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SIMILARITY JUDGMENTS IN STRATEGY FORMULATION: ROLE, PROCESS AND IMPLICATIONS
Author(s) -
FARJOUN MOSHE,
LAI LINDA
Publication year - 1997
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/(sici)1097-0266(199704)18:4<255::aid-smj875>3.0.co;2-j
Subject(s) - similarity (geometry) , diversification (marketing strategy) , cognition , construct (python library) , process (computing) , cognitive strategy , computer science , range (aeronautics) , artificial intelligence , psychology , management science , economics , marketing , business , engineering , neuroscience , programming language , aerospace engineering , image (mathematics) , operating system
Similarity judgments are an important and distinct aspect of strategy formulation. They are manifest in strategic decisions and errors, and in the construction of analytic concepts such as strategic groups and relatedness in diversification. However, existing models of strategy formulation either assume away the process of making similarity judgments or regard it as unproblematic. This paper highlights the role of similarity judgments in strategy formulation, and discusses cognitive findings showing that decision makers’ assessment of similarity is not free from bias. The cognitive findings help construct a new process explanation for a wide range of apparently isolated strategic errors. The process explanation is contrasted and integrated with traditional explanations based on imperfections in decision inputs. Finally, in light of the cognitive findings, the methods and assumptions of existing approaches in strategy formulation research to the construction of analytic concepts are reexamined. © 1997 by John Wiley & Sons, Ltd.