Politics, strong institution and competitive advantage: an examination of organizational aspiration for competition

Abstract

This study seeks to elucidate the interplay of interfirm rivalry and aspiration formation. Organizational aspiration serves as a categorical judgment over a desirable level of organizational performance. While aspiration as a driver of collective decision-making inside the firm is well recognized, our understanding is still limited as to the competitive consequence of aspiration-induced actions. From a computational model of aspiration-induced R&D, where competition is biased towards the status quo, this study suggests that although radical innovation calls for flexibility and diversity inside the firm, aspiration-induced action favors consensus such as a firm with machine bureaucracy either (1) in a market where a majority of consumers are unable to discern a small quality improvement, i.e., demand difficult to satisfy or (2) in a market where competitive advantage dissipates quickly, i.e., an unstable environment. In particular, this study shows that: (1) the level of organizational aspiration has little to do with the sustainability of competitive advantage; (2) aspiration strength-i.e., the extent of consensus among decision makers of the firm as to a legitimate level of organizational aspiration-interacts with the change in competitive advantage. The leading firm is likely to lose its competitive advantage when a follower has a stronger aspiration than the leader in a market whose demand is difficult to satisfy; and (3) the effect of aspiration strength on the sustainability of competitive advantage increases whenever organizational assets depreciate over time.