Looking forward instead of backward: Overconfidence, forward-looking aspirations and exploitive/explorative search

Abstract

Purpose

According to behavioral research, aspirations influence a firm's search – exploitive and explorative – for solutions that satisfy a firm's goals. Yet, such goal seeking behavior is adaptive to a firm's past experiences and not to a manager's expectations of its firm's future. A manager's expectations are often explained in terms of their confidence in future events. The purpose of this study is to address the following research question: how does a manager's confidence influence its expectations of a firm's future performance and goals; and how do these future expectations influence a firm's exploitive/explorative search?

Design/methodology/approach

In drawing on cognition and legitimacy research, a conceptual model was developed to explain the antecedents and outcomes of a firm's “forward-looking” aspirations. The antecedents to a firm's forward-looking aspirations are attributed to a manager's overconfidence – anchoring, confirmation and availability – biases. In using strategic legitimacy explanations, these biases introduce distinct types of forward-looking (exploitive/explorative) search that legitimize/de-legitimize a manager's forward-looking aspirations.

Findings

A key finding of this study is that it introduces a strategic decision-making process in which a firm's exploitive/ explorative search is adaptive toward its forward-looking aspirations.

Research limitations/implications

This forward-looking strategic decision-making process offers research implications to understand how a firm's future goals and expectations can offer new understandings of their past experiences and traditions and explains how a manager's overconfidence biases can influence the assessment of a firm's social aspirational groups.

Practical implications

In addition, this study also offers practical implications in which illustrative examples are used to explain this study's forward-looking strategic decision-making process.

Originality/value

A distinct contribution of this study is that it introduces a forward-looking orientation that has not been previously examined the backward focus of behavioral research.

Citation

Ng, D. (2020), "Looking forward instead of backward: Overconfidence, forward-looking aspirations and exploitive/explorative search", Journal of Strategy and Management, Vol. 13 No. 3, pp. 377-392. https://doi.org/10.1108/JSMA-07-2019-0120