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Politics, strong institution and competitive advantage: an examination of organizational aspiration for competition

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  • Inseong Song

    (Seoul National University)

  • Jonghoon Bae

    (Seoul National University)

Abstract

This study seeks to elucidate the interplay of interfirm rivalry and aspiration formation. Organizational aspiration serves as a categorical judgment over a desirable level of organizational performance. While aspiration as a driver of collective decision-making inside the firm is well recognized, our understanding is still limited as to the competitive consequence of aspiration-induced actions. From a computational model of aspiration-induced R&D, where competition is biased towards the status quo, this study suggests that although radical innovation calls for flexibility and diversity inside the firm, aspiration-induced action favors consensus such as a firm with machine bureaucracy either (1) in a market where a majority of consumers are unable to discern a small quality improvement, i.e., demand difficult to satisfy or (2) in a market where competitive advantage dissipates quickly, i.e., an unstable environment. In particular, this study shows that: (1) the level of organizational aspiration has little to do with the sustainability of competitive advantage; (2) aspiration strength—i.e., the extent of consensus among decision makers of the firm as to a legitimate level of organizational aspiration—interacts with the change in competitive advantage. The leading firm is likely to lose its competitive advantage when a follower has a stronger aspiration than the leader in a market whose demand is difficult to satisfy; and (3) the effect of aspiration strength on the sustainability of competitive advantage increases whenever organizational assets depreciate over time.

Suggested Citation

  • Inseong Song & Jonghoon Bae, 2016. "Politics, strong institution and competitive advantage: an examination of organizational aspiration for competition," Computational and Mathematical Organization Theory, Springer, vol. 22(4), pages 412-443, December.
  • Handle: RePEc:spr:comaot:v:22:y:2016:i:4:d:10.1007_s10588-015-9206-9
    DOI: 10.1007/s10588-015-9206-9
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    References listed on IDEAS

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    1. Michael I.C. Nwogugu, 2019. "Complex Systems, Multi-Sided Incentives and Risk Perception in Companies," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-137-44704-3, March.

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