Enhancing Analogical Reasoning and Performance in Strategic Decision Making

Abstract:     
Strategy scholars have recently started theorizing about the impact of and the extent to which managers reason by analogies drawn either from their own past experience or from vicarious knowledge about seemingly similar situations. We report results from an experimental study investigating the mechanisms that impact analogical transfer from one managerial decision problem to another similar situation. Our results show successful analogical transfer on a common real world managerial challenge using two isomorphic management simulations. The two management simulations have exactly the same underlying deep structure of causal relationships but have very different surface features. We show that decision makers exposed to variation in the initial source problem achieve higher transfer performance. This variation impedes performance in the short term because decision makers are forced to explore new parts of the problem space. However, additional exploration ultimately leads to greater knowledge of the source problem and higher transfer performance. Our results also show that adopting a systematic search strategy of the problem space also improves transfer performance. By identifying specific mechanisms that enhance analogical transfer across management situations sharing a common deep structure, our study contributes to and bridges research on the cognitive aspects of strategy and research in psychology examining analogical reasoning, category-based induction, and pattern recognition.

Number of Pages in PDF File: 45

Keywords: analogy, cognition, strategic decision making, experiment

working papers series