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Problemistic search theory, with its roots in the Carnegie School tradition, describes a behaviorally plausible process by which firms learn from performance feedback. A firm’s recognition of performance below aspirations leads to search for a solution to the problem, resulting in change intended to restore performance to the aspired level. The con...
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... Since the 1940s, scholars have noted that AI has been the basis of technological solutions to solve problems in different contexts using the processing capabilities of computer programs (Dick 2019;Posen et al. 2018). From its origins, AI studies have understood organisations as problem-solving systems in which humans and technologies interact (Haefner et al. 2021;Simon 2019). 2 As a branch of computer science, AI is connected to other disciplines, such as machine learning, image and natural language processing, robotics, and the internet of things (Brixner et al. 2020). ...
The article presents innovation in artificial intelligence (AI)-based health services as a co-production process between actors and digital artefacts that increase automation and augmentative routine dynamics. The co-production process is analysed from the routine dynamics and contributions of science and technology studies and complexity theory. An in-depth single case of co-production based on AI is analysed to illustrate the innovation process at the micro level. The analysis reveals four findings: (1) innovation in services based on AI-technological solutions emerges from sociotechnical assemblages enacted by actors, artefacts, and routine dynamics; (2) technological solutions based on AI are emergent properties; (3) co-production of technological solutions based on AI are contextualised on situated action and embedded in a cognitive distribution system that leads to automated and augmentative routine dynamics; and (4) the adoption of standardised AI-based technological solutions transforms institutional arrangements. Implications for policymakers and future research agendas are also outlined.
... Nevertheless, few studies have examined the driving motives behind corporate accounting information disclosure strategies from the perspective of performance persistence below aspirations (PPBA) (the length of time that performance stayed below the aspirations). Given the BTOF and subsequent extensive research confirming the critical influence of performance below aspirations (PBA) (Kotiloglu et al., 2021;Zhong et al., 2021) (see Posen et al. (2018) for a review), this research gap is alarming. ...
... In contrast, PBA triggers problematic searches, that is, PBA signals to decision-makers that something is wrong with their company, which in turn increases their motivation to find alternative solutions to improve performance. However, although a large number of studies have shown that PBA is important for a firm's business decisions (Lim & Mccann, 2014;Yu et al., 2019), there is also evidence that PBA has no impact on such decisions (Desai, 2016;Posen et al., 2018). ...
... This is because a brief period of poor performance (e.g., the presence of PBA) generally does not pose a serious threat to executives unless the poor performance persists over a long period of time (implying the presence of PPBA) (Yang et al., 2021;Yu et al., 2019). At the same time, decisionmakers tend to view a brief period of poor performance (e.g., the presence of PBA) as a random encounter in the course of a business rather than an important signal of a problem (Blagoeva et al., 2020;Posen et al., 2018). Therefore, as pointed out by Piening et al. (2021), executives pay more attention to PPBA than PBA and are more likely to take action to deal with PPBA (Xue et al., 2022). ...
Integrating the behavioral theory of the firm and agency theory, this study is the first to examine the antecedents of firms' choice to disclose low-quality accounting information from the perspective of performance persistence below aspirations. Based on empirical data of 31,326 firm-annual observations involving 3584 listed companies for the 2007–2021 period, we find that firms actively reduce accounting information reliability and comparability in the presence of performance persistence below aspirations. Furthermore, we find that CEO-CFO surname ties enhance the negative effect of performance persistence below aspirations on accounting information comparability. Finally, we find that agency costs play a mediating role in the relationship that performance persistence below aspirations has with accounting information reliability and comparability. This study is the first to examine performance persistence below aspirations and accounting information reliability and comparability. Meanwhile, this study provides important insights for policymakers to improve the quality of capital market information and for shareholders to improve the quality of corporate governance.
... In turn, 'performance below aspirations' may trigger either a high-intensity, 'problemistic search' response to address the underperformance (Posen et al., 2018) or a low-intensity, 'threat rigidity' response to safeguard core capabilities threatened by the underperformance (Osiyevskyy et al., 2017). In this vein, we posit that performance below aspirations leads to increased ego-network competitiveness due to problemistic search (Posen et al., 2018) or decreased ego-network competitiveness due to threat rigidity (Osiyevskyy et al., 2017). ...
... In turn, 'performance below aspirations' may trigger either a high-intensity, 'problemistic search' response to address the underperformance (Posen et al., 2018) or a low-intensity, 'threat rigidity' response to safeguard core capabilities threatened by the underperformance (Osiyevskyy et al., 2017). In this vein, we posit that performance below aspirations leads to increased ego-network competitiveness due to problemistic search (Posen et al., 2018) or decreased ego-network competitiveness due to threat rigidity (Osiyevskyy et al., 2017). ...
... The above-mention research is linked to performance feedback literature, which elucidates that a firm possesses aspirations that define acceptable performance (Greve, 2008;Gavetti et al., 2012;Posen et al., 2018). According to the classic behavioral explanation, performance above or below aspirations lead to increased organizational change. ...
Intra-industry alliance networks provide a firm with both collaborative opportunities and competitive challenges. When forming alliance networks within a particular industry, firms need to consider to which extent they compete in the same markets with their alliance network partners, who are also their industry peers. However, previous literature has not exhaustively addressed the antecedents of a firm's competitive behavior with their alliance network peers – i.e., a phenomenon we label ego-network competitiveness. This study draws on extensive panel data from the top global pharmaceuticals to examine this question. Combining behavioral and network perspectives, we test two competing hypotheses on how ego-network competitiveness varies relative to performance feedback and whether structural prominence moderates this relationship. Our results show that performance above and below aspirations increases ego-network competitiveness through high-intensity responses (i.e., problemistic and slack search). We also find that performance above aspirations increases ego-network competitiveness for firms with high structural prominence.
... performance shortfalls? This question has attracted much scholarly attention (e.g., Hu et al., 2022;Kuusela et al., 2017;Posen et al., 2018). ...
The problemistic search literature has long sought to understand which specific responses firms adopt when addressing performance shortfalls. Extant studies typically consider a few responses and focus on established decision rules to examine search directions. In so doing, they implicitly assume that all responses considered are workable solutions to performance shortfalls. In contrast, we argue that variations in decision-makers’ beliefs about the effectiveness of particular responses in improving firm performance play an important role. These beliefs, as well as evidence supporting them, determine which specific responses firms adopt. To test this argument, we focus on two types of search solutions represented by R&D intensity and philanthropic donation intensity. Based on 2009–2018 data collected from publicly listed Chinese firms, we find that, when decision-makers agree on the effectiveness of R&D, the positive relationship between performance shortfalls and R&D intensity strengthens; whereas when they agree on the effectiveness of corporate social responsibility (CSR), the negative relationship between performance shortfalls and donation intensity weakens. The effects of shared beliefs on the effectiveness of R&D and CSR are stronger when they are supported by relevant evidence, i.e., when there is a stronger correlation between R&D or CSR on the one hand and firm performance on the other.
... The manager's knowledge based on their and firm experience is limited because of human constraints; therefore, the opportunities and solutions they find lead to incremental innovation (Gavetti and Levinthal, 2000). Thus, to generate radical innovation expertise in the corporate innovation process, the managers adopt AI-based advanced technologies such as automation, networks, and machine learning which extend their existing knowledge domain to create a new field (Posen et al., 2018). ...
... In addition, to the best of our knowledge, Jir asek's work (2020) is the only study thus far that has modeled and tested a curvilinear relationship between performance feedback and corporate R&D intensity, meaning that these initial results would benefit from further validation and replication. Given that APGs are integral to triggering corporate strategic searching activities (Cyert & March, 1963;Posen et al., 2017), further investigation of the proposed curvilinear effects is warranted. ...
While extant research shows a curvilinear relationship between aspiration performance gaps and innovation input, we know far less about how vocational experiences of key firm decisions makers may shift this relationship. We propose the concept of executives’ vocational socialization and explore how it influences the relationship between firms’ aspiration performance gaps and innovation input from the perspectives of the behavioral theory of the firm and upper echelons theory. We theorize that two aspects of executives’ vocational socialization, namely, executives’ technical career experience and firm tenure, strengthen the inverted U‐shaped relationship between the negative aspiration performance gap and innovation input and weaken the U‐shaped relationship between the positive aspiration performance gap and innovation input respectively. We test these hypotheses using a panel dataset of 1158 listed firms in China from 2008 to 2017, and the empirical results from switching regression and fixed‐effect models support our hypotheses. Our study contributes to research on the aspiration performance gap, innovation input, and behavioral theory of the firm. This article is protected by copyright. All rights reserved.
... As such, failure may guard against overconfidence and encourage more seeking, learning, and incorporation of new knowledge (Rerup, 2005). It may prompt organization members to take action to find a solution, which typically involves the search for and acquisition of new and unfamiliar knowledge to determine the reasons for the product's failure (Argyris & Schön, 1996;Cyert & March, 1963) and to investigate new technological trajectories that may lead to success (Khanna et al., 2016;Levitt & March, 1988;Posen, Keil, Kim, & Meissner, 2018). ...
Research summary Through a longitudinal study of the product development portfolios of 457 US-based firms in the biotechnology industry, we investigate how prolific inventors shape a firm's innovative direction following product development failure. Contrary to received wisdom, we argue and demonstrate that an increase in the number of prolific inventors is associated with a decrease in firm propensity to pursue novel product innovation following such failure. We further find that the presence of prolific inventors with greater collaborative strength and longer tenure negatively moderate the positive relationship between failure and the pursuit of novel product development. We discuss the implications of our results for existing research on learning from failure and strategic human capital. Managerial summary In case of adverse events such as product development failure, managers often rely on the firm's prolific inventors to help the firm learn from failure. Our study shows that there are limits to this approach. While prolific inventors increase firm propensity for novel product development, such propensity is significantly decreased following product failure. We further establish that the presence of prolific inventors with greater collaborative strength and long tenures is especially likely to reduce firms' pursuit of novel products, while the presence of those with low collaborative strength and tenure tend to increase this propensity.
... Indeed, there are solutions (e.g., refinement of existing resources with existing partners) for relatively immediate improvements in innovation performance to reach the target level (Eggers & Suh, 2019). These solutions aimed at local searches are less likely to generate the variety required to solve novel problems and deliver innovative solutions (Fleming & Sorenson, 2004;Posen et al., 2018). The possibility of achieving performance targets through local searches becomes less as the performance gap increases because substantial performance improvements are less likely to reside in the vicinity of current routines (Puranam et al., 2015). ...
... Second, this study contributes to reconciling problemistic search and threat rigidity effects when a firm performs below the aspiration level by distinguishing situations that are in the neighborhood of aspirations and those that are well below. Although extant research has indicated that the key prediction of problemistic search conflicts with alternative theories (e.g., threat rigidity) when a firm performs below the aspiration level (Shimizu, 2007;Staw et al., 1981), it is still not fully explored how to reconcile these alternative predictions (Posen et al., 2018). The study highlights the shifting-focus model of risk-taking on interpreting underperformance relative to aspirations as a reparable gap or threat and, thus, substantially enriches our understanding of a firm's responses to innovation performance shortfalls in the collaboration network context. ...
Collaboration networks are not intrinsically unstable and fragile, ego-network stability cannot be taken for granted. Extant research has highlighted the determinants of ego-network stability; nevertheless, it is still unclear how behavioral factors affect a firm’s ego-network stability in a collaboration network as a consequence of a decision-maker’s bounded rationality. Drawing from the behavioral theory of the firm and attention-based view, this paper explores how ego-network stability is affected by performance feedback and investigates the influence of CEOs’ information advantage and power on firms’ responses to performance feedback. Using longitudinal data on Chinese publicly listed firms in the pharmaceutical industry from 2007 to 2020, we find that the magnitude of a firm’s outperformance relative to its aspirations harms its ego-network stability. The magnitude of a firm’s underperformance relative to its aspirations has a U-shaped relationship with its ego-network stability. Moreover, CEOs’ social capital and power strengthen the negative relationship between the magnitude of a firm’s outperformance relative to its aspirations and its ego-network stability, and CEOs’ social capital flattens the U-shaped effect of the magnitude of a firm’s underperformance relative to its aspirations on its ego-network stability.
... Prior work showed substantial variance in search behaviors (Billinger et al. 2014), but interestingly, the source of the heterogeneity remains less explored. Conceptual (Simon 1990, Helfat and Peteraf 2015, Posen et al. 2018) and empirical work (Levine et al. 2017, Kiss et al. 2020 suggested cognitive antecedents could help explain this heterogeneity. As Simon (1990) concisely stated, human search behavior is shaped not only by the task environment but also by the "computational capabilities of the actor" (p. 7). ...
... Vuculescu et al. 2021). Overall, our findings strengthen the connection between theoretical models and empirical findings(Puranam et al. 2015, Posen et al. 2018, Baumann et al. 2019).Finally, we contribute to behavioral strategy by providing managers with an improved understanding of cognitive factors important for facilitating distant search behaviors-argued to be a source of competitive advantage in complex settings(Gavetti 2012). Our results may have direct implications for search process governance because we find creative individuals more likely to engage in distant search. ...
Problem-solving in complex environments requires a cognitively demanding search for task solutions. Managing this search process presents a major challenge in organizations. We contribute to the literature on this topic by providing new evidence on the cognitive antecedents that shape how individuals search when engaged in complex problem-solving tasks. We present results from three laboratory studies, wherein 335 individuals solved a complex task. In doing so, they generated behavioral data coupled with survey-based measurements of the individuals’ cognitive styles and performance-based tests of their cognitive abilities. Our data analysis contributes to the current literature by documenting systematic heterogeneity in the persistence and distance of search that can be explained by the participants’ level of creativity, attention to detail, and executive functions. We extend the research on the microfoundations of adaptive search by linking cognitive antecedents with a complex search task, widening our insight into what search behavior certain cognitive microfoundations lead to, and showing how managers can more effectively shape organizational search.
History: This paper has been accepted for the Organization Science Special Issue on Experiments in Organizational Theory.
Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2023.1654 .
... While finding consensus on two types of outcomes-referenced frames (RF) and crafted frames (CF) (Cornelissen & Werner, 2014)-less is known in terms of how these come about. For this reason, Posen et al. (2018) invited scholars to investigate the way problems are formed and the processes leading to these outcomes. Given that innovation is increasingly tasked with ill-defined problems (Abdulla et al., 2020), their complexity, uncertainty and ambiguity are implied (Dunne & Dougherty, 2016;Mumford et al., 1994). ...
... When organizations recognize that performance is below aspiration, they look to innovation to discover solutions that reduce the misalignment between the aspired and actual level of performance (Posen et al., 2018). This misalignment between expectation and reality constitutes the problem (Getzels, 1975) presented to individuals. ...
... In fact, working on the problem space is pivotal to setting the creative endeavour (Abdulla et al., 2020;Unsworth, 2001), as the firm's decision to innovate is likely a by-product of individuals' problem framing (Gavetti & Levinthal, 2000). As Posen et al. (2018) report in their problemistic search theory literature review, avoiding the misalignment between problems and their solutions requires a deeper understanding of how problems are framed. ...
Problem framing is pivotal to fostering knowledge and innovation, especially in the modern environment where problems are often ill defined. However, the managerial literature has thus far mainly addressed problem framing from an outcome perspective, overlooking the processes that lead to the outcomes. A common view is that the complexity, ambiguity and uncertainty of ill‐defined problems call for a creative process. Therefore, through ethnographically observing six design thinking workshops, this study adopts a qualitative approach to explore the problem framing creative process. Specifically, we unpack three thinking modalities involved in the creative process (i.e. creative logics) of problem framing: analogical reasoning, associative thinking and abductive reasoning. We suggest that individuals enact these through seven creative operations. In addition, we link these creative operations to two types of problem framing outcomes: referenced frames and crafted frames. From a practitioner perspective, this study casts new light on the importance of problem framing for creativity and innovation, highlighting the ways in which individuals operationalize the creative logics to frame ill‐defined problems as original problems worth solving.
