Attention to market expansion: Aspirational antecedent and risk-taking consequence

The behavioral theory of the firm (BTOF) emphasizes the goal-directed logic in explaining firms’ risk-taking. Scholars in this tradition typically conceptualize how performance feedback indicates problems and triggers risk-taking behaviors. Yet, the theory remains underdeveloped in understanding decision-makers’ attention to forward-looking goals, such as market expansion, and its impact on firm risk-taking. In this study, we theorize performance feedback as an antecedent to decision-makers’ attention to forward-looking goals, and firm risk-taking as a consequence of such attention. Focusing on market expansion as a critical forward-looking goal, we first theorize how performance feedback influences decision-makers’ attention to market expansion. Then, we examine how such attention drives a firm’s risk-taking, contingent on how competitive the firm’s industry is. Using panel data on Chinese listed firms, we find that negative feedback exerts a stronger negative influence than positive feedback on decision-maker attention to market expansion. Moreover, attention to market expansion promotes firm risk-taking only when the focal firm’s industry competitive intensity is weaker. Our study extends the BTOF literature by providing novel insights and evidence that performance feedback drives firms’ attention to forward-looking goals and such attention influences firms’ risk-taking.