Performance Feedback in Hierarchical Business Groups : The Cross-Level Effects of Cognitive Accessibility on R&D Search Behavior

This study examines the cross-level effect of group-level managers on member firms' problemistic search in hierarchical business groups. Using multi-level data from Korean business groups, we propose that the effects of failure to meet an aspiration level on R&D search intensity increase when member firm performance and R&D investments are more cognitively accessible to group-level managers. Specifically, we find, first, that when underperforming firms are widespread in a business group, a focal member firm intensifies R&D search in response performance below an aspiration level because member firm performance, as a group-level problem, becomes cognitively accessible to group-level managers. Second, as member firms operating in R&D intensive industries are more prevalent in a business group, R&D investments, as a search solution, become more cognitively accessible to group-level managers. Thus, a focal member firm reinforces R&D search in response to the performance shortfall. We discuss the implications of these findings for research on the behavioral theory of the firm and performance feedback