Roles Of Performance Feedback And Technological Knowledge Networks In Technological Search

Abstract

Prior studies on the effect of performance feedback on organizational search have produced mixed results. To reconcile the mixed results, we develop a two-stage model of performance feedback and examine how the technological knowledge network of an industry shapes an organization’s responses to performance feedback. We propose that performance aspiration first induces an organization’s motivation to change its routine of technological search and then influences the direction of technological search. The effect of performance aspiration on the direction of technological search is moderated by the organization’s position in the technological knowledge network and network density. Our analysis of 182 semiconductor firms’ patenting activity, 1996-2008, reveals that a firm’s likelihood of its search intensity for new technological knowledge to be above the industry average is positively and negatively associated with the distance of performance below and above aspiration, respectively. The ratio of new knowledge from outside the industry to new knowledge from within the industry in the firm’s search activity is negatively associated with the distance of performance below aspiration. Furthermore, the firm’s centrality in the technological knowledge network and the network density moderate the effects of performance aspiration on the ratio.