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Exploration and Negative Feedback – Behavioral Learning, Escalation of Commitment, and Organizational Design


Keil, Thomas; Kuusela, Pasi; Stieglitz, Nils (2019). Exploration and Negative Feedback – Behavioral Learning, Escalation of Commitment, and Organizational Design. In: Joseph, John; Baumann, Oliver; Burton, Richard; Srikanth, Kannan. Organization Design. USA: Emerald Publishing Limited, 147-176.

Abstract

How do organizations respond to negative feedback regarding their innovation activities? In this chapter, the authors reconcile contradictory predictions stemming from behavioral learning and from the escalation of commitment (EoC) perspectives regarding persistence under negative performance feedback. The authors core argument suggests that the seemingly contradictory psychological processes indicated by these two perspectives occur simultaneously in decision makers but that the design of organizational roles and reward systems affects their prevalence in decision-making tasks. Specifically, the authors argue that for decision makers responsible for an individual project, responses given to negative performance feedback regarding a project are dominated by self-justification and loss-avoidance mechanisms predicted by the EoC literature, while for decision makers responsible for a portfolio of projects, responses to negative performance regarding a project are dominated by an under-sampling of poorly performing alternatives that behavioral learning theory predicts. In addition to assigning decision-making authority to different organizational roles, organizational designers shape the strength of these mechanisms through the design of reward systems and specifically by setting more or less ambiguous goals, aspiration levels, time horizons of incentives provided, and levels of failure tolerance.

Abstract

How do organizations respond to negative feedback regarding their innovation activities? In this chapter, the authors reconcile contradictory predictions stemming from behavioral learning and from the escalation of commitment (EoC) perspectives regarding persistence under negative performance feedback. The authors core argument suggests that the seemingly contradictory psychological processes indicated by these two perspectives occur simultaneously in decision makers but that the design of organizational roles and reward systems affects their prevalence in decision-making tasks. Specifically, the authors argue that for decision makers responsible for an individual project, responses given to negative performance feedback regarding a project are dominated by self-justification and loss-avoidance mechanisms predicted by the EoC literature, while for decision makers responsible for a portfolio of projects, responses to negative performance regarding a project are dominated by an under-sampling of poorly performing alternatives that behavioral learning theory predicts. In addition to assigning decision-making authority to different organizational roles, organizational designers shape the strength of these mechanisms through the design of reward systems and specifically by setting more or less ambiguous goals, aspiration levels, time horizons of incentives provided, and levels of failure tolerance.

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Additional indexing

Item Type:Book Section, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Social Sciences & Humanities > Economics, Econometrics and Finance (miscellaneous)
Social Sciences & Humanities > Strategy and Management
Language:English
Date:2019
Deposited On:21 Aug 2019 09:58
Last Modified:16 Apr 2020 00:03
Publisher:Emerald Publishing Limited
Series Name:Advances in Strategic Management
Number:40
ISBN:978-1-78756-330-8 (P) 978-1-78756-329-2 (E)
OA Status:Closed
Publisher DOI:https://doi.org/10.1108/S0742-332220180000040005
Other Identification Number:merlin-id:17330

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