CEO satisfaction and intended strategic changes: The moderating role of performance cues

Jorge Villagrasa, T. Buyl, Alejandro Escriba-Esteve

Research output: Contribution to journalArticleScientificpeer-review

Abstract

How do CEOs react to attainment discrepancies in their organizations' performance? Scholars have generally argued that (only) when performance falls below a certain aspiration level do CEOs intend to change the organization's strategy. However, empirical evidence on this issue is ambiguous and inconclusive. We address this puzzle directly by studying how CEOs' cognitive interpretations of performance (their satisfaction with the firm's performance) affect the magnitude of intended strategic changes, and we explore the moderating effect of the context (performance compared to the industry) on this relationship. Using a sample of medium-sized organizations, we find that CEOs' satisfaction with performance is negatively related to intended strategic changes, as expected, but only in contexts of poor performance compared to the industry. The negative relationship becomes less pronounced when performance compared to the industry reaches a certain threshold and even appears to reverse when the latter is extremely high. Moreover, exploratory post hoc analyses tentatively suggest the existence of two alternative intended change trajectories: contractive as a reaction to dissatisfaction and poor performance, and expansive as a response to satisfaction and high performance. These findings help to contextualize the effects of attainment discrepancies in light of conventional performance feedback theory and alternative theoretical perspectives.
Original languageEnglish
Pages (from-to)894-910
JournalLong Range Planning
Volume51
Issue number6
DOIs
Publication statusPublished - 2018

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Keywords

  • ASPIRATION-PERFORMANCE
  • CEO perceptions
  • COMMON METHOD VARIANCE
  • CONSEQUENCES
  • DETERMINANTS
  • FIRM PERFORMANCE
  • Intended strategic change
  • JOB-SATISFACTION
  • Performance feedback
  • REFERENCE POINTS
  • RISK-TAKING
  • Satisfaction with firm performance
  • TOP MANAGEMENT
  • UPPER ECHELONS

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