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Duke Seminar Series

Duke Seminar Series. Cognition and Strategy. Magdalena Cholakova . University Bocconi. OVERVIEW. Handbook of Strategic Management(Pettigrew, Thomas & Whittington,2002) . Cognition & Strategy Three approaches:

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Duke Seminar Series

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  1. Duke Seminar Series Cognition and Strategy Magdalena Cholakova University Bocconi

  2. OVERVIEW Handbook of Strategic Management(Pettigrew, Thomas & Whittington,2002) • Cognition & Strategy • Three approaches: • Behavioral decision theory: cognitive biases, heuristics and limitations inherent in people’s judgments; (Simon, 1955; Kahneman & Tversky, 1984) • Micro approach on cognitive maps and structural factors; (e.g., Huff, 1990) – the mental models of the key decision makers • Relations between cognitive structures and decision processes in SM (Walsh, 1995); Link mental models to key outcomes and choices about resource deployment; • Holistic view of strategy – bottom up and top down components • ‘organizational actors collectively create and enact a strategic space’

  3. OVERVIEW Handbook of Strategic Management(Pettigrew, Thomas & Whittington,2002)

  4. Discussion Question Proposition 2: The role of managerial cognition in strategy is grossly exaggerated. Cognition in organizations is distributed and embedded into the organizational structure and processes, and management has little scope to change it. Cholakova Res Questions

  5. Theoretical Background • Cartographic Myths in Organizations • ‘Maps put people in their place’ • Spatial relatedness is necessary for understanding to take place • ‘You have to know something already in order to see something different’ • Yet, much managerial life is socially constructed and the distinction between territory and map is not clear. • ‘Distortions of the territory find their way into maps, find their way out again when maps are coupled with action.’ (Weick, 1990) Cholakova Theory

  6. Theoretical Background (Garud & Rappa, 1994) Inversion at the micro level of cognition - evaluation routines begin reinforcing people’s beliefs Routines as the basis for individual reality – technological claims relevant to people with same routines Institutionalization at the macro level - shared cognition Cholakova Theory

  7. Theoretical Background • Looking forward and looking backward • Cognition as a ‘simple, low-dimensional representation of a more complex, higher dimensional fitness landscape’ • Cognition: forward-looking • Experiential wisdom: based on conditioning (feedback-based) • We must consider them JOINTLY (Gavetti & Levinthal, 2000) Cholakova Theory

  8. Framing Contests: Strategy Making & Uncertainty • Cognitive frames & a model on ‘framing contests’; • Individual to collective frames transformation • Cognition as dynamic, purposive, and politically charged process of meaning construction. (Kaplan, 2008) Cholakova Theory Criticism Comparisons Misconceptions Suggestions Res Questions

  9. Framing Contests: Strategy Making & Uncertainty (Kaplan, 2008) • ‘Frames influence strategic choices not in a deterministic fashion, but rather in one mediated by organizational framing contexts.’ • Framing can offer insights on firm inertia and adaptation. Cholakova Theory Criticism Comparisons Misconceptions Suggestions Res Questions

  10. Strategy Making in Novel and Complex Worlds (Gavetti et al., 2005) • Agent-based simulation model • Analogical reasoning versus rational deduction & local search • The role of Managerial & Structural characteristics for effective analogical reasoning • Depth versus Breadth of Experience • ‘The power of analogy depends not only on the representations, experience and orthodoxy of the management team, but also on the structure of the target landscape’. • Vertical structure: the relationship between number of detailed decisions per policy to number of higher-order policies • Horizontal structure: the intensity of the interaction within each policy domain and the intensity of the interaction across domains Cholakova

  11. The role of Cognition: Uncertainty Matters Nonetheless, it is important to consider the role of cognition in conjunction with the specific settings within which it rolls out and the relevant dynamics • Innovative (i.e. era of ferment/ discontinuous change), uncertain, novel decision-making context • Cognitive psychology is useful in exploring the development of new technologies (Garud and Rappa, 1994; Weick, 1990). • In weak and discontinuous environment, managerial cognition helps to create a general sense-making understanding the environment and opening to new alternatives (Kaplan, Murray and Henderson, 2003) • In novel contexts, managers elaborate information and search for solutions relying on the use of analogy (Gavetti, Levinthal and Rivkin, 2005)

  12. Cognition & Strategic: Back to the holistic view • Yet, let’s consider also: • The organization as an element of a broader, industry-level sensemaking process • Collective Beliefs and Overarching Social Identity Processes • Industry Belief Systems and Industry ‘Recipes’ (Spender, 1989) • Are there contexts in which we can rely on micro studies only and can we study cognitive structures in isolation from the environment in which they develop? • Are there settings in which this micro-level approach cannot be applied at all or has limited role?

  13. THANK YOU FOR YOUR ATTENTION! 13

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