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Causality Rules: Performance Feedback on Hierarchically Related Goals and Capital Investment Variability
Author(s) -
Mazzelli Ambra,
Nason Robert S.,
De Massis Alfredo,
Kotlar Josip
Publication year - 2019
Publication title -
journal of management studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.398
H-Index - 184
eISSN - 1467-6486
pISSN - 0022-2380
DOI - 10.1111/joms.12432
Subject(s) - causality (physics) , profitability index , bounded rationality , order (exchange) , economics , productivity , affect (linguistics) , rationality , investment (military) , microeconomics , capital (architecture) , econometrics , psychology , macroeconomics , finance , archaeology , quantum mechanics , politics , political science , law , history , physics , communication
We extend March and Simon’s (1958) analysis of strategic decisions by distinguishing between two rules for allocating attention – priority versus causality. We develop theory concerning causality rules which have been largely overlooked in prior literature. Specifically, we examine how performance feedback on the intermediate productivity goal and the higher‐order profitability goal independently and jointly influence the variability of firm capital investments. Panel analysis of 2,477 Spanish manufacturing firms reveals that these goals jointly affect the variability of capital investments through both priority and causality attention rules. Our study provides new insights on how firms handle multiple goals, deconstruct performance feedback, and cope with the attentional constraints of bounded rationality.