Multiple performance aspirations and problemistic search of firms

Abstract

Behavior theory of the firm (BTOF) is considered one of the most important theories that exerts a wide and deep impact on strategic management and organization theory. However, despite a considerable impact and wide applicability, BTOF and aspirations also attract some criticism. One of the main voices of criticism is that the formation of aspiration is considered to be automatic. To be specific, scholars argue that the construction processes of aspiration are not the same for different organizations considering their heterogeneous internal structure and external environments. In addition, researchers also suggest that the formation process of aspiration would be complex given that firms often have multiple goals in addition to performance. Besides, the role of limited rationality has not been fully realized since previous studies paid little attention to the cognitive process in the performance feedback model. Motivated by mentioned issues, this thesis wants to give a detailed exploration of multiple aspirations formation processes by considering the firm heterogeneity and managers' cognitive bias. Study 1 argues that managers' allocation of attention to multiple social reference groups is related to the extent of their identification with these social reference groups. Taking the BG affiliates as the research objects, I found that, they are more responsive to social comparison with internal group peers than with external industry peers, considering that affiliate managers have a stronger social identification towards their BGs. In addition, I also pointed out that this social identity-driven attention allocation, reflected in the effect differential between internal and external social comparisons on BG affiliates' strategic change, is moderated by several institutional factors, including group-level state ownership, market institutions, and mode of group CEO selection, which make a difference to the affiliate managers' social identification with their BGs. Study 2 presents a multi-layered conceptualization of Liability of Foreignness (LOF) by distinguishing two different types in a nested structure - undifferentiated LOF (uLOF) at the host country level and differentiated LOF (dLOF) at the home-host country dyad level. Based on the difference between uLOF and dLOF, I propose that in addition to all same-industry-peers reference groups, foreign firms face another two reference groups based on all other foreign firms in the same industry and all foreign firms from the same home country. I found that foreign firms would react to the performance comparison with all-foreign-peer and the home-peer-only reference groups. And the relevant salience of two comparisons is dependent on institutional factors at home country level (state capital participation and cultural tightness) and the host-home country dyads level (cultural distance). Study 3 predicts that CEOs would possess their leadership aspiration driven by self-interest. And the formation of leadership aspiration is closely related to the anchoring effect of the stakeholders in the CEO assessment process. Typically, CEOs are likely to take the performance of the prior CEO in the same firm as the aspiration and react with R&D search. Performance below leadership aspiration means serious negative consequence for CEOs' interests which makes the CEOs increases R&D intensity. And the role of leadership anchor is moderated by several factors that influence the information asymmetry such as previous CEO tenure, current CEO interlocks and inconsistent performance feedback. In sum, the mentioned studies deal with the automatic view of aspiration by emphasizing the role of multiple aspirations. They reveal that the formation of aspiration is influenced by several factors, such as organizational structure, institutional environment, and cognitive bias. Show more