Performance Feedback, Environmental Dynamism, and the Strategic Setting of Performance Targets: Evidence from the U.S. Computer Services Industry

Drawing on the Behavioral Theory of the Firm (BTOF) and an open-systems perspective, this study investigates how variations in performance feedback and environmental dynamism are related to the setting of future organizational performance targets. A fixed-effects regression model was estimated using a longitudinal panel of 2127 firm-year observations covering 402 U.S. computer services firms (SIC 737) over the period 2000 to 2025, a technologically dynamic setting. The results reveal an asymmetric pattern. Negative performance feedback is positively associated with aggressive target setting, whereas positive performance feedback shows no significant association. In addition, environmental dynamism significantly weakens the relationship between negative performance feedback and aggressive target setting, whereas no significant moderating effect is observed for positive performance feedback. These findings identify management target setting as an important behavioral outcome of performance feedback and indicate that environmental dynamism operates as a condition on organizational adaptation. The implications of these findings for theory and future research are discussed.