Managerial Cognition and Strategic Decision Making in Diversified Firms

Abstract

The research reported here sought to identify top managers' mental models about the management of diversification and to determine whether these beliefs are associated with important strategic decisions. The study identified three broad sets of beliefs or orientations about the management of diversification that are commonly held by managers of large diversified firms. The study found that these management orientations are significantly associated with a number of key strategic choices, including decisions about the extent of diversification, divestment activity, new product development efforts, and research and development spending. The results offer empirical evidence of the influence of managerial cognition on strategic decision making.

Keywords: experience, demography, cognition, diversification, management

JEL Classification: D71, D73, G32, G34, L22, L23, M51