The Behavioral Theory of the Firm proposes that firms search and intensify their behavior when performance is below their aspirations and reduce the intensity of their search behavior when they perform above their aspirations. We theorize that rather than adjusting the intensity of a specific behavior, managers choose between inward-directed (e.g., R&D investment, product launches) and outward-directed (e.g., strategic alliances, acquisitions) search behaviors. Based on a meta-analysis of 263 empirical studies, we find that firms engage in both inward- and outward-directed search when they perform below aspirations, and only in outward-directed search when they exceed them. These relations are moderated by organizational slack and societal trust. We contribute to the BTOF by relating positive vs. negative performance feedback to inward- versus outward-directed search, accounting for contextual factors.
