Abstract
Researchers have endeavored to explain the causes of short organizational time horizons because of the organizational and societal costs of corporate short-termism. These explanations, however, tend to confound cognitive with behavioral explanations, which masks the importance of cognitive biases. We address this oversight by situating our work in prospect theory and organizational search, which underscores the importance of external evaluations on organizational time horizons and the asymmetry of positive and negative evaluations. Specifically, we argue that negative evaluations will shorten organizational time horizons more than positive evaluations will lengthen them. In our research context of financial analysts, this means that “sell” recommendations will shorten time horizons more than “buy” recommendations will lengthen them. Our main thesis can help to explain rising short-termism among some publicly traded companies. We operationalize organizational time horizons by the language managers use during 3,136 quarterly earnings conference calls. We test our main hypothesis and other timing-related moderating effects on 98 extractives firms from 2006 to 2013.
| Original language | English |
|---|---|
| Pages (from-to) | 761-780 |
| Number of pages | 20 |
| Journal | Organization Science |
| Volume | 30 |
| Issue number | 4 |
| DOIs | |
| Publication status | Published - Jul 2019 |
| Externally published | Yes |
Keywords
- External evaluations
- Organizational search
- Organizational time horizon
- Security analysts
- Short-termism
- Textual analysis
Cite this
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One step forward, two steps back : how negative external evaluations can shorten organizational time horizons. / DesJardine, Mark; Bansal, Pratima.
In: Organization Science, Vol. 30, No. 4, 07.2019, p. 761-780.Research output: Contribution to journal › Article › Research › peer-review
TY - JOUR
T1 - One step forward, two steps back
T2 - how negative external evaluations can shorten organizational time horizons
AU - DesJardine, Mark
AU - Bansal, Pratima
PY - 2019/7
Y1 - 2019/7
N2 - Researchers have endeavored to explain the causes of short organizational time horizons because of the organizational and societal costs of corporate short-termism. These explanations, however, tend to confound cognitive with behavioral explanations, which masks the importance of cognitive biases. We address this oversight by situating our work in prospect theory and organizational search, which underscores the importance of external evaluations on organizational time horizons and the asymmetry of positive and negative evaluations. Specifically, we argue that negative evaluations will shorten organizational time horizons more than positive evaluations will lengthen them. In our research context of financial analysts, this means that “sell” recommendations will shorten time horizons more than “buy” recommendations will lengthen them. Our main thesis can help to explain rising short-termism among some publicly traded companies. We operationalize organizational time horizons by the language managers use during 3,136 quarterly earnings conference calls. We test our main hypothesis and other timing-related moderating effects on 98 extractives firms from 2006 to 2013.
AB - Researchers have endeavored to explain the causes of short organizational time horizons because of the organizational and societal costs of corporate short-termism. These explanations, however, tend to confound cognitive with behavioral explanations, which masks the importance of cognitive biases. We address this oversight by situating our work in prospect theory and organizational search, which underscores the importance of external evaluations on organizational time horizons and the asymmetry of positive and negative evaluations. Specifically, we argue that negative evaluations will shorten organizational time horizons more than positive evaluations will lengthen them. In our research context of financial analysts, this means that “sell” recommendations will shorten time horizons more than “buy” recommendations will lengthen them. Our main thesis can help to explain rising short-termism among some publicly traded companies. We operationalize organizational time horizons by the language managers use during 3,136 quarterly earnings conference calls. We test our main hypothesis and other timing-related moderating effects on 98 extractives firms from 2006 to 2013.
KW - External evaluations
KW - Organizational search
KW - Organizational time horizon
KW - Security analysts
KW - Short-termism
KW - Textual analysis
UR - http://www.scopus.com/inward/record.url?scp=85072668821&partnerID=8YFLogxK
U2 - 10.1287/orsc.2018.1259
DO - 10.1287/orsc.2018.1259
M3 - Article
AN - SCOPUS:85072668821
VL - 30
SP - 761
EP - 780
JO - Organization Science
JF - Organization Science
SN - 1047-7039
IS - 4
ER -