On the Unethical Use of Privileged Information in Strategic Decision-Making: The Effects of Peers’ Ethicality,Perceived Cohesion,and Team Performance

In order to make strategic decisions and improve their firm’s performance, top management teams must have information on the competitive context in general, and the firm’s competitors in particular. During the decision-making process, top managers can have access to “privileged information”—i.e., information of a confidential and potentially strategic nature that could ultimately confer a decisional advantage over competing parties. However, obtaining and using privileged information in a business context is often illegal—and if not, is usually deemed unethical or “against the rules.” Using a quasi-experimental design, this study explores the reasons why an individual might engage in such unethical behavior. We assess the extent to which managers use privileged information with respect to perceived team cohesion and peers’ ethicality. More specifically, our results show that the use of privileged information is predicted by the decision-maker’s perceptions of their team cohesion and their peers’ ethicality. Moreover, we find that team performance, as a group-level nonself-reported factor (measured by the firm’s share price in our simulation), moderates the relationship between cohesion and the use of privileged information. The relationship between cohesion, ethical behavior, and team performance is also discussed. We draw on these findings to make some practical suggestions on how to incorporate practices that could better prevent the unethical use of privileged information in strategic decision-making processes.     

Training strategic thinking: Experimental evidence

Strategic behavior is crucial for strong firm performance, especially in competitive environments. Thus, designing a good strategy is a key issue for firms. Designing a strategy requires a combination of strategic thinking—which involves analyzing a firm's strategic environment, defining a vision of its future, and devising new ideas to out-think competitors – and strategic planning – which implies using these ideas to formulate a business plan. Although many firms excel at strategic planning, few devote enough resources to strategic thinking, which results in strategic insanity (i.e., firms repeatedly applying the same strategies with the expectation of different outcomes). To foster a strategic environment within a firm, firm managers and other workers must show willingness for active involvement in a firm's strategic decisions. Nevertheless, not everybody has the skills to do so, as many firms lack work force training programs. This study shows, experimentally, how training affects firms' strategic behavior. The starting point is two groups of individuals with initially equal qualifications who play in a sequential game whose rules hinder the calculation of equilibria. The members of only one of the groups previously receive a treatment entailing a process of training and learning that aims at fostering strategic thinking. The results point to a significant increase in the number of strategic decisions in the treatment group in sharp contrast to the control group, confirming the initial hypothesis (i.e., the positive impact of training).     

Age,order of entry,strategic orientation,and organizational performance

This paper proposes an empirical test of several hypotheses linking age, order of entry, and strategic orientations to a firm's performance. Three strategies are defined: cost-leadership strategy, innovative differentiation, and marketing differentiation. The aim is to show that the impact on performance of both age and each of the three strategic orientations may differ according to a firm's order of entry into an industry.Following Lieberman and Montgomery's (1998) evaluation of their major contribution on first mover advantage, we emphasize three points. First, we develop and test hypotheses related to early and late followers' strategic orientations, broadening the scope of traditional studies on pioneers. Second, the model combines the dimensions of a firm's age, order of entry, and strategic orientations, as well as industry conditions (stage of the industry, environmental unpredictability, and technology diffusion), to establish a contingent model of performance analysis. Finally, the empirical study deals chiefly with organizational performance and not market share, which is considered a typical advantage accruing to pioneers.In addition, the scope of the study (582 French manufacturing firms) provides the means to fill a void in empirical studies because it is a broad cross-sectional test on non-U.S. data. The firms are mainly private, small to medium-sized, and single or dominant business firms. Therefore, our assumptions must be understood as particularly applicable to this type of firm.The results reveal important lessons for practitioners. First, we did not find a first-mover advantage in terms of organizational performance. In addition, pioneers' organizational performance is enhanced by the cost leader strategy—contrary to our assumption emphasizing innovative differentiation for these firms. Second, early followers' performance benefits from innovative differentiation and marketing differentiation. Finally, late entrants developing a cost leader strategy have a significantly higher performance. All groups considered, late followers are the firms most sensitive to environmental uncertainty and age effects.Our study clarifies the impact of a firm's age and strategic orientations on its performance depending on the firm's order of entry. The implications of these results are particularly relevant for practitioners and entrepreneurs. First, a cost leadership strategy seems to be a guarantee for a pioneer to increase its organizational performance. New ventures should therefore take into consideration the fact that newness and innovative differentiation might not be the best strategic orientations for high performance in the long run. Second, as a second mover, however, developing a superior product and being able to market it efficiently appear to be the enhancing factors of firm performance. Third, for both pioneers and early followers, age does not significantly reduce their performance. However, the longer a firm waits before entering, the greater is the negative effect of age on its performance. This is due to the difficulty of resisting competitive erosion, because pioneers and early followers drive the changes in the industry. The identification of these effects should help managers and stakeholders to make more effective entry decisions to sustain a firm's advantage, leading to better performance and higher probability of survival.     

An E-Valuation Framework for Developing Net-Enabled Business Metrics Through Functionality Interaction

Managers engaged in net-enabled business planning seek metrics to help them analyze the success of their e-business investments. Likewise, researchers require metrics to build analytical models and conduct empirical research on the impact of e-business strategies on firm performance. In this article, the authors develop a comprehensive E-Valuation Framework for identifying net-enabled applications and their resulting user-based functionalities for activities across the value chain. The authors propose that the real value from net-enabled applications can be found in functionality interactions, where one application enables or enhances functionality in another application. The comprehensive framework can be used to generate three types of metrics managers can use to evaluate their net-enabled strategic initiatives. Further, a classification of net-enabled organizations provides the basis for selecting applications critical to a firm's strategic thrusts. We make use of the resource-based view of the firm and real-options analysis to discuss how successful application deployment is based on the resources and assets the firm possesses as well as managing the rollout of an applications portfolio over time. The framework allows managers to map their organization's net-enabled initiatives into a coherent, easily understood visual representation and provides direction for researchers evaluating the efficacy of net-enabled business strategies.     

Innovation and risk-taking in a transitional economy: A comparative study of chinese managers and entrepreneurs

This research was set in the People's Republic of China. As former socialist China moves from central planning toward a more market-driven economy, improved knowledge about the new environment and firm decisions within such an environment has significant implications. For organizational researchers, such a transition represents a genuine shift of paradigm, and thus offers a unique opportunity to test existing organizational theories and develop new ones. For multinational businesses seeking business opportunities, they have to compete or cooperate with these Chinese firms, whether state-owned or privately owned.Motivated by a deep curiosity in, using the language of Williamson (1996), “What is going on there” behind the “bamboo curtain,” and underpinned by a strong conviction that organizational researchers have much to gain as well as to offer by focusing on transitional economies, I undertook this study to examine characteristics of a regulatory environment and the impact on innovation and risk-taking among Chinese managers and entrepreneurs. I collected original primary data that represents managers from large state-owned enterprises (SOEs) and entrepreneurs from small privately-owned enterprises (POEs) through personal interviews and a survey. Significant differences were found between managers and entrepreneurs in their reported environmental characteristics, strategic orientations, size, and firm performance, indicating that managers are not as innovative and are less willing to make risky decisions than entrepreneurs. Being smaller and faster than SOEs, entrepreneurial firms have adopted some strategies that distinguish them from their larger and more established competitors. Speed, stealth, and sound execution allow entrepreneurs to harvest first-mover advantages and thus increase their chances for survival in a turbulent environment.     

Entry deterrence/accommodation with imperfect strategic thinking capability

Both through empirical research and laboratory experiments it has been shown that managers are heterogeneous in strategic thinking-i.e., not all the managers can accurately conjecture their competitors’ behavior and actions. In this paper, we examine the entry deterrence/accommodation strategy of an incumbent firm facing a potential entrant that may behave less strategically than the incumbent in the way of conjecturing competitors’ actions and beliefs. We adapt the Cognitive Hierarchy model to capture this heterogeneity among the managers of the entrant firm and the incumbent firm. Surprisingly, we show that the incumbent can deter entry by investing in expanding the market size and the competition may increase the incumbent’s incentive to invest in market expansion. If entry does occur, the market expansion in our model also benefits entrant comparing to the case without market expansion. This feature of our result sets it apart from the standard result in the entry deterrence literature, which tends to suggest that incumbent has to either over-invest in actions harmful to entrant if entry occurs. In our model investing in expanding the market size makes the entrant to update its belief about the incumbent’s strategic thinking capability downward and thus, decreases the entrant’s expected profitability, which in turn deters entry. Our research has important implications especially for emerging markets given that the lack of management talent is a particularly severe problem among local firms in emerging markets and multinational companies pioneer in the emerging markets with great market expansion opportunities have to face the potential entry of local companies.     

The role of retentions in how marketing managers change their strategic orientation

This study looks at how a marketing organization changed its strategic orientation in response to environmental factors, and at the influence of retentions on the change effort. Retentions are defined , here as the concepts and mental models used by marketing managers when trying to respond to environmental changes. The influence of retentions on strategic orientation and factors affecting how retentions change are studied in the context of how a bank trust department responded to the deregulation of the financial services industry between 1982 and 1984. The dominant retentions held by managers both before and after deregulation are presented, and the events that contributed to the change of the retentions are examined. The results suggest that retentions prior to deregulation focused on external sources of influence and were associated with a defender strategic orientation. Retentions after deregulation, once the organization's strategic orientation stabilized, focused on critical resources and competitors and were associated with an analyser orientation. The adoption of the new retentions lagged deregulation by several years, and the transition did not match the steps prescribed by the marketing and strategic management literature. Instead, the transition took place through an iterative sequence of behaviours and evaluations more characteristic of the organizing model (Weick 1979). Managers changed their retentions incrementally by enacting small changes, evaluating the outcomes of their behaviour, and letting the outcomes redefine their retentions.     

Strategic Implications of Learning by Doing

This paper examines firm strategy when competitors are at different points along the learning curve. It shows that firms high on the learning curve will have strong incentives to exclude new competitors, while firms that are learning more slowly will have weaker incentives to hinder new competitors and may even wish to encourage entry. The same strategies are shown to apply when firm reputation is acquired through participation in an industry. Several examples of strategic behaviour that take advantage of differential learning speeds or heterogeneous reputations are suggested and a variety of applications of the principle involved are explored.     

Competitive Irrationality in Transitional Economies: Are Communist Managers Less Irrational?

Why do marketing managers in the transitional economies of Eastern Europe and China often engage in competitively irrational behavior, choosing pricing strategies that damage competitors’ profits, rather than choosing pricing strategies that improve their firm’s profits? We propose one possible reason, the moral vacuum created by the collapse of communist ideology. We hypothesize and find that managers who experienced formal communist moral ideological indoctrination are less likely to be competitively irrational than the post-communist managers who did not. Implications are discussed.     

Social Media Marketing Management: A Conceptual Framework

Managers today face many challenges when using social media in their marketing strategies. Drawing from social media literature, this study introduces a new framework to assist managers in developing and using social media as a marketing tool. This framework has four dimensions related to the actions managers perform when implementing and engaging with social media: messaging/projecting, monitoring, assessing, and responding. Each dimension of the framework may be applied differently based on the firm’s strategic direction or focus. The framework provides an opportunity for a firm to examine the entire scope of social media marketing from a broad strategic perspective as well as a more tactical perspective. Propositions formulated by the authors suggest how organizations with different strategic characteristics may manage social media differently. The study provides an understanding for managers of the variety of issues related to the specific aspects of maintaining a firm’s online presence based on a firm’s scope, culture, structure, and governance.     

Market performance and deviance from industry norms: (Mis)alignment of organizational risk and industry risk

Much of the attention in the risk literature focuses on organizational risk. This research argues that industry-level risk indirectly influences firm performance in addition to the direct effects of organizational risk. We contend industry-level risk norms influence market performance. Our general hypothesis is that when managers pursue strategies that deviate from industry risk norms, the firm's market performance will decline. We also test for the moderating effects of performance relative to targets and managerial ownership. The general hypothesis was supported for market risk and returns risk, but not for strategic risk. In addition, performance relative to target moderates this deviation-market performance relationship for market and returns risk. These findings have implications for the risk literature, particularly a firm's risk premium, and institutional theory, in terms of the tradeoff related to conformity to norms.     

Cross-cultural reliability and validity of a scale to measure firm entrepreneurial orientation

This study presents a foreign language version of a popular scale for measuring entrepreneurship and tests the instrument's utility in cross-cultural settings as a means of validating it for use abroad. Entrepreneurship refers to the pursuit of creative or novel solutions to challenges confronting the firm, including the development or enhancement of products and services, as well as new administrative techniques and technologies for performing organizational functions. Entrepreneurship is a fundamental posture, instrumentally important to strategic innovation, particularly under shifting conditions in the firm's external environment, and is applicable to any firm, regardless of its size and type. Scholars note that entrepreneurial activity is critical because it stimulates superior performance and may well be the key fundamental element in the procurement of advantages relative to competitors.Researchers have developed a popular scale for measuring entrepreneurship at the firm level, which has been found to be highly valid and reliable. This scale (the “ENTRESCALE”) examines eight items reflecting the innovative and proactive disposition of management at a given firm. However, as the ENTRESCALE's measurement properties have never been comprehensively assessed in a cross-cultural setting, the instrument lacks strong evidence of international validity and reliability. Accordingly, the cross-cultural correspondence between the ENTRESCALE and the construct it is supposed to measure is unknown, as is the extent of its utility to international practitioners. This situation reflects a problem common to measuring instruments developed in the United States and is particularly troublesome for scales intended to measure foreign phenomena of interest in international business. The researcher who assumes that a scale developed at home will function with equal efficacy abroad is most likely asking for trouble. There is a risk that such assumptions will lead to invalid inferences, an outcome potentially disastrous for the practitioner seeking to design appropriate strategies for international success.Sound measures of entrepreneurship are especially critical for managers attempting to understand the construct's cultural dynamic, at both the organizational and country levels, within subsidiaries, agencies, and other such entities presently representing or offering to represent the firm's interests abroad. By understanding the entrepreneurial dynamic in foreign settings, the multinational firm may be able to structure operations in ways that better suit existing local conditions and thereby avoid potentially adverse consequences. Further, it is useful to discern, by means of national studies, the entrepreneurial characteristics of management at firms, including existing or potential competitors, across entire countries.As a means of addressing this issue, this study seeks to test the measurement properties of the ENTRESCALE using samples of English- and French-speaking managers. Results indicate that the scale performs well in terms of both reliability and validity and possesses a unique factor structure. In concrete terms, this implies that the ENTRESCALE is suitable for measuring the entrepreneurship construct abroad. It is hoped that these results will: (1) contribute to improving future research endeavors of scholars studying the role of entrepreneurship in the increasingly global environment of business; (2) provide practitioners with a scale that can be used to measure the extent of entrepreneurial orientation among main operations, subsidiaries, and (potential) partner firms in foreign lands; and (3) raise the standard by which measuring instruments are designed and used for research in cross-cultural contexts.     

Cause mapping of simple and complex marketing strategies

Business-to-business relationships between original equipment manufacturing (OEM) suppliers and customers (brand name buyers) are an often studied issue; however, theoretical and empirical studies seldom focus solely on the suppliers' perspective. This paper examines OEM suppliers' perspectives and reports on the phenomenon of some suppliers choosing single customers while others focus on multiple customers to achieve the adaptive selling as their profit making that cause the parsimonious and complex customer strategies through the empirical studies. The study also uses mental models to analyze two specific cases of OEM suppliers within Taiwan's shoe industry in relation to what kinds of environmental changes that successful managers apply to their parsimonious and complex customer strategies. Mental models are used to map the evolution of these two OEM suppliers' customer strategies, along with their culture, competitive advantages, cooperation relationships, and environment. The study explores these five core propositions to show suppliers to employ different approach to customer strategies, and map the evolution of strategic development of Taiwan shoes companies from the 1970s through to the present day.     

The impact of firmspecific capabilities on the amount of capital raised in an initial public offering: Evidence from the biotechnology industry

Going “public” has a magical sound to most entrepreneurial managers. By going public the firm increases its legitimacy in the business community, improves access to debt financing, and creates a means of exit for major shareholders. However, by far the most important reason for going public is to infuse a significant amount of investment capital into the firm. It is well documented that small businesses frequently fail because of insufficient funding and heavy debt loads. Issuing an initial public offering (IPO) allows entrepreneurial firms to overcome these pitfalls. Clearly, if access to capital is the major goal of going public, then the success of an offering is measured by the amount of capital raised by the firm. This study presents a model of the total amount of capital raised by a firm through an IPO. The explanatory variables include several indicators of the scientific capabilities of the firm including the location of the firm, the quality of the research staff, the number of products under development, the number of patents held by the firm, and the firm's prior spending on research and development (R&D). The model is empirically tested on a sample of 92 biotechnology IPOs. The results provide strong support for the hypothesized positive relationship between the total amount of capital raised by a firm's IPO and the scientific capabilities of the firm.Our results have important implications for entrepreneurs. First, an entrepreneur needs to develop and send credible signals indicating the value of the firm's intangible assets to the market. Second, the market values as deep a product pipeline as possible given a firm's resource constraints. Third, choice of location is a key strategic decision that should not be overlooked. Fourth, the market values firm-specific capabilities and will increase the capital it is willing to invest in a firm accordingly. Finally, the amount of capital a firm raises in its IPO can be influenced by entrepreneurial managers' strategic decisions.     

THE EFFECTS OF CULTURE AND HUMAN RESOURCE MANAGEMENT POLICIES ON SUPPLY CHAIN MANAGEMENT STRATEGY

Afirm's corporate culture and human resource management (HRM) policies have an important impact upon the success of that organization's supply chain management strategy. A model that examines the relationship between organizational culture, HRM policies, and the firm's transaction/relationship orientation toward its employees and the impact of these factors on its choice of supply chain partners is presented. The paper then discusses four different HRM/logistics strategies a firm can implement and examines the degree of cultural fit that is likely to develop in each of these four strategies. Finally, managers are provided with a list of questions that allow an assessment of the fit between the firm's human resource and logistics management strategies.     

Emerging strategies in the venture capital industry

This article reports a study of the future direction of the venture capital industry by examining the basic strategies and strategic assumptions of a broad sample of venture capital firms. There are three main sets of results:First, the once homogeneous venture capital industry is rapidly dividing into several different “strategic groups.” Members of these “groups” are increasingly distinguishing themselves from other groups on four basic dimensions followed by member firms: 1. Financial Resources—Equity capital comes from a greater variety of sources (five major sources) resulting in fundamentally different demands on the mission of the receiving venture capital firm. 2. Staff Resources—The way venture capital firms use staff resources, particularly regarding investee management assistance, is becoming increasingly varied across different groups. Some firms provide fewer than 2-days per year, while others provide up to 450 man-days per year per client. 3. Venture Stages—While the overall industry retains a primary interest in stage 1,2, and 3 investment, specific firms vary considerably in the distribution of investment emphasis across these three stages. 4. Use of Financial Resources-Firms in the industry are becoming increasingly differentiated in the size of minimum investments they make ($100 M to $1000 M) and in their role as a direct investor versus a “broker” for institutional funds. Practicing venture capitalists should make use of this first set of findings in two ways. First, they may find it useful to compare their firm's orientation along these four strategic dimensions with those of the firm's that comprised this study. Second, they may seek to use these four strategic dimensions as a basis on which they might examine, clarify, and/or redefine the marketing strategy pursued by their firm.A second set of results identified three goals and priorities of venture capital firms that have neither changed over time nor across increasingly different strategic groups. Annualized, after-tax return on investments of between 25% and 40% remain the most common objective across all firms. A 5-to-6 year investment time horizon and a major emphasis on the quality of the management team in evaluating new deals were universal priorities across diverse venture capital firms.A third finding in this study was that venture capital firms profess greater “certainty” about the future direction of the venture capital industry than the direction of their firm. The most notable example of this is a strong sense that industry-wide rates of return are headed downward yet few senior partners expect their firm to experience this decline.Practicing venture capitalists may be interested to peruse these results to see what trends are predicted within the venture capital industry by this subsample of that industry. Second, they should consider the finding that industry-wide rates of return are headed downward in light of the first two sets of findings to develop their own opinion about the future performance of different strategic groups within the industry.It is important to note that the sample of venture capital firms on which this study was based did not include most of the larger, older funds. Some of these funds would be characterized as “industry leaders, pace-setters, and innovators.” The sample provides a solid representation of the “broad middle” of the venture capital industry and newer entrants into the industry. While larger, older funds are under represented, their impact on future trends and strategies in the industry is captured to some extent in the set of questions about “future direction of the venture capital industry.“Finally, the emerging strategic groups in the venture capital industry that were identified by this study may be useful information for investors as well as users of venture capital. For investors, the opportunity to participate in venture capital activity should become more clearly understood and varied. Basically, this study should help investors differentiate the strategic posture of different venture capital firms and funds on four factors rather than simply industry/geographic considerations.For users of venture capital, the results of this study suggest a possibility for multiple options that are both more accessible and more catered to specific needs. Users of venture capital should find a clearer basis on which to differentiate venture capital firms in terms of venture stage priorities, staff utilization orientations, sources and uses of financial resources. This should make for more informed “shopping” among different venture capital sources and provide a basis on which to “shop” for the most compatible firm.     

The project-management approach in the “systematic management” of innovative start-up firms

This paper presents the principal results obtained by applying the project- management approach to strategic planning and operations management of innovative start-up firms' key activities. This approach is used to implement Drucker's view of entrepreneurship as a systematic discipline and his recommendation that innovation be treated using his principle of systematic innovation.As is well known, the management of growth in an innovative start-up firm is a difficult problem facing that organization. During this particular stage of the firm's development, many interdependent activities need to be performed under the conditions of uncertainty and limited resources. In these cases, flexibility and contingency planning are necessary. The fact that there exists no generally accepted approach that an entrepreneur can utilize, however, results in chaotic situations in many such enterprises.The start-up firm cannot utilize the formalized management systems and procedures available and useful in large firms. In addition, a disorganized, chaotic, random management-decision process will seldom provide desirable results in such firms. Viewing the firm as a project to be managed with specific tasks, activities, precedence relations, durations, and milestones presents an opportunity to utilize project-management techniques, including the critical-path method (CPM).Recent research has demonstrated that project-management methodology and its computer- software applications are applicable to small, innovative start-up firms. By utilizing a microcomputer, one can analyze any start-up business for flaws in management or organization and can chart a more productive path for achieving the firm's strategic goals. Project management using computers is not new: it has been used for years for major aerospace, utility, and construction projects. Only recently, however, have microcomputers and software become inexpensive enough to allow small firms to utilize this approach.The project-management approach collects information about a start-up firm, including all of its planned activities consistent with its evolving business plan, and then utilizes a microcomputer and inexpensive, readily available project-management software to process the information collected. Among the outputs are a “GANTT chart,” which indicates when the various activities should begin and end; a “Job Report,” which provides the earliest and latest possible deadlines for starting and ending each activity; and a “Milestone Report,” which indicates when each key event is to be accomplished according to the strategic business plan. These status reports are extremely valuable to the CEO and to the management team as the firm is kept on course according to its strategic plan.This methodology has been applied to 20 innovative start-up firms in northern California, including a computer graphics company, a semiconductor-equipment manufacturer, and firms that develop software for professional athletes, educators, ophthalmologists, and radio-station managers. In addition, the project-management approach has been applied to plan and schedule Stanford University's current centennial fund-raising campaign.Results indicate that the CEO and the entire management team are able to plan, schedule, and control the innovative start-up firm's multiplicity of activities in a systematic way. The firm is also able to modify its strategic plan based on a review of its updated status reports and to modify its operations plans accordingly. Current research is under way to develop similar systematic methods for managing innovations in large organizations.     

Managing for Excellence in the Food and Beverages Industry

Abstract

In order to understand how to manage for excellence in the food and beverages industry, one must recognize some key principles that are utilized by top companies in this industry. The following article will provide detail examples of three top organizations to let the readers realize the strategies used by each company and what makes them superior than other competitors. The first example is about Nestlé's excellent achievement on market research and successful story about “Wellness strategy”. The second example shows how Coca-Cola produces the world's best known product and implements “Total Quality Management” and “Just-In-Time” system. The third example reveals the success secrets of McDonald's franchise kingdom and “three-legged-stool” relationship with its franchisees and suppliers. To be the top leader in the food and beverage industry, we suggest learning these skills.     

A cognitive perspective on managers' perceptions of competition

This paper focuses on the way managers perceive their competitive environment. Within a cognitive perspective it discusses why they might group similar competitors and considers whether they are attentive to all competing firms. The literature on similarity of perceptions between managers is reviewed. Interviews amongst managers in the North Sea off‐shore oil pumps industry revealed that they made sense of competition through a categorization process. None perceived the industry in the objective manner as economists suggest. Different perceptions as to the nature of competitions were found between managers, but more homogeneous perceptions were seen between managers in the same firm than between different firms.     

Inducements,Impediments, and Immediacy: Exploring the Cognitive Drivers of Small Business Managers' Intentions to Adopt Business Model Change

Small business managers rely on judgment and heuristics when making critical strategic decisions. We explore this phenomenon, expanding the theory on cognition and strategy to explain the cognitive determinants of strategic decisions leading to small firm business model change. We integrate existing theories (entrepreneurial opportunity exploitation, cognitive resilience, prospect theory, behavioral theory of the firm, threat‐rigidity) into a framework explaining strategic intentions, based on managers' perception of business opportunity interacting with assessment of the external environment, current performance, and prior experience. The framework is empirically tested in the context of Canadian real estate brokerage industry, facing potentially major disruptive change.