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An aspect of analogical reasoning that received limited attention in the strategy literature to date is the possibility of decision-makers locking into an analogy. This paper studies the adoption of the “mortgage-backed securities (MBS) are like bonds” analogy by bond market participants in the U.S. between 1970 and 2008. I find that the decision-makers maintained their commitment to the analogy despite evidence of important differences between MBS and bonds. Instead of responding to this evidence by either switching to a different source domain for their analogy or changing the relation specified in the analogy, the decision-makers changed the definition of bonds to match the analogy. This case of analogical lock-in had important societal consequences, blinding the decision-makers to the antecedents of the 2008 mortgage crisis.
The Superstitious Heuristic: Conceptualization and Measurement
The use of superstition as a heuristic in strategic decision-making is a phenomenon that commonly exists in different cultures and influences firms’ strategic behaviors and performance. In spite of its prevalence and importance, the phenomenon has been largely neglected in the strategy literature. As a first step toward filling this research gap, this study introduces the construct of superstitious heuristic and develops its conceptualization and measurement. In doing so, this study advances heuristics research in strategic management and offers a new angle to explain firm strategic behavior and performance. In a broader sense, it contributes to behavioral strategy research in response to the call for more endeavors that build the psychological underpinning of strategic management.
In Search of Contrarian Opportunities from the Blind Spot of Majority Rule
Jose P. Arrieta,
University of Amsterdam Chengwei Liu,
Organizational design is essential for managing a firm’s commission and omission errors when screening alternatives. Prior studies show that the majority rule is an efficient decision structure that minimizes both types of errors. We argue that industry-wide adoption of the majority rule nevertheless creates predictable omission errors at the ecology level and with them contrarian opportunities. We formally demonstrate an alternative screening rule—antimajority—that facilities the search of these opportunities and illustrates its scope conditions using a case from the venture capital industry. Our finding illuminates a decision model for the contrarian who is prepared to bear the risk when disrupting the majority.
Does the Size of Rewards Influence Performance in Cognitively Demanding Tasks?
Joachim Astrup Holst-Hansen,
Aarhus University Carsten Bergenholtz,
Classic micro-economic and psychology theories propose different implications of monetary rewards on performance. Meta-analyses have shown a positive effect of a reward (vs. no reward) when individual carry out simple, yet demanding tasks. Yet, increasing the reward does not necessarily improve the performance, since lab-studies involving cognitively demanding tasks have led to diverging results, supporting positive, negative and null-effects of higher (vs. lower) stakes. We present a pre-registered experiment of 160 participants solving both anagrams and math addition tasks. We do not find a statistically significant effect of the size of the reward on neither performance, self-reported effort nor intrinsic motivation. Future studies should contrast the impact of rewards on different kinds of task, e.g. comparing tasks requiring planning vs. simple cognition or motor skills.