Journal Article

Mental models, decision rules, and performance heterogeneity

Wood, Robert E., Gary, Michael Shayne

2011

Overview

This paper focuses on the role of managerial cognition as a source of heterogeneity in firm strategies and performance. We link differences in mental models to differences in decision rules and performance in a management simulation. Our results show more accurate mental models lead to better decision rules and higher performance. We also find that decision makers do not need accurate knowledge of the entire business environment; accurate mental models of the key principles are sufficient to achieve superior performance. A fundamental assumption in much of strategic management is that managers who have a richer understanding about organizational capabilities and the dynamics of industry structure can improve the performance of their firms. Our findings provide empirical evidence supporting this assumption and show that differences in mental models help explain ex ante why managers and firms adopt different strategies and achieve different levels of competitive success.

• Publisher: John Wiley & Sons, Ltd,John Wiley & Sons,Wiley,Wiley Periodicals Inc
• Subject: Business environments / Business management / Business organization / Business strategies / Chief executive officers / Cognition / Cognition & reasoning / cognitive frames / Cognitive models / Corporate strategies / Decision analysis / Decision makers / Decision making / decision rules / Decisions / Empirical evidence / Experimentation / Führungskräfte / heuristics / Knowledge / knowledge representations / Kognition / Management research / Management science / Management techniques / Managers / Mental models / Organizational analysis / Organizational effectiveness / Organizational structure / Parametric models / Partial knowledge / Planning methods / schema / Self efficacy / Senior management / Simulation / Strategic management / Studies / Task complexity / Unternehmenserfolg