Organizational Learning from Performance Feedback : A Behavioral Perspective on Innovation and Change

In an intriguing analysis of how firms evolve in response to performance feedback, Henrich Greve shows that high-performing organizations quickly lower their rates of market entry, innovation and growth, whereas low-performing organizations slowly increase. Greve examines the consequences for survival and performance, suggesting ways to improve organizations with performance feedback.

Revisiting Cyert and March's classic 1963 'Behavioral Theory of the Firm', Henrich Greve offers an intriguing analysis of how firms evolve in response to feedback about their own performance. Based on ideas from organizational theory, social psychology, and economics, he explains how managers set goals, evaluate performance, and determine strategic changes. Drawing on a range of studies, including the author's own analysis of the Japanese shipbuilding industry, he reports on how theory fits evidence on organizational change of risk-taking, research and development expenses, innovativeness, investment in assets, and in market strategy. The findings suggest that high-performing organizations quickly reduce their rates of change, but low-performing organizations only slowly increase those rates. Analysis of performance feedback is an important direction for research and this book provides valuable insights in how organizational learning interacts with other influences on organizational behaviour such as competitive rivalry and institutional influences.