Strategic responses to performance below aspiration: the moderating roles of institutional development and industry competition

Purpose This study aims to differentiate the effects of two categories of performance below aspiration – performance below historical aspiration and performance below social aspiration – on strategic change and further explore the moderating role of institutional development and industry competition in such linkages. Design/methodology/approach Drawing on a panel data set consisting of 5,747 observations from 967 Chinese firms in the period of 2008–2019, this study takes the generalized least squares (GLS) regression method to test all of hypotheses. Findings Performance below historical aspiration has a negative effect on strategic change, while performance below social aspiration has a positive effect on strategic change. Moreover, institutional development positively moderates the linkage of performance below historical aspiration to strategic change, and industry competition positively moderates the linkage of performance below social aspiration to strategic change. Originality/value This study extends of the consequences of performance below aspiration by differentiating historical aspiration from social aspiration, clarifies the boundary conditions such as industry competition and institutional development and augments the knowledge of the antecedents of strategy change.