(In)Consistent Performance Feedback and the Locus of Search

Abstract

Despite the prevalence and importance of multiple goals for organizations, research on how organizations respond to performance on multiple goals continues to be limited and has examined only search intensity as the focal response, ignoring that search may occur in different locations. We extend the research on multiple goals by developing and testing novel theory on the relationship between performance feedback on multiple goals and the locus of search. Drawing upon the behavioral theory of the firm and using panel data from global pharmaceutical firms, we first show that when performance is below aspirations on a primary goal, a firm's propensity to engage in distal search increases along both the technological (i.e., familiar vs. unfamiliar search) and the organizational dimension (i.e., internal vs. external search). However, building on more recent literature that points to the need to consider multiple goals of unequal importance and, specifically, the self-enhancement perspective, we argue and find that performance on a secondary goal modifies this pattern, particularly when performance on a primary goal is unsatisfactory. Under feedback inconsistency, where performance on a primary goal is low but performance on a secondary goal is high, decision-makers decrease distal search to both unfamiliar technological areas and areas external to the organization. Our theory and findings highlight the importance of performance feedback regarding multiple goals in regulating the key locus of search choices and extend research on self-enhancement and learning from performance feedback.