Similarity Judgments in Strategy Formulation: Role, Process and Implications

Walking between decision models: analogising in strategic decision making

“…Drawing on Steinbruner (1974) andSchwenk (1984) propose that decision makers use analogies from simple situations to guide problem definition in difficult situations (Stumpf and Dunbar, 1991;Farjoun and Lai, 1997), potentially resulting in unsuccessful strategic decisions (Duhaime and Schwenk, 1985). If so, one plausible explanation is that the relationship between environmental complexity and the complexity of cognitive structures follows an inverted U-shaped pattern (Schroder et al, 1967;Hedberg and Jönsson, 1978).…”

Rivalry and Learning among Clustered and Isolated Firms

“…Among the two separate approaches to the study of rivalry, the rational-economic and the cognitive managerial (Baldwin and Bengtsson, 2004;Chen, 1996;Miller and Chen, 1996;Farjoun and Lai, 1997), it is the last one which contributed to the exploration of the role of geographical proximity as an explicit and implicit criterion to "market construction".…”

“…A notable finding of these studies is that when learning is stimulated by the experiences of others, similarity is an orienting principle to choose from whom to learn (Darr and Kurtzberg, 2000). In fact, similarity reduces information uncertainty (Farjoun and Lai, 1997) creating a context of understanding. Since rivals are similar, their experiences are naturally salient (Ingram, 2002).…”

A Fresh Look at Decision Making in International Investment Choices: Firm International Coherence and Home-Host Country Relatedness

“…Firms resort to local search in the development of organizational routines and more broadly organizational learning (e.g., Levitt & March, 1988;March, 1991;Nelson & Winter, 1982;Simon, 1991). Research in the 'upper echelons' tradition (e.g., Carpenter, Geletkanycz, & Sanders, 2004;Hambrick & Mason, 1984) has also demonstrated that top managers' background, experiences, and values influence strategic decisions including corporate change (Goodstein, Gautam, & Boeker, 1994), product diversification (Farjoun & Lai, 1997;Pehrsson, 2006;Stimpert & Duhaime, 1997), international diversification (Tihanyi, Ellstrand, Daily, & Dalton, 2000), and product innovation (Tripsas & Gavetti, 2000).…”

“…Such judgments are generally ambiguous in nature (Farjoun & Lai, 1997), subject to cognitive biases in managerial perceptions (Barnes, 1984;Schwenk, 1984) and are based on simplifications of complex information, or categorizations (Dutton & Jackson, 1987). Such categories are likely to be based on early acquisition of information which is often on time invariant historical and geographic factors, such as neighbor countries, language, and religion, the elements taught in the school and that individuals are exposed to during their whole life.…”