Academic Abstract

Performance feedback theory (PFT) proposes that performance shortfalls trigger problemistic search followed by strategic change. However, empirical studies report inconsistent results, suggesting that organizational responses depend on the type of feedback considered and the pathways through which firms attempt to restore performance. To reconcile these conflicting findings, we conducted a meta-analysis of 74 performance feedback studies and integrated PFT with regulatory focus theory to explain when and how organizations respond to performance shortfalls. Our findings show that historical shortfalls (comparisons with a firm's past performance) are associated with strategic change, whereas social shortfalls (comparisons with peers) lead to stability through increased R&D intensity. We also demonstrate that strategic change and R&D intensity represent distinct behavioral outcomes of the feedback process that vary independently rather than unfolding in a fixed sequence. These findings advance PFT by highlighting the differentiated impact of feedback types and provide practical insights for managers seeking to assess the performance of their firms.

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