Beyond Collaborative Network Communities: Innovation Performance Feedback and the Formation of New Bridging Ties

Abstract Although extant research has highlighted the tangible benefits of bridging ties that interlink network communities, our understanding of the determinants of a firm's propensity to form new bridging ties is scarce. Drawing on the behavioral theory of the firm, we conceptualize the formation of new bridging ties as a consequence of decision-makers' bounded rationality and verify the effect of performance feedback on the share of new bridging ties. Additionally, we contend that decisions regarding forming new bridging ties in response to performance feedback are bounded by CEOs' experience. We use a longitudinal dataset of Chinese publicly listed firms in the pharmaceutical industry from 2010 to 2020. The results indicate that the magnitude of a firm's outperformance relative to its aspirations positively affects the share of new bridging ties, while the magnitude of a firm's underperformance relative to its aspirations has an inverted U-shaped relationship with the share of new bridging ties. CEOs' academic and political experience strengthens the positive relationship between the magnitude of a firm's outperformance relative to its aspirations and the share of new bridging ties. CEOs' political experience flattens the inverted U-shaped effect of the magnitude of a firm's underperformance relative to its aspirations on the share of new bridging ties.