Unpacking the effects of performance feedback on strategic change: the moderating role of industry conditions

Mishari Alnahedh and Abdullatif Alrashdan

Management Research Review, 2024, vol. 47, issue 8, 1176-1198

Abstract: Purpose - 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. Design/methodology/approach - 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. Findings - 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. Originality/value - 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.

Keywords: Strategic management; Resource allocation; Organizational change; Dynamic capability; Performance feedback; Behavioral theory of the firm; Industry conditions (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:mrrpps:mrr-11-2022-0766

DOI: 10.1108/MRR-11-2022-0766

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