Entry into new foreign markets: Performance feedback and opportunity costs

Ref, Ohad; Feldman, Naomi E.; Iyer, Dinesh N.; Shapira, Zur

doi:10.1016/j.jwb.2021.101258

Cited by 17 publications

(14 citation statements)

References 51 publications

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“…We argue that the former triggers problemistic search that leads the company to re-evaluate offshoring and to consider alternatives that are far from the focal initiative and that can take place either in a new host or in the home country; instead, positive discrepancies trigger an institutionalized search, that is an increase of the commitment towards the current strategy in the present host country. We also claim that the likelihood of the re-evaluation process increases with the size of performance discrepancy (see also Ref et al, 2021) and it is also moderated by a location-specific bias, i.e., it is attenuated or strengthened when the host country is perceived as strategic for the focal firm (Tversky and Kahneman, 1974).…”

Section: Introductionmentioning

confidence: 74%

“…A large positive discrepancy indicates a consistently good match between the current offshoring strategy and the host market. Success leads to organizational inertia (Ref et al, 2021), decreases the motivation for organizational change (e.g., Audia et al, 2000; Greve, 1998), increases the risk‐aversion and the conservative behaviours of decision makers (Elia et al, 2022), and narrows the search to the neighbourhood of the current solution (Billinger et al, 2014). In this case, a positive discrepancy leads decision makers to persist in allocating their attention to exploit business opportunities in the current host location.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

“…Behavioural theorists agree that organizations embrace strategic and operational change when they observe declining performance relative to their selected goals (Audia and Greve, 2006; Chrisman and Patel, 2012). Along the same lines, performance feedback research suggests that managers' tendencies to change their strategy are affected by the discrepancy between current performance and aspiration level (Ref et al, 2021). Specifically, when managers interpret performance as being unsuccessful or in need of improvement, they start a search process for possible alternative solutions (Cyert and March, 1963; Hu et al, 2011).…”

Section: Introductionmentioning

confidence: 99%

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Re‐Evaluating the Offshoring Decision: A Behavioural Approach to the Role of Performance Discrepancy

Elia

Goerzen

Piscitello

et al. 2022

J Management Studies

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Firms are in a continuous process of critically re‐evaluating their offshoring strategies due to performance discrepancies. While prior research has focused on the implementation of organizational responses to performance shortfalls, we examine the offline search process, a key antecedent of organizational change, during which firms simultaneously explore alternative solutions when facing either a positive or a negative discrepancy between performance and aspirations. We adopt the Behavioural Theory of the Firm (BTOF) to investigate how the search process is affected by the size and nature (as being positive or negative) of the discrepancy as well as how it is moderated by cognitive biases. By examining 441 offshoring initiatives, we study firms' search processes in a novel context that refers either to ‘local’ solutions that are close to the current activity (i.e., expansion in the same host country) or ‘distant’ solutions that are far from the current one (i.e., relocation to a third country or to the home country). Our results provide new insights into organizational search, namely that performance shortfalls lead to distant search unless this choice is moderated by a location‐specific anchor bias relating to the strategic importance of host location, while positive discrepancies trigger local search with decision‐makers more inclined to consider expansion in the current host country.

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Section: Introductionmentioning

confidence: 74%

Section: Hypothesis Developmentmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Re‐Evaluating the Offshoring Decision: A Behavioural Approach to the Role of Performance Discrepancy

Elia

Goerzen

Piscitello

et al. 2022

J Management Studies

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“…The extant research has explicitly linked performance feedback to organizational innovation, such as new product innovation (Parker, Krause and Covin, 2017), innovation search (Yu, Minniti and Nason, 2019) and R&D intensity (Xu, Zhou and Du, 2019). Recently, some scholars have asserted that performance feedback also accounts for firms' internationalization strategy (Jiang and Holburn, 2018;Ref et al, 2021). Despite the risks and uncertainties, international expansion to obtain global economies of scale or exploit a new growth area can be considered a managerial response to performance feedback.…”

Section: Behavioural Theory Of the Firmmentioning

confidence: 99%

“…Recently, some scholars have asserted that performance feedback also accounts for firms’ internationalization strategy (Jiang and Holburn, 2018; Ref et al. , 2021). Despite the risks and uncertainties, international expansion to obtain global economies of scale or exploit a new growth area can be considered a managerial response to performance feedback.…”

Section: Theoretical Background and Literature Reviewmentioning

confidence: 99%

Environmental Performance Feedback and Timing of Reshoring: Perspectives from the Behavioural Theory of the Firm

Zhang

Shui

Smart

et al. 2022

British J of Management

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The behavioural theory of the firm (BTOF) claims that firms' performance feedback is significant for strategic decision-making. Building upon this, we shift our focus from the widely researched topic of financial performance to sustainability performance. We theorize that firms' environmental performance feedback (i.e. performance relative to aspirations) influences their reshoring decisions. Based on a sample of publicly traded manufacturing multinational enterprises (MNEs) from 15 developed countries, we find that firms with below-aspiration environmental performance (BEP) are slower to engage in reshoring activity. In contrast, firms with above-aspiration environmental performance (AEP) are quicker to engage in reshoring. Moreover, we substantiate the moderating role of financial performance feedback: positive financial performance feedback enables firms with higher BEP to engage in reshoring activity even more slowly. Nevertheless, the moderating role of positive financial performance feedback has not been confirmed in the relationship between higher AEP and the timing of reshoring.

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The multifaceted ownership change of foreign subsidiaries: The diverse responses to different types of negative performance feedback

Guo

Kumar

et al. 2023

Global Strategy Journal

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Research SummaryBy integrating performance feedback theory and ownership management literature, we examine how parent multinational companies (MNCs) evaluate their foreign subsidiaries' poor performance against various aspirations and make multifaceted ownership change decisions. Our results show that social aspirations matter more than historical aspirations in ownership change decisions. When a focal subsidiary is underperforming relative to industry peers or overseas subsidiary peers, its parent MNC tends to change its ownership of foreign subsidiaries and by a high degree. However, regarding the direction of ownership change, a foreign subsidiary with performance below industry peers tends to experience an ownership decrease, whereas the opposite is true when a subsidiary's performance is below overseas subsidiary peers. Overall, we extend existing theories that downplay the role of aspirations in ownership changes.Managerial SummaryEffective ownership management in foreign subsidiaries is key to sustaining the global operations of MNCs. An important task for parent managers is to make sense of the poor performance of their foreign subsidiaries against various aspirations and respond in terms of ownership change decisions. We find that managers are more sensitive when their foreign subsidiary's performance is below its social peers than below its past performance. Specifically, parent managers tend to change ownership to a large extent when their foreign subsidiary is poorly performed compared with its industry peers as an external benchmark or overseas subsidiary peers as an internal benchmark. Moreover, parent managers tend to reduce ownership when the subsidiary's performance is below industry peers, while are more likely to increase ownership when the performance is below its overseas subsidiary peers.

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Entry into new foreign markets: Performance feedback and opportunity costs

Cited by 17 publications

References 51 publications

Re‐Evaluating the Offshoring Decision: A Behavioural Approach to the Role of Performance Discrepancy

Re‐Evaluating the Offshoring Decision: A Behavioural Approach to the Role of Performance Discrepancy

Environmental Performance Feedback and Timing of Reshoring: Perspectives from the Behavioural Theory of the Firm

The multifaceted ownership change of foreign subsidiaries: The diverse responses to different types of negative performance feedback

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