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This study examines firms' responses to performance assessments relative to multiple aspiration levels. We argue that comparisons of performance to multiple aspiration levels over time affects the interpretative clarity of feedback and, consequently, shapes a firm's responsiveness. We further conceptualize the relationship between performance relative to social and historical aspirations as ambiguous, inconsistent, and consistent performance feedback. Empirically, we examine the effects—on firms' responsiveness—of weak, negative, and positive correlations between performance relative to social and historical aspirations, where responsiveness is measured in terms of new product introductions. We find that both inconsistent and consistent feedback increase a firm's responsiveness, whereas ambiguous feedback dampens responsiveness. Our focus on this type of feedback ambiguity is novel, and it establishes the functional form of the relationship between feedback clarity/ambiguity and responsiveness. This paper augments the behavioral theory of the firm and research on performance feedback; it also extends previous work on ambiguity in strategic decision making.

In this study, we examine how business units of multidivisional (M-form) firms adapt their activities in response to poor performance at the corporate and business unit levels. By linking performance feedback theory with theories of attention and M-form organizations, we show that corporate structure influences the relationship between performance below aspirations and business unit adaptation. Because corporate structure vertically differentiates performance goals and problemistic search, solutions to performance problems vary across corporate and business unit levels, with divergent implications for business unit adaptation. We examine business unit adaptation empirically through new product introductions in the global mobile device industry, finding that poor performance at the business unit level leads to greater new product introductions. In contrast, corporate-level responses to performance problems have a negative cross-level effect on new product introductions. We also find that these negative effects are attenuated for strategically significant business units, which have more input into corporate responses. By linking structural and behavioral drivers of action, this paper contributes to the knowledge and understanding of adaptive behavior in multidivisional firms.

Organizational fields undergo upheavals. Shifting industry boundaries, new network forms, emerging sectors, and volatile ecosystems have become the stuff of everyday organizational life. Curiously, profound changes of this sort receive scant attention in organization theory and research. Researchers acknowledge fieldwide flux, emergence, convergence, and collapse, but sidestep direct investigations of the causes and dynamic processes, leaving these efforts to political scientists and institutional economists. We attribute this neglect to our field’s philosophical, theoretical, and methodological fealty to the precepts of equilibrium and linearity. We argue that ingrained assumptions and habituated methodologies dissuade organizational scientists from grappling with problems to which these ideas and tools do not apply. Nevertheless, equilibrium and linearity are assumptions of social theory, not facts of social life. Drawing on four empirical studies of organizational fields in flux, we suggest new intellectual perspectives and methodological heuristics that may facilitate investigation of fields that are far from equilibrium. We urge our colleagues to transcend the general linear model, and embrace ideas like field configuration, complex adaptive systems, self-organizing networks, and autocatalytic feedback. We recommend conducting natural histories of organizational fields, and paying especially close attention to turning points when fields are away from equilibrium and discontinuous changes are afoot.

Research summary: This study examines the abandonment of organizational practices. We argue that firm choices in implementing practices affect how firms experience a practice and their subsequent likelihood of abandonment. We focus on utilization of the practice and staffing (i.e. career backgrounds of managers), as two important implementation choices that firms make. The findings demonstrate that practice utilization and staffing choices not only affect abandonment likelihood directly but also condition firms' susceptibility to pressures to abandon when social referents do. Our study contributes to diffusion research by examining practice abandonment—a relatively unexplored area in diffusion research—and by incorporating specific aspects of firms' post-adoption choices into diffusion theory. Managerial summary: When do firms shut down practices? Prior research has shown that firms learn from the actions of other firms, both adopting and abandoning practices when their peers do. But unlike adoption decisions, abandonment decisions need to account for firms' own experiences with the practice. We study the abandonment of corporate venture capital (CVC) practices in the U.S. IT industry, which has experienced waves of adoption and abandonment. We find that firms that make more CVC investments are less likely to abandon the practice, and are less likely to learn vicariously from other firms' abandonment decisions, such that they are less likely to exit CVC when other firms do. Staffing choices also matter: hiring former venture capitalists makes firms less likely to abandon CVC practices, while hiring internally makes abandonment more likely. Plus, staffing choices affect how firms learn from the environment, as CVC managers pay attention to and learn more from the actions of firms that match their work backgrounds; i.e., firms that staff CVC units with former venture capitalists are more likely to follow exit decisions of VC firms, while those that staff with internal hires are more likely to follow their industry peers. Our results suggest that firms wanting to retain CVC practices should think carefully about the implementation choices they make, as they may be inadvertently sowing seeds of abandonment.

This study examines the effects of different uncertainty types on interorganizational imitation in firm exit decisions. We draw on herding models to conceptualize exit decisions as being based on a firm’s private information, which the firm updates with information inferred from observing the actions of others. We posit that different types of uncertainty differentially affect this observational learning process; in particular, we propose that certain uncertainty types attenuate (rather than foster) observational learning and subsequent imitation. We test this theory using a 29-year panel data set on the exit of private venture capital firms. Our results indicate that observational learning does influence imitation in firm exit decisions, and they also suggest that a common belief—that uncertainty enhances imitation—does not apply to all types of uncertainty. Specifically, we find that uncertainty fosters imitation only when it is idiosyncratic to the firm; uncertainties that are common to all firms, in contrast, actually reduce reliance on observational learning. By decomposing uncertainty into different types and explicating their effects on imitation, we demonstrate that this relationship is more nuanced than previously assumed and, in addition, highlight the role of deliberate information processing in imitation.

In this study, we examine how multiple and sometimes conflicting goals are prioritized and pursued in organizations. Theories of coalitions and political behavior address prioritization among goals and changes in goal emphasis over time but cannot accurately predict the behavior of organizations that pursue conflicting goals. By linking theories of performance feedback theory and variable risk preferences, we show that performance shortfalls relative to aspirations on multiple goals can trigger managerial concerns for organizational failure. In such situations, the goal perceived as more important for survival gets priority and triggers stronger reactions. Empirically, we examine how airlines’ dual focus on safety and profitability affects decisions regarding fleet changes. In the airline industry, safety and profitability have clear conflicts (at least in the short term) owing to the costs of replacing aircraft models with poor safety records. We find evidence that airlines pursue fleet safety goals, but the nature and extent of that pursuit depend on whether the firm’s profitability goals are being met. As predicted, the responsiveness to safety goals is strengthened by low profitability because safety is associated more closely with survival. The study augments existing research on multiple goals by emphasizing the nature of goal interdependencies and its implications for behavior in organizations.

We analyze optimal contractual arrangements in a bilateral research and development (R&D) partnership between a risk-averse provider that conducts early-stage research followed by a regulatory verification stage and a risk-neutral client that performs late-stage development activities, including production, distribution, and marketing. The problem is formulated as a sequential investment game with the client as the principal, where the investments are observable but not verifiable. The model captures the inherent incentive alignment problems of double-sided moral hazard, risk aversion, and holdup. We compare the efficacy of milestone-based options contracts and buyout options contracts from the client's perspective and identify conditions under which they attain the first-best outcome for the client. We find that milestone-based options contracts always attain the first-best outcome for the client when the provider has some bargaining power in renegotiation and identify their applicability to different R&D partnerships. This paper was accepted by Yossi Aviv, operations management.

In this study, we examine how multiple and sometimes conflicting goals are prioritized and pursued in organizations. Theories of coalitions and political behavior address prioritization among goals and changes in goal emphasis over time but cannot accurately predict the behavior of organizations that pursue conflicting goals. By linking theories of performance feedback theory and variable risk preferences, we show that performance shortfalls relative to aspirations on multiple goals can trigger managerial concerns for organizational failure. In such situations, the goal perceived as more important for survival gets priority and triggers stronger reactions. Empirically, we examine how airlines' dual focus on safety and profitability affects decisions regarding fleet changes. In the airline industry, safety and profitability have clear conflicts (at least in the short term) owing to the costs of replacing aircraft models with poor safety records. We find evidence that airlines pursue fleet safety goals, but the nature and extent of that pursuit depend on whether the firm's profitability goals are being met. As predicted, the responsiveness to safety goals is strengthened by low profitability because safety is associated more closely with survival. The study augments existing research on multiple goals by emphasizing the nature of goal interdependencies and its implications for behavior in organizations.

In this study, we examine how multiple and sometimes conflicting goals are prioritized and pursued in organizations. Theories of coalitions and political behavior address prioritization among goals and changes in goal emphasis over time but cannot accurately predict the behavior of organizations that pursue conflicting goals. By linking theories of performance feedback theory and variable risk preferences, we show that performance shortfalls relative to aspirations on multiple goals can trigger managerial concerns for organizational failure. In such situations, the goal perceived as more important for survival gets priority and triggers stronger reactions. Empirically, we examine how airlines' dual focus on safety and profitability affects decisions regarding fleet changes. In the airline industry, safety and profitability have clear conflicts (at least in the short term) owing to the costs of replacing aircraft models with poor safety records. We find evidence that airlines pursue fleet safety goals, but the nature and extent of that pursuit depend on whether the firm's profitability goals are being met. As predicted, the responsiveness to safety goals is strengthened by low profitability because safety is associated more closely with survival. The study augments existing research on multiple goals by emphasizing the nature of goal interdependencies and its implications for behavior in organizations.

In this study, we examine how multiple and sometimes conflicting goals are prioritized and pursued in organizations. Theories of coalitions and political behavior address prioritization among goals and changes in goal emphasis over time but cannot accurately predict the behavior of organizations that pursue conflicting goals. By linking theories of performance feedback theory and variable risk preferences, we show that performance shortfalls relative to aspirations on multiple goals can trigger managerial concerns for organizational failure. In such situations, the goal perceived as more important for survival gets priority and triggers stronger reactions. Empirically, we examine how airlines' dual focus on safety and profitability affects decisions regarding fleet changes. In the airline industry, safety and profitability have clear conflicts (at least in the short term) owing to the costs of replacing aircraft models with poor safety records. We find evidence that airlines pursue fleet safety goals, but the nature and extent of that pursuit depend on whether the firm's profitability goals are being met. As predicted, the responsiveness to safety goals is strengthened by low profitability because safety is associated more closely with survival. The study augments existing research on multiple goals by emphasizing the nature of goal interdependencies and its implications for behavior in organizations.