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International Journal of Academic Research in Business and Social Scien

July 2012, Vol. 2, N

ISSN: 2222-6

Factors Influencing Strategic Decision-Making

Processes

Mahmood NooraiePh. D. In Management , Islamic Azad University, Abhar Branch, Iran

Email: ([email protected])

Abstract

Decision-making is one of the most important functions of managers in any kind of

organization. Among different manager's decisions strategic decision-making is a complex

process that must be understood completely before it can be practiced effectively. Those

responsible for strategic decision-making face a task of extreme complexity and ambiguity.

For these reasons, over the past decades, numerous studies have been conducted to theconstruction of models to aid managers and executives in making better decisions

concerning the complex and highly uncertain business environment. In spite of much work

that has been conducted in the area of strategic decision-making especially during the

1990's, we still know little about strategic decision-making process and factors affecting it.

This paper builds on previous theoretical and empirical studies to determine the extent to

which contextual factors impact the strategic decision-making processes. Results showed

that researches on contextual factors effecting strategic decision-making process are either

limited or have produced contradictory results, especially studies relating decisions

familiarity, magnitude of impact, organizational size, firms performance, dynamism,

hostility, heterogeneity, industry, cognitive diversity, cognitive conflict, and ma nagers needfor achievement to strategic decision-making processes. Thus, the study of strategic

decision-making process remains very important and much more empirical research is

required before any definitive conclusion can be reached.

1. Introduction

The recent years have witnessed rapid changes in information technology, the new world

economic order, the coming of the new regional power and many others. All these changes

have presented on the one hand a very dynamic world of increased population, inflation,

social consumption, and on the other hand limited scarce resources. In such a complex andfast changing business environment, managers are faced with a multitude of decisions every

day. They have to make decisions even if they are not willing to do so. Pearce II & Robinson

(1989) indicated that decision-making is inevitable, because to explicitly avoid making a

decision is in itself to make a decision. Toffler (1980) in his book entitled The Third Wave

indicated that to make too many decisions, too fast, about too many strange unfamiliar

problems introduce a new element into management, forcing executives already nervous in

unpredictable environment to make more and more decisions and at a faster and faster

pace.

Among manager's different decisions strategic decisions are very important and play very

vital roles in any organization.
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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This study explores strategic decision-making process and factors affect the processes. The

choice to focus on strategic decisions is due to its nature and significance. Strategic

decisions are long term, highly unstructured, complex, and inherently risky and have great

impact on the future of the organization. Strategic decisions are those important decisions

that typically require a large amount of organizational resources, and firms environment

consideration. In strategic decisions, top management usually plays a central role, in making

the decisions (Hofer & Schendel, 1978). These decisions influence organizational direction,

administration, and structure (Christensen et al., 1982).

Since strategic decision not only affects the organization in which they are taken but also

the society (Colignon & Cray, 1980), it is not surprising that strategic decision-making

process has been heavily researched (Amason, 1996). in spite of the crucial role of strategic

decisions the strategy process research has not departed significantly from a stage of being

based on (Papadakis et al, 1998). Mature paradigms and incomplete

assumptions(Eisenhardt & Zbarack, 1992).

2. Literature Review (Strategic Decision-making)

The first step in the evolution of strategic management was taken in the late 1950's, when

firms developed a systematic approach to deciding where and how the firm will do its future

business (Ansoff, 1984). A strategy is a pattern in the organization's important decisions and

actions, and consists of a few key areas or things by which the firm is distinguished from

others (Digman, 1986). To Drucker, strategy is a purposeful action while to Mintzberg it is a

plan, a ploy, a pattern, a position, and a perspective (five Ps). Strategic management is

defined as the set of decisions and actions resulting in the formulation and implementation

of strategies designed to achieve the objectives of an organization (Pearce II & Robinson,1985).

According to Schwenk (1988) strategic decisions are ill structured, non-routine, and

important to the firm, in which top management usually plays a central role (Hofer &

Schendel, 1978). Strategic decision-making is incremental and interdependent, shaped by a

variety of contextual influences arising from past events, present circumstances, and

perspectives of the future (Quinn, 1980; March, 1981; Das, 1986; Neustadt & May, 1986).

One of the central features of strategic decisions is their lack of structure (Mintzberg et al.,

1976) mainly due to the complexity of the strategic problems (Mason & Mitroff, 1981).

Gamble and Thompson (2009) found that a company's strategy consists of competitivemoves and approaches management has developed to attract and please customers,

conduct operations, grow the business, and achieve performance objectives.

2.1 Strategic Issues

Strategic issues can be defined as developments, events and trends having the potential to

impact an organizational strategy (Ansoff, 1980; Dutton & Duncan, 1987). These issues can

represent problems or opportunities to decision makers. They are important because they

affect an organization's ability to achieve its goals or objectives (Dutton & Duncan, 1987).

Decision-making on strategic issues generally is treated as strategic decisions and therefore


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deserves strategic management consideration. According to Pearce II & Robinson (1994)

strategic issues typically have the following characteristics:

Require large amount of the firm's resources, Often affect the firm's long term prosperity, They are future-oriented, Usually have multifunctional consequences, They require consideration of the firm's external environment, and Require top-management decisions.2.2 Factors Affecting Strategic Decision-Making Process

Different theoretical models of strategic decision processes, which reflect different

conceptions of organization, have been suggested by various literatures (e.g. Mintzberg,

1973; Chaffee, 1985; Lyles & Thomas, 1988; Hart, 1992). These models that definitely differ

substantially in terms of their underlying assumption(s) about the decision context and the

characteristics of decision process are usually influenced by different factors. The factors

affecting the strategic decision-making in particular the different stages and process can be

classified into four major categories.

1. Decision-specific characteristics,2. Internal organizational characteristics,3. External environmental characteristics, and4. Management team's characteristics.2.2.1. Decision-Specific Characteristics

With respect to my literature review, there is limited research dealing with the relationship

between strategic decision-making process and decision specific characteristics.

Rajagopalan et al. (1993) believed that the relationships between decision specific factors

and decision process characteristics have received very limited attention in past research.

According to Papadakis et al. (1998) our understanding, however, of the impact of

decision-specific characteristics on organizational decision-making process is still quite

limited.

Research (e.g., Dean & Sharfman, 1993; Dutton, 1993; Papadakis et al., 1998) on decision-

making process recommends that managers in various organizations or even within the

same organization may view the same internal or external problem quite differently. Thusthe nature of the decision itself may be important and influences the strategic decision-

making processes. From among 121 studies, which have been conducted in terms of

contextual factors influencing strategic decision-making process, decision specific

characteristics have received very limited attention (20 percent). Following are the major

dimensions of decision specific characteristics which impact strategic decision-making

process

Decisions Familiarity

Decisions familiarity refers to the degree that the decision problem is clear to the decision -maker.


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Papadakis et al. (1998) did not find any relationship between decisions familiarity and

characteristics of the decision-making process. On the other hand, Fahey (1981) found that

decisions frequency (a proxy to familiarity) influences the extent of rationality and

politicization in the decision-making process. According to Nooraie (2011) familiarity is

negatively and significantly related to rationality of the strategic decision-making process,

but it is positively and significantly related to politicization in the strategic decision-making

process (Nooraie, 2001).

Decisions Magnitude of Impact

Decisions magnitude of impact refers to the extent that the decision will impact various

parts of the organization. Papadakis et al. (1998) and Hickson et al. (1986) found that

decisions magnitude of impact positively and significantly influences the extent of the

rationality and decentralization in the decision-making process. On the other hand, some

literature (e.g. Dean and Sharfman, 1993) claimed that the importance of strategic decision

is not related to the rationality of the decision. And the result of investigation that was

conducted by Nooraie (2008) indicates that decision magnitude of impact is significantly

associated with the level of rationality in the strategic decision-making process. And also

there is a positive relationship between decision magnitude of impact and decentralization

in the decision-making process (Nooraie, 2001)

Threat/crisis or Opportunity

If a decision is perceived as a crisis, different actions will be taken than if the decision is

perceived as an opportunity (Jackson & Dutton, 1988). Frederickson (1985) claimed thatwhen decisions are interpreted as threats as opposed to opportunities, actions taken in

making strategic decisions are characterized by greater comprehensiveness. According to

Papadakis et al. (1998) threat/crisis is positively related to the extent of decentralization in

the decision-making process. This is supported by Dutton, (1986) who claimed threat/crisis

is related to decentralization. However, a number of studied (e.g. Milburn, 1983) found that

when crisis become actual, this relationship will be changed to centralized.

Risky Decisions

Risky decisions are those decisions that have major impact on organizational effectiveness,high cost and difficult to reverse (Schilit, 1987). In their study of 329 strategic decisions,

Schilit and Paine (1987) concluded that the higher the riskiness/return, the greater is the

duration of the process, the level of negotiation, and the alliance/coalitions. Carter (1971)

found that decision context in terms of criticalness to decision makers, significantly

influences the decision process characteristics.

Decisions Complexity

Astley et al. (1982) in a research that was carried out with respect to decision specific

characteristics contended that decisions complexity is positively related to the extent of


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centralization in the decision-making process. This supports Fahey (1981), who found that

the decision process varies in terms of decisions complexity.

Type of Decisions

Papadakis et al. (1998) suggested that new business investment and investment in

marketing are significantly and negatively associated with the extent of

rationality/comprehensiveness in the decision-making process, but positively related to the

extent of decentralization. This support Fahey (1981) who found that type of decision

explains the nature of the decision-making process. What follows is further empirical

evidence supporting the impact of decision specific characteristics on strategic decision

process.

Sinha (1990) claimed that decisions characteristics significantly influence planning system

and therefore, influence the decision-making process. According to Cray et al. (1991) the

matter for decision may explain the kind of process that should be followed. Langley (1990)

suggested that pattern in decision-making processes and the use of formal analysis are

related to the nature of issues faced by organization. Rajagopalan et al. (1993) claimed that

decision specific factors such as urgency, risk, motive and complexity influence the strategic

decision making process.

Table 1 tabulates past studies on decision specific characteristics and strategic decision-

making process.


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July 2012, Vol.

ISSN: 222

410 www.hrmars.com

Table 1 Studies on decision specific characteristics and strategic decision-making process

Decision-specific

characteristic

Studies

Familiarit

y

Frequenc

y

Magnitu

de

of impact

Urgenc

y

Threat/Crisi

s/

Opportunity Riskiness

Complexit

y Motive

Information

source /

problem

classification

Type of

decision

Carter, 1971

Fahey, 1981

Astley et at, 1982

Frederickson, 1985

Pinfield, 1986

Volkema, 1986

Hickson et al, 1986

Schilit & Paine, 1987

Schilit, 1987

Jackson & Dutton, 1988

Papadakis et at, 1998 *

Cray et al, 1991

Dean & Sharfman, 1993

Nooraie 2001

Nooraie 2008

Nooraie, 2009

* Type of decision (e.g. new business development investment, investment in capital


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2.3 Internal Organizational Characteristics

The results of literature review in terms of internal organizational characteristics indicate

that research relating to organizational factors such as slack, past strategies, and power

have received very limited attention in previous research, while studies relating

organizational size to decision-making process have produced contradictory results.

Following are major internal organizational factors influencing strategic decision-making

process.

Organizational Structure and Power

Organizational structure can be described in many ways. Some researches (e.g. Van de Ven,

1976; Frederickson, 1986) define organizational structure as the degree of formalization,

integration and centralization. A review of the body of research indicates that research

agenda in organizational structure has been broadly carried out since 1990. Miller (1987)

found that formal integration is positively related to the extent of rationality and interaction

in the decision-making process, especially in successful and innovative firms. Miller et al.

(1988) claimed that there is a positive relationship between decision-making rationality and

formalization but negative relation between decision-making rationality and centralization.

Wally and Baum (1994) concluded that the more centralized a firm's decision making

structure, the faster the pace at which executives will evaluate an alternative; also the more

formalized a firm's decision-making structure the slower the pace at which executive will

evaluate an alternative. With regard to power distribution, Bourgeois and Eisenhardt (1988)

found that the centralization of power positively influences the extent of politicization in the

strategic decision-making process. Langley (1990), who investigated the relationship

between strategic decision-making process and different organizational models such asmachine bureaucracy, and adhocracy, found that patterns in decision-making processes

were related to organization structure, and leadership style.

Organizational Size

Organization size is another factor that influences strategic decision-making process.

Duhaime and Baird (1987) found that smaller business units usually have greater

involvement in the decision process than managers of large units. my literature review

indicates that studies relating organizational size to strategic decision process have

produced contradictory results; for example Fredrickson & Iaquinto (1989) and Child (1972)claimed that organizational size is positively related to the extent of

rationality/comprehensiveness in the decision-making process, while Dean & Sharfman

(1993) found no such a relationship. Nooraie (2001) suggested that organizational size is

positively associated with rationality and decentralization of the strategic decision-making

process but it is negatively related to politicization in the strategic decision-making.

Organizational Performance

Eisenhardt (1989) claimed that decision speed is positively related to firms performance.

Eisenhardt & Bourgeois (1988) found that firms performance is negatively related to theextent of politicization of the decision-making process. This finding supports that of Dean


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and Sharfman (1996), who found a negative relationship between decision-making

effectiveness and the extent of politicization in the decision-making process. In their study

of organizational performance, Papadakis et al. (1998) suggested that return on asset is

positively related to the extent of rationality/comprehensiveness and hierarchical

decentralization in the decision-making process. This is in line with the results presented by

Bourgeois and Eisenhardt (1988), who suggested that in high velocity environments, the

greater the delegation the better the performance of the firm and also with that of Dean

and Sharfman (1996) who found a positive relationship between decision-making

effectiveness and the extent of rationality in the decision-making process but at the same

time contradicts with some literature (e.g. Fredrickson, 1985) that found a negative

relationship between firms performance and the extent of comprehensiveness in the

decision-making process in unstable environment.

Organizational Slack

Organization slack, defined as a cushion of resources, helps organizations cope with

environmental changes and unexpected events. In my literature review I could not find any

empirical study relating slack to strategic decision-making process except the work of

Sharfman and Dean (1997) that concluded a positive relationship between slack and

flexibility in strategic decision-making process and Nooraie (2007) who found positive

relationship between organizational slack and the level of rationality in the strategic

decision-making process. What follows is further evidence supporting the impact of internal

organizational factors on strategic decision-making process.

Rajagopalan et al. (1993) indicated that past strategies influence the decision-making

process characteristics. With respect to formal planning, Sinha (1990) found that theorganization planning system is significantly affected by decision characteristics while a

formal planning system appears to have a positive influence on the extent of

rationality/comprehensiveness in the decision-making process (Papadakis et al., 1998).

Several studies have been carried out in terms of organizational information system

especially during 1990's. Molloy and Schwenk (1995) examined the relationships

between the use of computer-assisted information processing and strategic decision-

making process and noticed that the use of information technology does improve both

the efficiency and, more importantly, the effectiveness of the decision-making process.

A quasi-experiment was conducted by Smith and Hayne (1997), in which a group makes

business decisions under time pressure, where half of the groups enjoyed the benefits of

decision support system and the other half had no access to a decision support system.

They found that the presence of time pressure was negatively related to quality of decision-

making for both the supported and non-supported subgroups.

Van Bruggen et al. (1998) investigated the impact of the marketing decision support system

on the decision-making process and found that the use of the system improves decision

process, performance and quality and reduces the susceptibility to using the anchoring and

adjustment heuristics especially under low time pressure.


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Shrivastava and Grant (1985) concluded that the nature of strategic decision-making process

is associated with organizational learning system.

Organizational ideology influences the nature of the decision-making process in several

ways: it provides basis for problem identification, objective setting, and alternatives

generation. This makes it easier for managers to agree on which objectives are legitimate

and what alternatives are worth pursuing (Beyer, 1981; Brunsson, 1982). Regarding the link

between ideology and decision-making flexibility, Donaldson and Lorsch (1983) indicated:

An interrelated pattern or system of beliefs in each company provides corporate managers

with a framework for thinking about complex and uncertain choice, it sets important limits

on the strategic choice these managers are willing to make the interrelated wholeness of

these beliefs creates a powerful psychological constraint on top management s specific

choices. Table 2 summarizes studies on internal characteristics and strategic decision-

making processes.


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Table 2 Studies on internal characteristics and strategic decision-making process

Internal characteristics

Studies

Structure Power SizePerforma

nceSlack

Strategie

s

Formal

Planning

Informatio

n Support

System

Ideologies

Cyert & March, 1963

Bourgeois, 1981

Beyer, 1981 Brunsson, 1982

Donaldson & Lorsch, 1983

Shrivastara & Graunt, 1985

Miller, 1987

Duhaime & Baird, 1987

Bourgeois & Eisenhardt,

1988

Bourgeois & Eisenhardt,

1988

Miller et. at., 1988

Frederickson & Iaquinto,

1989

Sinha, 1990

Langley, 1990 Dean & Sharfman, 1993

Wally & Baum, 1994

Molloy & Schwenk, 1995

Smith & Hayne, 1997

Sharfman & Dean, 1997

Papadakis et at, 1998


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Van Bruggen et al , 1998

Nooraie 2001

Nooraie 2007


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2.4 External Environmental Characteristics

My review of literature in relation to external environmental factors reveals certain

important gaps. Most of previous studies have focused on one aspect of the external

characteristics (e.g. stability). Factors such as hostility, velocity, heterogeneity, and

uncertainty have received relatively little attention while researches relating environmental

dynamism and hostility to strategic decision-making process have produced contradictory

results. In the 21st century, managers of any organization must cope with a dynamic world

(Cook & Russell, 1981). According to Priem et al. (1995) firms usually are faced with an

environmental continuum ranging from stable to dynamic. In terms of environmental

factors that influence strategic decision-making process, the dimensions of dynamism,

hostility, heterogeneity, and stability were found to be significant.

Environmental Dynamism

Environmental dynamism refers to the rate of change, absence of pattern and

unpredictability of the environment (Dess & Beard, 1984). Based on these characteristics,

environmental dynamism as an important factor influencing strategic decision-making

process has been considered by several literatures.

Some of these studies (e.g. Frederickson, 1984; Frederickson and Mitchell, 1984;

Frederickson & Iaquinto, 1989) claimed that there is a negative relationship between the

extent of rationality/comprehensiveness in the decision-making process and performance in

unstable environment and positive relationship in stable environment. In contrast Bourgeois

(1985) found that in high velocity environment, effective firms use rational decision-making

process. On the same note Miller and Friesen (1983), Eisenhardt (1989), and Bourgeois and

Eisenhardt (1988) suggested that an increase in environmental dynamism is accompanied byan increase in the extent of rationality in the decision-making process. This is in line with

Nooraie (2001) who suggested the same and Priem et al. (1995) who defined that the extent

of rationality in strategic decision-making process is positively related to performance in

dynamic environments, while less rationality is associated with high performance in stable

environments.

Environmental Opportunity/Threat,

Dean and Sharfman (1993) viewed that there is a negative relationship between competitive

threat and the extent of rationality in the strategic decision-making and also betweencompetitive threat and flexibility in strategic decision-making.

Environmental Hostility

Environmental hostility is the extent that the situations in which firms are faced with price,

production and distribution competition, severe regulatory restrictions, shortage of

resources, and unfavorable market demand (Miller & Friesen, 1983). According to Miller and

Friesen (1983) environmental hostility is positively related to the extent of analysis in

strategic decision-making while Papadakis et al. (1998) did not find such a relationship. The

results of another study indicated that there is positive relationship between environmental


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hostility and rationality in the decision-making but it has negative relationship with

decentralization and politicization of the strategic decision-making (Nooraie, 2001).

Environmental Heterogeneity

Heterogeneity is the extent to which the elements of environment are dissimilar. Miller and

Friesen (1983) did not find any significant relationship between environmental

heterogeneity and the extent of analysis in decision-making process, while some studies

(e.g. Smart & Vertinsky, 1984) found a positive relationship between heterogeneity and the

extent of rationality/comprehensiveness in the decision-making process. On the other hand

Miller and Friesen (1983) and Langly & Rue (1980) suggested that environmental

heterogeneity is positively related to the extent of decentralization in the decision-making

process.

Uncertainty

Rajagopalan et al. (1993) described that uncertainty, beside other factors such as complexity

and munificence exerts significant influence on the strategic decision process. According to

Dean and Sharfman (1993) uncertainty is negatively related to the extent of rationality in

the decision-making process. In addition to the above factors Barney and Ouchi (1986)

concluded that the industry's structure is a major determinant of the profitability in the

industry and thus serve as a powerful influence on strategic decision-making process, while

Wally and Baum (1994) found that industry's structure do not appear to influence the

strategic decision-making process. Table 3 displays a summary of the studies on external

environmental characteristics and strategic decision-making process.


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Table 3 Studies on external characteristics and strategic decision-making process

External factors

Studies

Stability/

Instability

Opportunity

/

Threat

Certainty/

Uncertaint

y

VelocityHeterogenei

ty

Hostilit

y

Industrie

s

Dynamis

m

Lindsay & Rue, 1980

Miller & Frisen, 1983

Frederickson & Mitchell, 1984

Frederickson, 1984

Smart & Vertinsky, 1984

Frederickson, 1985

Bourgeois, 1985

Barney & Ouch, 1986

Grinyer et al, 1986

Bourgeois III & Eisenhardt, 1988

Eisenhardt, 1989

Frederickson & Iaquinto, 1989

Judge & Miller, 1991

Sharfman & Dean, 1991

Hitt & Tyler, 1991

Dean & Sharfman, 1993

Wally & Baum 1994

Priem et at, 1995 Sharfman & Dean, 1997


Nooraie 2001


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2.5 Top Management Team Characteristics

The results of my literature review indicate that research relating executive experience;

cognitive conflict and affective conflict, consensus, and need for achievement to nature of

the strategic decision-making process are very limited. A few studies that have tested theimpact of the managers need for achievement and cognitive diversity on strategic decision-

making process have produced opposite results. Upper echelon theory proposed by

Hambrick and Mason (1984) essentially argues that strategic choice is partially predicted by

executives' characteristics. The following are the major factors, which affect strategic

decision-making process in terms of top management team characteristics.

Risk Propensity

Several strategic decision researches focused on the relationship between risk and strategic

decision-making processes (e.g. Williams, 1965; Gupta, 1984; Barid & Thomas, 1985). Wally

and Baum (1994) found that decision-makers high tolerance for risk and a strong propensity

to act promote completion of the strategic decision-making process, this support

Eisenhardts (1989) proposition that fast strategic decision-making requires executives to

possess the confidence to act. Executive's risk propensity was not found to be a significant

moderator between objective criteria and strategic decision (Hitt & Tyler, 1991). According

to Papadakis et al. (1998) there is a negative relationship between executives risk

propensity and rule formalization. Based on Nooraie (2001) manager's risk propensity is

negatively associated with rationality of the strategic decision-making process however, it is

positively associated with decentralization and politicization in the decision-making

processes.

Education and Experience

According to Hambrick and Mason (1984) the amount, but not the type, of managers

education is positively related to innovation while the years of service of a top management

team negatively impact the decision-making process in terms of product innovation, this

support Nahavandi and Malekzadeh (1993) and also Schwenk (1984) suggestion that

individual characteristics affect the heuristics and cognitive maps used to make strategic

decisions.

Consensus

Consensus, defined as general agreement among all or most, is viewed as an important

outcome of group decision-making (Dess & Priem, 1995). Whyte (1989) suggested that

based on initial preference of members, the primary task of the group is to produce

consensus, and consensus among top management team can create both positive and

negative consequences. Some studies (e.g. Dess, 1987; Bourgevios, 1987) suggested that

consensus is positively related to firms performance while others (e.g. Bourgevios, 1985)

found negative relationship. Dess and Priem (1995) indicated that consensus might result in

common understanding and a strong commitment to strategic decision-making.


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Age

Hambrick and Mason (1984) suggested that an executive's age is negatively related to

propensity to risk; for example younger managers are more likely to make risky decisionthan the older one. Hitt and Barr (1989) indicated that managers' age has a negative impact

on compensation decisions and Hitt and Tyler (1991) found that in addition to the level of

education and experience, managers' age significantly moderates the relationship between

objective criteria and strategic evaluation of recruited candidates.

Cognitive Diversity

Cognitive issues have been considered in different studies. Cognitive diversity is defined in

terms of differences in beliefs and preferences held by members of the team (Miller et al.,

1998). Individual differences among strategic decision-makers affect strategic decision-

making activities (Hambrick & Finkelstein, 1987; Hitt & Tyler, 1991; Keats & Hitt, 1988).

Wally and Baum (1994) indicated that individual differences among executives are

important to the pace at which strategic decision-making occurs and they found that

managers cognitive ability is positively related to decision-making pace. Among studies in

terms of cognitive diversity some for example Bantel and Jackson (1989) found that

diversity is positively related to executive creativity while some others (e.g. O Reilly et al.,

1993) argued that higher levels of diversity result in less communication, leading to less

effective executive decision-making. In a similar vein, Miller et al. (1998) found that

cognitive diversity, preference diversity, and belief diversity among top management team

negatively influences the extent of comprehensiveness in the strategic decision-making

process.

Cognitive Complexity

Cognitive complexity is a variable that defines the structural complexity of an individual's

cognitive system (Schnier, 1979). According to Hambrick and Finkelstein (1987) managers

with greater cognitive complexity have greater discretion in strategic choice. Furthermore,

the extent of experience of top management team is positively related to administrative

complexity (Hambrick and Mason, 1984).

Cognitive Conflict and Affective Conflict

Amason (1996) claimed that cognitive conflict that emerges during strategic decision-

making process improves decision quality but affective conflict on the other hand produces

lower quality decisions.

Need for Achievement

As proposed by Miller et al. (1988) chief executive's need for achievement positively

influence the extent of the rationality in the decision-making process while Papadakis et al.

(1998) did not find such a relationship. This is in line with Nooraie (2001) who concluded thesame. What follows is further empirical evidence supporting the impact of top management


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characteristics on strategic decision-making process. According to Schilit and Pain (1987)

middle level managers are more likely to use systematic approach in strategic decision-

making process than the lower level managers. This supports Lyles and Mitroff (1980) that

suggested the higher up the managers in organizational hierarchy; the more likely they are

to utilize a rational process in their decision-making. Table 4 shows studies on topmanagement team characteristics and strategic decision-making process.


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Table 4 Studies on top management team characteristics and strategic decision-making process

Management team

characteristics

Studies

Risk

propensi

ty

Level of

educati

on

Level of

experienc

e

Consens

usAge

Cognitiv

e

diversit

y

Cognitive

Complexit

y

Cognitive

Affective &

Conflict

Executive

need for

achievement

Williams, 1965

Gupta, 1984

Barid & Thomas, 1985

Wally & Baum, 1994 Eisenhardt, 1989

Hitt & Tyler, 1991


Nahavandi & Malekzadeh, 1993

Miller et at, 1988

Dess & Priem, 1995

Hambrick & Mason, 1984

Hitt & Barr, 1989

Hambrick & Finkelstein, 1987

Bantel & Jackson, 1989

Keats & Hitt, 1988

O'reilly et at, 1993

Miller et at, 1998

Amason, 1996

Frederickson & Mitchell, 1984

Nooraie 2001


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3. Conclusions

Based on my literature review on strategic decision-making processes and factors effect it

following conclusions can be made.

Decision-making is one of the most important functions of the managerial job thus, theprimary duty of managers is decision-making. In terms of the decision-making process I noted that there are numerous approaches todecision-making. In spite of general similarities among them, there are some real differences

that result in a lack of conceptual consensus.

The most important models of decision-making are defined as (1) The rational orclassical model, which is based on quantitative disciplines, (2) The organizational model, which

is based on both behavioral and quantitative analysis, and (3) The political model, which is

almost totally behavioral.

Despite the literature, our knowledge of strategic decision-making process is limited. The impact of contextual factors and strategic decision-making process on decision-making process outputs is quite unclear. Considerable work has been carried out in the past decades focusing on factors affectingstrategic decision processes. Research in this area has shown progress; however much more

empirical research is required before any definitive conclusions can be reached.

Researches on factors effecting strategic decision-making process are either limited orhave produced contradictory results in other words studies relating: decisions familiarity,

magnitude of impact, organizational size, firms performance, dynamism, hostility,

heterogeneity, industry, cognitive diversity, cognitive conflict, and managers need for

achievement to strategic decision-making process have produced contradictory results.

Most of the researchers except Papadakis et al. (1998) have focused on the effects of a limited

number of factors involving one dimension of contextual factors on strategic decision-making

process (e.g. Fredrickson, 1984; Eisenhardt & Bourgeois, 1988; Priem et al., 1995) rather than in

an integrative manner. In my literature review I could find one empirical study conducted by

Papadakis et al. (1998) that focused on all the dimensions simultaneously. However they have

not examined the effects of the organizational slack, and level of top management team

experience on decision-making process, while they did not test the impact of strategic decision-

making process on quality of the decision-making process output.

According to Papadakis et al. (1998) in spite of the crucial role ofstrategic decisions thestrategy process research has not departed significantly from a stage of being based on;

Mature paradigms and incomplete assumptions(Eisenhardt & Zbarack, 1992 p.17). Thus, the

study of strategic decision-making process remains very important (Astley et al., 1982) and

much more empirical research is required before any definitive conclusion can be reached.

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