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Similarity judgments are an important and distinct aspect of strategy formulation. They are manifest in strategic decisions and errors, and in the construction of analytic concepts such as strategic groups and relatedness in diversification. However, existing models of strategy formulation either assume away the process of making similarity judgments or regard it as unproblematic. This paper highlights the role of similarity judgments in strategy formulation, and discusses cognitive findings showing that decision makers' assessment of similarity is not free from bias. The cognitive findings help construct a new process explanation for a wide range of apparently isolated strategic errors. The process explanation is contrasted and integrated with traditional explanations based on imperfections in decision inputs. Finally, in light of the cognitive findings, the methods and assumptions of existing approaches in strategy formulation research to the construction of analytic concepts are reexamined. [ABSTRACT FROM AUTHOR]

Despite widespread incorporation of risk measures in strategy research, there is little consensus regarding the meaning and measurement of risk. In contrast to the variability measures widely used in strategy studies, this paper draws from behavioral decision theory, finance, and management theory to present an alternative perspective on organizational risk--downside risk. The paper explains three categories of organizational downside risk measures based on the concept of lower partial moments. The latter returns of the paper present considerations involved in specifying operational measures of downside risk and an empirical comparison of alternative downside risk measures. [ABSTRACT FROM AUTHOR]

Strategic decision-making can be viewed as a special kind of decision-making under uncertainty. Such decision-making involves the activities of goal formulation, problem identification, alternatives generation, and evaluation selection. Researchers in cognitive psychology and behavioural decision theory have identified a number of cognitive simplification processes which may affect the way decision-makers perform these tasks. Within this paper, the research on these processes is summarized and their possible effects on strategic decision-making are discussed. Implications for future research in this area are also drawn. [ABSTRACT FROM AUTHOR]

A great deal of attention has focused on the potential benefits of the dialectic during strategic decision making. Some field studies have shown favourable perceptions of the dialectic. Exclusive use of field studies, however, is inadequate for a comprehensive evaluation of the dialectic. Controlled studies in the laboratory and the field are needed. Operationalizing the dialectic and measuring its effectiveness in Controlled settings has been the subject of debate. This paper reviews three controlled approaches lens model studies, creative task experiments, and case studies. The applicability of these approaches to dialectical research is discussed. Basic assumptions underlying controlled research are that the dialectic can be created in controlled settings and its effectiveness can be measured in terms of better decisions. [ABSTRACT FROM AUTHOR]

This paper illustrates the usefulness of game theory for strategic management through theoretical and empirical analysis of price competition in the presence of production backlogs. Game-theoretic analysis predicts a different relationship between relative prices and backlog levels than does analysis that ignores the sorts of interactive considerations emphasized by game theory. Empirical analysis based on data for the U.S. market for large turbine generators between 1951 and 1963 corroborates the game-theoretic prediction. The paper concludes with a discussion of the sorts of situations in which game-theoretic reasoning is particularly likely to prove useful. [ABSTRACT FROM AUTHOR]

Cluster analysis is a statistical technique that sorts observations into similar sets or groups. The use of cluster analysis presents a complex challenge because it requires several methodological choices that determine the quality of a cluster solution. This paper chronicles the application of cluster analysis in strategic management research, where the technique has been used since the late 1970s to investigate issues of central importance. Analysis of 45 published strategy studies reveals that the implementation of cluster analysis has been often less than ideal, perhaps detracting from the ability of studies to generate knowledge. Given these findings, suggestions are offered for improving the application of duster analysis in future inquiry. [ABSTRACT FROM AUTHOR]

Strategic management cannot ignore the place of applied business ethics in organizational planning and decision making. This article establishes some of the aspects that make business ethics unique, together with the necessary steps for making them an effective contributor to business performance. The focus is upon applied business ethics--patterns of conduct. The usefulness of business ethics is discussed in terms of its dependence upon the total objectives of the firm, the identification of relationships and interests of affected parties in the relevant environment, and the recognition of the need for consensus and for positive implementation procedures. These structural requirements and constraints constitute a system through which effective action can be attained as management addresses the various moral, social and human elements with which business ethics has to deal. In this paper the author is not presuming to offer substantive answers to alt, or even a few, of the ethical dilemmas and conflicts that business firms (or anyone else) cannot escape. Instead, what is proposed is a pragmatic approach outlining a path that can help to determine where we are, who is involved, what are the options, what are the dimensions and parameters of the problems in a business context, so that ethical issues (even those where uniquely 'right' answers are unattainable) can be treated with intelligence and fairness. [ABSTRACT FROM AUTHOR]

This paper examines a role for applied decision analysis in the strategic management process. It is argued that decision analysis should be regarded both as a heuristic and a 'thinking' algorithm for decision structuring and problem diagnosis and, in addition, as an input to the process of policy dialogue. A policy dialogue paradigm using decision analysis is outlined, in which various viewpoints are reconciled by the questioning of analyses and assumptions. This dialogue paradigm is viewed as being compatible with approaches such as strategic assumptions analysis, which have been suggested in the literature as an aid for the processes of problem finding, formulation and solution. [ABSTRACT FROM AUTHOR]

This paper calls attention to a central but neglected process in strategic decision making, i.e. strategic issue diagnosis (SID). A framework for discussing SID is presented in terms of three critical components: inputs, process characteristics and outputs. The framework is illustrated in the context of PIMS and BCG, two widely recognized strategy models. The major implications highlight the theoretical significance of SID for understanding strategic decision making. [ABSTRACT FROM AUTHOR]

The microeconomic theory of the firm encompasses classical marginal analysis and modern operations research techniques. Yet, one finds a paucity of explicit application of microeconomics to corporate planning. In this paper we explore the reasons for the seeming void and develop an economic theory of corporate planning. Our main thesis is that received microeconomic theory focuses on answers, and answers stated in non-operational terms. Nonetheless, economic theory asks questions of central importance to the strategic choices of the firm. These questions arise from economic theory and the fundamental notion of trade-offs. We develop a microeconomic theory of strategic search for corporate planning. The theory is used to develop important questions and efficient search in lieu of chaotic and random search. [ABSTRACT FROM AUTHOR]

Critics of game theory claim that it can be used to rationalize anything--even bank presidents setting their pants on fire in public. This article verifies the claim with a simple signalling model. The paper goes on to argue, however, that this criticsm is without force. Game theory is a toolbox for constructing useful models, rather than an empirically substantive theory; its power comes from imposing logical discipline upon the stories we tell. [ABSTRACT FROM AUTHOR]

The article presents an introduction to articles in the issue. This issue is a "summer special issue," an annual special publication that focuses on a certain topic. In addition, editors are chosen who are knowledgeable in that specific topic. This issue focuses on the topic of evolutionary perspectives relating to strategy and the guest editors are Robert Burgleman and William Barnett. More specifically, the articles within this issue focus on explaining performance differences including market power, resource perspective, transaction cost economics, and game theory.

A model of effective decision-making in a situation of distributed knowledge is developed, drawing on three perspectives; the sociocognitive perspective, which focuses on framing issues; the economic perspective, which focuses on the role played by incentives in the integration of knowledge and decision-making authority; and the process perspective, which stresses the role of integrating mechanisms and of processes that either hinder or foster risk awareness and flexibility. The model is tested on a sample of managers from different functional areas of Fortune 500 firms, using strategic responses to exchange-rate volatility as the context. The results show that all three perspectives—framing, incentives and process—are significant in explaining the effectiveness of strategic responses to volatile exchange rates. The findings suggest that simultaneously addressing managerial mindsets, incentives and process may be crucial to generating effective strategic responses across functions. [ABSTRACT FROM AUTHOR]

This article reviews and assesses the contribution, explicit or implicit, of various schools of organization theory to the development of a stream of research on the management of multinational companies, and summarizes what is seen as the emerging paradigm of multinational management. While the contribution of some of the schools has been substantial, we conclude that opportunities for more cross-fertilization between organization theorists and scholars of multinational strategic management have been missed, mainly because the differences between theory development and phenomenological understanding have seldom been bridged. [ABSTRACT FROM AUTHOR]

Numerous authors have argued for the need to study the process of strategic decision making. In the present study a judgement capturing methodology is employed, to identify the specific structures of decision models and simplification heuristics in a series of strategic investment decisions. Implications of the results and suggestions for future research are discussed. [ABSTRACT FROM AUTHOR]

The relative importance of internal organizational activities versus environmental interaction as sources of influence on strategic decision making was explored in a field study in 15 organizations. Results indicate that environmental interaction is the primary factor in determining departmental influence on strategic decisions. [ABSTRACT FROM AUTHOR]

Thirty-three case histories of the process of formulating the nature of a strategic decision are analysed to determine what patterns emerge when they are compared with the Lyles' model of strategic problem formulation. A description of each pattern, its causes, and results are discussed. [ABSTRACT FROM AUTHOR]

Despite weak empirical support for its effectiveness, the dialectical inquiry system (DIS) has been recommended to improve the strategic decision-making process. This study compares the effectiveness of the DIS to alternative techniques. Thirty-two organizational planners from the United Way of America were randomly assigned to a DIS and three other planning conditions. All planners submitted a planning report for a common cause situation. Results suggest that, in general, the quality of the reports from the planners in the DIS condition was inferior to the quality of reports submitted by subjects in other conditions. For example, reports submitted by planners in a devil's advocate condition were judged to reflect a significantly more appropriate degree of risk than reports submitted by DIS planners. These results suggest that further investigation of the DIS is necessary before the validity of the technique is assumed. [ABSTRACT FROM AUTHOR]