Conflict inside and outside: Social comparisons and attention shifts in multidivisional firms

Abstract

Research summary: Behavioral Theory highlights the crucial role of social comparisons in attention allocation in adaptive aspirations. Yet, both the specification of social reference points and the dynamics of attention allocation have received little scholarly examination. We address performance feedback from two social reference points relative to divisions in multidivisional firms: economic reference point and political reference point. Comparing divisional performance with the two reference points can give consistent or inconsistent feedback, which has important consequences for the dynamics of attention allocation in adaptive aspirations. We find consistent feedback leads to more attention to own experience, while inconsistent feedback results in more attention to the social reference point the focal division underperforms. Results reveal that political reference point plays an important role in determining managerial attention allocation.Managerial summary: This article is based on how goal-based performance of divisions relative to both their relevant external market rivals and sister divisions in multidivisional firms influences corporate resource allocation. As a result, various combinations of performance against the two groups of peers drive the reallocation of divisional management attention. We show that specific attention shifts occur on average as a function of the focal division's performance relative to the marketplace performance and that of sister divisions. Copyright (c) 2016 John Wiley & Sons, Ltd.