How do managerial perceptions of performance feedback affect innovation?

Although managers’ perceptions are core to the Performance Feedback Theory, few empirical studies measure managerial perceptions of their organization’s performance and theorize on the (in)consistency between perceptual and objective performance feedback. Based on longitudinal survey data of Canadian organizations, we examine how this (in)consistency affects the propensity for innovation in organizations. Our analysis broadly validates that inconsistency between the two types of feedback dampens innovation. Second, positive perceptions strengthen the relationship between positive objective performance feedback and innovation, leading to increased innovation, whereas negative perceptions strengthen the relationship between negative performance feedback and innovation, echoing the problemistic search hypothesis. We also find that perceptions moderate the effect of objective performance feedback differently in the social and historical dimensions as well above and below the aspiration thresholds.