Session 360

Heuristics and Biases in Strategy Choices

Track P

Date: Sunday, September 21, 2014


Time: 15:45 – 17:00


Room: Lisboa

Session Chair:

  • Donald Conlon, Michigan State University

Title: Doubling Down in Hollywood: A Multidimensional Test of the Determinants of Escalation of Commitment


  • Donald Conlon, Michigan State University
  • Jamal Shamsie, Michigan State University
  • Joel Koopman, University of Cincinnati

Abstract: Four serious criticisms of escalation of commitment research involve an over-reliance on lab studies, use of a limited set of predictors of escalation, an over-emphasis on psychological determinants, and an inability to link escalation behavior to whether the course of action proved successful or unsuccessful. We address these shortcomings using data from almost 1500 Hollywood films. We identify two project, psychological, social, and structural determinants, and test the relevance of these eight determinants to a financial measure of escalation that studios use to protect their already-incurred investment in the movie. We then examine whether this escalation measure and its antecedents predict whether the course of action was a successful strategic decision using financial performance data (box office revenues) of the film.

Title: Global Leaders and Popular Management Concepts: Innovation Heuristics, Boundary Capabilities, and Effectuation


  • Jacqueline Fendt, ESCP Europe

Abstract: This is a qualitative study on global leaders’ use of popular management concepts. Why do top executives read such concepts, rather than richly available validated theory, as they cope with conflicting demands of the current business context? Does – and if yes how – such literature help them to innovate and to keep a competitive advantage? Repeated narrative interviews of 20 corporate leaders over a period of 12 years are coded, conceptualized and categorized. Abstraction suggests that leaders rely intensely on effectuation, a set of behaviors and capabilities commonly known to be deployed by individual entrepreneurs and/or leaders of small, agile organizations. We conceptualize a set of nine innovation heuristics deployed, and give concrete examples for each. We frame these in terms of boundary capabilities and effectuation.

Title: Multiple Contexts Engender Multiple Rationalities: Ecological Rationality Approach to Capability Imitation


  • Patrick Regnér, Stockholm School of Economics
  • Harun Emre Yildiz, Stockholm School of Economics

Abstract: If behavioral strategy is set out to bring in “realistic assumptions about human cognition, emotions, and social behavior” (Powell et al., 2011: 1371), research in this emerging stream needs to go beyond conventional rational vs. bounded rational debate. It is not anymore novel to claim that managers are hardwired with cognitive biases. Nor do we see any added value in examining the battery of factors that can explain variance in a uniformly defined type of ‘rationality’. Instead, there is a need for an integrative perspective that can yield a more realistic picture of executive decision makers who interact in different social, political and historical contexts and, accordingly, develop their own heuristics and rules of thumb in order to arrive at their own ‘rational decisions’ attuned to their idiosyncratic ecologies. In this paper, we aim to fulfill this need.

Title: Organizational Ideology and Corporate Strategy: A New Vantage on “Socialistic” Resource Allocation Practices in Multibusiness Firms


  • Abhinav Gupta, University of Washington-Seattle
  • Forrest Briscoe, Penn State University
  • Donald Hambrick, Penn State University

Abstract: Building on the premise that organizations vary widely in their ideologies, particularly on the dimension of conservatism-liberalism, we argue that a more conservative company’s beliefs in the importance of allocating resources to their most efficient uses will be reflected in relatively “capitalistic” allocations (i.e., limited funds to units with poor prospects and abundant funds to units with favorable prospects). In contrast, more liberal companies, following their deep beliefs in egalitarianism, will be more “socialistic” (i.e., subsidizing units with poor prospects and taxing units with the best prospects). We further argue that a CEO’s embeddedness with the company will amplify the proposed relationship. We find support for our ideas on a sample of multibusiness firms’ capital allocations to their business units.

All Sessions in Track P...

Sun: 08:00 – 09:15
Session 459: Theoretical Foundations of Behavioral Strategy I
Sun: 09:30 – 10:45
Session 460: Theoretical Foundations of Behavioral Strategy II
Sun: 11:15 – 12:30
Session 461: Theoretical Foundations of Behavioral Strategy III
Sun: 15:45 – 17:00
Session 360: Heuristics and Biases in Strategy Choices
Session 363: Social Influence & Comparisons
Sun: 17:15 – 18:30
Session 612: Behavioral Strategy IG Business Meeting
Mon: 08:00 – 09:15
Session 354: Goals and Aspirations
Mon: 11:00 – 12:15
Session 352: CEO Decision Making
Mon: 14:45 – 16:00
Session 265: Learning, Search, Slack: The behavioral theory revisited
Session 353: Behavioral Foundations of Mergers & Acquisitions
Mon: 16:30 – 17:45
Session 359: Cognition Under Uncertainty & Risk Taking
Tue: 08:00 – 09:15
Session 358: Cognitive Processes in Strategy
Session 362: Search for Better Strategies
Tue: 11:00 – 12:15
Session 361: Creativity and Innovation
Tue: 15:30 – 16:45
Session 355: Behavioral Elements of Institutional Theory
Session 453: Competitive Dynamics
Tue: 17:15 – 18:30
Session 356: Affective and Cognitive Processes in Strategy
Session 357: Learning Processes

Strategic Management Society