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Single Stimuli, Multiple Responses: Performance Feedback and Firms' R&D Changes

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  • Michal Jirásek

Abstract

The behavioral theory of the firm assumes that firms react on performance feedback by increasing their search for alternative courses of action. However, the empirical literature is full of contradictory findings. This paper puts forward the idea that at least part of these contradictions can be explained if we can identify groups of firms behaving differently from firms in other groups and theoretical propositions. The paper uses exploratory analysis of US and German industrial firms and changes in R&D expense as their response to financial performance feedback. The cluster analysis of behavioural patterns of these firms results in identifying several behaviourally distinctive groups. The findings support the idea that contradictions in previous studies may partially stem from having a different mix of heterogeneously behaving firms. Also, they point to the proposition that for further understanding of responses to performance feedback, these groups of firms should be analysed separately.

Suggested Citation

  • Michal Jirásek, 2020. "Single Stimuli, Multiple Responses: Performance Feedback and Firms' R&D Changes," Prague Economic Papers, Prague University of Economics and Business, vol. 2020(4), pages 381-402.
  • Handle: RePEc:prg:jnlpep:v:2020:y:2020:i:4:id:734:p:381-402
    DOI: 10.18267/j.pep.734
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    More about this item

    Keywords

    Behavioral theory of the firm; performance feedback; R& D expense; ROA; US industrial firms;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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