Powell, T. C., Lovallo, D. & Fox, C. R. (2011) Behavioral strategy

Question 1

GOAL

Answer 1

argue the 3 different views and 4 core questions of behavioural strategy

They define behavioural strategy as:
Behavioral strategy merges cognitive and social psychology with strategic management theory and practice. Behavioral strategy aims to bring realistic assumptions about human cognition, emotions, and social behavior to the strategic management of organizations and, thereby, to enrich strategy theory, empirical research, and real-world practice.

Question 2

REDUCTIONIST:

Answer 2

• Reductionist, positivist, realist, and objectivist philosophies of science
  o favors quantitative hypothesis testing using methods such as mathematical modelling, simulation, and laboratory decision experiments.
  o Influenced by theoretical work in behavioural decision research, has made important contributions in strategic decision making, cognitive biases, risk perception, and intertemporal choice.
  o Measure: Individual judgements and decision making

Question 3

PLURALIST

Answer 3

• Pluralist, positivist, nominalist, pragmatist, or evolutionary philosophies of science.
  o draws on multiple theoretical traditions and uses methods ranging from case studies and simulations to large sample field research.
  o Combining behavioral decision theory with political theory, organization theory, and social cognition psychology
  o less concerned with individual decision making than with the overall decision environment of the firm and studies the consequences of bounded rationality, group conflict, learning, and executive decision making in organizations
  o Measure: Organizationally situated managers or groups

Question 4

CONTEXTUALIST

Answer 4

• Contextualist, phenomenological, constructivist, and critical philosophies of science
  o Concerned with management perception, sensemaking, cognitive schema, language, meaning, and enacted environments.
  o ‘contextual’ in emphasizing the primacy of context. Thus, empirical work ‘in context,’ favoring qualitative and interpretive methods such as ethnography and textual analysis and rejecting positivism and quantitative hypothesis testing
  o Measure: Cognitive maps, schema, and management perceptions

Question 5

4 CORE RESEARCH QUESTIONS

Answer 5

1) How does individual cognition scale to collective behavior?
- How particular forms of behavior arise in and among organizations
- A theory of aggregation that explains how individual behaviors produce collective outcome (possible starting point is the coalitions of cyert and march)

2) What are the psychological underpinnings of strategic management theory?
- When and why are resources and input factors undervalued?
- When and why can arbitrage opportunities exist in factor and product markets?
o Arbitrage opportunities are about places where there are inefficiencies and take advantage of that.
o This is the relationship between Behavioral Strategy and all other knowledge about Business Administration > you have to think about the people in the organizations. Pay attention to the people. How does behavioral strategy relate to all the other theories we have?
- What are the limits to arbitrage in factor and product markets?
- What are the implications for strategy?
- Is a normative theory of strategy possible?

3) Can behavioral strategy explain complex executive judgements?
- The core of Levinthal’s paper. To cope with complex judgments and decisions, people use simplifying heuristics that are prone to systematic biases. Rational vs judgemental decision making.

4) Can we improve the psychological architecture of the firm?
- What are the intended and unintended consequences of individual de-biasing in organizations?
- Is it possible to design the psychological architecture of the firm, including both choice architecture and decision processes, to yield better executive judgments?