Aspiration-Based Cognitive Frames and Adaptive Responses to Stretch Goals

This study examines how organizations respond to performance shortfalls under escalating stretch goals, moving beyond traditional “failure = search” models to emphasize the interpretive role of cognitive framing. Drawing on the behavioral theory of the firm and managerial cognition perspectives, we employ a mixed-method design that integrates a controlled simulation experiment (Study 1) with in-depth executive interviews (Study 2). Study 1 provides causal evidence that defensive frames channel resources toward exploitative innovation, while growth-oriented frames foster exploratory reallocation, demonstrating that identical shortfalls can produce divergent outcomes depending on interpretation. Study 2 extends these insights by showing that frames are socially embedded in organizational structures, cultures, and histories, and that they can persist through reinforcing cycles or shift following shocks and managerial interventions. Together, our findings extend behavioral strategy by positioning framing as a dynamic, context-dependent mediator of performance feedback, and by identifying conditions under which stretch goals foster rigidity or renewal.