Productive or non-productive? Negative performance feedback and firms' cost behaviors

Abstract

PurposeThe purpose of this paper is to examine the influences of negative performance feedback on firms' cost behaviors including productive behaviors (i.e. R&D behaviors) and non-productive behaviors (i.e. selling behaviors and business entertainment behaviors), as well as to investigate the roles of ownership types and marketization.Design/methodology/approachA sample of Chinese manufacturing firms from 2007 to 2018 is analyzed employing multiple regression models.FindingsThe results show that negative performance feedback has a positive but not significant effect on R&D behaviors, while its effect on selling behaviors is significantly positive. Meanwhile, there is an inverted U-shaped relationship between negative performance feedback and business entertainment behaviors. Furthermore, when facing a performance dilemma, state-owned enterprises tend to adjust selling behaviors, while nonstate-owned enterprises pay more attention to business entertainment behaviors. In terms of marketization, the firms in high-marketization regions are more likely to adjust their R&D, selling and business entertainment behaviors, while the firms in low-marketization regions are difficult to adjust these cost behaviors.Practical implicationsThis study explores the role of negative performance feedback in firms' cost behaviors and provides empirical evidence about the differentiated influences regarding ownership types and marketization.Originality/valueIntegrating insights from existing studies and introducing the behavioral theory of the firm and prospect theory, this study proposes a more inclusive framework that addresses the impacts of negative performance feedback on firms' cost behaviors. This paper deepens the understanding of firms' decision behaviors in the dilemma of performance shortfall.

Performance feedback duration and strategic change in USA manufacturing firms

“…Additionally, prior research in BTOF has studied many types of subsequent actions by the firm such as risk-taking (Bromiley, 1991), R&D expenditure (Chen, 2008), innovation (Greve, 2003), new market entry (Lim, 2019;Ref and Shapira, 2017), new product introduction (Brooks et al, 2023), acquisition and divestiture (Kuusela et al, 2017;Mishra, 2023), strategic investments (Zhang and Gong, 2018), non-productive outcomes such as selling and business entertainment (Tian and Hu, 2023), financial fraud (Harris and Bromiley, 2007;Xu et al, 2019), boundary spanning (Klueter and Monteiro, 2017), and capital allocation (Mazzelli et al, 2019). However, although many such variables have been broadly recognized as a change in the firm's strategy, the broader concept of strategic change has rarely been directly studied.…”

“…, 2023), acquisition and divestiture (Kuusela et al. , 2017; Mishra, 2023), strategic investments (Zhang and Gong, 2018), non-productive outcomes such as selling and business entertainment (Tian and Hu, 2023), financial fraud (Harris and Bromiley, 2007; Xu et al. , 2019), boundary spanning (Klueter and Monteiro, 2017), and capital allocation (Mazzelli et al.…”