Assistant Professor of Strategy, Fuqua School of Business, Duke University
"Corporate Structure, Performance Feedback and New Product Launches in Multi-divisional Firms" (with Vibha Gaba)
This paper examines the effects of corporate and business unit performance feedback on new product introductions in the multi-divisional firm. We depart from previous studies which have focused on unitary firms or implicitly ignored the unique goals embedded within the corporate structure. We propose that because the corporate structure segments attention to goals, responses to performance feedback at the corporate and business unit levels diverge. We find that business units respond to negative feedback in a manner consistent with failure-induced change models, whereas corporate units demonstrate threat-rigidity and status quo behavior. We further argue that goals and corresponding feedback may be prioritized through the corporate structure. Our results show that because the corporate unit shapes what business units attend to, the corporate unit’s performance feedback both dominates and attenuates business unit responses to performance changes.