Performance Feedback and Alliance Formation in the Emerging Market: The Influence of Social Norm

Abstract

Prior research on performance feedback and search have posited a universal model and have been limited to addressing the possible influence of external factors. Extending performance feedback literature on this gap, we theorize that problemistic search induced by negative performance feedback will be repressed when social norms such as face(mianzi) are prevalent in the environment. Using data from firms in China from 2001 to 2011, we examine the effect of external environment on performance feedback and alliance formation. Our findings support the idea that social norms such as face repress search, and show that technological uncertainty reinforces the repression effect when performance is the below aspiration level as well as slack-driven search when performance is above the aspiration level. The results suggest the need for the behavioral theory of the firm to incorporate external factors.