Aspirations, Performance, and Changes in Partnering Behavior: Evidence from the Pharmaceutical Industry 1990-2006

Building on the prior research on aspiration levels and managerial decision making, we examine the conditions under which pharmaceutical firms change their partnering behavior across time. Using insights drawn from behavioral theory and evolutionary theory of the firm, we argue that any change in partnering behavior is considered risky, and is triggered by the gap between actual performance and aspirational performance. Testing a sample of 988 pharmaceutical firms from 1990 to 2006, our results confirm the central idea of the paper - that the type of performance (financial or innovative) has a strong influence on the associated feedback loop and subsequent organizational action. When financial performance deviates from aspirations (either above or below), pharmaceutical firms decrease the extent of change in partnering patterns; in contrast, when innovative performance deviates from expectations (either above or below), pharmaceutical firms increase the extent of change in partnering patterns. Our results are stronger for aspiration levels based on historical comparisons than those for social comparisons.