Problem-Solving or Self-Enhancement? A Power Perspective on How CEOs Affect R&D Search in the Face of Inconsistent Feedback

Firms consider multiple reference points simultaneously to assess performance; however, these referents may be inconsistent in signaling success or failure. Consequently, decision makers use one of two contrasting decision rules when responding to inconsistent feedback: problem solving or self-enhan...

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Bibliographic Details
Published in:Academy of Management journal 2020-04, Vol.63 (2), p.332-355
Main Authors: Blagoeva, Radina R., Mom, Tom J. M., Jansen, Justin J. P., George, Gerard
Format: Article
Language:English
Subjects:
Behavior
Chief executive officers
Chief executives
Companies
Decision makers
Feedback
Feedback control systems
Ownership
Power
Prestige
Problem solving
Prospects
R&D
Referents
Research & development
Selfenhancement
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Summary:Firms consider multiple reference points simultaneously to assess performance; however, these referents may be inconsistent in signaling success or failure. Consequently, decision makers use one of two contrasting decision rules when responding to inconsistent feedback: problem solving or self-enhancement. So far, disparate theoretical logics and mixed evidence has limited our understanding about when decision makers shift their attention from positive to negative aspects of inconsistent feedback, or vice versa, and increase or decrease their research and development (R&D) search. We examine how different types of chief executive officer (CEO) power explain why some firms may respond to inconsistent feedback-that is, positive performance feedback and negative prospects-in distinct ways. We find that firms engage in less R&D search as a response to inconsistent feedback when CEOs have high levels of structural, ownership or expert power. In contrast, when CEOs have high levels of prestige power, firms undertake more R&D search as a response to inconsistent feedback. Our findings provide new insights and contribute to conversations about CEO power and performance feedback within the context of the behavioral theory of the firm.
ISSN:0001-4273
1948-0989
DOI:10.5465/amj.2017.0999