A Boundedly Rational Perspective on the Role of Above-Aspiration in Ambidextrous Aliances Choices

Abstract

This study investigates an unexplored issue: how firms make boundedly rational decisions in response to above-aspiration performance when configuring exploration and exploitation in an alliance portfolio. We employ behavioral heuristics to explore the role of above-aspiration performance and the influence of a CEO’s cognitive bias towards overconfidence. We also argue that the role of a CEO’s overconfidence in an alliance strategy depends on the degree of attention s/he pays to the latter, and how the attention allocation process is influenced by environmental factors. Three hypotheses are tested using a sample of U.S. high technology firms during 1992-2015. Our results establish that above-aspiration performance motivates firms to engage in exploration rather than exploitation alliances when configuring an alliance portfolio, and that a CEO’s overconfidence strengthens this relationship. The moderating effect of a CEO’s overconfidence decreases with environmental munificence and dynamism. Our study contributes to the literature on the behavioral theory of the firm by adopting a consistent capacity-based logic to examine a firm’s response to above-aspiration performance, and makes an additional contribution to the alliance portfolio literature by deconstructing the alliance portfolio configuration in terms of exploration versus exploitation alliances as a product of bounded rationality.