Top Executive Goal Orientations’ Effects on Environmental Scanning and Performance: Differences Between Founders and Nonfounders

Abstract

Firms differ in the extent to which they scan their environments, which ultimately affects their performance. Although upper echelons theory suggests that top executives’ individual-level attributes affect firm strategy and performance, our understanding of how these attributes affect firms’ environmental scanning remains weak. Advancing knowledge in this area is important because such scanning is a key first step in strategic decision making. We theorize that top executives’ goal orientations (i.e., inherent motivations that shape what individuals generally seek to accomplish when engaging in challenging tasks) affect their firms’ environmental scanning. Specifically, firms whose top executives exhibit higher learning goal orientations (i.e., they seek knowledge in an effort to improve) or higher performance prove goal orientations (i.e., they seek to demonstrate their competence to others) might engage in more environmental scanning than firms whose top executives have higher performance avoid goal orientations (i.e., they seek to avoid demonstrating incompetence). We also theorize that these relationships differ between founders (who have more status and influence in their firms) and nonfounders (who are under more pressure from owners). As firm environmental scanning is found to relate positively to firm performance, understanding how top executives shape this activity has important theoretical and practical implications. This study contributes to the growing stream of upper echelons research that examines top executives’ personality and cognitive, as opposed to demographic, characteristics. It also enriches understanding of the situational nature of goal orientations’ effects, which differ according to top executives’ status as founder or nonfounder.