Wednesday, January 23, 2013

Short and Long Term Performance Feedback and Absorptive Capacity

BEN-OZ Chanan, GREVE Henrich
Read the working paper
INSEAD Working Paper 2013/22/EFE

Research on organizational learning from performance feedback has produced findings on how organizational change is influenced by performance relative to aspiration levels, but has focused on short-term goal variables. In this paper, we examine how short- and long-term goals are related to short- and long-term actions, respectively. We do so by predicting changes in absorptive capacity from performance relative to aspiration levels, and by testing whether long-term goals mainly affect potential absorptive capacity, which has long-term effects, while short-term goals mainly affect the realized absorptive capacity, which has short-term effects. Using data from surveys of 252 decision makers representing 129 Israeli early stage high-tech organizations, our analysis yields supportive empirical findings. The findings imply that performance relative to aspiration levels have effects on long-term strategic actions as well as short-term ones, and thus argue against strict myopia.