The effect of perforamnce feedback, financial slack on the exploration and exploitation innovation

Lin Hua Lu, Poh Kam Wong, Shih Chieh Fang

Research output: Contribution to conferencePaper

Abstract

In this study, we focus on firms¡ performance feedback with regard to explorative and exploitative innovation. Building on Cyert and March¡s (1963) behavioral theory of the firm, performance feedback is a mechanism that can help companies to adjust their strategies, and deal with problematic or slack searches. We extended this argument in the context of Taiwan to investigate how firms adjust their behavior in terms of explorative and exploitative innovation when facing different kinds of performance feedback. Ten years¡ panel data with 374 firms was collected from Taiwanese firms in the electronic industry which were publicly listed on the Taiwan Stock Exchange (TSE) from 2000 to 2009. Our finding showed that firms do adjust their explorative and exploitative innovation activities in response to different kinds of performance feedback. In particular, when firms¡ performance is above their aspiration level, they prefer to maintain their exploitative innovation and reduce their explorative innovation. We also found the majority of Taiwanese firms are risk averse, and that when their performance falls below their aspiration level, they are likely to increase their exploitative innovation activities when the performance shortfall is small. In addition, we also found that financial slack not only has a direct effect on both explorative and exploitative activities, but also has a positive moderating effect on performance feedback when the level of performance exceeds the aspiration level. The evidence from Taiwanese electronic companies corroborates and extends the behavioral theory of the firm and not only allows us to test this theory in a new empirical setting, but also enables us to incorporate important factors not considered in previous research.

Original languageEnglish
DOIs
Publication statusPublished - 2011 Jan 1
Event71st Annual Meeting of the Academy of Management - West Meets East: Enlightening, Balancing, Transcending, AOM 2011 - San Antonio, TX, United States
Duration: 2011 Aug 122011 Aug 16

Other

Other71st Annual Meeting of the Academy of Management - West Meets East: Enlightening, Balancing, Transcending, AOM 2011
CountryUnited States
CitySan Antonio, TX
Period11-08-1211-08-16

Fingerprint

Innovation
Feedback
Electronics industry
Financial slack
Exploration and exploitation
Performance feedback
Industry
Aspiration Level
Firm performance
Behavioral theory of the firm
Innovation activities

All Science Journal Classification (ASJC) codes

  • Management Information Systems
  • Management of Technology and Innovation
  • Industrial relations

Cite this

Lu, L. H., Wong, P. K., & Fang, S. C. (2011). The effect of perforamnce feedback, financial slack on the exploration and exploitation innovation. Paper presented at 71st Annual Meeting of the Academy of Management - West Meets East: Enlightening, Balancing, Transcending, AOM 2011, San Antonio, TX, United States. https://doi.org/10.5464/AMBPP.2011.96.a
Lu, Lin Hua ; Wong, Poh Kam ; Fang, Shih Chieh. / The effect of perforamnce feedback, financial slack on the exploration and exploitation innovation. Paper presented at 71st Annual Meeting of the Academy of Management - West Meets East: Enlightening, Balancing, Transcending, AOM 2011, San Antonio, TX, United States.
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Lu, LH, Wong, PK & Fang, SC 2011, 'The effect of perforamnce feedback, financial slack on the exploration and exploitation innovation', Paper presented at 71st Annual Meeting of the Academy of Management - West Meets East: Enlightening, Balancing, Transcending, AOM 2011, San Antonio, TX, United States, 11-08-12 - 11-08-16. https://doi.org/10.5464/AMBPP.2011.96.a

The effect of perforamnce feedback, financial slack on the exploration and exploitation innovation. / Lu, Lin Hua; Wong, Poh Kam; Fang, Shih Chieh.

2011. Paper presented at 71st Annual Meeting of the Academy of Management - West Meets East: Enlightening, Balancing, Transcending, AOM 2011, San Antonio, TX, United States.

Research output: Contribution to conferencePaper

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Lu LH, Wong PK, Fang SC. The effect of perforamnce feedback, financial slack on the exploration and exploitation innovation. 2011. Paper presented at 71st Annual Meeting of the Academy of Management - West Meets East: Enlightening, Balancing, Transcending, AOM 2011, San Antonio, TX, United States. https://doi.org/10.5464/AMBPP.2011.96.a