In the behavioral theory of the firm, decision-makers' interpretation of performance feedback information is the fundamental intermediate step between the evaluation of performance and the consequent strategic decision-making. However, such interpretations can be shaped or even distorted by the cognitive lens taken by decision-makers, such as their time concept in terms of biased cognitions of the importance and imminence of the future over the present. This study focuses on the role of a specific temporal bias (the time concept expressed in languages) in shaping the response to performance feedback. On the basis of the baseline proposition of a positive relationship between the underperformance duration (a temporal dimension of performance feedback) and acquisition behavior, we theorize and empirically examine how the future-time reference (FTR) of languages under different conditions shapes the way firms respond to repeated performance shortfalls. Using a sample of 12,309 firms from 12 countries between 2007 and 2019, we find that the FTR weakens the connection between the underperformance duration and subsequent acquisitions. Moreover, slack resources strengthen, whereas political stability weakens, this moderating effect of FTR on the underperformance duration–firm acquisition relationship.

Although extant research has highlighted the tangible benefits of bridging ties that interlink network communities, our understanding of the determinants of a firm's propensity to form new bridging ties is scarce. Drawing on the behavioral theory of the firm, we conceptualize the formation of new bridging ties as a consequence of decision-makers' bounded rationality and verify the effect of performance feedback on the share of new bridging ties. Additionally, we contend that decisions regarding forming new bridging ties in response to performance feedback are bounded by CEOs' experience. We use a longitudinal dataset of Chinese publicly listed firms in the pharmaceutical industry from 2010 to 2020. The results indicate that the magnitude of a firm's outperformance relative to its aspirations positively affects the share of new bridging ties, while the magnitude of a firm's underperformance relative to its aspirations has an inverted U-shaped relationship with the share of new bridging ties. CEOs' academic and political experience strengthens the positive relationship between the magnitude of a firm's outperformance relative to its aspirations and the share of new bridging ties. CEOs' political experience flattens the inverted U-shaped effect of the magnitude of a firm's underperformance relative to its aspirations on the share of new bridging ties.

While the importance of innovation alliance for high-technological firms is well-documented, existing literature provides little guidance on the role of performance feedback in an alliance governance structure choice. Drawing on performance feedback theory, this study sheds light on the association between performance deviating (either above or below) from firms’ social aspirations and the governance structure choice of innovation alliances. Using an unbalanced panel of Chinese biopharmaceutical firms spanning from 2007 to 2020, we find that firms experiencing negative performance feedback prefer a non-equity innovation alliance structure, whereas those with positive performance feedback are more likely to adopt an equity one. The strength of these relationships is contingent on top management team average tenure and educational-level diversity. Our findings both provide theoretical and practical insights into guiding how firms under different states of performance feedback select alliance governance structures.

We propose that while positive performance feedback is positively related to firm sentiment, negative performance feedback is negatively associated with the firm sentiment. Additionally, overconfident Chief Executive Officers (CEOs) will improve the positive relationship between positive performance feedback and firm sentiment and reduce the negative relationship between negative performance feedback and firm sentiment. Using 7,182 firm-year observations for the 2004−2017 period, we show that positive performance feedback positively affects firm sentiment, and negative performance feedback negatively influences firm sentiment. We also found that higher levels of CEO overconfidence will minimize the negative impact of negative performance feedback on firm sentiment. Our research extends the current discourse on organizational impression management (proxied by firm sentiment) and CEO overconfidence research as we provide a nuanced relationship between firm performance feedback and organizational impression management. Our findings have theoretical and practical implications for corporate governance leaders and shareholders.