Session 153

Cognition, Bounded Rationality and Strategy

Track A

Date: Tuesday, October 9, 2012


Time: 08:00 – 09:15


Room: Meeting Hall IV (b)

Session Chair:

  • Thomas P. Moliterno, University of Massachusetts, Amherst

Title: Changing Strategic Patterns: An Application of the Attention-Based View to How Firms Adapt to Financial Crisis


  • Margaret Hughes-Morgan, Marquette University
  • Glenn Hodges, Michigan State University
  • Brandon Herring, Michigan State University

Abstract: This paper builds on prior theory and research within the Attention-Based View and competitive dynamics fields by examining changes in the patterns of strategic actions in the context of environmental crisis. Past research has examined firm adaptation to environmental change, but only in the context of deregulation. We posit that during a recession, managers’ focus of attention will shift, resulting in fundamental changes to prior patterns of strategic actions. Specifically, we expect firms to pursue less complex strategies reflected by a more limited repertoire of actions, while simultaneously engaging in an increased volume of actions. We also predict that smaller firms will more closely mirror their larger rivals’ strategies. Empirical analysis provides evidence supporting that firms do indeed decrease the complexity of their repertoires, while increasing the number of moves carried out.

Title: Nepotistic Evaluations: Social Similarity as a Driver of Accuracy and Bias of Equity Analysts\' Earnings Estimates


  • Guoli Chen, INSEAD
  • Raveendra Chittoor, University of Victoria
  • Balagopal Vissa, INSEAD

Abstract: We examine how social similarity between an equity analyst and the CEOs of the Indian companies they evaluate affects the accuracy and bias of analysts’ annual earnings estimates of those companies. We propose that in emerging economies such as India whose social institutions are evolving there may be different bases of social similarity – pre-modernity based as well as modernity based. We first examine the effects of social similarity along caste and language dimensions which are two traditional features of social stratification in India. We then compare and contrast these with similarity in terms of being co-alumni of the same educational institutions – a dimension based on modernity. We find support in a dataset of 1500 annual earnings estimates by 303 equity analysts during 2002-10.

Title: People’s Voice: Defending Society against Firms


  • Gino Cattani, New York University
  • Marco Clemente, Aalto University
  • Rodolphe Durand, HEC-Paris

Abstract: In this paper, we study how much people complain about a firm’s advertising. Past studies have focused on the convergence between infomediaries’ (media and legitimating agencies) and people’s assessments of firms. We disentangle this effect and propose that when media agree with a legitimating agency, people complain less against firms whereas when there is a disagreement between media and the agency’s judgments, people take responsibility to defend social norms and complain more. These relationships are moderated by the gravity of the norm violation contained in a firm’s ad. We test and confirm empirically these predictions using data on how many complaints the UK independent advertising agency ASA receives after media have communicated positive or negative reports on ASA decisions about companies’ prior advertisements.

Title: Psychological Bases of Social Assets: Implicit Bias in Stigmatized and High Status Organizations


  • Marco Clemente, Aalto University

Abstract: Previous studies have focused on the implications of social assets to organizations’ performance. However, the mechanisms that underlie these observed effects are poorly understood. Why do social assets impact performance? Current literature has mainly argued for a rational explanation: social assets contained relevant information; stakeholders rationally process them to make decisions that eventually impact organizations’ performance. Following Mentor 1968’s idea, we propose that social assets have a more psychological base: this means that stakeholders’ decisions are also due to implicit bias besides rational decisions. We find evidence of implicit bias towards stigmatized and high status organizations suggesting that social assets work also on an unconscious level. We discuss implications for companies and for the emerging Institution-Based View in the strategy literature.

All Sessions in Track A...

Mon: 08:00 – 09:15
Session 147: Emerging Market Firms and Complex Institutional Environments
Mon: 09:30 – 10:45
Session 220: Political Strategies in Transition Contexts
Mon: 13:30 – 14:45
Session 221: National Institutions and Firm Behavior
Mon: 16:30 – 17:45
Session 154: Embeddedness, Networks and Non-Market Strategies
Tue: 08:00 – 09:15
Session 153: Cognition, Bounded Rationality and Strategy
Tue: 11:00 – 12:15
Session 151: Coevolution of Institutions and Firm Strategy
Session 152: Institutional Change and Innovation
Tue: 14:15 – 15:30
Session 155: Institutional Transitions and Internationalization Strategies
Tue: 15:45 – 17:00
Session 219: Strategic Responses to Institutional Change
Tue: 17:30 – 18:45
Session 150: Legitimacy, Liabilities and Institutions

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