Corporate- and Functional-level Performance Feedback in New Product Development

In this study, we add new insights in the performance feedback theory by arguing that although organizations give primacy to feedback regarding corporate-level financial goals, they also have to attend to a variety of functional-level performance signals to identify more suitable solutions and better adjust their behavior. However, due to the multiplicity of functional goals, we build on Gestalt theory to suggest that firms may use two key properties of functional performance feedback (i.e., simplicity and predictability) to guide their problemistic search and effectively select behavioral responses. In a longitudinal sample of 97 global incumbent pharmaceutical firms, we find that a simpler and more predictable set of functional performance signals strengthens the relationship between poor financial performance and the number of new products that firms initiate