The Differential Effects of Historical and Social Aspirations on High- Performing Firms' Innovation

Abstract

Exploratory innovation is critical for high-performing firms’ long- term development. Integrating the performance feedback perspective and attention-based view, we explore the differential effects of relative performance above social and historical aspirations on both the innovation attention of top management teams (TMTs) and firms’ exploratory innovation. Our empirical testing is based on an unbalanced panel data of Chinese listed firms from 2011 to 2016, combined with text analysis. We find that relative performance above social aspiration weakens the TMT’s attention to exploratory innovation, while relative performance above historical aspiration strengthens the TMT’s attention to exploratory innovation. The consistency of the two types of performance feedback intensifies the above two relationships respectively. In addition, the TMT’s attention to explorative innovation plays a full intermediary role for the relationship between relative performance above aspirations and a firm’s explorative innovation. This study extends performance feedback literature through articulating the mechanism on how high- performing firms choose between exploratory and exploitative innovation.