the firm (BTOF), this study posits that firms performing below the aspiration levels avoid more taxes in the subsequent period than other firms. Empirical findings using data from a sample of U.S. firms for the period covering 1993-2016 support the hypothesis. The findings also show that, while there is a difference among firms meeting or beating the aspiration level, there is no statistically significant difference in tax avoidance level among firms performing short of their aspiration level. The study contributes to the existing literature by providing additional evidence extending the scope of literature in BTOF and tax avoidance areas.

A behavioral theory of patent application rhythm

2019 ◽  
Vol 58 (4) ◽  
pp. 743-758 ◽  
Author(s):  
Bin Guo ◽  
Peng Ding
Keyword(s):  
Performance Feedback ◽  
Positive Relationship ◽  
Patent Application ◽  
Theory Of The Firm ◽  
Feedback Mechanism ◽  
Behavioral Theory ◽  
Firm Level ◽  
Content Type ◽  
Application Data ◽  
Performance Discrepancy

Purpose Previous studies employing the behavioral theory of the firm have not explicitly taken the roles of decision makers and corporate governance into consideration. The purpose of this paper is to fill in this gap by integrating CEO overconfidence and discretion into the performance feedback mechanism. Design/methodology/approach Financial data were collected from 1,730 Chinese listed companies in the period 2011–2015. Firm-level patent application data were collected for 1988–2015 to measure firm patent application rhythm. Hypothesis testing relied on the fixed effect panel data model. Findings There is a positive relationship between performance discrepancy and a firm’s patent application rhythm. CEO overconfidence will weaken this positive relationship. The negative moderating effect of CEO overconfidence will be less pronounced when CEO discretion is high. Originality/value To the best of the authors’ knowledge, this work is the first empirical study that investigates the roles of CEO overconfidence and discretion in shaping the performance feedback mechanism.

Individualism-collectivism cultural differences in performance feedback theory

2020 ◽  
Vol 27 (3) ◽  
pp. 343-364
Author(s):  
Mooweon Rhee ◽  
Valerie Alexandra ◽  
K. Skylar Powell
Keyword(s):  
Cultural Differences ◽  
Performance Feedback ◽  
Decision Makers ◽  
Future Research ◽  
Individual Decision ◽  
Actual Performance ◽  
Content Type ◽  
Aspiration Levels ◽  
Decision Making Processes

PurposePerformance feedback theory (PFT) has informed analyses in numerous national contexts and has been used to explain various business and management activities of firms. Stemming from behavioral theory and grounded in a cognitive perspective, which views organizational actions as being the results of decisions produced by groups of individual decision-makers, PFT research has mostly assumed the universal nature of cognition and decision-making processes. However, PFT also presumes that individual decision-makers bring with them different backgrounds and experiences. Hence, this paper offers propositions on how cultural differences in individualism-collectivism influence the major components of PFT, including the formation and revision of performance goals (aspiration levels), and search behaviors and risk preferences in response to gaps between goals and actual performance. Implications for future research and practice are discussed.Design/methodology/approachThis paper offers theoretical propositions for the above purpose.FindingsThis is not an empirical analysis.Originality/valueBy integrating the individualism-collectivism differences framework into the PFT model, the authors answer previous calls to integrate concepts and frameworks from other theories into PFT while considering the role of cultural differences in aspiration-consequence relationships. Additionally, much of PFT research has focused on outcomes, while actual internal processes have remained unobserved. By focusing on how cultural differences influence various PFT processes, this conceptual analysis sheds light on the unobserved bounds of decision-makers' cognitions.

scholarly journals Social Performance Feedback and Firm Communication Strategy

2021 ◽  
pp. 014920632110422
Author(s):  
Heli Wang ◽  
Ming Jia ◽  
Yi Xiang ◽  
Yang Lan
Keyword(s):  
Impression Management ◽  
Performance Feedback ◽  
Corporate Social Performance ◽  
Social Performance ◽  
Theory Of The Firm ◽  
Strong Support ◽  
State Ownership ◽  
Communication Strategy ◽  
Socially Responsible ◽  
Aspiration Levels

Although corporate social performance has become an important measure of firm performance, there is little understanding about how firms respond to social performance feedback and how impression management may function as an important firm response to the feedback. Building upon and extending the literature on the behavioral theory of the firm and the strategic use of language, we examine how discrepancies between firms’ social performance and their aspiration levels affect how firms use visual expressions in their CSR reports. In addition, we argue that the relationship between social performance discrepancies and the use of visual expressions in CSR reports is moderated by the extent to which firms conduct socially responsible activities to enhance legitimacy (reflected in the level of state ownership) and the extent to which firms engage in social activities to improve financial performance (reflected in foreign exposure). Using a sample of Chinese firms issuing CSR reports from 2009 to 2017, our empirical results provide strong support for these arguments.

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