Advances in Strategic Management

Emerald Book Chapter: Top Managerial Cognitions, Past Performance, And Strategic Change: A Theoretical Framework Jerayr Haleblian, Nandini Rajagopalan

Article information:
To cite this document: Jerayr Haleblian, Nandini Rajagopalan, (2005),"Top Managerial Cognitions, Past Performance, And Strategic Change: A Theoretical Framework", Gabriel Szulanski, Joe Porac, Yves Doz, in (ed.) Strategy Process (Advances in Strategic Management, Volume 22), Emerald Group Publishing Limited, pp. 63 - 91 Permanent link to this document: http://dx.doi.org/10.1016/S0742-3322(05)22003-X Downloaded on: 30-08-2012 References: This document contains references to 94 other documents Citations: This document has been cited by 2 other documents To copy this document: permissions@emeraldinsight.com

Access to this document was granted through an Emerald subscription provided by BCU BUCURESTI For Authors: If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service. Information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.com With over forty years' experience, Emerald Group Publishing is a leading independent publisher of global research with impact in business, society, public policy and education. In total, Emerald publishes over 275 journals and more than 130 book series, as well as an extensive range of online products and services. Emerald is both COUNTER 3 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation.
*Related content and download information correct at time of download.

TOP MANAGERIAL COGNITIONS, PAST PERFORMANCE, AND STRATEGIC CHANGE: A THEORETICAL FRAMEWORK
Jerayr Haleblian and Nandini Rajagopalan
Prior empirical work on strategic change and persistence remains both equivocal and incomplete (Rajagopalan & Spreitzer, 1997). It remains equivocal because although it has shown that performance downturns are a major antecedent of strategic change it has not explained why some rms, when faced with performance downturns, respond with strategic changes, while others do not. Moreover, although prior research has shown that strong performance leads to strategic persistence, it has not explained why some rms change their strategy given strong performance. We argue that light may be shed on these questions if the cognitive variables of top managerial performance perceptions, performance attributions, strategic change efcacy, and strategic goals are assessed. In addition, the prior work on strategic change remains incomplete because it has focused on top managers reactive, but not proactive, role in the strategic change process. We develop the argument that top managers efcacy and goals can proactively motivate strategic change. We draw upon cognitive theory within psychology to more accurately assess the mediating and moderating effects of top managers perceptions, attributions, efcacy, and goals on strategic change.

Strategy Process Advances in Strategic Management, Volume 22, 6391 Copyright r 2005 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0742-3322/doi:10.1016/S0742-3322(05)22003-X

63

64

JERAYR HALEBLIAN AND NANDINI RAJAGOPALAN

Finally, we present testable research propositions and identify methodological implications and theoretical extensions for future research. The empirical strategic change literature has identied poor performance as a primary antecedent of strategic change (Rajagopalan & Spreitzer, 1997) and strong performance as a crucial incentive for strategic persistence (e.g., Boeker, 1997). Arguably, strong performance indicates a successful strategy that does not need change, while performance downturns signal that current strategies are no longer effective and require change (Ginsberg, 1988). However, in the broader management literature counterintuitive results have been reported in which (1) poor performance leads to persistence rather than change and (2) good performance results in change rather than persistence (e.g., Sitkin & Pablo, 1992). Given the antecedent condition of performance, then, critical questions remain unexplained. First, when faced with declining performance, why do some rms change their strategies, while others do not? That is, if poor performance is a primary driver of strategic change, why do we nd variance among rms faced with similar performance levels? Second, if strong performance is the main driver of strategic persistence, why do some rms change their strategy given strong performance? Existing theories within the strategic change literature do not explain how poor performance and strong performance can both lead to either strategic change or persistence. Although we do not present a model describing a complete set of factors that could explain these inconsistencies, we draw upon cognitive theory within psychology to shed some light on this question as we argue for the need to assess the inuence of top managerial cognitions to provide better understanding of the effects of past performance on strategic change. In addition, extant empirical research has been grounded solely in a theoretical model that adopts a reactive view of the top managers role in the strategic change process. Hence, recent work has assumed that top managers primarily react to past performance, and are more likely to change strategy when performance is poor (e.g., Grimm, Corsi, & Smith, 1993; Fombrun & Ginsberg, 1990). Because of this orientation, the strategy literature has typically not examined how proactive managerial cognitions and actions may inuence the strategic change process, such that strategic change may follow from good performance. Anecdotal accounts from the business press and published case studies of successful organizations (e.g., Harvard College, 1999; 2000, cases on General Electric, Medtronics) indicate that top managers do anticipate future environments and initiate strategic changes. However, empirical studies have rarely examined how managers proactively inuence and initiate strategic change within their

Top Managerial Cognitions, Past Performance, and Strategic Change

65

organizations (Rajagopalan & Spreitzer, 1997). Hence, we contend an underlying model of strategic change that has not recognized the role of proactive managerial cognitions has inhibited empirical work. We draw upon the cognition literature within psychology to identify two proactive antecedents to strategic change top managers efcacy beliefs and their strategic goals. By efcacy we mean a managerial belief that the rm is capable of changing strategy, and by goals we mean strivings to drive rm performance to a given level. We argue these proactive managerial cognitions shape organizational responses and hence inuence strategic change. Although a stream of research has examined the effects of managerial cognitions as antecedents to strategic change (e.g., Barr, Stimpert, & Huff, 1992; Child & Smith, 1987), our approach differs from this work as we provide a more complete explication of the underlying causal cognitive mechanisms through which strategic changes emerge. Prior empirical research has revealed variations in managerial perceptions and attributions across rms facing the same stimuli (e.g., Ginsberg & Abrahamson, 1991) but has generally not explained the underlying causal mechanisms for differing rm responses. Rather than being theory-driven, the approach in prior research has been phenomenon-driven. This has resulted in a somewhat fragmented examination of managerial cognitions, in which different operational definitions have resulted in limited comparability across studies and, at times, in contradictory empirical ndings (Walsh, 1995). By adopting a theory-driven approach, we not only specify the domain of managerial cognitions but also provide more precisely dened constructs to facilitate empirical testing and cumulative research. Further, prior work on managerial cognitions in strategic change has primarily focused on those cognitions that represent reactions of top managers to changes in rm performance. Our framework also incorporates proactive cognitions efcacy and goal setting into the context of strategic change. We rst discuss the theoretical arguments on the direct effects of past performance, and then we argue that these effects may be better understood when top managerial cognitions are considered. Specifically, we postulate that reactive managerial performance perceptions relative to aspirations mediate the effects of past performance on strategic change, while managerial attributions of the causes of performance moderate these perceptions. We then present theoretical arguments on the inuence of proactive strategic change efcacy and strategic goals on strategic change. After we present our theoretical framework, we provide key definitions, assumptions, and boundary conditions. We conclude by identifying methodological implications, and directions for future research.

66

JERAYR HALEBLIAN AND NANDINI RAJAGOPALAN

THEORETICAL FRAMEWORK AND RESEARCH PROPOSITIONS

In our framework, we examine the inuence of both reactive and proactive cognitive variables on strategic change. Reactive sources that impact strategic change are perceptions and attributions cognitions that determine the what and the why of performance. Perceptions are rst-order cognitions that assess what is the performance feedback: positive or negative? After performance feedback is perceived, attributions are second-order cognitions that attempt to establish why the performance is positive or negative. Given similar levels of performance among rms in an industry, top managers in one rm may view performance as poor while those in another rm may not, and these differing perceptions can lead to different motivational effects on strategic change. Even in the event that performance is perceived similarly across rms, top managers in various rms may still make differing attributions as to the underlying causes of the current performance level, which may also lead to different motivational effects on strategic change. Hence, perceptions and attributions have distinct effects on strategic change and should be distinguished. We will argue that the exogenous indicators of performance initially inuence (rst-order) perceptions of performance as positive or negative, and then they affect (secondorder) attributions about the underlying causes of performance, which are made on the dimensions of (1) controllability, (2) permanence, and (3) pervasiveness. Proactive sources of inuence efcacy and goal setting have rarely been examined within the strategic change literature. In the case of efcacy, top managers are more likely to initiate change when they feel the rm has the capability to successfully change its strategy. In the case of goals, top managers may set standards for future performance that motivate and direct strategic change actions. Specifically, top managers may create a discrepancy between current and future desired performance and then select strategic actions to bridge this gap. In contrast to perceptions and attributions, which represent top managers looking at the past to make sense of prior actions, efcacy and goals represent top managers looking forward as they anticipate future outcomes and strive for given results. Thus, we argue that both reactive and proactive managerial cognitions inuence strategic change. Our theoretical framework is presented in Fig. 1.

Top Managerial Cognitions, Past Performance, and Strategic Change

67

Reactive managerial cognitions P1 TM Attributions Controllability Permanence Pervasiveness P3 P2b

Firm Past Performance Intensity Duration

P2a

TM Perceptions of Past Performance

Magnitude of Firm Strategic Change

Proactive managerial cognitions P4a TM Strategic Change Efficacy P5 P6a TM Strategic Goals P6b Direct effects Moderated effects P4b

Fig. 1.

Theoretical Model.

EXPLAINING ANTECEDENTS TO STRATEGIC CHANGE: DEFINITIONS, ASSUMPTIONS, AND BOUNDARY CONDITIONS

We dene strategic change as any change in the fundamental pattern of present and planned resource deployments and environmental interactions that indicates how the organization will achieve its objectives (Hofer & Schendel, 1978, p. 25). Prior empirical literature has most frequently examined strategic change in terms of changes in patterns of resource allocations at either the business or the corporate level (Rajagopalan & Spreitzer, 1997). Examples of business-level strategic changes include changes in research and development expenditures, marketing expenditures, and product markets (e.g., Fombrun & Ginsberg, 1990; Goodstein & Boeker, 1991). Corporate-level strategic changes

68

JERAYR HALEBLIAN AND NANDINI RAJAGOPALAN

include changes in the type of diversication and the extent of diversication as reected in the composition of the corporate portfolio (e.g., Haveman, 1992). Although strategic change is an organization-level phenomenon, we assume that top managers primarily drive these changes (Finkelstein & Hambrick, 1996). Strategic choice theorists (Child, 1972), upper echelon theorists (Hambrick & Mason, 1984), and proponents of managerial discretion (Hambrick & Finkelstein, 1987) have all argued that a significant amount of the variance in rms strategic responses could be explained if there was a good understanding of how top managers perceive, respond to, and proactively initiate strategic responses. Our assumption is consistent with both the strategic change literature, which relates variations in top managers characteristics to variations in rm-level strategy (Wiersema & Bantel, 1992), and the broader managerial cognition literature, which shows how managerial perceptions shape specific organizational responses (e.g., Gioia & Chittipeddi, 1991; Pettigrew, 1987). Consistent with these two literatures, we argue that the most salient cognitions in understanding organizational responses are those formed at the organizations strategic apex or within its dominant coalition (e.g., Daft & Weick, 1984). These individuals store and interpret information (e.g., Simon, 1991) that inuences managerial actions (e.g., Barr et al., 1992; Lant, Milliken, & Batra, 1992) and leads to strategic change (e.g., Thomas, Clark, & Gioia, 1993). Importantly, while our focus is on the impact of top managerial cognitions on strategic change, we realize that group processes precede these cognitions. Because our focus is on how these shared cognitions affect strategic change, the processes that precede and inuence the emergence of shared cognitions are not included within the scope of our model. However, we do want to comment briefly on how group processes often result in shared cognitions, as forming a consensus from the initial preferences of individual members is the rst task of decision making in groups (Whyte, 1989). Specifically, each top manager interprets the rms performance and its strategic capability, and these cognitions may vary among team members within a rm. However, research has shown that there is a significant commonality of perceptions among managerial elites within a rm (Sutcliffe & Huber, 1998). In addition, cognitions often converge and operate at the group level, resulting in shared interpretations, which have been referred to in the strategy literature as team mental models (Klimoski & Mohammed, 1994), collective cognitive maps (Axelrod, 1976), dominant logic (Prahalad & Bettis, 1986), and strategic consensus (Knight et al., 1999). Although the dispersion of cognitions around the group average varies from small in homogeneous groups to large in heterogeneous groups,

Top Managerial Cognitions, Past Performance, and Strategic Change

69

consensus often results in both types of groups. Research clearly demonstrates that consensus is more likely in homogeneous groups with shared history, accomplishments, and norms (Fischer & Ellis, 1990) or similar demographics (Knight et al., 1999). However, in groups that begin with heterogeneous beliefs consensus may also form in two ways: mediation or domination (Bales & Cohen, 1979). In the case of mediation, differences are resolved as the group process unfolds (Knight et al., 1999; Walsh & Fahey, 1986), which involves the exchanging of multiple views after the team has accumulated and examined information and the integration of individual beliefs into a consensus (Gibson, 2001). In contrast, in the case of domination the cognitions of the powerful stand out and become the consensus view (Bales & Cohen, 1979). Hence, while there may be variations in individual top team member cognitions (Pettigrew, 1987), we assume that in a majority of cases a prevailing set of interpretations will emerge, either by mediation or domination, as the team evaluates the causes of poor performance and the rms strategic abilities. In the case in which heterogeneous beliefs within the top management team (TMT) do not become integrated through a process of consensus building or through domination, a lack of consensus may impede team actions because successful implementation requires a top team act on a common set of priorities. This suggests that shared group cognition may be essential for implementation of policies and decisions.

The Inuence of Past Performance on Strategic Change We begin our theoretical model with an assessment of the inuence of past performance on strategic change. Although the concept has probably been known for centuries (Hobbes, 1651), a substantial amount of psychological research in the rst half of the last century acknowledged rmly the important role of past performance, whereby strong performance (i.e., rewards) tend to increase the likelihood of persistence in current behavior and poor performance (i.e., punishment) tends to increase the likelihood of behavioral change (e.g., Mazur, 2001). Research from the management and nance disciplines has shown a similar relationship between performance and change. Strong rm performance has been shown to lead to organizational persistence (e.g., Audia, Locke, & Smith, 2000; Boeker, 1997; Greve, 1998) while poor rm performance has been associated with CEO change (e.g., Puffer & Weintrop, 1991) and divestitures (e.g., Kaplan & Weisbach, 1992).

70

JERAYR HALEBLIAN AND NANDINI RAJAGOPALAN

Building on the notion that good performance increases persistence while poor performance increases change likelihood, subsequent work in psychology has examined two distinct aspects of past performance its duration and its intensity. Intensity captures the extent of change in a performance dimension during the immediately preceding time period (such as a year). Duration refers to the number of time periods during which there is a consistent trend in performance, either a decline or an improvement. Research has shown that persistence increases with the duration (i.e., reoccurrence) of good performance (e.g., Neef, Shade, & Miller, 1964), and decreases with the duration of poor performance (e.g., Azrin, Holz, & Hake, 1963). Studies have also shown that as good performance intensity increases, so does the likelihood of increased persistence. Likewise, as poor performance intensity increases, so does the likelihood of diminution in persistence and subsequent behavior change (e.g., Neef et al., 1964). By extension, predicting increased or decreased variance in strategic change should involve the assessment of both the duration and intensity of performance. It is interesting that the effects of poor performance on strategic change remain contradictory. Some studies have found that poor performance increases the likelihood of strategic change (e.g., Lant & Mezias, 1992; Lant et al., 1992), while other studies have found no such relationship (Oster, 1982; Wiersema & Bantel, 1992; Grimm et al., 1993). However, a closer examination of prior studies indicates a plausible reason for this contradiction: duration and intensity are only rarely considered together, resulting in the incomplete measurement of prior performance. For example, studies that examine prior performance in cross-sectional settings may capture prior performance intensity but not its duration. This incomplete conceptualization of past performance may explain why these studies nd no consistent evidence of a relationship between poor prior performance and strategic change. In contrast, when studies perform a more complete assessment of past performance, more substantial support is found. For example, Boeker (1989), using a measure of prior performance that assessed both duration and intensity, examined rms performance since their founding and discovered that poor performance contributed to changes in strategy. In another study of strategic change that assessed both duration and intensity, Zajac and Kraatz (1993) also found that organizations with a long history of prior poor performance were more likely to undergo significant strategic changes than organizations with fewer periods of poor performance. Their longitudinal research design (16 years of performance data) permitted a more complete definition of the performance construct than studies that

Top Managerial Cognitions, Past Performance, and Strategic Change

71

only measured performance intensity. Thus, it appears that both the duration and intensity of past performance need to be jointly examined in order to predict subsequent change, suggesting the need for a longitudinal, rather than simply a cross-sectional, assessment of past performance. To summarize, empirical evidence suggests that poor consequences do impact strategic change and that prolonged and intense consequences have a greater likelihood of triggering change than infrequent or mild consequences. Thus, the direct effects of past performance are represented in the following proposition: Research Proposition 1. The greater the duration and intensity of poor performance, the greater will be the magnitude of strategic change. Top Managerial Performance Perceptions Although the inuence of performance consequences was originally emphasized in psychology (i.e., radical behaviorism), the eld gradually shifted and began to acknowledge the role of cognitions as mediating factors that, together with the effects of performance consequences, explain more variance in human behavior than performance consequences alone (Bandura, 1986; Mischel, Cantor, & Feldman, 1996). More recently, empirical strategic change literature has also begun to acknowledge the important role of managerial cognitions in the change process (e.g., Barr et al., 1992; Barr, 1998; Lant et al., 1992). We argue that the causal link from past performance to strategic change needs to recognize the crucial mediating role of top managerial perceptions of performance. That is, while performance inuences change, performance levels may be perceived differently among different rms (Greve, 1998). Hence, a similar level of performance may be viewed as poor within one rm but not in another. Variation across rms in the perception of performance is due in part to their aspiration levels (Grinyer & McKiernan, 1990). Top managers set aspiration levels and then judge performance as poor when it does not meet aspirations. This inevitably leads to different thresholds across rms as to what constitutes poor performance. Aspiration levels may be set relative to a rms prior performance (Cyert & March, 1963; Greve, 1998), which means that they tend to be raised after strong performance (Bandura, 1997). Research has also shown that aspiration levels are set relative to similar others (Festinger, 1954; Lant et al., 1992), particularly those with high performance levels (Bandura, 1986). Performance is perceived relative to

72

JERAYR HALEBLIAN AND NANDINI RAJAGOPALAN

aspiration levels because decision makers use aspiration levels to simplify a continuous performance measurement process into a discrete assessment of good or poor performance (March, 1988). If a downturn is perceived as poor performance, it is likely that this perception will act as a cognitive motivator to drive top managers toward strategic change actions to improve performance. At times, performance will be similarly construed across many rms (Mischel, 1973). As the duration and intensity of poor performance indicators increase (e.g., ROA below industry average for 10 consecutive quarters), the greater the likelihood that performance will be perceived as poor, because the performance will significantly under-perform aspirations across rms. However, when the duration and intensity of poor indicators are less severe (e.g., ROA slightly below industry average for one quarter), the perception of performance is open to more interpretation, because top managers are less certain about whether to classify the situation as poor performance. At the extreme, then, poor performance is construed similarly across top managers in different rms and is uniformly perceived as poor performance in every rm. However, in the middle range, where performance indicators are not so clear, the perception of poor performance differs across rms based, in part, on differing levels of aspirations. Those rms that do not perform up to aspirations will tend to perceive performance as poor and will be more likely to undertake strategic actions. Moreover, the greater the gap between aspirations and performance, the greater is the perceived poor performance, the greater will be the resulting magnitude of strategic change. These arguments together lead to the next two research propositions: Research Proposition 2a. The greater the duration and intensity of poor performance, the more likely top managers will perceive the performance as poor. Research Proposition 2b. The poorer the perceived performance, the greater will be the magnitude of strategic change. The Moderating Inuence of Top Managers Attributions on Strategic Change Psychological research on performance may explain the basic ndings that strong performance leads to persistence and poor performance motivates change (Research Proposition 1). Further, by adding the mediating effects of top managerial perceptions, differing perceptions may explain why one

Top Managerial Cognitions, Past Performance, and Strategic Change

73

rm changes its strategy, while another does not, given similar levels of performance (Research Propositions 2a and 2b). Hence, incorporating the role of performance perceptions allows us to account for greater variance between rms on strategic change. Still more variance on strategic change may be accounted for if the effects of managerial attributions are assessed. Specifically, the effect of performance perceptions on strategic change may be moderated by top managerial attributions, which intensify or attenuate the effect. Perceptions are rstorder effects that mediate the inuence of poor performance on strategic change. If top managers perceive that their rms have been punished, then second-order effects follow, in which managers make causal attributions retrospective judgments as they try to determine the causes of the performance downturns (this idea is further developed below). Based on these attributions, organizations respond differently. Thus, attributions have motivational effects (Bandura, 1997), which moderate the effect of rst-order perceptions on strategic change. Managerial attributions are retrospective judgments of causes. Top managers interpret performance and look for underlying causes to determine why an event has occurred. Attributions give the event meaning and help people anticipate future events (Weiner, 1986). Attribution theory assumes that people are motivated to understand and predict their environment (e.g., Kelly, 1955) and that they are concerned with perceived causes of prior events (Weiner, 1986). The meaning, however, is not inherent in a past event, but rather it depends upon how a person construes the event (Kelly, 1967). This argument is not new. Hume (1739) argued that causality is not inherent in environmental events and that people do not observe causes rather, perceivers of events construct causes in order to make their environments more meaningful. In an organization, as top managers assess rm performance as poor, attributions are made as to the underlying causes. The managers look back and attempt to make sense of prior performance, and their attributions of underlying causes inuence the likely repetition of future actions. Largescale empirical studies, however, have tended to ignore attributions as moderating factors impacting strategic change, even though variability in attributions may result in behavioral differences (Weiner, 1986), and failure to assess attributions may result in under-specied models. As we will explain, causal attributions for past performance may vary based upon the following three dimensions: controllability, permanence, and pervasiveness. Controllability is concerned with the source of the cause (i.e., personal or environmental), permanence with its length, and pervasiveness with its breadth.

74

JERAYR HALEBLIAN AND NANDINI RAJAGOPALAN

Controllability The founder of attribution thinking is Fritz Heider (1958), who argued that people ascribe causal factors either to a person or to the environment. An assumption underlying this characterization is that person-related causes are more controllable than environment-related causes. Subsequent research has shown that individuals are more likely to respond to poor performance with behavioral change when the cause is attributed to person-related rather than environment-related factors (Rotter, 1971). Similarly, strategy research has found that when managers attributed poor performance to external factors, they were less likely to change rm strategies (Lant et al., 1992). When performance downturns are attributed to external causes such competitors actions, changes in regulatory rules, shifts in technological standards, and changes in consumer preferences they are more likely to be viewed as uncontrollable rather than controllable. In contrast, when causes are attributed to internal factors such as an outdated product line, poor manufacturing facilities, or poor customer service, they are more likely to be viewed as controllable rather than uncontrollable. Attributions of controllability give managers some degree of condence in their organizations ability to respond to poor performance, and hence they are positively associated with the likelihood of strategic change (Barr, 1998; Ford, 1985; Ford & Baucus, 1987). We would expect top managerial attributions of poor performance to more uncontrollable factors to be less likely to result in the adoption of new behavior than the attribution to more controllable factors (e.g., Bettman & Weitz, 1983; Fiske & Taylor, 1984; Lant & Mezias, 1992). A classic illustration of the effect of controllability attributions on organizational responses can be found in the differential responses of two major US auto companies to performance decline in the 1970s. Ford Motor Companys managers interpreted the poor performance during the late 1970s as a problem with the companys quality standards, and based on this rm-level attribution they closed several plants. In contrast, Chrysler Corporation interpreted its poor performance as a problem with consumer demand, and based on this external attribution it persisted with past behaviors while appealing for government assistance (Dutton & Duncan, 1987). Some recent studies of strategic change have also highlighted the crucial role of managerial interpretations in explaining whether rms respond to declining organizational performance. Although research has shown that managers are more likely to attribute poor performance to uncontrollable factors (Wagner & Gooding, 1997), when managers attribute performance declines to controllable factors (such as poor strategy), they are more likely to initiate strategic changes (Barr et al., 1992; Lant et al., 1992; Meyer, 1982).

Top Managerial Cognitions, Past Performance, and Strategic Change

75

Permanence As work on attributions developed, it became apparent that some causes are more permanent than others (Weiner, 1986). For instance, a more permanent attribution might be a lack of rm competencies, whereas a lack of company-wide effort could be classied as a more temporary attribution. Similarly, if top managers attribute poor performance to a recession, we would classify this cause as temporary, while we would classify a technological change making our industry irrelevant, as an example of permanent attribution. Hence, the permanence dimension is concerned with time, with the underlying causes of poor performance ranging from temporary to permanent. The more permanent the attribution of causes, the more likely top managers will be to change future actions based on these attributions (Ford & Baucus, 1987). Moreover, we would expect the converse to be true: when managers see performance as caused by temporary problems within or outside the organization, they are less likely to change their strategies. Hence, causal attributions of permanence impact the magnitude of strategic change. Pervasiveness After the dimensions of controllability and permanence, a third dimension pervasiveness was later offered (Abrahamson, Seligman, & Teasdale, 1978), which dealt with the extent to which the cause of poor performance was limited or generalizable across a wider context. In other words, while permanence is concerned with time, pervasiveness is concerned with space. Some causes are specific to a narrow area, while others affect multiple domains of performance. Thus, top managers may view poor rm performance as being caused by a particular function (e.g., a weak marketing function) or an overarching problem that involves numerous functions (e.g., poor R&D, manufacturing, marketing, and human resources). When the cause of poor performance is seen as pervasive, top managers will be more deterred by it, and therefore they will be more likely to consider strategic change (e.g., Dutton & Duncan, 1987).To sum up, controllability, permanence, and pervasiveness will moderate the impact of perceived poor performance on strategic change. This leads us to the following proposition: Research Proposition 3. Top managerial attributions will significantly moderate the effects of perceived poor performance on strategic change. Specifically, the positive effect of perceived poor performance on the

76

JERAYR HALEBLIAN AND NANDINI RAJAGOPALAN

magnitude of strategic change will be stronger: a. The higher the attributed level of controllability of the underlying cause(s). b. The higher the attributed level of permanence of the underlying cause(s). c. The higher the attributed level of pervasiveness of the underlying cause(s). Proactive Cognitions and their Inuence on Strategic Change In the preceding section, we have argued that assessing performance perceptions and attributions can help to explain why poor performance leads to change. Specifically, the more prior aspirations exceed performance, the greater the perceived level of poor performance, which then increases the subsequent magnitude of strategic change. In addition, when the perceived poor performance is seen as controllable, permanent, or pervasive, the positive relationship between perceived poor performance and strategic change strengthens. Assessing perceptions and attributions also may help explain why poor performance can lead to persistence. In such cases, the underlying causes of perceived poor performance are seen as uncontrollable, temporary, contained, or a combination of the three, which reduces the motivation for change and may in fact result in strategic persistence. Perceptions and attributions can also explain why good performance may lead to strategic persistence. When performance exceeds prior aspirations and is classied as good performance, the more likely strategic persistence will follow. Furthermore, when the perceived good performance is viewed as controllable, permanent, or pervasive, the positive relationship between perceived strong performance and strategic persistence strengthens. In other words, very strong performance gives signals to top managers that current strategies are effective and should be continued. Up to this point, though, we have been arguing that top managers react to performance as they assess its nature and underlying causes; hence, the notion portrayed is that top managers are inuenced by past performance outcomes. It is interesting, however, that a history of strong performance (in contrast to recent strong performance) builds top managers beliefs regarding their rms efcacy or strategic capabilities, which aids managers in exerting inuence to control the directions of their rms. Thus, a history of strong performance increases top managers condence in their rms strategic capabilities as they plan and execute strategy, which helps

Top Managerial Cognitions, Past Performance, and Strategic Change

77

to explain the conundrum of why good performance may lead to strategic change. A significant amount of work in psychology has been concerned with discovering the principles of how cognitions promote change (Bandura, 1997). Hence, by drawing on the cognition literature within psychology we may be able to understand how proactive managerial cognitions promote strategic change. We will argue that the two critical forms of proactive managerial cognitions are beliefs regarding strategic change efcacy and the setting of strategic goals. Strategic change efcacy consists of top managers beliefs in their rms capability to change strategy, while strategic goals are anticipatory cognitions translated into performance targets that guide action (Bandura, 1997). It is of interest, however, that the empirical strategic change literature has practically ignored top managers proactive inuence. We argue that top managers plan for an organizations future and set goals that motivate and direct organizational actions. So, while past performance acts on top managers and directs their actions, top managers also act to inuence future performance (Child, 1972). In other words, a significant proportion of top management effort is directed not just at reacting to performance declines but toward cognitive activities whereby strategic change may be inuenced by the self-regulation of actions. Thus, anticipated organizational futures act as cognitive motivators that impact strategic change.

Top Managerial Strategic Change Efcacy Beliefs Albert Bandura is the researcher most associated with work on efcacy, which represent managerial beliefs in the capabilities of rms to exercise control over strategic actions. Efcacy beliefs have been found to be highly predictive of behavior and a powerful source of inuence on choice, indicating that perceptions of future states drive present actions (Bandura, 1997). It is also interesting that efcacy beliefs may drive actions different from those that past performance outcomes might dictate, so that good performance, for example, may lead to change rather than persistence. In the context of strategic change, efcacy is the top managerial belief in a rms capability to execute a particular strategy. More specifically, top managers assess efcacy based on past performance and then develop probabilistic causal expectations about future outcomes of strategic actions based on assessed capability. These are beliefs about what the rm can do under different sets of conditions, and these beliefs, in turn, guide strategy development.

78

JERAYR HALEBLIAN AND NANDINI RAJAGOPALAN

Past performance inuences the formation of efcacy, as top managers estimate capabilities based on prior experience. For instance, performance success increases efcacy beliefs, with the most resilient forms of efcacy resulting from overcoming obstacles through strong effort. On the other hand, performance failure decreases efcacy beliefs, especially if failures occur early and often and attributions of non-controllability are made for the failures (Bandura, 1997). Organizational decision-making requires the coordination, monitoring, and managing of collective efforts, and experience allows top managers to develop rules for effective management. Under such conditions, efcacy beliefs exert substantial impact on the quality of decision-making (Wood & Bandura, 1989). Thus, efcacy beliefs are inuenced by prior experience, but they also inuence future experience. Firms will take action when they hold strong strategic change efcacy beliefs and have outcome expectations that make the effort seem worthwhile. It is important, however, to distinguish efcacy from prior work on expectancy theory. Specifically, expectancy theory assumes that the expectation of effort-driving performance impacts choices. In contrast to effort expectations, efcacy is a broader concept concerned with abilities to produce a level of performance, which are based on skills, knowledge, resources, and capabilities, rather than on effort alone (Wood & Bandura, 1989). It is also worth noting that efcacy research has shown that while efcacy expectations contribute to performance, effort expectations do not (Bandura, 1997), which may account for the relatively weak performance of expectancy theory in predicting organizational actions (Locke & Latham, 1990). Therefore, when top managers believe their rms are capable of changing their strategy and believe that this change will be effective, they are more likely to take strategic change actions (Audia et al., 2000). Efcacy beliefs can also be related to an organizations ability to change a key concept within the strategic change literature (e.g., Dutton & Duncan, 1987). In empirical studies, size and age have been offered as proxies for an organizations ability to change. These proxies have then been related to strategic change, but with mixed results. Some studies have found a negative relationship either between organization size and strategic change (Fombrun & Ginsberg, 1990), or between organization age and strategic change (Kelly & Amburgey, 1991). In contrast, other studies have found a positive relationship between these two proxies and strategic change (Boeker, 1989; Zajac & Kraatz, 1993). Organizational inertia arguments are offered to explain negative ndings, while resource arguments or experience arguments are used to justify positive relationships. However, rather than size and age having a direct effect on strategic change, these variables may inuence

Top Managerial Cognitions, Past Performance, and Strategic Change

79

managerial efcacy beliefs, which in turn shape change behaviors. For one thing, top managers may construe size and age variously within different organizations. For example, while managers in one rm may view size or age as a significant constraint on their ability to effect change, managers in another similarly sized or similarly experienced rm may view the larger resource base or increased experience associated with size or age as significant positive inuences on their ability to execute change. Thus, by relating organizational attributes like size and age to efcacy rather than directly to change, we may be able to reconcile prior contradictory ndings in the empirical change literature. Finally, strong efcacy beliefs promote aspirations, which guide, motivate, and regulate actions (Bandura, 1991). The appraisal of abilities inuences goal setting: strong efcacy beliefs result in the setting of challenging goals, contribute to strategic thinking, and help managers to maintain efforts toward the goals, even when setbacks are experienced (Bandura & Wood, 1989; Locke & Latham, 1990; Prussia & Kinicki, 1996). In other words, efcacy beliefs are an important inuence through which goals create motivational effects. After a difcult accomplishment, those with strong efcacy beliefs tend to set even higher goals that create new challenges to be mastered. Thus, in direct contrast to the notion that good performance breeds only persistence, strong efcacy beliefs contribute to taking on new challenges, even when company performance has been good. Efcacy beliefs, then, are inuenced by past performance, and in turn they inuence both strategic change and goal setting. This leads us to the following propositions: Research Proposition 4a. Performance will inuence managerial strategic change efcacy. Specifically, the greater the duration and intensity of strong performance, the stronger will be the managerial strategic change efcacy beliefs. Research Proposition 4b. Top managerial strategic change efcacy beliefs will directly inuence strategic change. Specifically, the stronger the efcacy beliefs, the greater will be the magnitude of strategic change. Research Proposition 5. Top managerial strategic change efcacy beliefs will impact strategic goal setting. Specifically, the stronger the efcacy beliefs, the more challenging will be the strategic goals. Strategic Goal Setting Goal-setting theory has academic and management precursors, including the work of F. W. Taylor, Peter Drucker, T. A. Ryan, and Kurt Lewin, but

80

JERAYR HALEBLIAN AND NANDINI RAJAGOPALAN

most modern work is associated with Edwin Locke and his colleagues (e.g., G. Latham, C. Earley, M. Erez, C. Lee). Goals are generally dened as desired performance outcomes (Locke & Latham, 1990), and as top managers identify them the intended outcomes have the effect of directing attention, focusing effort, and contributing to persistence (Locke, Shaw, Saari, & Latham, 1981). More specifically, setting a goal is a cognitive comparison process in which a valued standard is set as a challenge that creates a state of disequilibrium. Performance is then assessed relative to the standard, which gives direction to action (Bandura, 1997). The necessary components for goal setting, then, are a standard of performance and feedback that allows the measuring of performance against the standard (Bandura & Cervone, 1983). Based on prior performance and experience with organizational environments, top managers set goals that direct and motivate organizational actions. Thus, goals are often adjusted based on prior performance: if goals are reached, top managers may then raise the bar and increase the performance goals for the rm. In other words, the stronger the prior performance, the more challenging the goals that top managers are likely to set. As with efcacy beliefs, then, goals are not formed in isolation but are based on top managers reections on past performance and on their perceptions of the rms resources and capabilities. Higher standards for rm performance are typically set relative to prior performance (though they may also be set in comparison with another rm), and they lead to performance goal setting (e.g., Lewin, Dembo, Festinger, & Sears, 1944). The more condence top managers have in their rms competencies, resources, and capabilities based on experience, the more likely they are to set higher goals. After the standard is attained, top managers will generally have an improved sense of their rms competencies and are likely to set still-higher standards (e.g., Ryan, 1970). A new standard is then adopted, and this again creates a state of disequilibrium that continues to drive motivation. Therefore, goal setting allows top managers to direct their own motivation, rather than to simply react to events. Modern goal-setting work has shown two primary ndings. First, goals that are challenging (assuming they are accepted) lead to greater effort than do easily achieved goals. Challenging goals direct action to relevant behaviors, inspire continued effort over a longer term, and lead to more benecial outcomes. Second, specific challenging goals lead to greater performance than do vague do your best goals (Locke & Latham, 1990). The more elaborated or detailed a goal is, the more effective it is in motivating action (Mischel & Patterson, 1976). Here is an example of a goal

Top Managerial Cognitions, Past Performance, and Strategic Change

81

set at General Electric, as described by former chairman Jack Welch (Harvard College, 2002). The goal is both specific and challenging:
We never did more than 5 inventory turns, and we said wed go to 10. We had no idea how to get to 10. We published in the annual report that wed do 10. Well do 8 this year. We all know what we are shooting for 200,000 people know what we are shooting for.

When the goals are difcult to meet, increased effort may not be sufcient to achieve targets, and problem solving to discover how targets can be reached may lead to changes in strategy. For example, goal setting at General Electric was sometimes referred to as stretch targets, and the following quote from a General Electric executive suggests that problem solving and innovation are needed to meet stretch goals (Harvard College, 2002):
People like problem solving. They want to go to that next level. However, stretch goals could degenerate into a justication for forcing people to work a 60-hour week to achieve impossible goals. But, its the process you are trying to stimulate. You are trying to get people to think of fundamentally better ways of performing their work.

Importantly, though, goals not only direct attention and mobilize effort but also inuence planning in situations in which goals require the development or modication of strategy (Locke & Latham, 1990). This cognitive task involves an attempt to consider the best means to accomplish the goal: complex or difcult goals often require creative problem solving that may result in a more efcacious process than previously used (Locke et al., 1981; Naylor & Ilgen, 1984). Research has shown that goals lead to more planning (e.g., Bandura & Simon, 1977; Earley & Perry, 1987; Latham & Baldes, 1975), and difcult, specific goals stimulate higher-quality planning (e.g., Earley, Wojnaroski, & Prest, 1987) and are associated with the most effective strategies (Chesney & Locke, 1991; Klein, Whitener, & Ilgen, 1990). To achieve a goal, effort must be exerted, and so goals direct attention and action toward goal-relevant activities. However, if the goal is challenging, sheer effort may not be enough innovation and problem solving may be needed in order to discover suitable strategies for reaching the goal. Less difcult goals activate stored knowledge and skills relevant to meeting the goal, but if goals are difcult their achievement requires more than simply executing learned habits. Therefore, goal setting is relevant to strategy because it often entails a change in strategy to meet the demands of the goal (Locke & Latham, 1990). A strategic change, then, may follow from the setting of goals, particularly if they are difcult and specific. Larry Bossidy, chairman of Allied Signal, Inc., used specific and challenging stretch targets (e.g., increasing earnings per share by 15% annually). Among other things, to reach these

82

JERAYR HALEBLIAN AND NANDINI RAJAGOPALAN

goals, he encouraged strategic change such as the development of new markets and products (Hill & Jones, 2001). In such ways, top managers proactively inuence their environment as they set performance standards to create a state of disequilibrium. Then, in order to reach the strategic goals they have set, they may very well initiate strategic change. To sum up, then, efcacy beliefs may lead to the setting of high goals, and both efcacy beliefs and goals may foster strategic change. This leads to the following two propositions: Research Proposition 6a. Performance will inuence managerial strategic goals. Specifically, the greater the duration and intensity of strong performance, the more challenging will be the goals set. Research Proposition 6b. Top managerial strategic goals will directly inuence strategic change. Specifically, the more challenging and specific the goal, the greater will be the magnitude of strategic change. To summarize our framework, then, the duration and intensity of poor performance affect strategic change. Importantly, however, top managers interpret performance, which contributes to a differing likelihood of strategic change initiatives across rms, even given similar performance. To better understand how top managers interpret performance, we need to understand both their perceptions and attributions of performance. In the case of perceptions, top managers compare their rms current performance to their prior aspiration levels: aspirations exceeding performance are more likely to be seen as poor performance, whereas performance exceeding aspirations is more likely to be viewed as a strong performance. Once performance is perceived as strong or poor, then attributions are made as to its underlying causes its controllability, permanence, and pervasiveness and these attributions, in turn, attenuate or amplify the effects of perceived performance on strategic change. Perceptions and attributions are reactive forms of strategic change, but more proactive forms of strategic change are also possible. Sustained strong performance has the effect of boosting top managers efcacy beliefs in their rms strategic capabilities, which in turn increases the likelihood that more challenging strategic goals will be set. It is interesting, then, that strong performance sets into motion forces for change, as the condence of top managers in rm capability grows, whereby they are more willing to take on strategic changes. And since they have met prior goals, they are more willing to set more difcult goals, which increases strategic change likelihood. Therefore, both reactive and proactive forces impact on strategic change.

Top Managerial Cognitions, Past Performance, and Strategic Change

83

RESEARCH IMPLICATIONS AND EXTENSIONS

A detailed discussion of the methodological implications of our framework is beyond the scope of the current paper. However, in the spirit of demonstrating the testability of our propositions, and in order to encourage empirical work, we offer some specific guidelines for future research that include preferred data sources as well as suggested operationalizations and appropriate levels of analyses of variables within the model. Data Sources and Methodologies for Future Empirical Research Our framework suggests that the direct effects of rm performance (exogenous variable) and the intervening effects of managerial perceptions and cognitions need to be assessed to explain variance in rms strategic change behaviors. We suggest that direct effects of past performance and strategic change/persistence can be assessed through archival data sources (such as annual reports) and external experts such as industry analysts, consultants, and academics (Eisenhardt & Bourgeois, 1988; Tushman & Anderson, 1986). However, to assess managerial perceptions and cognitions (endogenous inuences), data sources and methods more amenable to a managerial frame of reference will be needed, such as decision strategic decision scenarios or primary eld surveys (Hodgkinson, Brown, Maule, Glaister, & Pearman, 1999; Thomas et al., 1993). Thomas et al. (1993), who used decision scenarios to capture top managers interpretations and archival data sources to measure actual changes in rm performance and behaviors, demonstrated how different data sources can be combined to obtain information from both managerial and external frames of reference. Our framework can be tested similarly, because exogenous antecedents can also be measured based on annual reports or external experts. Then, the members of the TMT can be surveyed with an instrument that utilizes multi-item scales of cognitions that map onto the exogenous changes identied through archival sources. Ideally, the exogenous variables would be measured at least one time period prior to the measurement of cognitions and cognitions would be assessed at least one time period prior to the evaluation of strategic change.1 Operationalizing Prior Performance, Managerial Perceptions, and Cognitions Many of the constructs developed in our theoretical framework have yet to be operationalized, and prior research offers only limited guidance in this

84

JERAYR HALEBLIAN AND NANDINI RAJAGOPALAN

regard.2 Hence, we offer preliminary suggestions for empirical measures of our constructs, with the caveat that these measures may need renement before they can be incorporated into a formal empirical test of our propositions. Intensity and Duration of Past Performance Intensity can be dened as the degree of change in a performance dimension during the immediately preceding time period, usually 1 year. Duration refers to the number of time periods during which past performance is being measured (e.g., for poor performance it may refer to the number of time periods during which past performance on the chosen dimensions has been below the industry median, the rms historical median, or has declined). Duration and intensity should be obtained either from archival sources or from non-managerial assessments in order to prevent common methods bias. Since most rms use multiple measures of performance accounting and nancial, qualitative and quantitative duration and intensity need to be multi-dimensional constructs so that they can be mapped onto the rms frame of reference. A preferred method is to ask experts to weight individual performance measures by their level of importance and thus create a weighted index of composite performance.3 Perceived Performance This measure can be based on managerial assessments of the extent to which they perceive the rms past performance to be below, at, or above their aspiration levels for (1) the immediately preceding time period corresponding to the intensity measure and (2) for multiple time periods corresponding to the duration measure. The lower (higher) the level of managerial satisfaction, the greater will be the degree of perceived poor (strong) performance. Thus, poor performance and strong performance could be assessed on the same scale, with low scores denoting higher levels of poor performance. Our approach differs from Greve (1998), who assumed homogenous aspiration levels across all rms (either industry performance or historical performance). We believe, in contrast, that aspirations can themselves vary across top managers in different rms. Hence, instead of using an objectively determined aspiration level and applying the same standard to all rms, we recommend a perceptually based measure of satisfaction that allows for variation in managerial aspirations. Thus, we assume that some rms may compare themselves with the highest performers in the industry to set aspiration levels, while others may use industry average performance,

Top Managerial Cognitions, Past Performance, and Strategic Change

85

and still others may aspire to beat the best recent performance of their own rm. By assessing managerial perceptions of satisfaction relative to their subjective aspirations, we can capture greater variance in the rst-order perceptions of strong and poor performance.

Attributions of Controllability, Permanence, and Pervasiveness These measures need to be operationalized in relation to managers interpretations of the underlying causes of the rms past performance. An assessment of controllability would judge the extent to which managers attribute the rms past performance to causes that are within the control of the rm. The scale developed by Hodgkinson (1992) to measure senior executives attributions of controllability is a noteworthy approach.

Perceived Strategic Change Efcacy Assessing efcacy requires expert knowledge on what it takes to succeed in a given strategy, perhaps supplemented with interviews and questionnaires, in order to identify levels of challenge and impediments to successful strategic performance (Bandura, 1997). Once challenges are understood, top managers can be presented with strategic change scenarios portraying different levels of strategic challenges. In such cases, they rate the strength of their belief in their rms ability to implement the strategic change, which is a judgment of capability, not intention. In the only prior strategic change study that assessed efcacy, a two-item scale assessed respondents condence in achieving predetermined levels of market share (Audia et al., 2000). However, this measure did not clearly distinguish efcacy from strategic goals. A preferred measure would rate efcacy in relation to various strategic change options and would separately assess strategic goals.

Strategic Goals Assessing the degree of specicity and challenge of strategic goals can be construed as a three-step process. In the rst step, top managers may be asked to specify their relevant performance criteria. Then, when the relevant criteria are ascertained, top managers may be asked to identify the performance levels they are trying to attain for the next year (e.g., Locke, Frederick, Lee, & Bobko, 1984). External experts familiar with the rms industry and past performance may then rate performance goals on the dimensions of specicity and challenge.

86

JERAYR HALEBLIAN AND NANDINI RAJAGOPALAN

Extensions and Directions for Future Research We limited the scope of our framework in order to explicate the underlying causal mechanisms that explain the relationship between rm performance and strategic change and to identify the crucial role of managerial cognitions in determining this relationship. This limited scope, however, offers useful directions for future research. To keep our model focused and to more fully develop the underlying theoretical arguments, we assumed the existence of a dominant set of top managerial cognitions as the starting point for our propositions. However, future research can extend our model and examine the antecedents to managerial cognitions. For instance, attributions can stem from variations in top managers prior experiences, functional backgrounds, managerial problem domain familiarity (Sitkin & Pablo, 1992), and organizational control systems (Grinyer & McKiernan, 1990). Similarly, in addition to prior rm experiences, strategic change efcacy beliefs may be shaped by vicarious experience as the performance of other rms is assessed, or from the inuence of analysts, industry experts, or respected others who might convince top managers of their rms capabilities (Bandura, 1997). Thus, antecedents to top managerial cognitions should be explored. For the sake of simplicity and clarity, we also separately examined the role of reactive (perceived performance and attributions) and proactive (efcacy beliefs and goals) cognitions. However, examining the interactions between the reactive and proactive components could also usefully extend our model. These cognitive forces operate simultaneously, and more work is needed to provide understanding of their relative importance and mutual interactions in explaining strategic change. In addition, although we identied the dominant role of managerial cognitions in the change process, there are several variables that limit managerial discretion stemming from organizational inertia (Hannan & Freeman, 1984) and resource constraints (Pfeffer & Salancik, 1978). While our model accommodates these variables through their effects on managers efcacy beliefs and strategic goals, we recognize that these factors can also have direct effects on the magnitude of strategic change. For that reason, empirical tests of our model should incorporate controls for other significant but non-cognitive sources of variations in rm strategies. Including such controls in conjunction with the direct, mediating, and moderating effects identied in our model would contribute to a more completely specied theoretical model of strategic change. To sum up the paper as a whole, we made a distinct theoretical contribution by identifying and elaborating upon the underlying cognitive

Top Managerial Cognitions, Past Performance, and Strategic Change

87

dynamics and their causal effects in the strategic change process. We believe that our theory provides a compelling and logical justication for the inuence of top managerial cognitions on strategic change and that it helps ll the black box between past performance and strategic change.

NOTES
1. Thus, in a longitudinal research design, exogenous changes would be measured for tn to t; cognitions at time t; and strategic change from t to t+i, in which n and i capture the duration over which change is conceptualized. 2. The exception to this observation is our dependent variable magnitude of strategic change. Operational measures for both corporate and business-level strategic change can be readily found in extant empirical literature (Rajagopalan & Spreitzer, 1997). Hence, we do not offer a distinct measure for this construct. 3. Performance measures typically depend on the industry and thus need to be assessed in relation to accepted industry norms. Single-industry studies that compare multiple rms using the same performance criteria would offer the simplest and most accurate test of our propositions; however, multi-industry studies that carefully control for industry-level variations can also offer a meaningful test of our framework.

REFERENCES
Abrahamson, L. Y., Seligman, M. E. P., & Teasdale, J. (1978). Learned helplessness in humans: Critique and reformulation. Journal of Abnormal Psychology, 87, 4974. Audia, P. G., Locke, E. A., & Smith, K. G. (2000). The paradox of success: An archival and a laboratory study of strategic persistence following radical environmental change. Academy of Management Journal, 43, 837853. Axelrod, R. (1976). The structure of decision: The cognitive maps of political elites. Princeton, NJ: Princeton University Press. Azrin, N. H., Holz, W. C., & Hake, D. F. (1963). Fixed-ratio punishment. Journal of the Experimental Analysis of Behavior, 6, 141148. Bales, R. F., & Cohen, S. P. (1979). Symlog: A system for the multiple-level observation of groups. New York: The Free Press. Bandura, A. (1986). Social foundations of thought and action: A social cognitive perspective. Englewood Cliffs, NJ: Prentice-Hall. Bandura, A. (1991). Social cognitive theory of self-regulation. Organizational Behavior and Human Decision Processes, 50, 248287. Bandura, A. (1997). Self-efcacy: The exercise of control. New York: W.H. Freeman and Company. Bandura, A., & Cervone, D. (1983). Self-evaluative and self-efcacy mechanisms governing the motivational effects of goal systems. Journal of Personality and Social Psychology, 45, 10171025.

88

JERAYR HALEBLIAN AND NANDINI RAJAGOPALAN

Bandura, A., & Simon, K. M. (1977). The role of proximal intentions in self-regulation of refractory behavior. Cognitive Therapy and Research, 1, 177193. Bandura, A., & Wood, R. E. (1989). Effect of perceived controllability and performance standards on self-regulation of complex decision-making. Journal of Personality and Social Psychology, 56, 805814. Barr, P. S. (1998). Adapting to unfamiliar environmental events: A look at the evolution of interpretation and its role in strategic change. Organization Science, 9, 644669. Barr, P. S., Stimpert, J. L., & Huff, A. S. (1992). Cognitive change, strategic action, and organizational renewal. Strategic Management Journal, 113, 1536. Bettman, J. R., & Weitz, B. A. (1983). Attributions in the boardroom: Causal reasoning in corporate annual reports. Administrative Science Quarterly, 28, 165183. Boeker, W. (1989). Strategic change: The effects of founding and history. Academy of Management Journal, 32, 489515. Boeker, W. (1997). Strategic change: The inuence of managerial characteristics and organizational growth. Academy of Management Journal, 40, 152170. Chesney, A. A., & Locke, E. A. (1991). An examination of the relationship among goal difculty, business strategies, and performance on a complex management stimulation task. Academy of Management Journal, 34, 400424. Child, J. (1972). Organization structure, environment and performance: The role of strategic choice. Sociology, 6, 122. Child, J., & Smith, C. (1987). The context and process of organizational transformation Cadbury limited in its sector. Journal of Management Studies, 24, 565593. Cyert, R. M., & March, J. G. (1963). A behavioral theory of a rm. Englewood Cliffs, NJ: Prentice-Hall. Daft, R. L., & Weick, K. E. (1984). Toward a model of organizations as interpretation systems. Academy of Management Review, 9, 284295. Dutton, J. E., & Duncan, R. B. (1987). The inuence of the strategic planning process on corporate change. Strategic Management Journal, 8, 103116. Earley, P. C., & Perry, B. C. (1987). Work plan availability and performance: An assessment of task strategy priming on subsequent task completion. Organizational Behavior and Human Decision Processes, 39, 279302. Earley, P. C., Wojnaroski, P., & Prest, W. (1987). Task planning and energy expended: Exploration of how goals inuence performance. Journal of Applied Psychology, 72, 107114. Eisenhardt, K. M., & Bourgeois, L. J. (1988). Politics of strategic decision making in highvelocity environments. Academy of Management Journal, 31, 737770. Festinger, L. (1954). A theory of social comparison processes. Human Relations, 7, 117140. Finkelstein, S., & Hambrick, D. (1996). Strategic leadership: Top executives and their effect on organizations. Minneapolis: West Publishing. Fischer, A. B., & Ellis, D. G. (1990). Small group decision-making. New York: McGraw-Hill. Fiske, S. T., & Taylor, S. E. (1984). Social cognition. New York: Random House. Fombrun, C., & Ginsberg, A. (1990). Shifting gears: Enabling and disabling forces on changes in corporate aggressiveness. Strategic Management Journal, 11, 297308. Ford, J. D. (1985). The effects of causal attributions on decision makers responses to performance downturns. Academy of Management Review, 10, 770786. Ford, J. D., & Baucus, D. A. (1987). Organizational adaptation to performance downturns: An interpretation-based perspective. Academy of Management Review, 12, 366380.

Top Managerial Cognitions, Past Performance, and Strategic Change

89

Gibson, C. B. (2001). From knowledge accumulation to accommodation: Cycles of collective cognitions in work groups. Journal of Organizational Behavior, 22, 121134. Gioia, D. A., & Chittipeddi, K. (1991). Sensemaking and sensegiving in strategic change initiation. Strategic Management Journal, 12, 433448. Ginsberg, A. (1988). Measuring and modeling changes in strategy: Theoretical and empirical directions. Strategic Management Journal, 9, 559575. Ginsberg, A., & Abrahamson, E. (1991). Champions of change and strategic shifts: The role of internal and external change advocates. Journal of Management Studies, 28, 173190. Goodstein, J., & Boeker, W. (1991). Turbulence at the top: A new perspective on governance structure changes and strategic change. Academy of Management Journal, 34, 306330. Greve, H. R. (1998). Performance, aspirations, and risky organizational change. Administrative Science Quarterly, 43, 5886. Grimm, C. M., Corsi, T. M., & Smith, K. G. (1993). Determinants of strategic change on the LTL motor carrier industry: A discrete-choice analysis. Transportation Journal, 32, 5663. Grinyer, P., & McKiernan, P. (1990). Generating major change in stagnating companies. Strategic Management Journal, 11, 131147. Hambrick, D. C., & Finkelstein, S. (1987). Managerial discretion: A bridge between polar views of organizational fates. In: B. Staw & L. L. Cummings (Eds), Research in organizational behavior (pp. 369406). Greenwich, CT: JAI Press. Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: The organization as a reection of its top managers. Academy of Management Review, 9, 193206. Hannan, M. T., & Freeman, J. (1984). Structural inertia and organizational change. American Sociological Review, 49, 149164. Harvard College, President, & Fellows of. (1999). GE compilation: Jack Welch 19811999. Harvard Business School Video, 300511. Harvard College, President, & Fellows of. (2000). Medtronic: Vision 2010. Harvard Business School Case, 9800357. Harvard College, President, & Fellows of. (2002). GEs two-decade transformation: Jack Welchs leadership. Harvard Business School Case, 9399150. Haveman, H. A. (1992). Between a rock and a hard place: Organizational change and performance under conditions of fundamental environmental transformation. Administrative Science Quarterly, 37, 4875. Heider, F. (1958). The psychology of interpersonal relations. New York: Wiley. Hill, C. W., & Jones, G. R. (2001). Strategic management theory. Boston: Houghton Mifin. Hobbes, T. (1651). Leviathan. Cambridge, UK: Cambridge University Press. Hodgkinson, G. P. (1992). Development and validation of the strategic locus of control scale. Strategic Management Journal, 13, 311317. Hodgkinson, G. P., Brown, N., Maule, A. J., Glaister, K. W., & Pearman, A. D. (1999). Breaking the frame: An analysis of strategic cognition and decision making under uncertainty. Strategic Management Journal, 20, 977985. Hofer, C., & Schendel, D. (1978). Strategy formulation: Analytical concepts. St. Paul: West Publishing Company. Hume, D. (1739). A treatise of human nature. London: Clarendon. Kaplan, S. N., & Weisbach, M. S. (1992). The success of acquisitions: Evidence from divestitures. Journal of Finance, 47, 107138. Kelly, D., & Amburgey, T. L. (1991). Organizational inertia and momentum: A dynamic model of strategic change. Academy of Management Journal, 34, 591612.

90

JERAYR HALEBLIAN AND NANDINI RAJAGOPALAN

Kelly, G. A. (1955). The psychology of personal constructs. New York: W. W. Norton. Kelly, H. H. (1967). Attribution theory in social psychology. In: D. Levine (Ed.), Nebraska symposium on motivation. Lincoln, NE: University of Nebraska Press. Klein, H. J., Whitener, E. M., & Ilgen, D. R. (1990). The role of goal specicity in the goal setting process. Motivation and Emotion, 14, 179193. Klimoski, R., & Mohammed, S. (1994). Team mental model: Construct and metaphor. Journal of Management, 20, 403427. Knight, D., Pearce, C. L., Smith, K. G., Olian, J. D., Sims, H. P., Smith, K. A., & Flood, P. (1999). Top management team diversity, group process, and strategic consensus. Strategic Management Journal, 20, 445465. Lant, T. K., & Mezias, S. J. (1992). An organizational learning model of convergence and reorientation. Organization Science, 3, 4771. Lant, T. K., Milliken, F. J., & Batra, B. (1992). The role of managerial learning and interpretation in strategic persistence and reorientation: An empirical exploration. Strategic Management Journal, 13, 585608. Latham, G. P., & Baldes, J. J. (1975). The practical significance of Lockes theory of goal setting. Journal of Applied Psychology, 60, 122124. Lewin, K., Dembo, T., Festinger, L., & Sears, P. (1944). Level of aspiration. In: J. McVHunt (Ed.), Personality and the behavior disorders (Vol. 1). New York: Ronald. Locke, E. A., Frederick, E., Lee, C., & Bobko, P. (1984). Effect of self-efcacy, goals, and task strategies on task performance. Journal of Applied Psychology, 69, 241251. Locke, E. A., & Latham, G. (1990). A theory of goal setting and task performance. Englewood Cliffs, NJ: Prentice-Hall. Locke, E. A., Shaw, K. A., Saari, L. M., & Latham, G. P. (1981). Goal setting and task performance: 19691980. Psychological Bulletin, 90, 125152. March, J. G. (1988). Variable risk preferences and adaptive aspirations. Journal of Economic Behavior and Organizations, 9, 524. Mazur, J. E. (2001). Learning and behavior. Upper Saddle River, NJ: Prentice-Hall. Meyer, A. D. (1982). Adapting to environmental jolts. Administrative Science Quarterly, 27, 515537. Mischel, W. (1973). Toward a cognitive social learning reconceptualization of personality. Psychological Review, 80, 252283. Mischel, W., Cantor, N., & Feldman, S. (1996). Principles of self-regulation: The nature of willpower and self-control. In: E. T. Higgins & A. W. Kruglanski (Eds), Social psychology: Handbook of basic principles (pp. 329360). New York: Guilford Press. Mischel, W., & Patterson, C. J. (1976). Substantive and structural elements of effective plans for self-control. Journal of Personality and Social Psychology, 28, 172179. Naylor, J. C., & Ilgen, D. R. (1984). Goal setting: A theoretical analysis of a motivational technology. Research in Organization Behavior, 6, 95140. Neef, N. A., Shades, D., & Miller, M. S. (1964). Assessing inuential dimensions of reinforcers on choice in students with serious emotional disturbances. Journal of Applied Behavioral Analysis, 27, 575583. Oster, S. (1982). Intra-industrial structure and the ease of strategic change. Review of Economics and Statistics, 64, 376383. Pettigrew, A. (1987). Context and action in the transformation of the rm. Journal of Management Studies, 24, 649670.

Top Managerial Cognitions, Past Performance, and Strategic Change

91

Pfeffer, J., & Salancik, G. (1978). The external control of organizations: A resource dependence perspective. New York: Harper & Row. Prahalad, C. K., & Bettis, R. A. (1986). The dominant logic: A new linkage between diversity and performance. Strategic Management Journal, 7, 485501. Prussia, G. E., & Kinicki, A. J. (1996). A motivational investigation of group effectiveness using social cognitive theory. Journal of Applied Psychology, 81, 187198. Puffer, S. M., & Weintrop, J. (1991). Corporate performance: The role of performance expectations. Administrative Science Quarterly, 36, 119. Rajagopalan, N., & Spreitzer, G. M. (1997). Toward a theory of strategic change: A multi-lens perspective and integrative framework. Academy of Management Review, 22, 4879. Rotter, J. B. (1971). External control and internal control. Psychology Today, 5, 3742. Ryan, T. A. (1970). Intentional behavior. New York: Ronald Press. Simon, H. A. (1991). Bounded rationality and organizational learning. Organization Science, 2, 125134. Sitkin, S. B., & Pablo, A. L. (1992). Reconciling the determinants of risk behavior. Academy of Management Review, 17, 938. Sutcliffe, K. M., & Huber, G. P. (1998). Firm and industry determinants of executive perceptions of the environment. Strategic Management Journal, 19, 793807. Thomas, J. B., Clark, S. M., & Gioia, D. A. (1993). Strategic sensemaking and organization performance: Linkage among scanning, interpretation, action and outcomes. Academy of Management Journal, 36, 239271. Tushman, M. L., & Anderson, P. A. (1986). Technological discontinuities and organizational environments. Administrative Science Quarterly, 31, 439465. Wagner, J. A., & Gooding, R. Z. (1997). Equivocal information and attribution: An investigation of patterns of managerial sense-making. Strategic Management Journal, 18, 275286. Walsh, J. P. (1995). Managerial and organizational cognition: Notes from a trip down memory lane. Organization Science, 6, 280321. Walsh, J. P., & Fahey, L. (1986). The role of negotiated belief structures in strategy making. Journal of Management, 12, 325338. Weiner, B. (1986). An attributional theory of motivation and emotion. New York: Springer. Whyte, G. (1989). Groupthink reconsidered. Academy of Management Review, 14, 4056. Wiersema, M. F., & Bantel, K. A. (1992). Top management team demography and corporate strategic change. Academy of Management Journal, 35, 91121. Wood, R. E., & Bandura, A. (1989). Social cognitive theory of organizational management. Academy of Management Review, 14, 361384. Zajac, E. J., & Kraatz, M. S. (1993). A diametric forces model of strategic change: Assessing the antecedents and consequences of restructuring in the higher education industry. Strategic Management Journal, 14, 83102.