Why Do Goliaths Fall?: Performance Referents in Successful Organizations

Abstract

Referents are standards of comparison that managers use to interpret organizational performance. In this paper, it is argued that managers holding identities of their firms as successful are subject to psychological processes influencing the content and stability of such comparators. While a number of different referents are implicit in many organizational perspectives, social comparison theory and temporal comparison theory are two cognitive viewpoints that provide insights into why some referents are preferred over others by executives of successful organizations. It is argued that the selective use of a small number of referents, and their associated effects on learning, is one factor promoting organizational decline. Implications for practicing managers and suggestions for future theory building are discussed.