Using Panel Data DEA to Measure CEOs’ Focus of Attention: An Application to the Study of Cognitive Group Membership and Performance

Abstract

In this study, we examine the existence and performance of cognitive groups. In accordance with the attention-based view of managerial cognition, cognitive groups are defined as groups of firms in which the CEOs focus their attention on similar strategic elements when seeking to maximize their firm’s competitive advantage. We developed a panel data extension of the original Data Envelopment Analysis to gauge CEOs’ focus of attention and then clustered firms into groups. We compared our approach, with other approaches that use content analysis of CEOs’ letters to shareholders and CEOs’ demographic characteristics to measure CEOs’ attention. Although the different approaches are related, indicating the existence of a common underlying construct (i.e., mental models), our approach explains a higher proportion of the variation in organizational performance.

Keywords: cognitive groups, CEO attention, data envelopment analysis, mental models

JEL Classification: G20, M11