Research On Internal And External Performance Feedback And Strategic Change Of Subsidiaries

Business groups play an important role in emerging economy,and the behavior and strategies of subsidiaries is a hot issue in the academic circle.As the competitive environment becomes more and more complex,it is difficult for each subsidiary to obtain competitive advantage simply by static market and strategic actions.In the competitive market,it has become a prominent feature for firms to constantly update and adjust their strategies.However,there are few studies concerning the strategic change of subsidiaries,which makes it increasingly urgent to explore the antecedence of the strategic change of subsidiaries.Taking business group subsidiaries as our research subject,this paper explores the link between performance feedback and strategic change of subsidiaries based on the basic viewpoint of behavior theory of the firm.According to the behavior theory of the firm the decision-making of firms is influenced by the performance related to the organizational aspirations.When the actual performance of the firm is higher than the aspirations,that is,the positive performance feedback;When the firm performance is below the aspirations,that is,the negative performance feedback.Different performance feedback will affect the motivation and risk bearing level of enterprise managers,and then affect the enterprise strategic decision.Focusing on the context of business group,given that subsidiaries usually compare their performance with not only peers from the same industry,but also others with the same business group,we divide organizational performance feedback into external performance feedback and internal performance feedback.We further explore how a subsidiary's strategic decision is affected by internal and external performance feedback,and consider the moderating effect of internal and external environment dynamics.Based on the analysis of the matching samples of China's industrial enterprise database and listed company database,we found that,when a subsidiary's actual performance is below the aspiration level from peers in the same industry,it has more strategic change;when a subsidiary's actual performance is below the aspiration level from others in the same business group,it also has more strategic change.However,positive external and internal performance feedback has no significant influence on the strategic change of subsidiaries.Moreover,the relative uncertainty of internal and external environment affects the degree of subsidiary managers react to different performance feedback.To be specific,when the external market competition is intense,the negative external performance feedback inspires greater strategic change;when the internal competition within a business group is intense,internal performance feedback inspires more strategic change.Our conclusions are helpful to deepen the understanding of the performance feedback and strategic change of subsidiaries.