The Fog of Feedback: Ambiguity and Firm Responses to Multiple Aspiration Levels

Abstract

This study examines how firms respond to feedback from comparisons of a single performance indicator to multiple aspiration levels. Empirically, we compare firm performance to both historical and social aspiration levels, and examine the impact of the correlation of these two indicators on new products introductions. We argue that three types of feedback  ambiguous (weak correlations), contradictory (negative correlation), and consistent feedback (positive correlation)have different implications for firm responses. Our findings demonstrate that both contradictory and consistent feedback increase a firm’s propensity to respond to feedback. However, ambiguous feedback lowers a firm’s propensity to respond due to motivation and coordination problems that arise when performance signals are ambiguous. Our study builds and augments theories of ambiguity and performance feedback in organizations.