Abstract
This study draws on the behavioral theory of the firm (BTOF) to understand why and how different media coverage, conceptualized as the “soft” performance feedback, can drive firms’ search behaviors differently, leading them to make strategic changes in different domains. By decomposing multifaceted strategic changes into short versus long-term domain, we posit that negative media coverage fosters firms to conduct a problemistic search, which increases both the short- and long-term strategic changes in the firms, though at a different degree; while positive media coverage encourages firms to pursue a slack-driven search, which increases the firms’ long-term strategic changes aiming for future gains but decreases their short-term strategic changes. We find support for the hypotheses by analyzing a sample of 8,499 firm-year observations covering 2,452 listed companies in China from 2012 to 2017. Both theoretical and practical implications are discussed.
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