Prior Experience of Managers and Maladaptive Responses to Performance Feedback: Evidence from Mutual Funds

• 成果类型: Article
• 署名作者: Gaba, Vibha; Lee, Sunkee; Meyer-Doyle, Philipp; Zhao-Ding, Amy
• 署名单位: INSEAD Business School; Carnegie Mellon University; Technical University of Munich
• 刊物名称: ORGANIZATION SCIENCE
• ISSN/ISSBN: 1047-7039
• DOI: 10.1287/orsc.2022.1605
• 发表日期: 2023
• 页码: 894-915
• 关键词: performance feedback; prior experience; human capital; Organizational learning; behavioral theory of the firm; overconfidence; microfoundations of firm behavior and performance

摘要

In this study, we examine how the prior experiences of decision makers systematically influence their assessment of and responses to negative performance feedback. We posit that, although greater and more specialized experiences enable managers to build relevant knowledge and expertise in specific domains, they also make them overconfident in their abilities and strategies. Such experience-induced overconfidence further leads to distortions in the performance assessment process, hindering a firm's ability to recognize and respond to poor performance. We empirically test these arguments in the context of U.S. mutual fund managers making investment decisions in response to fund performance below aspirations. As hypothesized, we find that more experienced and more specialized fund managers change their investment decisions less when faced with negative performance feedback than managers who are less experienced and less specialized. In additional analyses, we further showthat the lower responsiveness of more experienced (specialized) managers is associated with the fund's lower future performance, supporting our proposed theoretical mechanism (overconfidence). This study augments existing performance feedback research by showing how decision makers' prior experience can impede problem-solving behavior in organizations. It also contributes to the literature on human capital and organizational learning by documenting an unintended consequence of accumulated human capital on firm adaptive behavior.