scholarly journals Performance Shortfalls and R&D Investment Change: Aspirations, Actions, and Expectations

2021 ◽  
Vol 13 (6) ◽  
pp. 3006
Author(s):  
Liying Huang ◽  
Lerong He ◽  
Guangqing Yang
Keyword(s):  
Performance Feedback ◽  
Theory Of The Firm ◽  
Firm Resources ◽  
Market Conditions ◽  
Firm Level ◽  
Internal Resources ◽  
Moderating Factors ◽  
Firm Response ◽  
Underperforming Firms ◽  
D Investment

Built on the Behavioral Theory of the Firm, the paper examines how firm response to performance feedback is influenced by firm expectation on the likelihood of an action to close the performance gap. Using firm level change in R&D intensity as a problemistic search behavior, we explore how performance shortfalls relative to social and historical aspirations may prompt underperforming firms to adjust its R&D investment intensity, and how the magnitude of this adjustment is moderated by firm resources, past experience, industry and market conditions. We conduct our analysis using a longitudinal sample of Chinese firms listed on the ChiNext Board between 2009 and 2017. Our results indicate that underperforming firms increase their R&D intensity to a larger degree than their over-performing peers and periods when these firms have substantial cumulated R&D spending, abundant organizational slack, and are competing in more dynamic industries. We also document that these moderating factors influence relationships between social and historical aspirations and R&D investment decisions in a distinct way. We conclude that firm internal resources, capabilities and external industry and market conditions all affect firm expectations, and consequently shape the direction and magnitude of organizational actions in response to performance aspirations.

Invest in Innovation or Not? How Managerial Cognition and Attention Allocation Shape Corporate Responses to Performance Shortfalls

2021 ◽  
pp. 1-36
Author(s):  
Lerong He ◽  
Liying Huang ◽  
Guangqing Yang
Keyword(s):  
Performance Feedback ◽  
Attention Allocation ◽  
High Tech ◽  
Moderating Effects ◽  
Managerial Cognition ◽  
Industry Competition ◽  
Aspiration Levels ◽  
The Relationship ◽  
Underperforming Firms ◽  
D Investment

ABSTRACT This study investigates the influence of managerial cognition and attention allocation on firms’ responses to negative performance feedback. We explore how managerial cognition, as shaped by managers’ experiences, connections, positions, and industry environments, affects underperforming firms’ attention allocation and, consequently, their decisions to invest in innovation. Utilizing a longitudinal sample of Chinese high-tech firms from 2009 to 2017, we find that firms increase investment in research and development (R&D) when performance falls below aspiration levels. We also document that underperforming firms are associated with an even larger R&D investment increase when their CEOs have an R&D or engineering background, serve simultaneously as the board chair, or are not politically connected. In addition, we highlight the moderating effects of industry competition and industry norms on the relationship between firm underperformance and R&D intensity. We conclude that managerial cognition affects firms’ allocation of attention to innovation as a solution for closing performance gaps and shapes corporate responses to negative performance feedback.

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.

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.

Does Performance Breed Slack? Ownership as a Contingency to the Performance Feedback and Slack Relationship

2021 ◽  
pp. 014920632110142
Author(s):  
Varkey Titus ◽  
Jonathan P. O’Brien ◽  
Jaya Dixit
Keyword(s):  
Performance Feedback ◽  
Stock Price ◽  
Theory Of The Firm ◽  
Organizational Outcomes ◽  
Organizational Slack ◽  
Length Relationship ◽  
Different Types ◽  
Stakeholder Perspective ◽  
Shareholder Perspective ◽  
The Relationship

Although organizational slack is a prominent construct in strategic management, it is often treated as an antecedent or enabler of other organizational outcomes, and thus our understanding of where slack comes from is underdeveloped. We draw on the behavioral theory of the firm to develop a better understanding about the antecedents of organizational slack. In so doing, we address a gap in the literature on the antecedents of slack by developing base models showing how and why performance feedback influences the three most common types of slack studied in the literature. Moreover, we contend that ownership is an important contingency that influences these relationships because different types of owners are motivated by different norms. Within a “communitarian” culture such as Japan, domestic owners generally have a multifaceted relationship with the firm and hence are motivated by norms of reciprocity and embeddedness, thereby allowing managers to adopt a stakeholder perspective. In contrast, foreign investors typically have only an arm’s-length relationship with the firm and are thus motivated by stock price, thereby putting “contractarian” pressures on managers to adopt a shareholder perspective. This domestic/foreign ownership distinction influences how resources are allocated and therefore the relationship between performance feedback and different types of slack in the firm. We further emphasize that these relationships will vary in accordance to where the slack resides: internal or external to the firm. We find general support for our hypotheses.

scholarly journals Measuring Firm-Level Productivity Convergence in the UK: The Role of Taxation and R&D Investment

2013 ◽  
Author(s):  
Ioannis Bournakis ◽  
Sushanta Mallick ◽  
David Kernohan ◽  
Dimitrios A. Tsouknidis
Keyword(s):  
Firm Level ◽  
Productivity Convergence ◽  
The Uk ◽  
D Investment

Aspiration, foreignness liability and market potential

2018 ◽  
Vol 35 (6) ◽  
pp. 1009-1032
Author(s):  
Lee Li ◽  
Gongming Qian ◽  
Zhengming Qian ◽  
Irene R.R. Lu
Keyword(s):  
Performance Feedback ◽  
Small Firms ◽  
Theory Of The Firm ◽  
Market Potential ◽  
Content Type ◽  
Country Market ◽  
International Behavior ◽  
Relationship Of ◽  
The Impact ◽  
The Relationship

PurposeUsing behavioral theory of the firm, the purpose of this paper is to examine how a small firm’s performance relative to historical and social aspirations is related to its international entrepreneurial orientation (IEO). This study also explores two environmental factors, liability of foreignness (LoF) and host-country market potential (HMP), as the moderators for the relationship of performance and IEO.Design/methodology/approachThis study uses survey for data collection from Canadian small firms and employs regression models for data analysis.FindingsThe results show that small firms demonstrate stronger IEO when their performance is below aspirations, but their IEO diminishes when their performance exceeds aspirations. The authors also found that a small firm’s LoF does not moderate the impact of its performance feedback on IEO. However, the authors found HMP plays a moderating role when a small firm’s performance is below aspirations.Originality/valueThis study investigates the relationship of IEO to aspiration and found that this relationship is moderated by HMP. The study advances our knowledge on small firms’ international behavior.

The chief financial officer (CFO) profile and R&D investment intensity: evidence from listed European companies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Gianluca Ginesti ◽  
Rosanna Spanò ◽  
Luca Ferri ◽  
Adele Caldarelli
Keyword(s):  
Listed Companies ◽  
Master Of Business Administration ◽  
Chief Financial Officer ◽  
Corporate Investments ◽  
Firm Level ◽  
Content Type ◽  
Doctor Of Philosophy ◽  
The Impact ◽  
D Investment ◽  
Practical Implications

PurposeThis study aims to investigate whether the characteristics of the chief financial officer (CFO) have an impact on the intensity of the corporate research and development (R&D) investment.Design/methodology/approachBased on hand-collected data for the CFOs of a sample of the largest European listed companies for the period 2013–2016, this study uses regression analyses to test empirically the association of CFO education, CFO gender and CFO age with R&D investment intensity.FindingsThe presence of female CFOs, CFOs with a Master of Business Administration (MBA) or Doctor of Philosophy (PhD) degree and older CFOs is positively associated with the intensity of R&D investment.Research limitations/implicationsThis study relies on some observable characteristics of CFOs and focuses on large listed companies.Practical implicationsThe results of this study may help investors, stakeholders and practitioners to understand better which type of CFO characteristics are more likely to result in higher firm-level R&D investment intensity.Originality/valueThis study offers the first insights into the impact of CFOs, as the most prominent C-suite executives, on the level of corporate investments in R&D activity.

Resources on the Stage

2016 ◽  
pp. 106-126
Author(s):  
Derya Findik ◽  
Aysit Tansel
Keyword(s):  
Wireless Local Area Network ◽  
Local Area Network ◽  
Trade Openness ◽  
Local Area ◽  
Policy Implications ◽  
Area Network ◽  
Firm Resources ◽  
Firm Level ◽  
Resource Limited ◽  
Ict Adoption

This study examines the impact of firm resources on ICT adoption by the Turkish business enterprises using firm level data. The data for this study consists of 3633 firms in manufacturing and services sectors. We investigate the effect of firm resources on the adoption of ICT by using ordered logit model. Adoption of ICT is an index variable including four categories which ranges from single technology ownership to four technology ownership. These technologies are local area network (LAN), wireless local area network (WLAN), intranet, and extranet. We assume that these technologies are complementary. We find that firms do not need to use same amount of resources while adopting single technology as they would while adopting complementary technologies. In the adoption of complementary technologies, the effect of firm size, trade openness, human capital, purposes of ICT usage and environmental factors such as region and industry increases. On the other hand, full complementarity among technologies does not require the full exploitation of the firm resources. As a result of inefficient use of firm resources, single and two technology owner firms, which are composed of resource-limited small and medium sized enterprises (SMEs), do not accomplish the technology adoption benefits of the three and four technology owners. We discuss a set of policy implications to promote the efficient use of firm resources for single and two technology owner firms. The effect of firm resources on the adoption of complementary technologies is analysed in this study which has not been investigated before in this context.

Resources on the Stage

2018 ◽  
pp. 978-999
Author(s):  
Derya Findik ◽  
Aysit Tansel
Keyword(s):  
Wireless Local Area Network ◽  
Local Area Network ◽  
Trade Openness ◽  
Local Area ◽  
Policy Implications ◽  
Area Network ◽  
Firm Resources ◽  
Firm Level ◽  
Resource Limited ◽  
Ict Adoption

This study examines the impact of firm resources on ICT adoption by the Turkish business enterprises using firm level data. The data for this study consists of 3633 firms in manufacturing and services sectors. We investigate the effect of firm resources on the adoption of ICT by using ordered logit model. Adoption of ICT is an index variable including four categories which ranges from single technology ownership to four technology ownership. These technologies are local area network (LAN), wireless local area network (WLAN), intranet, and extranet. We assume that these technologies are complementary. We find that firms do not need to use same amount of resources while adopting single technology as they would while adopting complementary technologies. In the adoption of complementary technologies, the effect of firm size, trade openness, human capital, purposes of ICT usage and environmental factors such as region and industry increases. On the other hand, full complementarity among technologies does not require the full exploitation of the firm resources. As a result of inefficient use of firm resources, single and two technology owner firms, which are composed of resource-limited small and medium sized enterprises (SMEs), do not accomplish the technology adoption benefits of the three and four technology owners. We discuss a set of policy implications to promote the efficient use of firm resources for single and two technology owner firms. The effect of firm resources on the adoption of complementary technologies is analysed in this study which has not been investigated before in this context.

scholarly journals International talent inflow and R&D investment: Firm-level evidence from China

2020 ◽  
Vol 89 ◽  
pp. 32-42 ◽  
Author(s):  
Hao Wei ◽  
Ran Yuan ◽  
Laixun Zhao
Keyword(s):  
Firm Level ◽  
Investment Firm ◽  
D Investment
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