All Aspirations are Not Created Equal: The Differential Effects of Historical and Social Aspirations on Acquisition Behavior

Research on performance aspirations has tended to assume that historical and social aspirations work in parallel and influence strategic behavior in a similar manner. The authors posit that these two distinct modes of performance comparison in fact lead to dissimilar firm behavior. The authors also explore how variability in prior acquisition performance influences the relationship between aspiration levels and subsequent strategic behavior. The authors examine our questions in the context of mergers and acquisitions within the US commercial banking industry from 1988-2005. Consistent with our prediction, we find that firms’ acquisition behavior varies significantly depending on whether historical or social comparisons are used. The authors also find that high variability in the previous acquisition performance of the firm intensifies the relationship between acquisition performance relative to aspirations and the probability of the firm making acquisitions below historical and social aspirations, but attenuates the relationship above such aspirations.