Strategic Social Comparisons: How Historical Performance Influences Reference Group Selection

Abstract

This paper examines organizational heterogeneity in social comparison related to organizational aspirations. Organizational social comparison is the process wherein an organization compares performance with its reference group. Combining the organizational aspiration literature and the social comparison literature, we investigate the immediate and deferred influences from organizational self-comparative performance (difference between organizational performance and aspiration) on social reference group selection. Our theorizing is based on the activation of different social comparison motives. We hypothesize that an organization progressively narrows the performance range of its social reference group when performance increases, while first narrows and then broadens the industry range of the group as performance increases from below to above aspiration. We also hypothesize that higher variance of self-comparative performance across time weakens the effect from positive self- comparative performance; while it strengthens the effect from negative self-comparative performance. We utilize one-step system GMM estimations on a secondary dataset of 1,127 North American listed firms from 2006 to 2015. The results partially support our hypotheses. Our research advances the knowledge on organizational heterogeneity in social reference group selection by expanding the role of historical performance, adding the self-improvement motive of social comparison, and highlighting the time dimension when investigating relevant antecedents.