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Article
Publication date: 27 May 2022

Maqsood Ahmad, Qiang Wu, Muhammad Naveed and Shoaib Ali

This study aims to explore and clarify the mechanism by which cognitive heuristics influence strategic decision-making during the coronavirus disease 2019 (COVID-19…

Abstract

Purpose

This study aims to explore and clarify the mechanism by which cognitive heuristics influence strategic decision-making during the coronavirus disease 2019 (COVID-19) pandemic in an emerging economy.

Design/methodology/approach

Data collection was conducted through a survey completed by 213 top-level managers from firms located in the twin cities of Pakistan. A convenient, purposively sampling technique and snowball method were used for data collection. To examine the relationship between cognitive heuristics and strategic decision-making, hypotheses were tested by using correlation and regression analysis.

Findings

The article provides further insights into the relationship between cognitive heuristics and strategic decision-making during the COVID-19 pandemic. The results suggest that cognitive heuristics (under-confidence, self-attribution and disposition effect) have a markedly negative influence on the strategic decision-making during the COVID-19 pandemic in an emerging economy.

Practical implications

The article encourages strategic decision-makers to avoid relying on cognitive heuristics or their feelings when making strategic decisions. It provides awareness and understanding of cognitive heuristics in strategic decision-making, which could be very useful for business actors such as managers and entire organizations. The findings of this study will help academicians, researchers and policymakers of emerging countries. Academicians can formulate new behavioural models that can depict the solutions to dealing with an uncertain situation like COVID-19. Policymakers and strategic decision-making teams can develop crisis management strategies based on concepts from behavioral strategy to better deal with similar circumstances in the future, such as COVID-19.

Originality/value

The paper’s novelty is that the authors have explored the mechanism by which cognitive heuristics influence strategic decision-making during the COVID-19 pandemic in an emerging economy. It adds to the literature in strategic management, explicitly probing the impact of cognitive heuristics on strategic decision-making; this field is in its initial stage, even in developed countries, while little work has been done in emerging countries.

Peer review

The peer review history for this article is available at https://publons.com/publon/10.1108/IJSE-10-2021-0636.

Details

International Journal of Social Economics, vol. 49 no. 10
Type: Research Article
ISSN: 0306-8293

Keywords

Article
Publication date: 13 April 2012

Benjamin T. Hazen, Dianne J. Hall and Joe B. Hanna

The purpose of this study is to identify the critical components of the reverse logistics (RL) disposition decision‐making process and suggest a decision framework that…

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Abstract

Purpose

The purpose of this study is to identify the critical components of the reverse logistics (RL) disposition decision‐making process and suggest a decision framework that may guide future investigation and practice.

Design/methodology/approach

The authors utilized a problem‐driven content analysis methodology. RL literature from 2000 through 2010 was content analyzed to determine which components may impact a firm's RL disposition decision.

Findings

The authors extrapolated seven RL disposition decision components from a compilation of 60 variables identified in the literature. Practical implications and suggestions for future research are offered, and a RL disposition decision‐making framework is presented.

Research limitations/implications

Although methodological techniques were carefully followed, the nature of a content analysis may be subject to author bias. Future investigation and use of the framework presented will verify the findings presented here.

Practical implications

This study identifies seven components that should be considered when deciding which RL disposition alternative should be adopted and integrates these components into a decision‐making framework. Supply chain professionals who refer to this framework during the decision process will benefit from a more comprehensive analysis of potential RL disposition alternatives.

Originality/value

Congruent with recent assertions suggesting that RL research is evolving from an operational‐level focus to a holistic business process approach for maximizing value recovery, this study synthesizes operational‐level research to develop a practical framework for RL disposition decision‐making.

Details

International Journal of Physical Distribution & Logistics Management, vol. 42 no. 3
Type: Research Article
ISSN: 0960-0035

Keywords

Article
Publication date: 19 July 2011

James R. Langabeer and Jami DelliFraine

Although management researchers have long recognized that cognitive and behavioral constructs can influence strategic process, there have been surprisingly few empirical…

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Abstract

Purpose

Although management researchers have long recognized that cognitive and behavioral constructs can influence strategic process, there have been surprisingly few empirical studies exploring their actual influence. More specifically, there have been no reported findings examining how an executive's general tendency to expect positive outcomes (i.e. optimism) shapes their strategic process. The purpose of this paper is to examine if optimism serves as a cognitive bias that short‐circuits the strategic process, or more specifically results in a greater use of incrementalism versus a comprehensive rational process.

Design/methodology/approach

This is an initial study to explore the relationships between optimism and strategic process. The authors opted for a large cross‐sectional sample of chief executive officers (CEOs) in the for‐profit sector of the US healthcare industry, distributed 810 surveys, and received a 21 percent response rate. The authors' methods incorporated the well‐established Life Orientation Test for optimism, and interaction effect regression models, correlations, and ANOVAs were used to test relationships.

Findings

It was found that at the time of the study, executives were more optimistic than average. It was further found that higher optimism is associated with less rational (and more incremental) strategic decision‐making processes. Organizational size also had an interaction effect on the optimism‐strategic process relationship.

Research limitations/implications

The authors operationalized only a few variables in this initial study. A more comprehensive study, utilizing many more variables and exploring optimism for the top management team (beyond just the CEO) is being incorporated into subsequent studies.

Practical implications

If disposition (e.g. optimism) is associated with strategic processes, then a better understanding of executive's dispositions could be used to better align CEOs with organizational types and stage of life cycle.

Originality/value

This is the first study of its kind to begin to explore the association between dispositional optimism and strategic processes.

Details

Management Research Review, vol. 34 no. 8
Type: Research Article
ISSN: 2040-8269

Keywords

Article
Publication date: 7 November 2016

Satish Kumar and Nisha Goyal

The purpose of this paper is to investigate the relationship between rational decision-making and behavioural biases among individual investors in India, as well as to…

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Abstract

Purpose

The purpose of this paper is to investigate the relationship between rational decision-making and behavioural biases among individual investors in India, as well as to examine the influence of demographic variables on rational decision-making process and how those differences manifest themselves in the form of behavioural biases.

Design/methodology/approach

Using a structured questionnaire, a total of 386 valid responses have been collected from May to October 2015. Statistical techniques like t-test, analysis of variance (ANOVA) and Fisher’s least significant difference (LSD) test have been used in this study. Structural equation modelling (SEM) has been used to analyse the relationship between rational decision-making and behavioural biases.

Findings

The findings show that the structural path model closely fits the sample data, indicating investors follow a rational decision-making process while investing. However, behavioural biases also arise in different stages of the decision-making process. It further explores that gender and income have a significant difference with respect to rational decision-making process. Male investors are more prone to overconfidence and herding bias in India.

Research limitations/implications

The findings of the study have significant implication for the individual investors. It is recommended that if individuals are aware about the biases, they may become alert before taking irrational investment decisions.

Originality/value

To best of the authors’ knowledge, the present study is a first of its kind to investigate the relationship between rational decision-making and behavioural biases among individual investors in India.

Details

Qualitative Research in Financial Markets, vol. 8 no. 4
Type: Research Article
ISSN: 1755-4179

Keywords

Book part
Publication date: 30 November 2020

Tassilo Henike and Katharina Hölzle

Great uncertainty accompanies entrepreneurs’ processes of designing promising business models (BMs). Therefore, stabilising factors act as important means in this process…

Abstract

Great uncertainty accompanies entrepreneurs’ processes of designing promising business models (BMs). Therefore, stabilising factors act as important means in this process. In this study, we examined the impact of cognitive dispositions and visual BM frameworks on the BM process and outcomes. By using partial-least-square structural equation modelling (PLS-SEM) and an experimental setting, our results show that the stabilising function of BM frameworks depends on entrepreneurs’ cognitive dispositions. This finding contributes to the cognitive BM perspective and explains how cognitive dispositions and visual framing effects act as boundary conditions for the theory of stabilising factors. This also has important implications for applying frameworks in practice.

Details

Business Models and Cognition
Type: Book
ISBN: 978-1-83982-063-2

Keywords

Book part
Publication date: 12 January 2021

Daniel R. Clark and Jeffrey G. Covin

The literature on international entrepreneurship offers two competing views on why new ventures internationalize: (a) the nature of the opportunity pulls them…

Abstract

The literature on international entrepreneurship offers two competing views on why new ventures internationalize: (a) the nature of the opportunity pulls them international or (b) the founder pushes the firm international. While these two internationalization drivers are not independent, they do represent unique causal mechanisms. Previously, the tools available to understand the entrepreneur’s disposition toward internationalization were limited. The present study uses the theoretical foundation of the international entrepreneurial orientation construct and from it develops and tests an attitudinally-based individual-level measure of disposition toward internationalization. To ensure the validity and reliability of the new measure, termed International Entrepreneurial Orientation Disposition, studies were conducted to: develop new scale items, examine their psychometric properties and construct validity, and demonstrate criterion validity. A strong measurement model is developed using structural equation modeling (CFI = 0.93, RMSEA = 0.07), and the measure is shown to be useful as a predictor of perceived international venture attractiveness.

Details

Entrepreneurial Orientation: Epistemological, Theoretical, and Empirical Perspectives
Type: Book
ISBN: 978-1-83867-572-1

Keywords

Book part
Publication date: 19 August 2015

Sebastiaan Van Doorn, Mariano Heyden, Christian Tröster and Henk Volberda

Entrepreneurial orientation (EO) plays an important role in explaining firm performance. In this study, we investigate the relation between EO and performance at the…

Abstract

Entrepreneurial orientation (EO) plays an important role in explaining firm performance. In this study, we investigate the relation between EO and performance at the strategic business unit (SBU) level and examine the influence of decision-making mode and social capital of the focal business unit manager. Adopting the attention-based view (ABV) as our main theoretical perspective, we examine the impact of decision-making mode (i.e., participative vs. autocratic) on the EO–performance relation. In addition, we investigate the extent to which strong network ties with actors at lower, similar, and higher hierarchical positions, respectively, enable SBU managers to effectively engage in participative decision-making processes when leveraging EO. Our findings based on 119 SBUs of one large international company provide nuanced insights into how local conditions interact to shape EO’s influence on performance.

Article
Publication date: 8 August 2008

Lauren R. Skinner, Paul T. Bryant and R. Glenn Richey

The objective of this paper is to empirically examine the impact that different disposition strategies have on strategic performance in the reverse logistics process. This…

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Abstract

Purpose

The objective of this paper is to empirically examine the impact that different disposition strategies have on strategic performance in the reverse logistics process. This research also includes the role of the returns policy in the customer decision‐making process as a foundation for determining the appropriate disposition strategy.

Design/methodology/approach

A general review of the literature and depth interviews with logistics professionals following commonly employed investigative techniques provided the foundation for the study. A survey was developed and mailed to the senior supply chain operations professional at 400 companies in the auto parts industry resulting in 118 usable responses.

Findings

The current research shows that under instances of active resource commitment to reverse logistics programs, operations and supply chain managers may expect superior performance by choosing destroying, recycling, refurbishing, and/or remanufacturing of product.

Practical implications

If firms focus on reverse logistics activities as a must do, a strategic approach that examines outcomes rather than day‐to‐day operations is suggested. If managers do not have adequate resource support for reverse logistics, they should destroy the product. The other disposition options all require significant resources in order to reclaim value from returns.

Originality/value

Traditional strategy research has focused on the importance of a strategic fit between a firm's internal strengths and weaknesses and the external environment. In contrast, a resource approach stresses internal aspects of the firm. This study combines the two views along with examining the effects of resource commitment.

Details

International Journal of Physical Distribution & Logistics Management, vol. 38 no. 7
Type: Research Article
ISSN: 0960-0035

Keywords

Article
Publication date: 28 June 2022

Maqsood Ahmad

This article aims to systematically review the literature published in recognized journals focused on cognitive heuristic-driven biases and their effect on investment…

Abstract

Purpose

This article aims to systematically review the literature published in recognized journals focused on cognitive heuristic-driven biases and their effect on investment management activities and market efficiency. It also includes some of the research work on the origins and foundations of behavioral finance, and how this has grown substantially to become an established and particular subject of study in its own right. The study also aims to provide future direction to the researchers working in this field.

Design/methodology/approach

For doing research synthesis, a systematic literature review (SLR) approach was applied considering research studies published within the time period, i.e. 1970–2021. This study attempted to accomplish a critical review of 176 studies out of 256 studies identified, which were published in reputable journals to synthesize the existing literature in the behavioral finance domain-related explicitly to cognitive heuristic-driven biases and their effect on investment management activities and market efficiency as well as on the origins and foundations of behavioral finance.

Findings

This review reveals that investors often use cognitive heuristics to reduce the risk of losses in uncertain situations, but that leads to errors in judgment; as a result, investors make irrational decisions, which may cause the market to overreact or underreact – in both situations, the market becomes inefficient. Overall, the literature demonstrates that there is currently no consensus on the usefulness of cognitive heuristics in the context of investment management activities and market efficiency. Therefore, a lack of consensus about this topic suggests that further studies may bring relevant contributions to the literature. Based on the gaps analysis, three major categories of gaps, namely theoretical and methodological gaps, and contextual gaps, are found, where research is needed.

Practical implications

The skillful understanding and knowledge of the cognitive heuristic-driven biases will help the investors, financial institutions and policymakers to overcome the adverse effect of these behavioral biases in the stock market. This article provides a detailed explanation of cognitive heuristic-driven biases and their influence on investment management activities and market efficiency, which could be very useful for finance practitioners, such as an investor who plays at the stock exchange, a portfolio manager, a financial strategist/advisor in an investment firm, a financial planner, an investment banker, a trader/broker at the stock exchange or a financial analyst. But most importantly, the term also includes all those persons who manage corporate entities and are responsible for making their financial management strategies.

Originality/value

Currently, no recent study exists, which reviews and evaluates the empirical research on cognitive heuristic-driven biases displayed by investors. The current study is original in discussing the role of cognitive heuristic-driven biases in investment management activities and market efficiency as well as the history and foundations of behavioral finance by means of research synthesis. This paper is useful to researchers, academicians, policymakers and those working in the area of behavioral finance in understanding the role that cognitive heuristic plays in investment management activities and market efficiency.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Book part
Publication date: 29 July 2009

Lawton R. Burns, Rajiv J. Shah, Frank A. Sloan and Adam C. Powell

Change in ownership among U.S. community hospitals has been frequent and, not surprisingly, remains an important issue for both researchers and public policy makers. In…

Abstract

Change in ownership among U.S. community hospitals has been frequent and, not surprisingly, remains an important issue for both researchers and public policy makers. In the past, investor-owned hospitals were long suspected of pursuing financial over other goals, culminating in several reviews that found few differences between for-profit and nonprofit forms (Gray, 1986; Sloan, 2000; Sloan, Picone, Taylor, & Chou, 2001). Nevertheless, continuing to the present day, several states prohibit investor-ownership of community hospitals. Conversions to investor-ownership are only one of six types of ownership change, however, with relatively less attention paid to the other types (e.g., for-profit to nonprofit, public to nonprofit). This study has two parts. We first review the literature on the various types of ownership conversion among community hospitals. This review includes the rate at which conversions occur over time, the relative frequency in conversions between specific ownership categories and the observed effects of conversion on hospital operations (e.g., strategic direction and decision-making processes) and performance (e.g., access, quality, and cost). Overall, we find that the impact of ownership conversion on the different measures is mixed, with slightly greater evidence for positive effects on hospital efficiency. As one explanation for these findings, we suggest that the impact of ownership conversion on hospital performance may be mediated by changes in the hospital's strategic content and process. Such a hypothesis has not been proposed or examined in the literature. To address this gap, we next study the role of strategic reorientation following hospital conversion in a field study. We conceptualize ownership conversion within a strategic adaptation framework, and then analyze the changes in strategy content and process across sixteen hospitals that have undergone ownership conversions from nonprofit to for-profit, public to for-profit, public to nonprofit, and for-profit to nonprofit. The field study findings delineate the strategic paths and processes implemented by new owners post-conversion. We find remarkable similarity in the content of strategies undertaken but differences in the process of strategic decision making associated with different types of ownership changes. We also find three main performance effects: hospitals change ownership for financial reasons, experience increases in revenues and capital investment post-conversion, and pursue labor force reductions post-conversion. Membership in a multi-hospital system, however, may be a major determinant of both strategy content and decision-making process that is confounded with ownership change. That is, ownership conversion may mask the impact of system membership on a hospital's strategic actions. These findings may explain the pattern of performance effects observed in the literature on ownership conversions.

Details

Biennial Review of Health Care Management: Meso Perspective
Type: Book
ISBN: 978-1-84855-673-7

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