Adaptive Aspirations and Performance Heterogeneity: Attention Allocation Among Multiple Reference Points

Abstract

Organizations learn and adapt their aspiration levels based on reference points (prior aspiration, prior performance, and prior performance of reference groups). The relative attention that organizations allocate to these reference points impacts organizational search and strategic decisions. However, very little research has explored this. Therefore, we build a recursive feedback model of learning from organizational experience that explains heterogeneity of attention allocation to the reference points in adaptive aspirations. In a sample of the German magazine industry (1972–2010) we find when early in their life cycle and as they or their parent company age, organizations tend to focus more on their own aspirations; however, when at the verge of bankruptcy, they increase their attention to competitors’ performance.

Keywords: aspiration adaptation, attention allocation, experience, feedback loops, learning