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

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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.

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Authors and Affiliations

  1. Graduate School of Business (58-303), Seoul National University, Seoul, 151-916, Republic of Korea

    Inseong Song

  2. Graduate School of Business (58-509), Seoul National University, Seoul, 151-916, Republic of Korea

    Jonghoon Bae

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  1. Inseong Song
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  2. Jonghoon Bae
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Correspondence to Jonghoon Bae.

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Song, I., Bae, J. Politics, strong institution and competitive advantage: an examination of organizational aspiration for competition. Comput Math Organ Theory 22, 412–443 (2016). https://doi.org/10.1007/s10588-015-9206-9

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