Results

Found 55 articles

Clear filters

Caught in an Expectations Trap: Risks of Giving Securities Analysts What They Expect
PDF
2023 | Organization Science | Citations: 0
Authors: Bascle, Guilhem; Jung, Jiwook

Abstract: Although recent research shows that there is mounting pressure on firms to achie ... Expand

Abstract: Although recent research shows that there is mounting pressure on firms to achieve earnings expectations of securities analysts, firms are far from being passive conformers; many firms proactively manage such pressure, particularly with earnings management tools. Yet why does the pressure to meet analyst expectations persist despite firms’ efforts to reduce it? To address the question, we develop an intertemporal model of the mutually reinforcing relationships between analyst expectations and firms’ strategic response, combining the behavioral theory of the firm and the concept of expectations trap. We argue that firms’ efforts to meet analyst expectations strengthen their salience as a predominant performance benchmark and, in doing so, ironically put them under greater pressure from analysts in three sequentially related steps—escalating future earnings expectations, imposing more severe penalties for failure to meet heightened expectations, and generating compensatory action for missed expectations. Our analysis, using data on more than 700 of the largest listed U.S. firms between 1986 and 2015, supports our arguments. Our study expands the scope of the behavioral theory of the firm, by demonstrating the increasing importance of performance feedback based on analyst expectations. Our study also contributes to the research on earnings pressure, by illuminating why the pressure persists despite firms’ efforts to reduce or evade it, and finally to the literature on strategic management of external expectations, by elaborating its unintended, long-term consequences. Supplemental Material: The e-companion is available at https://doi.org/10.1287/orsc.2021.1569. Collapse

Semantic filters: behavioral theory of the firm

Topics: strategic management organizational productivity Generally Accepted Accounting Principles IS downsizing accounting

Methods: longitudinal research statistical hypothesis test Compustat descriptive statistic robustness check

Theories: behavioral theory of the firm institutional theory
How Does (In)consistent Performance Feedback Affect Business Model Digitalization？

2023 | Americas Conference on Information Systems | Citations: 0
Authors: Chen, Yao; Chen, Meng; Liu, Hefu; Tang, Xinlin

Abstract: Despite the merits of business model (BM) digitalization to sustain organizatio ... Expand

Abstract: Despite the merits of business model (BM) digitalization to sustain organizational competitive advantages, many firms are cautious to digitalize their BMs due to the efforts needed and the high risks accompanying them. To date, the existing understanding of the antecedents of BM digitalization is still underdeveloped. We draw on the behavioral theory of the firm to develop a comprehensive understanding of what motivates firms to promote BM digitalization. In so doing, this study explores how (in)consistency between historical and social performance feedback affects BM digitalization. Moreover, we theorize that board experience with BM digitalization from interlock firms is an important contingency that influences these relationships. Based on panel data from 2,373 Chinese-listed firms from 2008 to 2019, the results provide general support for our arguments. This study contributes to the BM digitalization literature by disentangling the critical roles of (in)consistent performance feedback and board experience. Collapse

Semantic filters: behavioral theory of the firm

Topics: organizational productivity research and development corporate governance accounting accounting standard

Methods: theory development machine learning descriptive statistic statistical hypothesis test word2vec

Theories: behavioral theory of the firm
Prior Experience of Managers and Maladaptive Responses to Performance Feedback: Evidence from Mutual Funds
PDF
2023 | Organization Science | Citations: 0
Authors: Gaba, Vibha; Lee, Sunkee; Meyer-Doyle, Philipp; Zhao-Ding, Amy

Abstract: In this study, we examine how the prior experiences of decision makers systemati ... Expand

Abstract: In this study, we examine how the prior experiences of decision makers systematically influence their assessment of and responses to negative performance feedback. We posit that, although greater and more specialized experiences enable managers to build relevant knowledge and expertise in specific domains, they also make them overconfident in their abilities and strategies. Such experience-induced overconfidence further leads to distortions in the performance assessment process, hindering a firm’s ability to recognize and respond to poor performance. We empirically test these arguments in the context of U.S. mutual fund managers making investment decisions in response to fund performance below aspirations. As hypothesized, we find that more experienced and more specialized fund managers change their investment decisions less when faced with negative performance feedback than managers who are less experienced and less specialized. In additional analyses, we further show that the lower responsiveness of more experienced (specialized) managers is associated with the fund’s lower future performance, supporting our proposed theoretical mechanism (overconfidence). This study augments existing performance feedback research by showing how decision makers’ prior experience can impede problem-solving behavior in organizations. It also contributes to the literature on human capital and organizational learning by documenting an unintended consequence of accumulated human capital on firm adaptive behavior. Funding: This work was supported by INSEAD research & development funds. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2022.1605. Collapse

Semantic filters: behavioral theory of the firm

Topics: IT career organizational productivity human resource management unintended consequence problem solving

Methods: robustness check descriptive statistic theory development qualitative content analysis SEC EDGAR

Theories: theory of bounded rationality behavioral theory of the firm
Iterative Coordination and Innovation: Prioritizing Value over Novelty
PDF
2023 | Organization Science | Citations: 0
Authors: Ghosh, Sourobh; Wu, Andy

Abstract: An innovating organization faces the challenge of how to prioritize distinct goa ... Expand

Abstract: An innovating organization faces the challenge of how to prioritize distinct goals of novelty and value, both of which underlie innovation. Popular practitioner frameworks like Agile management suggest that organizations can adopt an iterative approach of frequent meetings to prioritize between these goals, a practice we refer to as iterative coordination. Despite iterative coordination’s widespread use in innovation management, its effects on novelty and value in innovation remain unknown. With the information technology firm Google, we embed a field experiment within a hackathon software development competition to identify the effect of iterative coordination on innovation. We find that iterative coordination causes firms to implicitly prioritize value in innovation: Although iteratively coordinating firms develop more valuable products, these products are simultaneously less novel. Furthermore, by tracking software code, we find that iteratively coordinating firms favor integration at the cost of knowledge-creating specialization. A follow-on laboratory study documents that increasing the frequency and opportunities to reprioritize goals in iterative coordination meetings reinforces value and integration, while reducing novelty and specialization. This article offers three key contributions: highlighting how processes to prioritize among multiple performance goals may implicitly favor certain outcomes; introducing a new empirical methodology of software code version tracking for measuring the innovation process; and leveraging the emergent phenomenon of hackathons to study new methods of organizing.History: This paper has been accepted for the Organization Science Special Issue on Experiments in Organizational Theory.Funding: The authors gratefully acknowledge financial support from Google LLC, the Harvard Business School Division of Research and Faculty Development, and the National Science Foundation [Grant 1122374].Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2021.1499. Collapse

Semantic filters: behavioral theory of the firm

Topics: innovation management Google+ productivity systems development application programming interface

Methods: experiment survey field experiment descriptive statistic laboratory experiment

Theories: theory of bounded rationality behavioral theory of the firm organizational theory
How Do Performance Goals Influence Exploration-Exploitation Choices?
PDF
2023 | Organization Science | Citations: 0
Authors: Raveendran, Marlo; Srikanth, Kannan; Ungureanu, Tiberiu; Zheng, George L.

Abstract: Employees in organizations are frequently subject to performance goals such as s ... Expand

Abstract: Employees in organizations are frequently subject to performance goals such as sales or publication targets. However, often employees do not know what actions will allow them to meet these goals. To perform such tasks effectively, employees need to explore to quickly learn from experience which among the available alternatives offers the higher reward potential, so that they can concentrate subsequent efforts on exploiting it. Prior work models such explore-exploit problems as an adaptive learning process, where employees sequentially sample various options and learn from feedback. However, we currently do not know how performance goals influence this adaptive learning process. We argue that performance goals influence the adaptive learning process by modifying how feedback is perceived. Individuals subject to challenging goals are more likely to interpret feedback from poor alternatives as failures. Therefore, they quickly develop high belief strength that the inferior alternative is worse than the superior alternative, enabling them to reduce “useless exploration,” but also making them slow to adapt to environmental shocks. We test our predictions in a series of laboratory experiments and find that decision makers subject to challenging goals exploit more (relative to those with moderate goals). We also show that such an exploitation focus, while beneficial in stable environments, is detrimental in unstable ones. Our finding that challenging performance goals improve performance in learning tasks stands in contrast to prior findings that such goals inhibit performance in search tasks, an insight that warrants further study to improve our understanding of goal setting in the knowledge economy.History: This paper has been accepted for the Organization Science Special Issue on Experiments in Organizational Theory.Funding: K. Srikanth was supported by SMU Seed Funding Grant for the initial version of this paper.Supplemental Material: The e-companion is available at https://doi.org/10.1287/orsc.2019.13311. Collapse

Semantic filters: behavioral theory of the firm

Topics: pandemic anonymity business process management

Methods: laboratory experiment robustness check experiment theory development statistical power analysis

Theories: behavioral theory of the firm
INFORMATION SECURITY RISK AND BOUNDARY CHANGING BEHAVIOR

2022 | Americas Conference on Information Systems | Citations: 0
Authors: Pataci, Hilal; Ravichandran, T.

Abstract: The escalating information security threats and their impacts have made firms p ... Expand

Abstract: The escalating information security threats and their impacts have made firms pay careful attention to potential risks they face and the actions they can take to mitigate such risks. We explore if and how the information security risk perceptions of firms shape their boundary-changing behaviors. We argue that organizations have risk transfer, risk avoidance, risk reduction, risk acceptance options, and combine these options in their attempts to reduce the perceived effects of information security risks. Organizations through risk transfer could transfer some effects of information security risks to third parties, while boundary changing behaviors could alter the potential vulnerabilities of a firm and hence decisions to alter firm boundaries are likely to be shaped by risk perceptions. By fine-tuning 11 state-of-the-art NLP models with causal extraction, we find that organizations' information security risk perception is positively associated with their information security risk transfer behavior, and less-risky boundary changing actions. Collapse

Semantic filters: behavioral theory of the firm

Topics: information security risk decision making IT security threat social media Slack

Methods: natural language processing BERT theory development experiment Lagrange multiplier test

Theories: behavioral theory of the firm lemon market theory
IT Investments under Earnings Pressure

2022 | International Conference on Information Systems | Citations: 0
Authors: Schinnen, Matthias; Obermaier, Robert

Abstract: Recent research has shown managers' tendency to cut discretionary investments t ... Expand

Abstract: Recent research has shown managers' tendency to cut discretionary investments to meet short-term earnings targets. However, how these aspirational levels of performance and associated conflicts of interest between managers and shareholders influence information technology (IT) investments has hardly been examined. Drawing on behavioral agency theory, we analyze how earnings pressure -the pressure managers feel to meet or beat analysts' consensus earnings forecast -influences IT investments. We find that earnings pressure is associated with a reduction in firms' IT investment commitment, based on the frequency of sentences within 10-K filings emphasizing IT investment. This finding points towards a hitherto unconsidered influence of capital markets on IT investments in literature on IT investment determinants. Further, we plan to analyze if this reduction entails negative or positive stock market performance consequences. Understanding the performance consequences will allow us to lay the foundation towards effectively addressing this issue within corporate governance. Collapse

Semantic filters: behavioral theory of the firm

Topics: IT investment corporate governance advertising management research and development accounting

Methods: longitudinal research autocorrelation analysis survey descriptive statistic data modeling

Theories: agency theory behavioral theory of the firm
Why Are Firms with Lower Performance More Volatile and Unpredictable? A Vulnerability Explanation of the Bowman Paradox
PDF
2021 | Organization Science | Citations: 0
Authors: Becerra, Manuel; Markarian, Garen

Abstract: This study investigates the negative relationship between firm risk and accounti ... Expand

Abstract: This study investigates the negative relationship between firm risk and accounting performance known in the strategy field as the Bowman paradox, which has been generally attributed to differences across firms in their willingness to take risk. Most research to date relies on the behavioral theory of the firm to suggest that underperformers take greater risks to increase their performance to their reference point. As an alternative explanation, we suggest that the Bowman paradox may result from the inherent vulnerability of low performers to negative external shocks. Our panel analysis of 2,681 U.S. firms from 1980 to 2010 confirms that firms with lower performance within their industry are more affected by negative shocks to the economy. The asymmetric vulnerability of low performers to external events makes their overall accounting performance more volatile and difficult to predict by market analysts, even if all firms have a similar attitude toward risk taking and capabilities to manage change. Our vulnerability explanation is also supported by our empirical analysis of the 2008 global financial crisis as a natural experiment. Furthermore, we find strong evidence of a negative risk–return relationship using different methods to control for their endogeneity. Collapse

Semantic filters: behavioral theory of the firm

Topics: organizational productivity research and development financial performance accounting database system

Methods: descriptive statistic regression analysis method longitudinal research natural experiment econometric modeling

Theories: resource based view of the firm behavioral theory theory of economic recessions behavioral theory of the firm
The Sequence Effect in Panel Decisions: Evidence from the Evaluation of Research and Development Projects
PDF
2021 | Organization Science | Citations: 0
Authors: Criscuolo, Paola; Dahlander, Linus; Grohsjean, Thorsten; Salter, Ammon

Abstract: We examine how groups fall prey to the sequence effect when they make choices ba ... Expand

Abstract: We examine how groups fall prey to the sequence effect when they make choices based on informed assessments of complex situations, for example, when evaluating research and development (R&D) projects. The core argument is that the temporal sequence of selection matters because projects that appear in a sequence following a funded project are themselves less likely to receive funding. Building on the idea that selecting R&D projects is a demanding process that drains participants’ mental and emotional resources, we further theorize the moderating effect of the influence of the timing of the panel meeting on the sequence effect. We test these conjectures using a randomization in sequence order from several rounds of R&D project selection at a leading professional service firm. We find robust support for the existence of a sequence effect in R&D as well as for the moderating effect. We further explore different explanations for the sequence effect and how it passes from the individual to the panel. These findings have broader implications for the literature on innovation and search in general and on group decision making for R&D, specifically, as they suggest that a previously overlooked dimension affects selection outcomes. Collapse

Semantic filters: behavioral theory of the firm

Topics: research and development decision making innovation management anonymity decision support system

Methods: autocorrelation analysis longitudinal research simulation case study qualitative interview

Theories: behavioral theory of the firm
The Plural of Goal: Learning in a World of Ambiguity
PDF
2021 | Organization Science | Citations: 9
Authors: Levinthal, Daniel A.; Rerup, Claus

Abstract: In the Carnegie School tradition of experiential learning, learning processes ar ... Expand

Abstract: In the Carnegie School tradition of experiential learning, learning processes are driven by the encoding of performance outcomes as a success or failure relative to a goal. We expand this line of inquiry by highlighting how conflicting and thus ambiguous outcomes across multiple goals make interpretation a critical aspect of organizational learning processes. In early work in the Carnegie tradition, interpretation played a role in the demarcation between what constituted success or failure on a given outcome metric. However, in March’s latter writings, learning and decision making produce an arena or even an opportunity for generating interpretations and broader meanings regarding roles, values, and identities. We explore how the two interpretive approaches in March’s work play out across three modes of responses to ambiguity. First, the process of self-enhancement whereby participants interpret conflictual outcomes so that they, the participants, appear in a positive light. Second, an explicit political process regarding the contestation of how to interpret conflicting outcomes. Third, from the perspective of the organizations’ literature on wisdom, participants may embrace ambiguity either to enhance learning or simply to enrich individuals’ interpretation of their experiences. Although these three modes of response do not offer a complete set of responses for learning in a world of ambiguity, they constitute valuable touchstones for the perspective we wish to put forward and, collectively, help enrich our understanding of the role of learning, ambiguity and interpretation within the Carnegie School. Collapse

Semantic filters: behavioral theory of the firm

Topics: organization learning decision making sensemaking

Methods: reinforcement learning qualitativ observational study

Theories: behavioral theory of the firm

Page 1 of 6 Next

AIS11

Journals

Conferences

Semantic Filter

Found 55 articles

Caught in an Expectations Trap: Risks of Giving Securities Analysts What They Expect

How Does (In)consistent Performance Feedback Affect Business Model Digitalization？

Prior Experience of Managers and Maladaptive Responses to Performance Feedback: Evidence from Mutual Funds

Iterative Coordination and Innovation: Prioritizing Value over Novelty

How Do Performance Goals Influence Exploration-Exploitation Choices?

INFORMATION SECURITY RISK AND BOUNDARY CHANGING BEHAVIOR

IT Investments under Earnings Pressure

Why Are Firms with Lower Performance More Volatile and Unpredictable? A Vulnerability Explanation of the Bowman Paradox

The Sequence Effect in Panel Decisions: Evidence from the Evaluation of Research and Development Projects

The Plural of Goal: Learning in a World of Ambiguity