Attributing Performance Failures with Two Aspiration Levels

Organization tries to adapt to its environment by learning from its performance feedback generated from the comparison between performance and the aspiration level, which leads the organization to make adaptive decisions accordingly. Even though the sources of aspiration level are theoretically different, the line of empirical research has treated as if organization processes the performance feedbacks from historical and social aspirations as identical, assuming that the organization tries to explore to solve the negative performance feedback. However, this paper argues that this approach misleads the organizational decision making processes in two ways: neither it explains the decision makers’ different psychological dynamics of organizational decision making processes, nor it addresses the organization’s rigidity when it perceives the poor performance as external threat. Therefore, this paper focuses on the distinguished features of each historical and social aspiration, and tries to understand the different mechanisms when the organization attributes its failure to each aspiration. We also show how organization explores when the feedbacks from the two aspirations correspond and when does not correspond, since organization considers both social and historical performance feedback simultaneously. To empirically test our hypotheses, we analyzed 2,432 firm-year data of 323 South Korean Shipbuilding firms from 2000 to 2014 and provide evidence to support our hypotheses.