Positive Performance Feedback and Innovation Search: New Ideas for Sustainable Business Development

Abstract

Although the literature suggests that firms tend to adopt “conservative” behavior in the face of positive performance feedback, there are also studies that take the opposite view on the impact of positive performance feedback. Based on the behavior theory of the firm and regulatory focus theory, this study explored the impact of positive performance feedback on innovation search behavior and the boundary effect of CEO regulatory focus to gain insight into the mechanisms of innovation search behavior and to promote innovation for sustainable development. Based on data from 230 biopharmaceutical companies in China, the analysis found that: (1) positive performance feedback had a significant positive effect on depth search behavior and a significant negative effect on breadth search behavior; (2) CEOs’ promotion focus had a negative moderating effect on the relationship between positive performance feedback and depth search behavior and a positive moderating effect on the relationship between positive performance feedback and breadth search behavior; and (3) CEOs’ prevention focus positively moderated the relationship between positive performance feedback in relation to depth search behavior. This study extends the behavior theory of the firm and reveals the mechanism of the differential impact of positive performance feedback on innovation search behavior, which has implications for the study of which innovation search practices should be conducted by high‐performing firms to promote sustainable development.