Heuristics and rationality in strategic decision making: An exploratory study

Results from exploratory research giving evidence for the use of heuristics in strategic decisions are reported and a general model of the decision process in the form of a generative grammar is developed based on these results.

Abstract

The importance of good decision making to the strategic success of an enterprise is evident. In a dynamic environment, decision processes not only need to be well designed but they must adapt rapidly to changes in the environment. Existing work on decision making has centred around the concepts of rational and boundedly rational decision processes, and on their absence owing to political and organizational processes. Recent work has indicated a third model of decisions, based on the use of heuristics. While this model has been widely used in other fields, such as artificial intelligence, its use in analysis of strategic management decisions has been notable by its absence. This article reports exploratory research giving evidence for the use of heuristics in strategic decisions. It discusses the categories of heuristic found and evidence for the use of mental models and learning in decision processes. A general model of the decision process in the form of a generative grammar is developed based on these results. Implications for the design of decision processes in dynamic environments to facilitate rapid learning and adaptivity are discussed and the need for further research is underlined.