Leeds University Business School Conscious and non-conscious cognition and emotions: Implications...

Leeds University Business School

Conscious and non-conscious cognition and emotions: Implications for the

psychological micro-foundations of strategic management

Gerard P. Hodgkinson

Centre for Organizational Strategy, Learning & Change (COSLAC)

Copyright © Gerard P. Hodgkinson 2010


Aims

• Survey recent conceptual and methodological advances in psychology and related fields that have begun to provide a deeper understanding of intuition and related non-conscious, affective-cognitive processes

• Assess the implications of these developments for laying behaviourally plausible micro-foundations for the field of strategic management

• In so doing, constructively critique Teece's (2007) recent dynamic capabilities framework, offering countervailing psychological insights and prescriptions for organizational adaptation



…a timely warning!

• “The hype about neuroscience we’re now seeing has happened before, with the original left brain/right brain research, which I helped pioneer. Our work got hugely distorted in the popular press, and it was impossible to find hard data for most of the claims that were being made. The failure to live up to the hype arguably obscured the real advances we did make...no one gains from a pseudoscientific approach to business, least of all managers. While I understand the appeal of bringing scientific rigor to this area of management, the quest for certainty could well devalue the intuition that managers traditionally rely on. In the end, investors pay managers to exercise good judgment, not to read scanner printouts.” M.S. Gazzaniga, The Brain as boondoggle, Harvard Business Review March-April, p. 66 (2006)



• Historically viewed as a junk science concept, at best on the fringes of respectability

• Now occupies important place in dual-process theories of cognition (both old and new variants), creativity research, behavioral decision making, personality and individual differences and social cognitive neuroscience

• Research and practical applications in all the applied domains of psychology (from industrial/organizational to educational to medical) and related fields (e.g. law, management)

The nature of intuition



• Instinct• Insight• Tacit knowledge• Creativity• Implicit learning • Implicit memory

What intuition is not




• Instinct (basic reflex actions)• Insight• Tacit knowledge• Creativity




• Instinct (basic reflex actions)• Insight (eureka moment preceded by an incubation

period)• Tacit knowledge• Creativity





period)• Tacit knowledge (knowledge that is hard or impossible to

verbalize)• Creativity





period)• Tacit knowledge (knowledge that is hard or impossible to

verbalize)• Creativity (intuition may help the creative process but it’s

not the same thing)



• Instinct• Insight• Tacit knowledge• Creativity

• Yet popular writers and broadcasters frequently confuse intuition with these related but distinct phenomena




• Instinct• Insight• Tacit knowledge• Creativity

• Yet popular writers and broadcasters frequently confuse intuition with these related but distinct phenomena

• Or try to blend them in unhelpful ways (e.g. ‘business instinct’, ‘gut instinct’, ‘intuitive insight’)




• Knowing, without knowing why (Claxton, 2000) • Accompanied by strong somatic reaction and feeling

of certitude– Even when taking evasive action, people purporting its use report

a feeling of ‘inner calm’ and certitude

• Typically intuitions occur in situations characterized by one or more of the following:– Time pressure– Information overload– Insufficient information– Acute danger

So what is intuition?



Intuiting (the underlying process of intuition)

• “A complex set of inter-related cognitive, affective and somatic processes, in which there is no apparent intrusion of deliberate, rational thought. Moreover, the outcome of this process (an intuition) can be difficult to articulate.” (Hodgkinson, Langan-Fox & Sadler-Smith, 2008, p. 4)



• Dane and Pratt (2007: 40) defined intuitions as ‘affectively-charged judgments that arise through rapid, non-conscious, and holistic associations’

• Three major elements:– Cognitive – Affective– Somatic

Intuitions defined


Early ‘Split Brain’ Neuroscience

•Strategy applications:

* Mintzberg (1976) ‘Planning on the left side and managing on the right’, HBR

* Taggart & Robey (1981) ‘Minds and Managers’, AMR

• Hemispheric specialization, predicated on the lateralization of function hypothesis

• Informed by Gazanniga and Sperry’s studies of so-called ‘split brain’ patients (commissurotomy)


• Brain is a limited capacity processor of information (cf. Herbert Simon’s notion of bounded rationality)

• Two forms of processing: – Automatic (less effortful, non-conscious)– Controlled (effortful, conscious, analytical)

• Most processing occurs automatically (resource conservation) and is thus prone to bias

• Views intuition as an automated form of cognition (summed up by Simon’s notion of ‘analyses frozen into habit’)

• Hence intuition is a potential source of cognitive bias to be ironed out via decision-aiding techniques that force a switch from automatic to controlled, effortful processing

Intuition and conventional dual-process theory



• Conventional dual-process views of intuition are giving way to conceptions in which skilled decision makers draw upon conscious and non-conscious cognitive processes in parallel, which compete and operate in a dynamic interplay (cf. Evans, 2007, 2008)

• Advances in social cognitive neuroscience (and related developments in social cognition, cognitive psychology and neuroeconomics) increasingly support this shift in emphasis

The nature of intuition: An update


Hypothesized neural correlates of the C-system supporting reflective social cognition (analogous to controlled processing) and the X-system supporting reflexive social cognition (analogous to automatic processing) displayed on a canonical brain rendering from (A) lateral, (B) ventral, and (C) medial views.Note: the basal ganglia and amygdala are subcortical structures that are displayed here on the cortical surface for ease of presentation. (Source: Lieberman, MD, Annual Review of Psychology, Vol. 58. © 2007 by Annual Reviews. All Rights Reserved.)


Contemporary Developments inSocial Neuroscience

• Social Cognitive Neuroscience (SCN)• Integrates social, cognitive, and neurological levels of

analysis, thus avoiding charges of reductionism (Ochsner & Lieberman 2001)

• This interdisciplinary approach is changing views of a range of social phenomena, from the formation of political attitudes (Lieberman et al 2003) to the evolution of culture (Mesoudi et al 2006)

• Neuroeconomics• Building on the above developments, this emerging field is

questioning many of the psychological assumptions embedded in standard economic models

• Attempting to render theories of economic exchange more consistent with contemporary understanding of the human brain (Camerer 2005; Glimcher & Rustichini 2004; Loewestein, 2008; Sanfey et al. 2003)



• SCN and Neuroeconomics both posit interaction between two distinct cognitive systems (each multiple neural)

• Shift from ‘default-interventionist’ to ‘parallel-competitive’ dual-process models (Evans, 2008)

• Default interventionist dual-process theories posited the role of cortical/higher mental functions is to correct the ‘primitive’ limbic system’s automatic and affective responses (which are viewed as sources of bias and irrationality to be minimized)

• Automatic system provides default behaviors (e.g. automatic attitudes, intuitive judgments) that the analytical system refines

• Parallel-competitive models assume a more complex interaction between the systems, each operating simultaneously and competing

• Reflexive processes are not relegated to mere source of error and bias to be overcome with effort, but integral to human cognition and critical for skilled processes such as intuition (Lieberman, 2000)

Contemporary Developments in Social Neuroscience



Other pertinent developments

• The somatic marker hypothesis – Memories embodied as resonating emotions activated in

context-congruent situations (Bechara, 2004; Damasio, 1994)

• ‘Affective tags’ (Finucane et al., 2000)– Positive & negative markers from individuals’ ‘affect pools’ tag to

all mental images (Slovic et al., 2000)

• The affect heuristic and affect as information• The body loop and as-if loop (Bechara, 2004)

– Decision making under uncertainty with the body loop– Decision making under certainty with the fainter as-if loop



Intuitive abilities, styles, and strategies

• Intuition construed as quantifiable differences in task performance (i.e. ability; cf. Sternberg, 1997)

• Intuition construed as an enduring overarching preference of approach to information processing (i.e. cognitive style; cf. Allinson & Hayes, 1996)

• Intuition construed as a cognitive strategy, switchable at will (cf. Hogarth, 2001; Klein, 2003)


Source: G.P. Hodgkinson and I. Clarke, 2007, ‘Exploring the cognitive significance of organizational strategizing: A dual-process framework and research agenda,’ Human

Relations, 60, 243-255. Copyright © 2007 Sage Publications.

Basic typology of contrasting cognitive strategies and styles


Intuitive ability

• Unresolved issue of accuracy of intuitive judgments

• Intuition may be more useful for generating hypotheses that need further testing (Atkinson & Claxton, 2000).

• Sources of bias associated with intuitive heuristic judgments (representativeness, availability and anchoring and adjustment) well documented in the behavioural decision-making literature (e.g. Kahneman, Slovic, & Tversky, 1982).

• However, this lab-based research takes advantage of participants’ ignorance of arithmetical and statistical principles rather than focusing on their experience and knowledge and to require them to generate intuitively a final solution to a problem (Bowers et al., 1990).



Rapid Primed Decision Making

– RPD = two-step process (Klein, 1998: 24):– decision makers ‘size up the situation to recognize which course of

action makes sense’– evaluate that course of action via mental simulation



Critique of RPD (Hodgkinson et al., 2008: pp. 7 - 8)

• High face validity and seemingly corroborated by Klein’s own empirical findings, but…

• Klein is unclear about the degree of fidelity required of mental simulations to render them useful in the complex, time pressured, ‘life-or-death’ situations in which he claims they are typically deployed

• Given the basic restrictions of working memory capacity, these simulations must be of limited overall fidelity, but even allowing for the fact that they are typically constructed on the basis of just three variables and six transitions, it is difficult to envisage such simulations being mentally rehearsed in ‘real time’ in the manner envisaged by Klein



Measuring intuition as cognitive style or strategy (ability?)

– Rational-experiential inventory (REI: Epstein et al., 1996)

• Need for cognition (adapted from Cacioppo & Petty, 1982)

• Faith in intuition– Revised form REI (Epstein et al., 1998)

• Rational ability (self-report)• Rational engagement • Experiential ability (self-report)• Experiential engagement

– Recent psychometric studies fail to recover the ability-engagement distinction but strongly support the basic two-dimensional structure of the original REI (Hodgkinson et al, 2009b), commensurate with the underlying dual-process theory of Epstein and colleagues



Future directions in the assessment of intuition

• The study of intuitive episodes (lab and field) rather than self-reported preferences– Use of critical incident technique and repertory

grid/multidimensional scaling to reflect upon incidents where intuition seems to have been used effectively vs. ineffectively

– Cognitive task analysis/cognitive mapping/knowledge elicitation procedures in conjunction with time-pressured decision tasks

– Diary studies and related experience sampling methods – fMRI (in conjunction with the above)



Can intuition be manipulated?

• $64,000 question• Need to disentangle the process (intuiting) from the

outcomes (intuitions)• The short answer is we can probably facilitate the

process but not control the outcomes (but we can nonetheless assess outcomes, both proximal to and distal from the decision episode)

• Create the enabling conditions in which skilled intuition is likely to occur and flourish (see Hodgkinson et al., 2009a, Long Range Planning)



Intelligence is…

• Clear and conscious• Logical and justified• Error-free and correct• Verbal and symbolic• Egocentric and total• Rapid and decisive

AND fuzzy/vague

AND unjustified

AND experimental

AND fantasy

AND empathic

AND slow / receptive



Creative cognition

• Creative cognitions manifest as intuitions (intimations or feelings of knowing) operate at the other end of the speed continuum to the lightening-fast judgements that arise in response to the complex, time pressured situations of the type studied by NDM and expertise researchers

• Allowing for a period of incubation creates space for mental relaxation and the consequent removal of analytical blocks, for serendipitous associations to occur, and allow the slow spreading of activation trails that may throw up a new metaphor, perspective or connection that conjoins previously unrelated elements



Creative cognition

• The intuitive facet of creativity is both a complex and ambiguous competency to recognise and assess

• It is also difficult to accommodate within organizational cultures and structures that scorn fallibility and prohibit experimentation, risk taking and departures from efficient standard operating procedures

• The creative cognitions which are one outcome of non-conscious, intuitive processes are, like their analytical counterparts, fallible, but nonetheless essential to the generation and exploration of novel ideas in preparing viable alternatives for success



Significance for understanding & developing dynamic capabilities?

• The economic, and to a lesser extent psychological, microfoundations of dynamic capabilities have received growing scholarly attention over recent years

• Teece’s (2007) contribution constitutes the most comprehensive framework to date for the analysis of capabilities development in organizations

• Teece posited three generic dynamic capabilities as the core foundations of the evolutionary and economic fitness of the business enterprise

Copyright © Gerard P. Hodgkinson & Mark P. Healey 2010

DYNAMIC

CAPABILITIES

Foundations of dynamic capabilities & business performance Adapted from Teece, 2007. ‘Explicating dynamic capabilities: The nature and microfoundations of (sustainable) enterprise performance.’ Strategic Management Journal, 28, p. 1342.

SENSING SEIZINGMANAGING THREATS/

TRANSFORMING

Analytical Systems (and

Individual Capacities) to Learn and to Sense, Filter, Shape, and

Calibrate Opportunities

Enterprise Structures, Procedures, Designs and Incentives for

Seizing Opportunities

Continuous Alignment and Realignment of

Specific Tangible and

Intangible Assets


• This framework currently downplays the significance of emotional/affective and non-conscious cognitive processes, especially intuition, in sensing, seizing and reconfiguring

• Accordingly, we revisit the psychological foundations of Teece’s framework to rectify this imbalance

• We develop countervailing psychological insights on the origins and development of dynamic capabilities, highlighting economic actors’ need to blend effortful forms of analysis with the skilled utilization of less deliberative, intuitive processes, thereby harnessing the cognitive and emotional capacities of individuals and groups

Basic Thesis & Contribution



• We challenge the key underlying psychological assumption implicit within Teece’s framework (and the writings of many contemporary strategic cognition scholars) that there is a single underlying dimension or continuum comprising conscious cognition versus non-conscious cognition and emotion/affect

In sum…

Non-conscious cognition & affect/emotion

Conscious cognition



Rather…

• some affective and emotional triggers and associated responses are processed consciously, while others are processed non-consciously (cf. Bandura, 1986)


‘Hot cognition’ (Emotional/affective)

‘Cold cognition’

Sub

cons

ciou

s/au

tom

atic

Conscious/deliberative


DYNAMIC

CAPABILITIES

Foundations of dynamic capabilities & business performanceAdapted from Teece, 2007. ‘Explicating dynamic capabilities: The nature and microfoundations of (sustainable) enterprise performance.’ Strategic Management Journal, 28, p. 1342.


TRANSFORMING


Individual Capacities) to Learn and to Sense, Filter, Shape, and Calibrate

Opportunities





Intangible Assets

DYNAMIC

CAPABILITIES

SEIZINGMANAGING THREATS/

TRANSFORMING





Intangible Assets

PROBLEM

In addition,learning, sensing,

filtering, shaping & calibration involve intuition & other nonconscious

cognitive processes and the use of affective &

emotional processes


DYNAMIC

CAPABILITIES

SEIZINGMANAGING THREATS/

TRANSFORMING





Intangible Assets

SENSING as FEELING and

ANALYSIS

Systems and processes that

enable and support the blending of

analytical, intuitive & affective/ emotional

information


Copyright © G. P. Hodgkinson & M. P. Healey 2009

Psychological Foundations of Sensing Revisited

Extant Foundations

Supporting Literature(s) Revised Foundations

Supporting Literature(s)

Opportunity discovery and creation originate from the cognitive and creative (‘right brain’) capacities of individuals, requiring access to information and the ability to recognize, sense, and shape developments

Entrepreneur-ship literature

Organizational search (e.g. March & Simon, 1958; Nelson & Winter, 1982)

Identifying and creating opportunities through searching, synthesizing and filtering information stems from the interaction between reflexive (e.g. intuition, implicit association) and reflective (e.g. analogy, explicit reasoning) cognitive and emotional capabilities

Social cognitive neuroscience research on the interaction between reflexive and reflective systems (e.g. Lieberman, 2007)


Psychological Foundations of Sensing Revisited (cont.)

Extant Foundations



Recognizing, scanning, and shaping depend on individuals’ cognitive capabilities and extant knowledge

Knowledge-based view of the firm (e.g. Grant, 1996)

Organizational learning (e.g. Levinthal & March, 1993)

Recognizing, scanning, and shaping depend on the capability to harness emotion to update mental representations (e.g. dissonance recognition) and skilled utilization of automatic processes to synthesize information and form expert judgments

Cognition and capabilities literature (e.g. Gavetti, 2005)

Affective processes in learning (e.g. Lieberman, 2000)


Psychological Foundations of Sensing Revisited - 1

• Affective micro-foundations of sensing

• Utilizing affect as information is an essential part of sensing

• Experts use non-conscious pattern matching, yielding affectively charged intuitive judgments (Dane & Pratt, 2007; Lieberman, 2001)

• Emotion directs attention to threats and opportunities

• Affective reactions to opportunities signal need for further appraisal

• Dissonance provides signal and motivation for schema change




• Implications

• Capabilities in diagnosing/acting on emotional signals, not suppressing them, differentiate dynamic firms from unresponsive ones

• ‘Cold’ approaches to schema change insufficient – need systems, structures and tools to enable emotion learning (e.g. from dissonance)

• Dynamic capabilities require a psychologically safe climate




• Nonconscious micro-foundations of sensing

• Sensing = detailed analysis, deliberative learning (Porter, 1985; Zollo & Winter, 2002)

• But … nonconscious cognition underpins the ability to navigate the social (e.g. Bargh & Chartrand, 1999) and informational (Hodgkinson & Sparrow, 2002) environment

• “The inability of the analytical mode to synthesize” (Mintzberg, 1994:320)

• Reflexive processes enable decision makers to cut-through data to see the ‘big-picture’, vital to strategic situational awareness (Hodgkinson & Clarke, 2007), which in turn enables rapid identification of important developments for exploitation




• Implications• Sensing capabilities are not rooted in elaborate knowledge

management systems per se, which can exacerbate rather than ameliorate information overload (Griffith, 2008)


DYNAMIC

CAPABILITIES


TRANSFORMING




Enterprise Structures, Procedures, Designs and

Incentives for Seizing

Opportunities



Intangible Assets



Psychological Foundations of Seizing Revisited

Extant Foundations


Revised Foundations


Seizing innovative investment choices requires managers to override ‘dysfunctions’ of decision making

Overcoming biases requires a cognitively sophisticated and disciplined approach to decision making

Classical behavioral decision theory (e.g. Kahneman & Tversky, 1979)

Classical behavioral decision theory (e.g. Kahneman & Tversky, 1979)

Seizing opportunities requires harnessing emotional reactions to strategic alternatives

Cognitively effortful processes can exacerbate bias - alleviating bias and inertia requires cognitive & emotional capabilities

Neuroeconomics: immediate emotions shape choice (e.g. Loewenstein et al., 2008)

Self-regulation (e.g. Ochsner et al., 2002)

Affect in de-escalation of commitment (e.g. Sivanathan et al., 2008)


Psychological Foundations of Seizing

• Emotions in strategic decision making• Visceral (felt) reactions to choice alternatives often

overpower evaluations based on subjective probability (e.g. Loewenstein et al., 2001; Rottenstreich & Hsee, 2001; Bechara et al., 1997)

• Cold cognitive assessments of new investment alternatives are unlikely to stimulate effective seizing

• For effective seizing, need to build positive emotional associations to new opportunities. Highlights the importance of imagery, scenarios …



Psychological Foundations of Seizing (cont.)

• Unlocking fixations with existing strategies• Escalation of commitment (e.g. Staw, 1976)• Disengagement from a failing course of action involves

self-regulatory processing to reduce emotional engagement (Wong et al, 2006; Henderson et al., 2007)

• Hubris may create bias (Hiller & Hambrick 2005; Teece, 2007), but too little self-regard can actually exacerbate strategic persistence


DYNAMIC

CAPABILITIES


TRANSFORMING






Continuous Alignment and Realignment of Specific

Tangible and Intangible

Assets



Psychological Foundations of Reconfiguring Revisited

Extant Foundations



Top management ability to coordinate and execute strategic renewal and corporate change

Organizational structure and design and strategy and performance literatures (e.g. Bartlett & Ghoshal, 1993; Chandler, 1962)

Reconfiguration requires management of the transition and repeated redefinition of social identities by alleviating implicit bias and self-regulating emotional responses to identity threats posed by major change, i.e. reconfiguration of social identities with emotional attunement

Research on the neural basis of self and self-regulation (e.g. Derks et al., 2008)


Psychological Foundations of Reconfiguring Revisited (cont.)

• Managing social-identity processes is key to reconfiguring• Identity issues cause resistance to strategic change (e.g. Nag et al.,

2007; Haslam et al., 2003)

• Traditional cognitive solutions (e.g. Gioia et al., 2000) are problematic

• SCN sheds new light on self and identity mechanisms• Identity threat leads to heightened activity in emotion-regulation

centers of the brain (e.g. Derks et al., 2008)

• Identity threat (e.g. change devaluing a group) and in/outgroup bias (e.g. against new opportunities, change agents) stems from automatic social categorization and stereotyping (Amodio, 2008)



Psychological Foundations of Reconfiguring Revisited (cont.)

• Implications:• Reconfiguring involves tackling the emotional and nonconscious (i.e.

reflexive) aspects of identity change

• Self-regulation, affirmation of consonant identities



Implications and Conclusions

• Toward a ‘behaviorally plausible’ account of dynamic capabilities? (cf. Gavetti, Levinthal & Ocasio, 2007)

• Extant behavioral theory and research on dynamic capabilities informed by neo-classical economics divorces cognition from emotional and affective processes and affords only a minimal role to nonconscious cognition

• Taken to its logical conclusion, this body of work yields a vision of organizations starved of emotion and rendered intuitively incapable – thus, effectively blinkered and relatively unresponsive




• Teece’s (2007) framework remains central• But, behavioral plausibility is not its strength - the core psychological

assumptions underpinning this (and other) framework(s) need revising in the light of recent advances in social cognitive neuroscience and neuroeconomics




• Learning from contemporary advances in SCN and neuroeconomics, we offer countervailing descriptive, normative, and prescriptive insights

• To maximize their true effectiveness in sensing, seizing and transforming, organizations need to acquire and utilize to the full the requisite mixture of conscious and nonconscious cognitive processes, each of which are infused with affectivity and emotion …

… i.e. developing and maintaining dynamic capabilities requires firms to harness managers’ and employees’ reflexive and reflective abilities



Where do we go from here?

• We need to continue illuminating the generative mechanisms that contribute to the identification and enhancement of intuition and related processes

• In order to develop a more nuanced appreciation as to when and how their use can be harnessed and complemented with other approaches



Some follow up reading

• Hodgkinson, G.P. & Clarke, I. (2007). Exploring the cognitive significance of organizational strategizing: A dual-process framework and research agenda. Human Relations, 60, 243-245.

• Hodgkinson, G. P., & Healey, M. P. (2008). Cognition in organizations. Annual Review of Psychology, 59, 387-417.

• Hodgkinson G. P., Langan-Fox J., & Sadler-Smith E. (2008). Intuition: A Fundamental Bridging Construct in the Behavioural Sciences. British Journal of Psychology, 99, 1-27.

• Hodgkinson, G.P., Sadler-Smith, Burke, L.A., Claxton, G., & Sparrow, P.R. (2009a). Intuition in organizations: Implications for strategic management. Long Range Planning, 42, 277-297.

• Hodgkinson, G.P., Sadler-Smith, E., Sinclair, M., & Ashkanasy, N.M. (2009b). More than meets the eye? Intuition and analysis revisited. Personality and Individual Differences, 47, 342-246.


Conscious and non-conscious cognition and emotions: Implications for the psychological micro-foundations of strategic management

Gerard P. Hodgkinson

Centre for Organizational Strategy, Learning and Change (COSLAC)

Email: [email protected]: +44(0)113 343 4468

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