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korean management review - Vol. 50 , No. 5

[ Article ]
korean management review - Vol. 50, No. 4, pp.1129-1157
Abbreviation: kmr
ISSN: 1226-1874 (Print)
Print publication date 31 Aug 2021
Received 18 Dec 2020 Revised 15 Apr 2021 Accepted 29 Apr 2021

Exploring Firm Heterogeneous Effects of Problemistic Search: The Moderating Effects of Top Management Team Pay Dispersion and Long-Term Incentive Plan
Hyunsik Gong ; Jina Kang ; Juil Lee
(First Author) Hyundai Heavy Industries (
(Co-Author) Seoul National University (
(Corresponding Author) University of Ulsan (

문제해결형 탐색의 차별적 효과에 대한 탐구: 최고경영진의 임금 격차와 장기 인센티브의 조절효과

This is an open access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted, distribution, and reproduction in any medium, provided the original work is properly cited.
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A behavioral theory of the firm provides insights into organizational search based on performance feedback. The prior studies have suggested that if a firm’s performance falls below aspiration levels, the firm is engaged in R&D investment as part of problemistic search. Although providing a useful view of organizational search behavior, existing research has limitations in shedding light on firms’ heterogeneity in problemistic search. In this respect, we posit that the differential effect of negative performance feedback on R&D investment is mainly derived from TMT compensation system. Specifically, this study predicts that depending on TMT pay gap, the positive relationship between negative performance feedback and R&D investment will differ. This study also suggests that as TMT incentive is long-term oriented, R&D investment as problemistic search will be strengthened. To test our hypotheses, we conduct an empirical analysis using firms in the U.S. machinery/computer equipment industry from 2000 to 2018. We find that the larger the TMT pay gap, the weaker the positive relationship between negative performance feedback and R&D investment, while the larger the long-term oriented TMT incentives, the stronger the positive link between negative performance feedback and R&D investment. We then discuss theoretical and practical implications of the results.

Keywords: Problemistic search, R&D investment, TMT, Pay dispersion, Long-term incentive


This research is supported by the Research Fund of University of Ulsan in 2021.

This paper is written by revising and supplementing the first author’s master’s thesis.

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∙ The author Hyunsik Gong works for Hyundai Heavy Industries. He graduated from the department of Chinese Studies at the Chinese University of Hong Kong and received MS from Technology Management, Economics, and Policy Program of Seoul National University. His research interests center on performance feedback, technology innovation, and knowledge transfer.

∙ The author Jina Kang is a Professor of Technology Management, Economics, and Policy Program (TEMEP) at Seoul National University (SNU). Jina received BSc from KAIST, MBA from Wharton School of University of Pennsylvania and Ph.D. in strategy and innovation management from Anderson School of UCLA. Jina taught at California State University in Fullerton (CSUF) before coming to SNU, and her current research focuses on how firms form alliances to gain knowledges and innovation.

∙ The author Juil Lee is an assistant professor of College of Business Administration at University of Ulsan. He graduated from Yonsei School of Business, Yonsei University and received his MS and Ph.D. in management from Yonsei University. Prior to joining University of Ulsan, he worked as a post-doctoral researcher at Seoul National University. His research interests lie in the area of organizational learning and change, entrepreneurship, innovation, and small and medium enterprises.