The cognitive perspective in strategic choice

Abstract

This paper examines to what degree organizations use strategies that focus on maximizing shareholder value (Theory E) or if they use strategies emphasizing the development of organizational capability (Theory O). Applying a cognitive perspective in strategic choice, our main goal was to investigate to what extent cognitive biases influenced strategic choices. A survey was developed that measured different aspects of the cognitive perspective in strategic choice. It was distributed to managers of several medium-sized organizations in Scandinavia (n = 119). The results indicated that managers used mixed strategies (Theory E and O) contrary to recommendations. Results also revealed that illusions of control together with beliefs about change processes skewed the application of strategies towards Theory E. Theoretical and practical implications of the results were finally discussed enlightening the cognitive perspective in strategic choice.