Who depends on why: Toward an endogenous, purpose‐driven mechanism in organizations' reference selection

Johannes Luger

Strategic Management Journal, 2023, vol. 44, issue 8, 2035-2059

Abstract: Research Summary This paper investigates how firms select reference organizations, that is, other firms to which they compare themselves. We question the exogenous nature of references (i.e., them being defined via industry‐categorizations) but suggest that, via motivations or purposes, firms endogenously select them. We evaluate our findings when analyzing proprietary data on hotels' self‐selection of comparison‐hotels. In support of our arguments, we find that in situations of increased uncertainty regarding firms' own relative abilities and standing, firms make adjustments to their selected references toward more similar ones. This enables them to obtain more diagnostic information about their relative abilities and this effect holds constant of (exogenous) industry‐entry or exit events. Our findings contribute to an updated understanding about the role of comparison organizations in firms' decision‐making. Managerial Summary Prior work shows that comparisons with other firms (i.e., references) play an important role for our understanding of firms' decision‐making. For example, performance comparisons with references can trigger search or a decision‐need, ultimately, leading to acquisition‐decisions, new‐product‐introductions, and the like. When questioning the selection of such references, prior work has typically derived them from (exogenous) industry‐categorizations. We review this practice by relying on rare, longitudinal data on firms' reference self‐selection. When controlling for industry level effects, we find that firms adapt references as a function of changes in their comparison needs (e.g., self‐assessment). This is important because it implies an endogenous reference selection mechanism and shifts the attention from industry‐categorizations toward an understanding of comparison needs and their emergence when attempting to understand firms' decision‐making.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/smj.3486

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:stratm:v:44:y:2023:i:8:p:2035-2059

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0143-2095

Access Statistics for this article

More articles in Strategic Management Journal from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().