The role of reference points and organizational identity in strategic adaptation to performance feedback

Abstract

Purpose This study aims to elucidate reference points and organizational identity in letters to shareholders (LTSs) of publishing companies and develops propositions on their relation to strategic adaptation. This study examines how characteristics of reference points (number, temporality and specificity) and organizational identity (focus, discontinuity and distinctiveness) relate to strategic adaptation. This research advances performance feedback theory and behavioral strategy by presenting rich data on how managers use reference points. This study also theorizes on the role of organizational identity as an observation frame. Finally, this study informs managers on how they can adapt reference points and organizational identity to drive strategic adaptation in their organizations. Design/methodology/approach This paper uses text analysis of LTSs of eight companies in the global publishing industry over six years. The research design is an exploratory, comparative case study. Findings The authors present the findings of rich empirical data analysis of reference points and organizational ideology, develop a typology and propose three proposed relationships. This paper develops three propositions on how characteristics of reference points (number, temporality and specificity) and organizational identity (focus, discontinuity and distinctiveness) relate to strategic adaptation. Originality/value This study elucidates reference points that managers use when they make sense of performance feedback. This study further develops a typology of reference points and suggests propositions on how reference points and organizational identity relate to strategic adaptation. The novel linguistic approach to revealing reference points-in-use and the study of decision-making in its empirical context contribute to a better understanding of the micromechanims of decision-making that are central to behavioral strategy.