Innovations are a salient source of competitive advantage for firms, and they often acquire salient knowledge through external sources in the form of acquisitions. A crucial assumption is that firms often use the knowledge that is acquired, however, growing literature suggests that is not the case. We expand this literature by looking at how behavioral biases in the form of social and historical aspirations impact the use of knowledge post acquisitions. Further, we investigate the moderating effect of CEO overconfidence between aspiration levels and knowledge use. Our results suggest that negative performance feedback against social aspirations increases the bias towards external knowledge and CEO overconfidence attenuates this relationship by downplaying the importance of negative feedback. Poor performance against historical aspirations does not have the same effect suggesting different attention mechanisms for social and historical aspirations.
