Sustainable Business Development

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This entry is adapted from the peer-reviewed paper 10.3390/su14042086

In the context of open innovation, enterprises’ thirst for innovation resources is increasing day by day. Faced with limited resources, innovation search behavior, as a way to collect and learn information such as knowledge and technology to increase the novelty of resources, is an important way for enterprises to break through the status quo in order to obtain a wider range of resources and improve the innovation of enterprises. However, in the existing literature, there are many studies on the impact of innovation search behavior on innovation performance, but the existing studies are scarce and paradoxical regarding the influencing factors of antecedent variables of innovation. In today’s rapidly evolving society with faster product iterations and changing consumer needs, the market competition environment is becoming increasingly fierce, which leads to higher standards for enterprises to carry out innovation activities. More and more enterprise managers find that by relying on their own resources, they cannot adapt to the changing market environment and cannot obtain sustainable innovation advantages. Enterprises need to actively conduct innovative search behaviors to obtain resources according to their own state, and innovative resources need not only include internal resources but also external resources, which are open. In this context, the open innovation behavior of enterprises is promoted through innovation search behavior, and sustainable competitive advantages are obtained to ensure the sustainable development of enterprises.

positive performance feedback innovation search regulatory focus sustainable development

1. Positive Performance Feedback and Innovation Search

There is positive performance feedback to innovation search behavior and explores the ambidextrous nature of innovation search behavior. Existing research on the performance expectation feedback largely assumes that innovation search behavior is fixed ^[1]. However, the market is changing, and the resource environment faced by enterprises and the speed of research and development of biopharmaceuticals cannot remain unchanged, so the innovation search behavior should not be static but dynamic. This study helps companies analyze the impact of positive performance feedback on two dimensions of innovation search behavior and how to choose a suitable method in the face of dynamic changes in the environment so as to help companies improve the utilization of resources, enhance innovation, and achieve sustainable development ^[2]^[3].

Positive performance feedback indicates that the firm is growing well during the current operating period, is “relatively rich”, and is motivated to innovate. CEOs often carry out innovative behaviors driven by innovation motivation ^[4], such as innovation search behavior. However, this paper argues that higher-performing firms may respond differently to different innovation search behaviors.

First, the manageability of risk in the familiar path: Firms that experience positive performance feedback typically have more idle resources (e.g., capital, equipment, and human resources) ^[5]. Although the success of operations during this period leads to the existence of some idle resources, firms aiming to gain a sustained competitive advantage to achieve sustainable growth need to seek new breakthrough solutions and perform increasingly well relative to competitors, which requires innovation search behavior ^[6]. The abundance of idle resources compensates for the cost of time and uncertainty consumed by firms conducting innovation search behavior and also encourages CEOs to experiment and explore ^[7]. The available idle resources are limited. In the process of running a business, making changes to the way the organization strategically allocates resources not only raises the CEO’s own hiring risk ^[8] but also risks professional reputation acquired from the previous business success, which poses a double threat of loss for the CEO and increases the fearfulness and psychological cost of innovation search behavior for the CEO. In order to reduce the employment risk and maintain the acquired professional reputation, the CEO prefers the plan with low decision risk ^[9]. With the motivation of “seeking stability”, put idle resources into existing fields, conduct depth research and development, reduce risks to a controllable range, and depth search behavior has become a better behavioral choice.

Second, it enhances the CEO’s decision-making confidence on a familiar path. Positive performance feedback proves the effectiveness of the current strategy of the enterprise, and better performance also improves the confidence of CEO in the early strategic choice, confirming that the CEO is correct in the utilization of resources and the grasp of development direction ^[10]. This also leads CEOs to believe that control over the use of internal corporate resources is effective and that they have some experience and competence in the development and exploration of external resources ^[11]. In the current era of open innovation, CEOs are also aware that internal resources alone are not sufficient and that they need to draw more innovative knowledge from external sources to expand the resource base of the firm in order to improve the firm’s innovation performance. Innovation search behavior has been identified as the preferred strategy for CEOs to facilitate innovation ^[12]. To some extent, CEOs are influenced by their past technological development trajectories because past successful experiences make CEOs confident in their existing strengths. Therefore, risk and experience are more likely to focus CEOs’ searches on familiar paths during innovation search behavior. CEOs are thus more likely to focus on a familiar path. Depth search behavior using existing channels can reduce the possibility of errors and increase the predictability of search ^[13]^[14]. In addition, CEOs in the successful state have lower motivation to search for information ^[15] because early successes have made the CEO more confident. Accordingly, CEOs tend to conduct depth searches to find profits.

2. Moderating Role of Regulatory Focus: CEO Regulatory Focus

According to the regulatory focus theory, two different motivational systems influence how individuals view risk taking and security: promotion focus and prevention focus. The promotion focus is the individual’s motivation to pay attention to progress and growth and tend to pursue risks and opportunities; the prevention focus is the motivation of individuals to avoid losses and ensure safety and tend to avoid risks and pursue stability ^[8]^[16]^[17].

Established studies have indicated that decisions between involving organizational gain capture and loss avoidance can be predicted by the regulatory focus of the CEO ^[17]. CEOs with a high promotion focus tend to seek new resources and challenges, while CEOs with a high defensive focus tend to seek security and conservatism ^[16]^[17].

2.1. CEO Promotion Focus

The biopharmaceutical enterprise studied in this work is an enterprise that relies on continuous R&D and innovation ^[18]. The biopharmaceutical industry has become high innovation ability and large resource consumption ^[19]. With the requirements of high innovation ability, innovation search behavior is indispensable, and different regulatory focus of CEOs may have different influences on innovation search preferences because of their different inclinations.

First, promotion-focused CEOs have an aggressive risk-taking spirit ^[20]^[21]. Promotion-focused CEOs have a high propensity for risky exploration by seeking more new knowledge and resources to supplement the missing parts of the business ^[22]. Second, promotion-focused CEOs have a strong desire for self-actualization needs and a goal orientation of “maximizing acquisition” because they place a high value on their own growth. People with a high promotional focus prefer to maximize their achievements, which is related to the promotion focus on achieving “maximum goals” ^[23], pursuing their own growth and aspirations, and preferring to use the resources at their disposal to maximize their own growth and thus achieve their overall career goals ^[13]. Although this trial-and-error-based resource exploration activity may have great uncertainty, cost, and risk, the successful development of new fields is a huge contribution to biopharmaceutical companies, as well as to the growth of the CEO ^[24]. Conversely, the presence of positive performance feedback can encourage focused CEOs to pursue broader domains of exploration, at the expense of exploiting existing domains. Positive performance feedback provides good external conditions for CEOs to explore and take risks, and the presence of disposable resources and corporate strengths is more likely to motivate promotion CEOs to take risks and “maximize acquisition” orientation. CEOs driven by a promotional focus are more likely to break new ground for the organization and help the business gain more revenue when facing certain risks.

Therefore, when the CEO promotes focus at a high level, the degree of motivation to pursue innovation, risk-taking, and to obtain maximum progress increases, and the motivation to ensure minimal risk and stability in decision-making in familiar paths diminishes.

2.2. CEO Prevention Focus

First, prevention-focused CEOs have a stronger tendency to be risk-averse. Second, prevention-focused people usually pursue “minimum goals”, tend to be stable ^[25], prefer more limited options, and value the enforcement of rules and regulations ^[26], directing individuals to focus on safety goals. They are more sensitive to negative information, value their reputation and external image, avoid failures and potential losses as much as possible, and prefer to adopt avoidance-based strategies in their behavioral strategies to obtain performance and protection ^[27]. In the process of running a business, the CEO takes the minimum goal to achieve profitability ^[28]. When CEOs with prevention focus traits conduct innovative searches, they apply their resources to familiar areas to the greatest extent possible. Prevention-focused CEOs rely more on familiar knowledge in their innovation search choices and base their exploration and innovation activities on existing empirical paths ^[29]. Focusing on established or easily accessible technologies and resources, they apply their expertise to familiar areas of activity to increase the efficiency of resource use and speed of development ^[30]. Furthermore, due to concerns about risk and cost, defensive-focused CEOs are more likely to choose familiar, successfully practiced paths for development and exploration to reduce the risk and uncertainty of search costs ^[31]. CEOs are more likely to choose familiar, successfully practiced paths to develop and explore in order to reduce riskiness and uncertain search costs ^[32].

Therefore, when the CEO prevention focus at a high level, the degree of motivation to pursue stability, security, and risk avoidance is enhanced, the motivation to ensure the lowest risk in familiar paths and stability in decision-making is enhanced, and the CEO is highly likely to choose actions with lower risk, familiar paths, and to pursue stability.

The theoretical model of this study is illustrated in Figure 1.

Figure 1. The theoretical model.

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