Poor Performance Experience and Explorative Actions: A Synthesis of Prospect Theory and Threat-Rigidity Theory

By synthesizing threat-rigidity theory and prospect theory, this study hypothesizes a U-shaped relationship between poor performance experience and the likelihood of adopting explorative actions. The study also considers the negative moderating effect of peer adoption of such actions on the relationship. The examination of the purchasing behavior of hospitals of new types of high technology equipment is a fundamentally explorative action and confirms the proposed hypotheses. This study finds that hospitals with less poor performance experience are likely to undertake explorative actions. As poor performance experience accumulates to a certain level, hospitals are less likely to undertake explorative actions. However, as poor performance experience increases to an extremely high level, hospitals are more likely to undertake explorative actions. In addition, the U-shaped curve becomes smoother as more peers concurrently pursue explorative actions. This study demonstrates a way of reconciling the conflicts between threat-rigidity theory and prospect theory, and contributes to an understanding of the effects of performance on successive organizational exploration.