Organizational Performance Relative to Aspirations: Exogenous Roots of Performance Feedback
Abstract
This dissertation offers new insights on organizational decision making with respect to performance relative to aspirations and the role of external coalition members and reciprocal internal organizational responses. In doing so, it contributes to the behavioral theory of the firm literature. While most behavioral theory of the firm studies focus mainly on the outcomes of performance relative to aspirations and have taken aspirations for granted, this dissertation elaborates on the existing literature to identify the gaps in our understanding of organizational aspirations and makes suggestions on how to extend the theory of organizational aspirations. I further focus on external coalition members that exist beyond formal organizational boundaries of the firm and study their systematic reactions to performance relative to aspirations and how those reactions are looped back into organizational responses to performance discrepancies.
Essay 1 reviews the literature on aspirations from the behavioral theory of the firm perspective. By discussing origins, definitions, loci, dimensionality and adaptation of aspirations as well as organizational attention to aspirations and outcomes, I propose revisions to the existing understanding of aspirations. In particular, an inverted model of aspirations that abandons the assumption of psychological neutrality of aspirations as well as stability and progress aspirations on single performance measure would allow for explaining the decisions of emerging organizations and co-existence of multiple organizational aspirations.
Essay 2 combines behavioral theory of the firm with Hirschman’s exit and voice concepts and develops a theoretical model that explains how external coalition members, namely shareholders, are looped into the performance feedback mechanism that links organizational responses to performance relative to aspirations. I pose that voice and exit are two alternatives that individual shareholders can pursue in response to performance discrepancies, both below and above aspirations, and that collective shareholder voice motivates the firm to adapt to such performance discrepancies. The essay further empirically tests the proposed conceptual model using a set of panel data methods.
Essay 3 further elaborates on the idea of external roots in performance feedback by looking at the organizational slack as the barrier between external and internal coalition members. Unlike the earlier literature which associated slack with organizational innovativeness, this paper demonstrates that slack is a political instrument that enhances the position of internal coalition members and mutes the voice of external coalition members, hence, hindering organizational reaction to performance below aspirations. This paper further argues that high slack amplifies the negative effect of self-enhancement on problemistic search.