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In this chapter, we present a theory on how organizational performance feedback influences individual decision-maker cognitions and thereby changes a team’s attention focus in terms of strategy. We argue that when performance compares unfavorably to aspiration levels, decision-makers reconsider current strategies in favor of unfamiliar, uncertain ones and become more risk tolerant. Furthermore, as decision-makers devote additional cognitive resources to do so, changes in attention focus in a decision-making team will be observed. Using data from a business simulation and repeated questionnaires, we capture the teams’ attention focus and the organizational performance feedback evaluation process of the individuals and teams.

Performance 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.

This paper offers theoretical propositions for the above purpose.

This is not an empirical analysis.

By 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.

Resource reconfiguration enables firms to adapt in dynamic environments by supplementing, removing, recombining, or redeploying resources. Whereas prior research has underscored the merits of resource reconfiguration and the modes for implementing it, little is known about the antecedents of this practice. According to prior research, under given industry conditions, resource reconfiguration is prompted by a firm’s corporate strategy and by characteristics of its knowledge assets. We complement this research by identifying learning from performance feedback as a fundamental driver of resource reconfiguration. We claim that performance decline relative to aspiration motivates the firm’s investment in knowledge reconfiguration, and that this investment is reinforced by the munificence of complementary resources in its industry, although uncertainty about the availability of such resources limits that investment. Testing our conjectures with a sample of 248 electronics firms during the period 1993–2001, we reveal a clear distinction between exploitative reconfiguration, which combines existing knowledge elements, and exploratory reconfiguration, which incorporates new knowledge elements. We demonstrate that performance decline relative to aspiration motivates a shift from exploitative reconfiguration to exploratory reconfiguration. Moreover, munificence of complementary resources mitigates the tradeoff between exploratory and exploitative reconfigurations, whereas uncertainty weakens the motivation to engage in both types of reconfiguration, despite the performance gap. Nevertheless, codeployment, which extends the deployment of knowledge assets to additional domains, is more susceptible to uncertainty than redeployment, which withdraws those assets from their original domain and reallocates them to new domains. Our study contributes to emerging research on resource reconfiguration, extends the literature on learning from performance feedback, and advances research on balancing exploration and exploitation.

In crowdsourcing contests, the capabilities and performance of individual workers (solvers) determine whether seeker firms can obtain satisfactory solutions from the platform. It is noted that solvers may learn such skills in crowdsourcing from doing (experiential learning) or observing (vicarious learning). However, it remains unclear if such learning can be materialized into improved performance considering the unique settings of crowdsourcing contests. The study aims to understand how experiential learning and vicarious learning enhance solver performance and under what conditions.

The model was tested using survey and archival data from 261 solvers on a large contest platform in China.

Results support the premise that experiential learning and vicarious learning separately and jointly enhance solver performance. Moreover, perceived task uncertainty strengthens the effect of vicarious learning but weakens the effect of experiential learning, whereas perceived competition uncertainty weakens the effect of vicarious learning.

The current study enriches the understanding of the impacts of experiential learning and vicarious learning and offers a more nuanced understanding of the conditions under which solvers can reap the performance benefits from learning in crowdsourcing contests. The study also provides practical insights into enhancing solver performance under perceived task uncertainty and perceived competition uncertainty.

Using job demands–resources (JD–R) theory, the purpose of this paper is to investigate the role of job demands (difficult performance appraisal (PA) objectives) and job resources (performance feedback and leader member exchange (LMX)) on employee reports of PA cynicism. The paper also investigates the consequences of PA cynicism on intent to quit and bad sportsmanship.

Survey data on PA demands and resources, PA cynicism and turnover intentions were obtained from employees. Supervisors rated their employees’ level of sportsmanship.

Contrary to the predictions of JD–R theory, the authors found that employees are most likely to be cynical when they experience high levels of job resources (LMX and performance feedback) and high levels of job demands (difficult objectives).

The study demonstrates that PA cynicism matters – employees with higher levels of PA cynicism were more likely to contemplate leaving the organization; employees with high levels of PA cynicism are rated as bad sports by their supervisors.

Employees are sensitive to gaps between the description and reality of a PA process which can trigger thoughts of organizational exit and ineffective work behaviors. human resource managers need to ensure that employees regard the PA process as valuable, useful and worth their time and effort.

The authors contribute to the PA literature by investigating the role of both job resources and demands. PA research has focused on the specification of job demands, underplaying the role of job resources in employee attitudes toward PA.

This paper aims to integrate insights from the behavioral theory of the firm and the dynamic capabilities perspective to explain how the historical and social attainment discrepancies motivate firms to change. Specifically, this paper proposes that a negative historical attainment discrepancy encourages the firm to engage in strategic change to solve its performance problems. In contrast, this paper advanced that a positive social attainment discrepancy motivates strategic change as a mechanism to bolster the firm’s position within the industry. Further, this paper integrated the moderating effects of industry dynamism and industry munificence.

This paper tests hypotheses using panel data on 2,435 US public firms over the years from 1996 to 2018. This paper uses a fixed-effects regression model to empirically test these hypotheses.

This paper finds empirical support for the effects of both the negative historical attainment discrepancy and the positive social attainment discrepancy on the firm’s tendency to engage in strategic change. As for the hypothesized moderating effects, this paper finds that industry munificence accentuated the effects of both attainment discrepancies on the firm’s tendency to engage in strategic change. However, the results do not support the hypothesized moderating effect of industry dynamism on either of these attainment discrepancies.

This paper contributes to the research on the separate effects of historical and social comparisons within the context of strategic change. Further, the paper bolsters our understanding of how performance feedback increases the firm’s tendency to change. Finally, the paper integrates theoretical views from the behavioral theory of the firm and the dynamic capabilities perspective on how socially high-performing firms may build and sustain their competitive advantage through organizational change.

Corporate social responsibility (CSR) captures organizational actions that account for economic, social and environmental performance. CSR is becoming increasingly relevant for organizations because of changing societal norms and attitudes. Prior research on CSR shows that socially responsible actions are beneficial for the firm and the society. However, much less is known about the antecedents of CSR. The authors suggest that CSR is a strategic organizational decision and use organizational performance feedback theory to explain how organizations decide on CSR activities.

Using a longitudinal sample of 189 US public firms with 1,050 observations, the authors test how performance decreases below aspirations and performance increases above aspirations influence CSR. The authors also test for the moderation effect of LGBT inclusion on these relationships as a proxy for CSR consistency and stakeholder support.

The authors find that as organizational performance decreases further below aspirations, CSR increases and LGBT inclusion strengthens this increase. The authors also find that as performance increases above aspirations, organizations become more engaged in CSR, but LGBT inclusion does not moderate this relationship.

Prior research recently started extending the performance feedback theory to CSR, but empirical findings on the relationships between performance feedback and CSR are seemingly inconclusive. Moreover, studies had primarily focused on performance below aspirations and to a much lesser extent on performance above aspirations. This study aims to better integrate organizational performance feedback theory to the CSR discourse.

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).

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.

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.

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.

We examine the influence of the self-assessment and self-enhancement motives on the choice of comparison organizations in two experimental studies. Study 1 shows that: (1) self-assessment generally prevailed over self-enhancement, guiding decision makers to choose organizations that were more similar and had better performance; (2) self-enhancement was more pronounced under conditions of low performance, leading participants to more frequently choose organizations that were less similar and had lower performance; and (3) self-enhancing comparisons inhibited perceptions of failure and the propensity to make changes. Study 2 extends the results of Study 1 by showing that participants were more likely to choose comparison organizations that had lower performance and were less similar when they were in a self-enhancement mindset than when they were in a self-assessment mindset. The combined effects of self-assessment and self-enhancement on the choice of comparison organizations are discussed in relation to the broader organizational literature on learning from performance feedback.

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.

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.

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.

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.