Strategic decision making in business relationships: A dyadic agent-based simulation approach

This study employs agent-based simulation to model strategic decision making in business relationships, examining the influence of two important strategy drivers in business relationships (performance and power) on relationship success (relationship survival and performance). The study offers insights into the complex and evolutionary interaction and feedback effects between networking strategy choice, relationship performance and power. Findings show that although certain strategies may be desirable for firms to manage their business relationships, they are not necessarily as successful in all situations. Results indicate that a trade-off exists between relationship context and performance which needs to be considered in strategic networking decisions. Further, the study shows that too many strategy changes cause relationships to become unstable and thus negatively affect performance. The authors refer to this phenomenon as strategy volatility — the rate at which actors change their networking strategies within relationships. This phenomenon arises when too many variables influence firms' decision making and thus cause firms to frequently change their strategy. Although strategy volatility has a relationship safeguarding effect in the short term, this effect diminishes over time.     

Examining Proactive Strategic Decision‐Making Flexibility in New Product Development

While strategic flexibility is widely accepted as a prerequisite for a firm's success, its application in strategic decision making to a firm's new product development (NPD) activities is limited to only a few studies. Furthermore, many organizations still have difficulties creating proactive strategic flexibility in their decision‐making processes. Past research studies have largely ignored the relationship between strategic decision‐making flexibility and firms' resources and/or capabilities and success in the context of NPD. This study advances strategic flexibility by adopting the proactive approach of NPD decision‐making flexibility and by examining its role in translating organizational resources and capabilities into NPD success. This study draws upon the resources, capabilities (i.e., flexibility), and performance framework to show how proactive strategic decision‐making flexibility plays a crucial role in developing new products that can create new opportunities and comply with market needs. Therefore, this research aims to (1) develop an operational definition of strategic decision‐making flexibility and (2) propose a framework to understand the drivers and the subsequent new product performance outcomes of strategic decision‐making flexibility. This study adopts the proactive perspective of strategic decision‐making flexibility and defines it as a capability that enables firms to develop NPD strategies to respond to future changes in the environment. The analysis, based on data collected from 103 European firms, shows that that the effects of long‐term orientation, strategic planning, internal commitment, and innovative climate on proactive strategic decision‐making flexibility are significant. The findings indicate specifically the roles of both champions and gatekeepers, who infuse a firm's knowledge with a clear understanding of its resources, constraints, and market needs, thereby enhancing decision makers' motivation to behave proactively to precipitate transformation. The results also reveal a positive association between proactive strategic decision‐making flexibility and NPD performance outcomes. As such, strategic flexibility provides firms with an ability to adapt to changing environments and to create new market opportunities, product, and technological arenas, and to deliver successful new products. When firms open new market, technological, and product arenas, they can easily foresee their new demands and changes and successfully deliver new products, meeting customer needs/demands, and offering benefits such as quality, cost, and timeliness. This study therefore provides a valuable reference point for future research in strategic decision‐making flexibility in NPD.     

Strategic (MIS)FIT: The Implementation of TQM in Manufacturing Organizations

This paper explores how fit with the organization's strategic orientation relates to performance following total quality management (TQM) implementation. Conceptualizing the organization as a system of interrelated activities, we propose that TQM is an ‘elaborating element’ that achieves internal fit when the core elements of the activity system are orientated toward a ‘cost leadership’ rather than ‘differentiation’ strategic position. When internal fit occurs, TQM drives tighter interactions among core elements in the activity system, resulting in greater performance. Using longitudinal data from a sample of 780 manufacturing organizations, we find that TQM is positively related to performance for cost leaders, but negatively related to performance for differentiators. Our findings support the contingency perspective whereby internal fit serves as an overarching contextual factor influencing TQM success. Copyright © 2012 John Wiley & Sons, Ltd.     

Influences on strategic decision effectiveness: Development and test of an integrative model

This paper draws upon three broad perspectives on the strategic decision‐making process in order to develop a more completely specified model of strategic decision effectiveness in a different context, namely Egypt. The key variables in this model consist of three strategic decision‐making process dimensions (rationality, intuition, and political behavior); seven moderating variables concerning decision‐specific, environmental, and organizational factors; and strategic decision effectiveness as an outcome variable. A two‐stage study was conducted in which the first stage provided exploratory insights and the second stage investigated hypotheses on the impact of strategic decision‐making process dimensions on strategic decision effectiveness and the moderating role of broader contextual variables. The second‐stage study produced three major findings: (1) both rational and political processes appear to have more influence on strategic decision effectiveness than does intuition; (2) strategic decision effectiveness is both process‐ and context‐specific; and (3) certain results support the ‘culture‐free’ argument, while others support the ‘culture‐specific’ argument. Copyright © 2007 John Wiley & Sons, Ltd.     

Managing strategic change through TQM: learning from failure

This article argues that the study of total quality management (TQM) failure is a valuable vehicle to extend our knowledge of strategic change management. The article reviews the literature on TQM and, after reporting the findings from an in-depth case study concludes by discussing the meaning of 'failure' and the lessons for managing strategic change that can be learnt from the study of TQM decline.     

On strategic management decision processes

This paper attempts to bridge the divide between rational/analytical and behavioural/political conceptions of strategic decision making. The linkages and interactions between these approaches to the making of strategic decisions are explored in the context of a specific decision arena—strategic energy management.     

Total quality management as competitive advantage: A review and empirical study

Total Quality Management (TQM) has become, according to one source, ‘as pervasive a part of business thinking as quarterly financial results,’ and yet TQM's role as a strategic resource remains virtually unexamined in strategic management research. Drawing on the resource approach and other theoretical perspectives, this article examines TQM as a potential source of sustainable competitive advantage, reviews existing empirical evidence, and reports findings from a new empirical study of TQM's performance consequences. The findings suggest that most features generally associated with TQM—such as quality training, process improvement, and benchmarking—do not generally produce advantage, but that certain tacit, behavioral, imperfectly imitable features—such as open culture, employee empowerment, and executive commitment—can produce advantage. The author concludes that these tacit resources, and not TQM tools and techniques, drive TQM success, and that organizations that acquire them can outperform competitors with or without the accompanying TQM ideology.     

Heavy lies the crown? How job anxiety affects top executive decision making in gain and loss contexts

Research summary: Despite abundant anecdotal evidence that many top executives experience anxiety in their jobs, the upper echelons literature has remained largely silent on the organizational implications of executive job anxiety. In this study, we theorize that job anxiety will cause executives to (1) create a social buffer against threats by surrounding themselves with supportive decision‐making teams, and (2) pursue lower‐risk firm strategies. We further argue that these effects will vary depending upon whether strategic decisions occur in gain versus loss contexts. We test our ideas using a novel multisource, multimethod approach that includes data from 84 top executives of large organizations, their decision‐making teams, their friends and families, and archival sources. Results from an analysis of 154 major strategic decisions provide general support for our theory. Managerial summary: Although many top executives experience anxiety in their jobs, some struggle more with anxiety than others. Our paper is the first to focus on how job anxiety affects executives' decisions. We analyze 154 major strategic decisions made by 84 top executives of large organizations in a range of industries, collecting data from personal interviews with executives and surveys of their decision‐making teams, spouses, and friends. We find that anxious executives take fewer strategic risks, especially when things are going well. We further argue that anxious executives focus more on “buffering” themselves from threats, and find that they surround themselves with close supporters when times are tough. Our results demonstrate a pattern through which anxiety causes top executives to focus more heavily on avoiding potential threats. Copyright © 2015 John Wiley & Sons, Ltd.     

Elevating Repositioning Costs: Strategy Dynamics and Competitive Interactions

Research summary: This article proposes an approach for modeling competitive interactions that incorporates the costs to firms of changing strategy. The costs associated with strategy modifications, which we term “repositioning costs,” are particularly relevant to competitive interactions involving major changes to business strategies. Repositioning costs can critically affect competitive dynamics and, consequently, the implications of strategic interaction for strategic choice. While the literature broadly recognizes the importance of such costs, game‐theoretic treatments of major strategic change, with very limited exceptions, have not addressed them meaningfully. We advocate greater recognition of repositioning costs and illustrate with two simple models how repositioning costs may facilitate differentiation and affect the value of a firm's capability to reduce repositioning costs through investments in flexibility. Managerial summary: This article illustrates how the decision to make a strategic change is affected by both the cost to the firm of making the various strategy modifications, as well as the cost to its rivals of changing their strategies in response. These “repositioning costs” are important because they shape the responses each competitor would likely make to a move by the other competitor, and should be anticipated when considering an initial change to one's own strategy. The paper shows how repositioning costs can be used strategically to facilitate differentiation, and to assess the value of potential investments in flexibility. Copyright © 2017 John Wiley & Sons, Ltd.     

Strategic decision speed and firm performance

This 4‐year study examines the effect of strategic decision speed upon subsequent firm performance and identifies environmental and organizational characteristics that relate to decision speed. We draw upon strategic decision‐making theory and organization theory to propose that strategic decision speed mediates the relation between environmental and organizational characteristics and performance. Measures of business environment, organization structure, strategic decision speed, and firm performance (growth and profitability) were collected from 318 CEOs from 1996 to 2000. Structural equation modeling confirmed that fast strategic decision‐making predicts subsequent firm growth and profit and mediates the relation of dynamism, munificence, centralization, and formalization with firm performance. Copyright © 2003 John Wiley & Sons, Ltd.     

Factors that reduce rigid product adaptation decisions: The case of exporting firms in China

As a distinct stream of research, export marketing strategy examines management's reaction to environmental threats in the forms of export adaptation strategies. Review studies repeatedly found that product adaptation was correlated with superior export performance. Despite the insights gained from strategic export marketing research, there remains very limited knowledge concerning organizational factors that may reduce rigid product adaptation decisions. Based on the threat-rigidity theory, this study identified two critical factors that reduce rigid product adaptation decisions: export coordination and process control mechanisms. The empirical evidence showed that export venture performance was adversely affected by rigid product adaptation decisions, and such adverse effect was particularly strong when operating under technological uncertainty. Exporting firms are advised to reduce likelihood of rigid product adaptation decisions by expanding export coordination when integrating business functions within the firm and adopting process control when monitoring exchanges with foreign agents.     

Technological change and worker participation in Europe

This article analyses the extent, evaluation and strategies for the future of employees, representatives and management regarding participation in technological change. The results from interviews in the UK, France, Germany, Italy and Denmark show a low level of involvement, particularly in strategic decision making, a positive evaluation of participation by practitioners and the intention to increase levels of involvement on both sides of industry.     

Toward understanding strategic issue diagnosis

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.     

An empirical investigation of strategic investment decision models

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.     

Organizational and technological antecedents for knowledge acquisition and learning

This paper examines the factors affecting the decision to acquire external technology and the relative importance of different technology acquisition strategies pursued by British and Japanese firms. The paper draws on a study of 38 firms, consisting of 23 UK-based and 15 Japanese firms. This is not a comparative study of British and Japanese technology acquisition strategies. Rather, we aim to identify common factors affecting the decision to acquire external technology and the means by which firms attempt to do this. We identify two clusters of variable which appear to affect the decision to acquire technology. Firstly, an organization's inheritance, which includes corporate strategy, competencies, culture and what we refer to as management's 'comfort' with the technology. Secondly, the characteristics of the technology to be acquired, specifically, its competitive impact, complexity, codifiability and what we refer to as 'credibility' potential. Together, these factors will determine the degree and nature of technology acquisition strategy. We find that contrary to the present academic preoccupation with alliances and joint ventures, the firms examined ranked universities, research consortia and licensing as the most important sources of external technology.     

Uncovering the hidden costs of offshoring: The interplay of complexity,organizational design,and experience

This study investigates estimation errors due to hidden costs—the costs of implementation that are neglected in strategic decision‐making processes—in the context of services offshoring. Based on data from the Offshoring Research Network, we find that decision makers are more likely to make cost‐estimation errors given increasing configuration and task complexity in captive offshoring and offshore outsourcing, respectively. Moreover, we show that experience and a strong orientation toward organizational design in the offshoring strategy reduce the cost‐estimation errors that follow from complexity. Our findings contribute to research on the effectiveness of sourcing and global strategies by stressing the importance of organizational design and experience in dealing with increasing complexity. Copyright © 2012 John Wiley & Sons, Ltd.     

Environmental dynamism and strategic decision‐making rationality: an examination at the decision level

Several approaches have been used to explore environmental dynamism as a contingent predictor of the relationship between rational‐comprehensive strategic decision‐making and firm‐level performance. At the decision level of analysis, however, small sample sizes, low statistical power, and statistical dependence have plagued the research. Through the use of a simulated decision‐making environment and multilevel analysis, this study examined 400 decisions from 54 executive teams. Consistent with much of the existing firm‐level research, the results indicated that environmental dynamism may moderate the relationship between rational‐comprehensive decision making and decision quality. Surprisingly, the form of the relationship differed from much of the firm‐level research. Copyright © 2003 John Wiley & Sons, Ltd.     

Autonomy strategies of government owned business corporations in Canada

State-owned enterprises, referred to as “government owned business corporations” in this paper, are a common phenomenon in Canada, are increasing in number, and are contributing substantially to the economy. The environment for these corporations is examined to establish the principal components and to identify two dominating trends in public policy, privatization and commercialization. The paper suggests that these trends, plus management's desire for flexibility, are resulting in the formulation of autonomy strategies designed to increase management's decision making capability relating to operating and strategic management with less government interference. A final section integrates the environment and autonomy strategies discussions to develop a typology for classifying the behaviour of government owned business corporations. The paper concludes that managers of government owned business corporations in Canada are formulating and implementing autonomy strategies because of environmental factors, public policies, and management's desire for independence.     

Competitive forces and strategic choice decisions: an experimental investigation in the United States and Japan

Managers operate in a complex, uncertain environment and tend to form simplified models in order to cope with this environment and make competitive strategic decisions (i.e., cost‐leadership, differentiation, or focus). In this study, we use an experimental design to examine the strategic choice decision‐making process in firms located in the United States and Japan. We develop several main‐effect propositions regarding managerial selection of competitive strategies, depending on the competitive forces (buyer power, threat of substitutes, threat of new firm entry, and high intensity of rivalry) they are facing. We propose a main effect due to country of origin: Japanese managers prefer a cost‐leadership strategy more than American managers do. We also propose several interaction effects regarding cross‐national differences in strategy selection between Japanese and U.S. managers. To test our propositions, we collected experimental data from 316 U.S. executives and 459 Japanese executives. We assessed relative impacts of the competitive forces on strategic decision‐making using a multilevel regression analysis. The research findings indicated that high buyer power and high substitution threat were associated with a preference for cost‐leadership strategies, and Japanese managers were significantly more likely to prefer a cost‐leadership strategy than U.S. managers. We also found that, under conditions of high buyer power, U.S. managers were less likely than Japanese managers to enter a market with a differentiation or focus strategy. We found little support for other interaction hypotheses, suggesting points of similarity between U.S. and Japanese managers. We conclude with a discussion of theoretical and managerial implications of our results. Copyright © 2002 John Wiley & Sons, Ltd.     

Breaking the frame: an analysis of strategic cognition and decision making under uncertainty

This paper reports the findings of two experimental investigations into the efficacy of a causal cognitive mapping procedure as a means for overcoming cognitive biases arising from the framing of strategic decision problems. In Study 1, final year management studies undergraduate students were presented with an elaborated strategic decision scenario, under one of four experimental conditions: positively vs. negatively framed decision scenarios, with prechoice vs. postchoice mapping task orders (i.e., participants were required to engage in cognitive mapping before or after making a decision). As predicted, participants in the postchoice mapping conditions succumbed to the framing bias whereas those in the prechoice mapping conditions did not. Study 2 replicated and extended these findings in a field setting, on a sample of senior managers, using a decision scenario that closely mirrored a strategic dilemma currently facing their organization. Taken together, the findings of these studies indicate that the framing bias is likely to be an important factor in strategic decision making, and suggest that cognitive mapping provides an effective means of limiting the damage accruing from this bias. Copyright © 1999 John Wiley & Sons, Ltd.