Single Stimuli, Multiple Responses: Performance Feedback and Firms' R&D Changes

Michal Jirásek

Prague Economic Papers, 2020, vol. 2020, issue 4, 381-402

Abstract: The behavioral theory of the firm assumes that firms react on performance feedback by increasing their search for alternative courses of action. However, the empirical literature is full of contradictory findings. This paper puts forward the idea that at least part of these contradictions can be explained if we can identify groups of firms behaving differently from firms in other groups and theoretical propositions. The paper uses exploratory analysis of US and German industrial firms and changes in R&D expense as their response to financial performance feedback. The cluster analysis of behavioural patterns of these firms results in identifying several behaviourally distinctive groups. The findings support the idea that contradictions in previous studies may partially stem from having a different mix of heterogeneously behaving firms. Also, they point to the proposition that for further understanding of responses to performance feedback, these groups of firms should be analysed separately.

Keywords: Behavioral theory of the firm; performance feedback; R& D expense; ROA; US industrial firms (search for similar items in EconPapers)
JEL-codes: D22 D91 O32 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.18267/j.pep.734

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