Conflict inside and outside: Social comparisons and attention shifts in multidivisional firms

Abstract

Research summary: Behavioral Theory highlights the crucial role of social comparisons in attention allocation in adaptive aspirations. Yet, both the specification of social reference points and the dynamics of attention allocation have received little scholarly examination. We address performance feedback from two social reference points relative to divisions in multidivisional firms: economic reference point and political reference point. Comparing divisional performance with the two reference points can give consistent or inconsistent feedback, which has important consequences for the dynamics of attention allocation in adaptive aspirations. We find consistent feedback leads to more attention to own experience, while inconsistent feedback results in more attention to the social reference point the focal division underperforms. Results reveal that political reference point plays an important role in determining managerial attention allocation.Managerial summary: This article is based on how goal-based performance of divisions relative to both their relevant external market rivals and sister divisions in multidivisional firms influences corporate resource allocation. As a result, various combinations of performance against the two groups of peers drive the reallocation of divisional management attention. We show that specific attention shifts occur on average as a function of the focal division's performance relative to the marketplace performance and that of sister divisions. directs how organizations learn and adapt (Cyert and March, 1963). The generalized model of performance feedback depends on a satisfactory performance level-referred to as the aspiration level-against which an organization compares its actual performance. According to BTOF (Cyert and March, 1963), organizations adapt their aspirations based on historical comparisons with their own experience (i.e., prior aspiration and prior performance) and social comparisons with others' experience (i.e., others' performance). That is, As a political coalition, this party consists largely of union members, the poor, teachers, single women, government workers, minorities, college professors, and young voters. These groups have different goals and interests on some important issues, but cooperate in a manner that benefits all to some degree.

Quo Vadis, Dynamic Capabilities? A Content-Analytic Review of the Current State of Knowledge and Recommendations for Future Research

“…Indeed, the behavioral theory of the firm suggests that it is the dynamic nature of attention and aspirations that enables search and the generation of new (entrepreneurship) opportunities. Similarly, other studies following the behavioral tradition (Hu, Blettner, & Bettis, 2011;Hu, He, Blettner, & Bettis, 2017) emphasize the important performance implications of aspiration adaptation speed, attention allocation dynamics, and reference group setting strategies within firms. Thus, further integration of the dynamic capabilities paradigm with the behavioral theory of the firm is a rich avenue for future research.…”

How Third-Party CSR Evaluation Matters: Keeping Up with Rivals in CSR Performance Ratings of Korean Firms, 2011–2015

“…Scholars of the behavioral theory of firms have long argued that a firm's current performance below or above a specific reference point (i.e., the industry average) determines managers' perception of their firm's degree of failure or success [9][10][11][12][13][14][15]. In particular, perceptions of failure compared with industry rivals are likely to motivate managers to allocate more efforts and resources toward finding solutions that they believe can remedy the shortfalls in the firm's current performance vis-à-vis those of their rivals [9][10][11][12][13][14][15].…”

“…In particular, perceptions of failure compared with industry rivals are likely to motivate managers to allocate more efforts and resources toward finding solutions that they believe can remedy the shortfalls in the firm's current performance vis-à-vis those of their rivals [9][10][11][12][13][14][15]. That is, when managers see their firm's current performance falling below the expectation or reference level, they will perceive the current state of their firm's operations as being problematic, and in need of updates or overhaul [9][10][11][12][13][14][15].…”

“…Combining insights from the research on ratings/rankings [1][2][3][4][5][6][7][8] and a behavioral theory of the firm [9][10][11][12][13][14][15], we hypothesize that rated firms are more likely to enhance their subsequent CSR behavior, and hence performance ratings, when their negative CSR rating gaps-CSR ratings below the industry average-are large rather than small, while positive CSR rating gaps-CSR ratings above the industry average-are unlikely to change their subsequent behavior. We reason that this relationship arises because firms tend to seek to eschew being seen as CSR laggards compared with their industry rivals, thereby putting more efforts toward elevating their CSR performance.…”

Stock Return or Sales Growth? Multiple Performance Feedback and Strategic Investments Under Securities Analysts’ Earnings Pressure

“…Second, we contribute to the BTOF literature by advancing our understanding of how managerial attention may shift among multiple dimensions of performance feedback (Gaba and Joseph, ; Greve, ; Joseph and Gaba, ), namely, sales growth and stock return. Shifts in managerial attention research focus either on social versus historical performance feedback (e.g., Hu et al, ; Kacperczyk et al, ; Kim et al, ) or use different dependent variables. For example, dependent‐variable scholars have used include new product introduction (Joseph and Gaba, ), new venture growth and survival (Wennberg et al, ), mergers and acquisitions (Iyer and Miller, ), or R&D in family versus nonfamily firms (Chrisman and Patel, )).…”