A Review of Multilevel Regulatory Focus in Organizations

Regulatory fit and leadership

Leaders serve organizations as “makers of meaning” (Brockner & Higgins, 2001). In this role, they frame organizational goals to focus follower attention on specific outcomes that are organizationally important. However, results of research on regulatory fit suggest that leaders should tailor their message to fit the regulatory focus of their followers. The study of leader-follower regulatory fit complements the growing literature on person-supervisor fit (Kristof-Brown, Zimmerman, & Johnson, 2005) and interpersonal regulatory fit (Righetti, Finkenauer, & Rusbult, 2011). Research on leadership styles is expansive, but recent work integrating RFT has shed new light on old results. For instance, transformational leadership positively affected the motivational strength of promotion-oriented followers (Benjamin & Flynn, 2006), while a transactional leadership style related positively to follower maintenance organizational citizenship behaviors (Shin, Kim, Choi, Kim, & Oh, in press). In addition, regulatory fit between leader-follower regulatory focus reduced turnover intent (Hamstra, Van Yperen, Wisse, & Sassenberg, 2011) and increased feelings of value (Hamstra, Van Yperen, Wisse, & Sassenberg, 2014) when promotion-focused followers viewed leaders as transformational and prevention-focused followers viewed leaders as transactional.

However, using a hierarchical perspective on regulatory focus, Stam, van Knippenberg, and Wisse (2010) proposed that visionary appeals, typically considered a promotion-oriented frame, could be couched as avoiding negative and undesirable situations that “fit” followers with a prevention focus. In two experiments, they found that visionary appeals motivated followers to higher levels of performance regardless of the follower regulatory focus, as long as leaders tailored appeals to fit follower regulatory focus. In fact, emotional displays by the leader prior to communication primed follower regulatory focus to make them more receptive to leader persuasion (Venus, Stam, & van Knippenberg, 2013). Stam, van Knippenberg, Wisse, and Nederveen (2014) found that leaders characterized by actions perceived to be promotion oriented seem to be more effective in crisis situations.

Additionally, self-sacrificial leaders who put the interests of the group above their own enhance the prosocial behaviors of followers with high levels of prevention focus (De Cremer, Mayer, van Dijke, Schouten, & Bardes, 2009). Because leaders role model prosocially, they activate a sense of duty and responsibility among their followers, which extends work that found that role models motivate followers with strategies that align with follower regulatory focus (Lockwood, Sadler, Fyman, & Tuck, 2004). Role models who endorse achievement motivate the promotion-focused individual, while those who endorse avoiding failure motivate the prevention-focused individual. Overall, the results of these studies suggest that benefits to the organization, such as lower turnover and increased follower motivation, may accrue by adjusting leader style to fit with follower chronic regulatory focus.

Future research on the regulatory fit between leaders and followers and the associated processes may be beneficial. For instance, emotionally intelligent (EI) leaders perceive and regulate their emotions and the emotions of their followers (George, 2000; Mayer & Salovey, 1995). Affective state is heavily entwined with regulatory focus, as promotion focus relates to cheerfulness/dejectedness emotions, while prevention focus relates to quiescence/agitation emotions (Higgins, 1997; Yen, Chao, & Lin, 2011). Indeed, studies often control subject mood when measuring regulatory focus in individuals (cf. Crowe & Higgins, 1997; Neubert, Kacmar, Carlson, Chonko, & Robert, 2008). Because affect influences regulatory focus and vice versa, high-EI leaders who effectively manage emotions may also more effectively regulate follower state regulatory focus than low-EI leaders. Some of the motivation benefits derived from emotional intelligence may be the result of regulatory fit created by the leader’s management of follower state regulatory focus. A similar argument could be made for chronic regulatory focus as an antecedent in leader-member exchange relationships (Sparrowe & Liden, 1997). A determining criterion for the high-quality relationship might be the regulatory fit between leader chronic regulatory focus and followers. High levels of fit within dyads would be more likely to create an exchange relationship in which followers go beyond the performance required by their obligations. In addition, Kark and Van Dijk (2007) proposed that leaders enhance influence via fit by altering their behavior toward different followers on the basis of follower motivational needs.

Regulatory focus and HR management

While RFT research in organizational behavior has flourished, there has been substantially less work with HR management. The HR implications for regulatory focus encompass a broad range of topics, including ethics, job analysis, job design, performance management, compensation, training and development, and selection and recruitment. For example, given that promotion and prevention are rooted in values and needs of individuals, there is the potential to develop selection strategies for promotion and prevention (Higgins, 2000; Kuhn, 2015; Wallace & Chen, 2006). Consider two scenarios: an R&D context and a vigilant work context. In the R&D context, a promotion focus could be of great value as a result of its relationship with innovation performance (Lanaj et al., 2012), whereas in work requiring vigilance, such as air traffic controllers, a prevention focus may be more valuable.

Similar logic applies to HR management in groups and teams, as well as work design. In creative, entrepreneurial, or intrapreneurial contexts, teams tasked with innovating new products or efficiencies could be designed to be disposed toward developing a collective promotion focus (which we discuss later). Once the team identifies a potentially valuable innovation, another team, designed to be disposed toward collective prevention focus, could examine the feasibility of the innovation through a thorough vetting process (P. D. Johnson & Wallace, 2011). Both marketing and resource production firms have been known to design their innovation processes using such a strategy, but research on this structure is limited.

Because regulatory focus is readily malleable, organizations could develop training programs to manage follower regulatory focus. A training intervention may help employees and leaders recognize when it is appropriate to switch focus to maximize task effectiveness (Wallace et al., 2008). For example, in contexts where production and safety are at odds with one another, leaders could learn to recognize when tasks require speed and when they require safety. When these organizational states trigger, they could encourage follower promotion focus or prevention focus, depending on which undertaking is most salient. This capability could lead to dynamic optimal fit processes between task requirements and regulatory foci as work demands and requirements change (Wallace & Chen, 2006). Existing research suggests that leaders can influence climates that are conducive to conditions enabling regulatory foci switching (Wallace, Butts, Johnson, Stevens, & Smith, in press), but much more research is needed to identify effective leader training that results in optimal regulatory foci in followers.

To our knowledge, only twice have researchers manipulated regulatory focus in the workplace (see the Regulatory Focus Methods section below for more discussion); in both cases, they established a regulatory focus condition by changing task instructions for each subject. Van Dijk and Kluger (2004) created a scenario where the subject “had to keep” (prevention) or “desired to have” (promotion) a job. This suggests that in the workplace, the effect of instructions on regulatory focus could be used to frame task performance to enhance organizational outcomes. For example, stock brokerage managers cope with potentially volatile fluctuations in the market, so they may need to adjust their employees’ attitudes toward risk. In addition to explicit information about risk, instructions could also be framed using terminology associated with feats (promotion) or diligence (prevention), depending on their market outlook. Thus, in addition to market information, they would have induced a motivational state in their brokers, although the amount of time this state persists has not been studied to our knowledge. We should also consider the practical and ethical ramifications of manipulation of regulatory focus by organizations. In holding a position of power, managers are uniquely responsible for decisions that affect current or future employees. Brown, Treviño, and Harrison (2005) suggest that ethical leaders are those whom followers perceive as honest and trustworthy and who make principled and fair choices. Manipulating the regulatory focus of followers for organizational gain is ethically challenging, particularly with regard to the individual ramifications of regulatory fit. If fit results in feeling “right” for the individual, misfit is then implied to feel “wrong.” A leader who induces a “wrong” fit may be seen by the follower as untrustworthy or unfair. Hamstra, Van Yperen, Wisse, and Sassenberg (2014) found that when there is fit, followers perceive leaders as more effective.

Finally, we note that collective bargaining agreements may have implications for regulatory focus in organizations. Research questions include examining the effects of chronic regulatory focus on union membership, collective bargaining, and contract negotiation, as well as the reciprocal effects of such a contract on the regulatory focus of union members and company managers. Both sides of the union contract may be influenced by a strong situation created by its exacting requirements for interaction. Contractual demands and limitations on managerial and employee action may require vigilance and responsibility more than accomplishment and achievement, possibly resulting in individual and collective prevention focus instead of promotion focus.

Regulatory focus and entrepreneurship

Entrepreneurs often find themselves in highly dynamic and unpredictable environments in which there are few external guides for their decisions or actions. A lack of guidance implies that entrepreneurs must rely primarily on internal resources, such as their own skills, abilities, knowledge, and passion in self-regulating their activities (e.g., Cardon, Wincent, Singh, & Drnovsek, 2009). In short, they depend on self-regulation to successfully navigate the complex environments in which they work (e.g., Vohs & Baumeister, 2011). Brockner, Higgins, and Low (2004) provided a framework for understanding how RFT can help clarify key aspects of the entrepreneurial process. They reached the conclusion that neither promotion nor prevention focus is superior because each offers advantages and disadvantages during the various phases of the entrepreneurial process. For example, Brockner et al. proposed that in the initial, prefounding stage, a key task for entrepreneurs is the generation of ideas for new products or services. During this important phase, entrepreneurs who adopt a promotion focus have important advantages because promotion facilitates creativity, willingness to change, and consideration of new possibilities (e.g., Friedman & Förster, 2001). However, Fitzsimmons and Douglas (2011) reasoned that during early phases of the entrepreneurial process when individuals form intentions concerning entrepreneurship, they often adopt a prevention focus because of concerns about protecting limited resources by avoiding losses. These findings suggest that both promotion and prevention focus offer benefits during the entrepreneurial process and a potential area for future regulatory focus research, as the balance between potential benefits and potential costs provided by a promotion and prevention focus may vary strongly across various process phases.

Although there are other relevant topics, we limit our review of RFT in entrepreneurship to three areas we perceive as most salient: entrepreneurial intentions, opportunity recognition, and the actual financial performance of new ventures. Entrepreneurial intentions reflect a readiness on the part of prospective entrepreneurs to take the actions necessary to adopt this role. Since intentions are often the single best predictor of overt behavior (e.g., Zhao, Seibert, & Lumpkin, 2010), entrepreneurial intentions are useful in predicting whether individuals will actually act to develop opportunities. McMullen and Shepherd (2002) found that as the perceived benefits of entrepreneurial action increased, so too did entrepreneurial intentions, which were stronger for individuals in a promotion focus than in a prevention focus. These results are consistent with RFT, which suggests that achievement and success are salient outcomes for individuals in a promotion focus. However, we wonder whether regulatory fit might play a role in the intent to act entrepreneurially. When the opportunity is personally aspirational, there is a good fit with promotion-focused potential entrepreneurs. Yet social entrepreneurs act out of a sense of responsibility to society; thus, prevention-focused social entrepreneurs may feel activated by such opportunities because of the regulatory fit resulting from feelings of duty and responsibility associated with social activism.

Similarly, many definitions of entrepreneurship (e.g., Shane, 2012) suggest that the entrepreneurial process starts with opportunity recognition, or the identification of a perceived means of generating economic or social value not previously developed by others (Baron, 2006). Identifying an opportunity is an initial step toward positive entrepreneurial outcomes. Individuals with a promotion focus would be more likely to search for and identify new opportunities than those with a prevention focus. Tumasjan and Braun (2012) found that entrepreneurs’ levels of promotion focus related positively to both the number and innovativeness (i.e., quality) of identified opportunities, while prevention focus was unrelated to these outcomes. RFT may be particularly relevant to models of opportunity recognition as pattern identification. Specifically, entrepreneurs recognize opportunities for new ventures by perceiving connections between seemingly unrelated events or trends, and these patterns suggest new business opportunities (Baron, 2012). Related research on entrepreneurial alertness suggests that opportunity recognition requires three processes: (1) alert scanning and search for opportunities, (2) alert association and connection across various sources of information (a key aspect of the pattern recognition view), and (3) evaluation of identified opportunities (Tang, Kacmar, & Busenitz, 2012). Consistent with RFT, promotion focus may facilitate the active search and alert association components of alertness. However, with its greater focus on potential costs or losses, a prevention focus may enhance effective evaluation of opportunities.

Finally, actual financial performance of new ventures is a key dependent variable in the field of entrepreneurship. Behavioral processes that link the skills, characteristics, judgment, and actions of individual entrepreneurs to firm-level performance are complex and indirect in nature, involving a variety of mediators and moderators (Baron, 2012). However, evidence indicates that entrepreneurs strongly influence the fortunes of their companies. Recent research concerning the role of self-regulation in entrepreneurship suggests that RFT offers insights into these processes (Nambisan & Baron, 2013). For instance, Jaskiewicz and Luchak (2013) used RFT and regulatory fit as a basis for understanding why family-owned businesses tend to be more successful (i.e., profitable) in stable environments when headed by family-member CEOs but are more successful in more dynamic environments when headed by non-family-member CEOs. They suggest that family-member CEOs are primarily concerned with protecting the family’s financial and social interests and so adopt a prevention focus. In stable environments where change is slow and predictable, avoiding losses is an important consideration and may provide important benefits. However, prevention focus is less effective in dynamic settings where flexibility and rapid “changes in course” are essential. Nonfamily CEOs tend to adopt a promotion focus as they seek to enhance growth and gains since achieving these goals will advance their careers. Related studies found that a match between CEOs’ regulatory focus and the industry conditions they faced influenced the performance of their companies (Hmieleski & Baron, 2008; Kammerlander, Burger, Fust, & Fueglistaller, in press).

Future RFT and entrepreneurship research should seek to examine the relationship between regulatory focus and nonfinancial measures of new venture success. Research in personal outcomes of the entrepreneurial process, such as subjective well-being (e.g., Baron, Franklin, & Hmieleski, in press), suggests that investigating their relationship with RFT may be informative as to how people experience these other forms of success. Moreover, entrepreneurial passion involves intense positive feelings toward entrepreneurial activities and plays an important role in many aspects of entrepreneurship (e.g., Cardon et al., 2009) by facilitating several aspects of launching and operating new ventures. Research findings, however, suggest that only promotion focus elicits passion because it more closely aligns with positive affective states (Idson, Liberman, & Higgins, 2000). It seems likely to us that a promotion focus has a significant positive influence on a greater variety of forms of success over prevention focus as a result of its fit with the uncertain and risk-laden life of an entrepreneur.

Another avenue for future research involves examining the relationship between RFT and other aspects of personality and self-regulation. Entrepreneurs score higher on conscientiousness, openness to experience, and optimism than the broader population (e.g., Baron, Hmieleski, & Henry, 2012; Hmieleski & Baron, 2009; Zhao & Seibert, 2006). Promotion focus shows similar relationships (Lanaj et al., 2012) and, as such, it seems likely that entrepreneurs may demonstrate a promotion focus over a prevention focus. Yet a combination of the two forms of regulatory focus is theoretically more advantageous to the entrepreneur, since excessive optimism and very high levels of positive affect can lead entrepreneurs to ignore negative input and to be unwilling to withdraw from failing strategies or courses of action (e.g., Baron et al.; Hmieleski & Baron). To our knowledge, these relationships have not yet been investigated.

As innovation is a key characteristic of entrepreneurship, evidence supports the importance of a promotion focus in the creative process (e.g., Friedman & Förster, 2001). However, prevention focus also has a role in creativity and effective innovation. In an examination of the iterative design thinking process, Kröper, Fay, Lindberg, and Meinel (2011) found that different phases of the design thinking process required different strategies to attain success. For process steps that are oriented toward novel tasks and creativity, subjects tended to have high levels of promotion focus, but when the process demanded analytical tasks, such as synthesizing or testing ideas or accomplishing administrative tasks, subjects tended to have high levels of prevention focus. These results align with suggestions by Brockner et al. (2004) that both facets of regulatory focus are critical to innovation, with promotion focus providing the creative spark and prevention focus encouraging careful evaluation of creative ideas prior to implementation. The role of prevention focus in innovation evaluation may be particularly important to entrepreneurs as a result of lack of resources available to make errors.

Furthermore, because resources are typically quite limited, entrepreneurs often need to acquire financing, specialized labor, and information from external sources to develop opportunities, and they may be more successful in obtaining these resources when there is regulatory fit with potential investors that results in motivational activation for both parties in the relationship (Brockner et al., 2004). Existing research indicates that potential investors generally focus exclusively on potential gains, which limits the fit when the entrepreneur demonstrates a prevention focus. This is not to say that investors have little interest in avoiding losses—far from it. In fact, they often reject overly optimistic business plans as unrealistic (e.g., Barringer, 2009). Therefore, while a promotion focus seems more likely to generate enthusiasm on the part of investors, there remains the possibility of an inverted-U-shaped function for this relationship in which very high levels of promotion focus are less successful in obtaining the support entrepreneurs seek unless a prevention focus tempers it to some degree. Individuals who demonstrate this combination of promotion and prevention approaches may be more likely to attain success; however, these dynamics remain to be studied.

Finally, despite the frequent use of detailed business plans by first-time entrepreneurs, it may be more important for them to get the business started than to invest large amounts of time in preparing such plans. Some researchers suggest that approaches involving effectuation, bricolage, and improvisation are more useful to entrepreneurs (Frese & Gielnik, 2014). These strategies for entrepreneurial action rely on the dynamic response to the available means, resources, and situation to enhance entrepreneurial success. Individuals with a chronic promotion focus may be more likely to adopt such methods when compared to a chronic prevention focus as a result of greater fit. They may also be able to use them more effectively; however, we can imagine scenarios where, despite the systemic fit of promotion focus with entrepreneurship, the entrepreneur may be inclined to use prevention-focused strategies or tactics. One of these is the choice between preparing detailed business plans and using these other approaches to developing entrepreneurial opportunities. External conditions, personal needs, skills, and the values of individual entrepreneurs may interact to demand one or the other. In addition, prevention-focused entrepreneurs may be more successful when they use a business plan because they indicate due diligence, while promotion-focused entrepreneurs may be more successful without one. Investigating these possibilities offers an intriguing topic for future research.

Regulatory focus as a collective structure

CRF, a functional equivalent of individual regulatory focus, is a multilevel construct representing the process by which teams self-regulate to bring action into alignment with team goals (P. D. Johnson & Wallace, 2011). CRF shares similar group antecedents and consequences with individual regulatory focus, as it develops from the shared needs and values of individuals that form as they interact with one another to form a collective structure by which other collective constructs develop (Morgeson & Hofmann, 1999). By creating a shared understanding of group needs and values, groups regulate behaviors toward collective goals. Research on group goals is extensive, with broad qualitative (Locke & Latham, 1990) and quantitative (O’Leary-Kelly, Martocchio, & Frink, 1994) analyses finding that group goals enhance individual and team productivity and satisfaction because group goals act as the shared end states that drive collective regulation of behavior.

There are few studies of CRF, but Rietzschel (2011) found that a high climate for innovation in a team, which encourages novelty and experimentation, results in collective promotion focus and enhanced innovation performance. In addition, Levine, Higgins, and Choi (2000) studied the processes that lead to a convergence of strategic orientations in teams. They manipulated three-person teams to induce either a promotion focus or a prevention focus. The group members were then given memory recognition tasks in which they decided collectively whether they remembered a word in a list. In the promotion condition, groups made riskier decisions about the presence of a word versus the prevention condition. This study presented evidence that regulatory focus acts to collectively control behavior in team goal striving.

Similarly, Beersma, Homan, Van Kleef, and De Dreu (2013) found that collective prevention-focused teams had better outcomes when working toward team goals rather than individual goals, while goal interdependence did not influence the success of promotion-focused teams. The authors proposed that interdependence is most salient to prevention-focused teams as a result of the obligations and duties team membership imposes on the individuals. For goals with little interdependence, obligations are not present, which allows individuals to strive for achievement without regard to failing the team. Finally, Sacramento, Fay, and West (2013) found that demanding work resulted in better creativity for individuals with a high promotion focus and that team promotion focus moderated the relationship between the effects of challenge stressors on team creativity. Although there is interest in CRF, means for assessment remain confused. Of these studies, two induced a collective state while the others aggregated on the basis of agreement and used the mean team score to define CRF.

With increased interest in collective motivational processes (Chen & Kanfer, 2006), we see merit in a broad program of study on CRF addressing team self-regulation toward team goals to provide insight into team regulatory processes, particularly with regard to collective antecedents, such as team diversity. In addition, the effects of CRF on collective outcomes, including performance and decision making, should be a fruitful area of study. For example, the self-regulatory effects of CRF on team decisions could provide insight into the operationalization of groupthink in teams (Janis, 1972). We would expect that groups with high levels of agreement about CRF would be susceptible to groupthink; however, prevention CRF may be less so as a result of the salience of duty and responsibility. Of additional interest is the interaction of individual regulatory focus and CRF on group decision making. Researchers could also examine the development process of regulatory focus in teams, as well as how CRF interacts with each group member’s individual regulatory focus both during this developmental process and after CRF is established. Indeed, this is another form of regulatory fit between individuals and their environment. CRF may play a significant role in transforming individual behavior at different stages of the team development process.

Social dynamics

Beyond CRF, however, the interaction of individuals with regard to regulatory focus has gained attention from researchers, including social networks, communication styles, and social norms. Chung and Tsai (2009) examined word-of-mouth advice in social networks as spread by tie strength. Word of mouth passes via strong network ties for both promotion- and prevention-inclined subjects. However, promotion-focused givers of advice also passed similar levels of word of mouth via weak ties. Additionally, Pollack, Forster, Johnson, Coy, and Molden (2015) found that promotion focus in entrepreneurs predicts the number of people influenced by the entrepreneur and revenue generation from the entrepreneurial network.

Regulatory focus also affects how communication occurs. Because promotion orients toward general goals, individuals with a promotion focus use more abstract language regarding desired end states, preferring broad verbiage that leaves open the possibilities for success (Semin, Higgins, de Montes, Estourget, & Valencia, 2005). Individuals with a prevention focus, however, use language characterized by concrete and action-oriented terms that align with error minimization, which may be caused by inexact or vague statements. Furthermore, the salience of obligation to prevention focus enhances the adoption of socially defined norms when compared to promotion focus (Zhang, Higgins, & Chen, 2011), particularly with regard to norms of reciprocity (Keller, Hurst, & Uksul, 2008). For prevention-focused individuals, norm violations with regard to reciprocity lead to aggressive and hostile reactions (Keller et al.). Because people with a chronic prevention focus adopt group norms as a matter of form, they may defer to others within the group to enhance the development of team climates.

Finally, as the shared perceptions of individuals in a group, climate serves as a method for regulating the behavior of the individual to comply with collective expectations (Kuenzi & Schminke, 2009). Wallace and Chen (2006) found that individual prevention focus mediates the effects of safety climate on safety performance among group members. The shared perception of safe behavior among group members that underlies a safe climate creates a context in which loss from unsafe acts is undesirable by group members. The safety climate elicits a prevention focus from individual group members, who go about their daily tasks with a mind toward preventing losses associated with injuries. Groups without a strong safety climate failed to have a strong prevention focus among their members, which resulted in decreased safety performance. Wallace et al. (in press) also found that a high-involvement climate provided a “contextual boost” to the effect of individual promotion focus on innovation performance.

Multilevel regulatory fit

As another form of regulatory fit between individuals and their environment, regulatory fit within groups is critical in determining the regulatory strategies and tactics in which individuals engage to accomplish their goals (Scholer & Higgins, 2008). Regulatory misfit exists when chronic regulatory focus and situationally adapted strategies are not congruent; thus, we expect that when there is a mixture of promotion- and prevention-focused team members, there may be misfit for some individuals in the actions pursued by the team. Early in the team development process, prior to the development of a CRF, the motivational consequences of regulatory fit may be particularly influential on team members because a common cognitive structure for team goal striving has not been established. Despite establishing CRF, however, each individual still possesses a regulatory preference for goal striving and end states. When a mismatch occurs between CRF and individual chronic regulatory focus, lack of fit may leave those having counterfacets of individual regulatory focus demotivated.

Currently, research offers little in the way of explaining how CRF interacts with individual regulatory focus within teams. Research on how and when individuals suppress their personal inclinations in favor of the collective will would provide interesting insight into team processes. On one hand, we expect individuals to exhibit individual chronic regulatory focus in interactions with the team. If the CRF does not “fit,” individual performance may decline, conflict may increase, and a number of other possible deleterious outcomes may ensue. Yet regulatory focus is malleable to situational effects, and team dynamics can be strong influences; thus, CRF may suppress the exhibition of individual regulatory focus in favor of the collective. Of additional interest are the conditions and processes by which individual and CRF change dominance. We recommend that researchers assess these interactions longitudinally to increase understanding of how to manage individual and team motivation processes in teams with multiple goals.

The effects of regulatory misfit in teams can create even larger problems when regulatory focus is studied at the collective level. We found no studies to date investigating regulatory misfit with CRF and the organizational situation. Teams that are homogenously composed of promotion or prevention regulatory focus likely have a strong CRF. A homogenous team with a strong promotion CRF may be collectively demotivated by an organizational context that demands duty and responsibility. However, a diverse team composed of team members with various chronic regulatory preferences may be more resilient in the face of misfit despite a unified CRF as a result of the individual activation of team members in response to the organization’s contextual demands. Because collective constructs are typically based on agreement and use the resulting mean as representation of the collective structure, individual fit must be assessed in order to study collective fit. We feel that it would be interesting to evaluate fit between CRF and organizational operations, such as company safety policy and quality programs.

Regulatory focus and strategic management

There are a limited number of studies in the field of strategic management that use RFT. The first topic to do so builds upon upper echelons theory (Hambrick & Mason, 1984) to address the role of executive regulatory foci in affecting organizational outcomes. For example, Wallace, Little, Hill, and Ridge (2010) investigated the relationship between CEO regulatory focus and firm performance, arguing that both promotion focus and prevention focus relate positively to firm performance. They also proposed that environmental dynamism moderates these relationships, depending on the regulatory fit between the CEO and the competitive environment. They found a positive relationship between CEO promotion focus and firm performance, as well as the moderating effect of environmental dynamism on both facets of regulatory focus, but the results were inconclusive for promotion focus and performance depending on who rated dynamism. Gamache, McNamara, Mannor, and Johnson (in press) make similar arguments with respect to the regulatory fit between a CEO’s foci and circumstances, finding direct relationships for CEO regulatory foci and acquisition activity measured in terms of both number and value of acquisitions. However, they find that the regulatory fit with granting CEO stock options does not seem to amplify the positive effect of promotion focus but does seem to weaken the negative effect of prevention focus such that the relationship is present only when CEOs are granted minimal stock options.

A second group of research studies within strategic management integrates RFT with agency theory (Jensen & Meckling, 1976), which argues for the alignment of executive influence on strategic outcomes with shareholder goals via the structure of executive compensation as a means to align interests (for a review, see Devers, Cannella, Reilly, & Yoder, 2007). Wowak and Hambrick (2010) developed theoretical propositions about how regulatory focus affects the responses of executives to contractual incentives aimed at risk taking. They propose that executives higher in promotion focus will approach risky decisions considering the potential gains, whereas executives higher in prevention focus will dwell on potential losses. As such, executives high in either focus will not be swayed by stock options: The highly promotion-focused executive will be inclined to take risks regardless of options, whereas no amount of potential gain from stock options will be enough to incentivize risk from the highly prevention-focused executive. While these propositions remain untested to our knowledge, the findings of Gamache and colleagues (in press), which treat regulatory foci as the independent variable and incentives as the moderating factor rather than the opposite (as Wowak and Hambrick argue), offer some insight that CEO regulatory foci and incentives interact.

Weber and Mayer (2011) also integrate RFT into effective contract design, arguing that both transaction cost economics and relational views of governance regard contracts as a means to deter opportunism in exchanges; as such, both approaches implicitly take a prevention-focused viewpoint with respect to devising contracts to ensure safeguards. In contrast, the benefits of applying both prevention- and promotion-focused lenses to contractual design simultaneously to help devise agreements that ensure safeguards, while concurrently applying promotion focus, may result in agreements that induce creativity, flexibility, and cooperative behavior in exchanges. These still-untested propositions apply to a wide range of strategy research questions related to both intrafirm and interfirm relationships, such as design of effective executive incentives as well as selection of exchange partners and vertical integration decisions.

A third area of strategy-based RFT research investigates the sociocognitive impact derived by an organization from top management team (TMT) regulatory focus. In general, these studies extend the organizational behavior perspective on leadership framing activities to alter others’ responses. For example, Taylor-Bianco and Schermerhorn (2006) propose that a mix of both promotion and prevention focus cascades from top management through the organization to affect the capacity to implement change. Arazy and Gellatly (2012) offer some support for this notion in finding that project leader regulatory focus affects the engagement of other workers in corporate knowledge management systems. Bullard and Manchanda (2013) also take a sociocognitive view of regulatory foci, finding that general actions of an organization affect the inferences that individuals make about the organization. Spanjol, Tam, Qualls, and Bohlmann (2011) discuss the implications of goal pursuit strategies advanced by upper management on product development teams. Rhee and Fiss (2014) utilize RFT to argue that how firms frame the adoption of poison pills in press releases affects stock market reaction. They found support for their hypotheses that announcements of adoption that use shareholder value enhancement (or gain) framing will positively relate to market reaction, but they found a nonsignificant relationship for their argument that a shareholder value protection (or nonloss) framing will also relate positively to stock market reaction. Collectively, these studies indicate not only that leaders can set the tone for promotion or prevention focus to affect organizational phenomena such as creativity but also that organizational-level actions can dictate how people perceive the organization.

Regulatory focus and future strategic management research

Although the application of RFT to strategic management research has been limited, we see a number of avenues for extending this line of inquiry. First, our review identifies a handful of studies that take an upper echelons perspective on regulatory focus, yet they are limited to studies of single executives, particularly CEOs, and to a narrow set of dependent variables. The emphasis on the CEO is perhaps understandable given the disproportionate influence of the CEO on organizational-level decisions and the difficulty in accessing executives for study (cf. Hambrick & Mason, 1984). Similarly, outcomes of interest focus primarily on organizational performance with little attention on other organizational outcomes important to strategic management theory and practice. Thus, future studies can extend RFT to the TMT by linking TMT regulatory focus (including the CEO) to additional organizational phenomena, such as divestments and outsourcing/insourcing decisions. Because these decisions involve risk and reward, we expect differences among executives in choices made among various strategic alternatives as a result of the influence of regulatory fit between the organization and the environment.

In addition, while our review highlights research that investigates RFT in a social setting, TMTs are unique in many ways from groups/teams/collectives at other levels of the organization. Thus, insights into team processes at other levels may or may not hold in executive settings. McMullen, Shepherd, and Patzelt (2009) proposed a theoretical model of competitive threat attention by firms on the basis of the hierarchical location of the managers and manager regulatory focus, suggesting that a strong prevention focus held by the responsible middle manager leads to an increased identification of threats as that manager enacts vigilant strategies in environmental scanning. However, as managers ascend the organizational hierarchy, other strategic concerns begin to play a more significant role in their positions, resulting in a decreased salience for prevention and an increase in promotion. Strategy researchers could extend this line of thinking by investigating regulatory focus in individual TMT members and the TMT as a whole as they affect intragroup dynamics and organizational outcomes.

Future research on executives could also extend RFT to boards of directors. Prior research articulates that boards serve two primary purposes—providing resources and monitoring (Hillman & Dalziel, 2003). RFT may help to extend our understanding of the degree to which boards do serve these purposes. Collectively, promotion-focused boards may strive to increase resources and pursue success with a disregard to their fiduciary duty to shareholders, while prevention-focused boards may take their duty to the status quo too seriously and miss important strategic opportunities that require a level of risk taking. Again, we revisit regulatory fit with the environment as an influence on the strategic decisions approved by the board. Studies of board regulatory focus may also help address the limited research on board composition outside of more easily observable phenomena (S. G. Johnson, Schnatterly, & Hill, 2013) and may help to explain why certain individuals serve on boards (Finkelstein, Hambrick, & Cannella, 2009).

Our second suggestion is to assess extant theory that remains untested to extend our knowledge of RFT and contracting, particularly by incorporating knowledge gained at other levels of analysis. For example, Holler, Hoelzl, Kirchler, Leder, and Mannetti (2008) relate regulatory foci to tax compliance, finding that compliance is higher when a match exists between individuals’ regulatory foci and informational campaigns aimed at highlighting potential for gains from compliance or loss from noncompliance. The evidence that regulatory foci work in concert with situational stimuli (e.g., Hmieleski & Baron, 2008; Wallace et al., 2010) may extend our knowledge of contracts and the role of situational factors of organizations and their executives.

Finally, further research on the sociocognitive perspective of RFT at the highest levels of the organization may extend our understanding of both regulatory focus and TMTs by addressing sociocognitive processes at work. Of specific interest to us are organizational-level climates for promotion or prevention, as they may have important ramifications for outcomes such as operational effectiveness and innovation as well as organizational learning, particularly exploration and exploitation (March, 1991). CRF shows promising evidence for support, but a broad climate shared by a large organization remains unstudied. Important questions include the development and propagation of the climate through an organization (Taylor-Bianco & Schermerhorn, 2006) and the effects of organizational actions as they serve to reinforce the foci (Bullard & Manchanda, 2013). For example, organizational structure seems to affect team performance, with promotion-oriented tasks performed at a higher level by divisionally structured teams and prevention-oriented tasks performed at a higher level by functionally structured teams (Dimotakis, Davison, & Hollenbeck, 2012).

Beyond these currently established topics on RFT and strategy, we see many possibilities for future research as a result of the need to explain differences in human action. For example, RFT may have implications for both the payments perspective (Lippman & Rumelt, 2003a), which aims to understand revenues and rents as a function of payments to rent generating resources, and the bargaining perspective (Lippman & Rumelt, 2003b), which articulates the role of management in discovering or estimating the value of resource combinations. The actions of individuals tasked with both payment and bargaining for an organization will be influenced by their regulatory focus and, hence, organizational revenues and rents. Perhaps promotion-focused individuals are more likely to “overpay” for resources and be aggressive in bargaining as they pursue potentially valuable resource combinations. Their prevention-focused counterparts focus on avoiding valuation errors and are less likely to acquire valuable resources, try new combinations, and bargain conservatively. Similarly, as a result of the individual influence of regulatory focus on decision making, RFT can extend the study of resource orchestration, or how managers structure, bundle, and leverage firm resources, such as how and why managers acquire and accumulate the resources they do and subsequently explain variance in how those resources are bundled (Sirmon, Hitt, & Ireland, 2007). The same logic would also apply to the study of competitive dynamics by investigating the role that regulatory foci play in decision makers’ competitive actions and responses (cf. Ketchen, Snow, & Hoover, 2004).

Finally, by adopting a multilevel view of RFT, we can add insight into the microfoundations of strategic management (Felin & Foss, 2005). Individuals compose organizations, which suggests that individuals matter to organizational success. Yet as Felin and Foss note, strategy theorizing has not adequately emphasized the individual as an explanatory element. By addressing individuals’ underlying natures, propensities, and motivations, we may explain organizational-level phenomena. Multilevel research that integrates individuals’ and groups’ regulatory foci to the organizational level explicitly addresses the Felin and Foss point by adding insight into regulatory focus effects on strategic phenomena. An example would be the microfoundations of the routines and capabilities literature: Given that regulatory foci affect individual and group processes, it seems natural to extend this knowledge to organizational routines and capabilities. Organizational routines are patterns of behavior within organizations that are subject to change if conditions change, which aligns well with prevention regulatory focus’s preference for the status quo and our conceptualization of regulatory fit and serves as a basis for determining how routines originate in organizations.