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This study aims to compare alternative search behaviors managers enact with regard to firm aspirations.

The behavioral theory of the firm predicts that poor performance relative to aspiration levels leads to search for ways to raise performance over aspirations. Most researchers have assumed search leads to risk‐taking or innovation. However, firms might search for ways to raise performance without incurring additional risk, such as reducing expenses. This paper compares the two models of search using data on research and development (R&D) spending.

The results generally support the cost cutting argument; R&D spending increases monotonically with performance relative to social aspirations.

These results suggest researchers need to consider searches that emphasize cost reduction, as well as searches that emphasize innovation.

Overall, this paper extends behavioral work on risk‐taking and R&D to provide a more complex view of the interactions between kinds of aspiration levels and both innovation and search behavior.

Can (and should) strategy scholarship attempt to find general prescriptions for business strategy that are applicable to all firms across all business conditions? We suggest that a universal theory of business strategy is a chimera: attractive but completely illusory. Our argument is based on two fundamental insights namely, organizations do not automatically adopt all practices and activities that could benefit them (even if knowledge about those activities is in the public domain), and theories and empirical work can address portions of the strategy problem usefully without attempting or achieving a general theory of strategy. Based on this, we believe strategy scholarship can fruitfully build on a variety of mid-range theories to offer three things from a prescriptive standpoint: (1) understanding the structure and processes inherent in organizations and markets; (2) offering productive ways to frame and analyze problems; and (3) offering recommendations for stratagems that appear successful. More generally, organizations might find immense value in strategy scholarship that offers specific tools, prescriptions, and alternative ways of looking at a problem, and that raise performance, on average.

Good research goes beyond testing the aggregate predictions of a theory to test the theory's underlying mechanism. A mechanism is a plausible account of the process that causes a systematic relationship between variables. Strategy researchers particularly need to understand the mechanisms that drive firm behavior and outcomes because we seek both to explain and offer prescriptions. We recommend that theories clearly specify their mechanisms and that empirical research test such mechanisms. Such tests will help differentiate among theories with similar aggregate predictions.

Business cycles strongly influence corporate sales and profits, yet strategy research largely ignores the possibility that corporate management practices related to the business cycle influence profitability. This paper aims to offer initial empirical support for the view that high peformance firms use a variety of business cycle management (BCM) practices that low performance firms do not.

This exploratory study examines the association of firm performance with business cycle management behaviors identified in the prescriptive literature and further developed from a set of case analyses. The empirical analysis uses a matched sample of 35 pairs of high vs low performers from the S&P 500.

Discriminant and conditional logit analyses provide preliminary evidence that business cycle‐sensitive behaviors such as countercyclical hiring and investment associate positively with firm performance.

Future research should use larger data sets and strictly archival data to overcome the limitations of the small sample size and data coding with some subjective elements.

This research suggests a variety of business cycle related practices dealing with staffing, capital investment, acquisitions and divestitures, capital financing, credit policy, pricing, and advertising may improve firm performance.

This is the first paper to offer evidence of the impact of business cycle related practices across a range of practices and industries.