Striving toward the future: aspiration—performance discrepancies and planned organizational change

Abstract

Interest has been growing in understanding how organizations' aspiration levels affect their planning for future organizational change. Previous research has not specified whether organizations use direct competitors or other comparable organizations as referents for forming their aspirations. In this study, it is argued that organizations form their social aspirations based on two types of interorganizational comparisons: competitive and striving. In competitive comparisons, an organization compares its current performance against that of its current direct competitors. When relative performance is poor, these organizations plan more extensive and more radical change. However, the study shows that organizations that are performing well relative to competitors do not necessarily become inertial, as theory suggests. Rather, organizations engage in striving comparisons by comparing their current performance against the performance of organizations to which they strive to be like in the future. The analyses show that organizations with large striving discrepancies are driven to more extensive and more radical change, even if they are performing well compared to current competitors. The study examined this interplay between competitive and striving discrepancy in explaining organizational change on a sample of 131 AACSB accredited business schools.

Managerial Risk Taking

“…A wide range of studies have examined the role of performance relative to historical and/or social aspirations on risk taking. In this literature, managerial risk taking has been operationalized as acquisitions (Audia & Greve, 2006;Greve, 2008Greve, , 2011Iyer & Miller, 2008;Kim, Finkelstein, & Haleblian, 2015), entrance into new markets (Barreto, 2012), innovation (Chen, 2008;Chen & Miller, 2007;Gaba & Bhattacharya, 2012;Gaba & Joseph, 2013;Greve, 2003;O'Brien & David, 2014;Vissa, Greve, & Chen, 2010), illegal behavior (Baucus & Near, 1991;Harris & Bromiley, 2007;Madsen, 2013), and organizational change (Arrfelt, Wiseman, & Hult, 2013;Baum & Dahlin, 2007;Greve, 1998;Labianca, Fairbank, Andrevski, & Parzen, 2009;Lant, Milliken, & Batra, 1992;Massini, Lewin, & Greve, 2005;Park, 2007). Most of these studies have found evidence supporting BTOF main-effect predictions of greater managerial risk taking after underperforming and lower levels of risk taking when over performing.…”

“…Reflecting these concerns, caution that firm risk, often captured by accounting measures, may not reflect executives' attitudes and biases toward risk. In this regard, we encourage greater use of primary data to measure managers' risk behaviors and reference points (see, for example, Labianca et al, 2009;Larraza-Kintana et al, 2007;Massini et al, 2005;Singh, 1986). We recognize the difficulty of collecting primary data, but we believe that this approach, along with mixed methods (which are seldom used), will advance our understanding of managers' past, present and future reference points and attitudes toward risk taking.…”

“…Baum et al (2005) demonstrate that firms above social aspirations but below historical also tend to become more risk-taking. Several scholars have also extended the aspirations of firm managers to include particular targets (Labianca et al, 2009) or particular goals in addition to overall financial performance (Greve, 2008;Baum et al, 2005). In these cases, the particular frame of reference becomes a more salient goal for firm managers' comparisons.…”

Dynamic Environment, Tournament Incentive and State-owned Listed Firms Risk Taking

“…Firms risk taking involves new technology innovation and improvement, new products researches and development, new processes modification and reform, which will promote firms making significant technological advances and win the competitive superiority in markets (Labianca et al, 2009) [11]. The above R&D spending has long been deemed as highly risky investment, which represents firms input on innovation but accompanying higher uncertainty.…”

Disentangling Risk and Change

“…Finally, a number of studies, listed in the third column of table 1, have explicitly examined risky change, generally by considering multiple change decisions accompanied by varying levels of risk (i.e., Greve, 1998Greve, , 2003aLabianca et al, 2009). Greve's study of changes in radio station formats (1998) offers an excellent demonstration of risky change by clearly articulating levels of risk inherent in the different change decisions.…”