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Strategic and International Management > 1.2 > Flashcards

1.2 Flashcards

1
Q

Where do organisational goals come from?

A
  • Organizational structure
  • Organizational power.
    No joint preference ordering.
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2
Q

What is the bargaining process?

A

Side payments.

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3
Q

In the bargaining process, what are the objectives and the goals?

A

Objectives as adaptive aspiration levels.
Goals can be contradictory and ambiguous.

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4
Q

What is the administrative man?

A

It is fundamentally human.
Describes the idealised decision-maker in organisations.
It’s characterised by rational and logical decision-making.

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5
Q

What determines our decisions?

A

The order in which we search.

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6
Q

What happens as complexity increases?

A
  • Use of approximations & simplifications
  • Substantially differ from reality
  • Mind is constrained in understanding/computing.
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7
Q

How are the human preferences?

A
  • Unstable
  • Contradictory
  • Endogenous
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8
Q

What does sociological & psychological base affect?

A

How we construct the simplified decision problem and how we evaluate it.
What we are determines how we see the world and how we decide.

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9
Q

What is bounded rationality?

A

Real-world decision makers operate under bounded rationality.
Bounded rationality is when, given constraints, managers make decisions which are good enough, in a given situation, instead of the best possible decision.

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10
Q

Human decision making is constrained by what?

A

Limited knowledge and computational capacity.

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11
Q

What is the novelty of the stimuli/problem to the decider?

A
  • Decisions are partly determined by previous actions/decisions.
  • Humans develop routines/programs/fixed responses. Experience: solution from repertoire from defined stimuli/problem.
  • Short-cut/ cessation of scanning information, even choice.
  • Choice, if highly habitual, can occur unconsciously.
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12
Q

What is an example of unconscious choice?

A

Morning coffee (program & routine).

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13
Q

How are humans when comes to making decisions?

A

Humans frequently ignore their own preferences when making decisions.
Humans are socially embedded.

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14
Q

What are the aspects that influence decisions?

A

Cognition, affection, relations and routines.

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15
Q

How can we predict strategic action?

A

By approximating individual’s socio-psychological, experimental, and educational vector.

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16
Q

What is the cognitive bias of overconfidence?

A

Humans tend to systematically overestimate their knowledge/abilities and their capability to predict. This effect is more pronounced for trained people or experts.

17
Q

What is the better than average effect linguistically? And technically?

A

Linguistically: overestimate own abilities, knowledge, and standing relative to others.
Technically: overestimate the mean of uncertain outcomes.

18
Q

What is miscalibration effect linguistically? And technically?

A

Linguistically: exaggerated trust in prediction of uncertain events.
Technically: underestimate the variance of uncertain outcomes.

19
Q

What is CEO overconfidence?

A

Excessive belief in their abilities and judgement.

20
Q

What are the negative consequences on strategic action of CEO overconfidence?

A
  • Higher acquisition premiums - Value destroying mergers
  • Higher innovation return volatility
  • Overoptimistic management forecasts.
21
Q

What is CEO narcissism?

A

Inflated sense of self-importance and a focus on personnel success.

22
Q

What is desire for narcissistic supply?

A

Striving for fame, applause, and external recognition of (subjective) superiority.

23
Q

What are the consequences of CEO narcissism on strategic actions?

A
  • Grandiose
  • impact on managerial discretion via lack of political acumen and interpersonal sensitivity
  • tendency towards unique CSR and sociopolitical activism.
24
Q

What is CEO greed?

A

The pursuit of excessive/extraordinary material wealth.

25
Q

What is the empirical evidence of CEO greed?

A

Greedy CEO behaviour reduces shareholder returns. Powerful boards reduce this effect.

26
Q

What is survivorship bias?

A

The thousands non-survivors that failed trying.
The DAX does not include failed firms and firms that remained small.
Success is visible, failure is invisible, therefore humans often systematically underestimate failure and make biased inferences.

27
Q

What is attribution bias?

A

Giving too much credit to internal factors for success, while attributing failures primarily to external factors.

28
Q

What is the romance of leadership?

A
  • Tendency to over-attribute corporate success to individual CEOs
  • Casual attribution of corporate success to CEOs
  • Mystification of leadership, romanticised heroic view of CEOs.
29
Q

What is halo bias?

A

The human tendency to rate unobserved qualities by a visible bright quality.

30
Q

What is heroism in management?

A

Bias towards valuing leaders who take dramatic, high-risk action.

31
Q

What is the story bias?

A

Preference for compelling narratives and anecdotes over data-driven analysis.

32
Q

If accuracy is nice but not necessary in sense-making, then what is necessary?

A
  • Preserves plausibility and coherence
  • is reasonable and memorable
  • embodies past experience and expectations
  • resonates with other people - can be constructed retrospectively but also can be used prospectively
  • captures both feeling and tough
  • allows for embellishment to fit current oddities
  • is fun to contrast.
    In short, what is necessary in sense-making is a good story.
33
Q

What is heroism in management?

A

Luck often plays a pivotal role in explaining the performance of Start-ups and established firms.

34
Q

What is CEO cognitive dissonance?

A

A state of mind occurring when individuals are confronted with inconsistent cognitive elements.

35
Q

How can CEOs reestablish consonance?

A
  • Explaining away failure
  • Optimistic reinterpretations.
36
Q

What is the implication for strategic management of CEO cognitive dissonance?

A

CEO cognitive dissonance can lead to suboptimal strategic actions.

37
Q

What is a social phenomenon?

A

Mimicking of subjectively more knowledgeable individual’s actions in an ambiguous situation or context.

38
Q

What is groupthink in strategy?

A

Dysfunctional decision-making of highly competent individuals in a social context due to a desire for conformity and harmony in groups.

Strategic and International Management (10 decks)

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