| Abstract |
This study develops a cross-level model of performance feedback in corporate hierarchies. We examine how the corporate office in Korean business groups affects the R&D search behavior of member firms. Extending the behavioral theory of the firm, we propose and test hypotheses on how the cognitive accessibility of member firms’ performance and R&D activities to group-level managers shapes performance feedback of member firms. Consistent with our theory, we find, first, that when the prevalence of underperformance of member firms increases at the group level, underperforming member firms reinforce their R&D search. Second, for business groups more focused on R&D, the effects of underperformance on R&D intensity are larger. Finally, for members firms that share the same name as the business group, underperformance strengthens their R&D search. |