Hostname: page-component-cd9895bd7-jn8rn Total loading time: 0 Render date: 2024-12-28T04:26:47.114Z Has data issue: false hasContentIssue false
  • English
  • Français

Beyond Bounded Rationality: CEO Reflective Capacity and Firm Sustainability Performance

Published online by Cambridge University Press:  23 March 2021

Yingya Jia ,
Anne S. Tsui  and
Xiaoyu Yu
Yingya Jia*
Affiliation:
Shanghai University, China
Anne S. Tsui
Affiliation:
Arizona State University, USA University of Notre Dame, USA Peking University, China Fudan University, China
Xiaoyu Yu*
Affiliation:
Shanghai University, China
*
Corresponding author: Yingya Jia (amandajia08@163.com) and Xiaoyu Yu (yuxiaoyu@shu.edu.cn)
Corresponding author: Yingya Jia (amandajia08@163.com) and Xiaoyu Yu (yuxiaoyu@shu.edu.cn)
Get access Rights & Permissions [Opens in a new window]

Abstract

Optimal or rational decision making is not possible due to informational constraints and limits in computation capability of humans (March & Simon, 1958; March, 1978). This bounded rationality serves as a filtering process in decision making among business executives (Hambrick & Mason, 1984). In this study, we propose the concept of CEO reflective capacity as a behavior-oriented cognitive capability that may overcome to some extent the pervasive limitation of bounded rationality in executive decision-making. Following Hinkin's (1998) method and two executive samples, we developed and validated a three-dimensional measure of CEO reflective capacity. Based on two-wave surveys of CEOs and their executive-subordinates in 213 Chinese small-medium sized firms, we tested and confirmed three hypotheses on how CEO reflective capacity is related to a firm's sustainability performance (including economic, societal, and environmental dimensions) through the mediating mechanisms of strategic decision comprehensiveness and CEO behavioral complexity. We discuss the contribution of this study to the literature on the upper echelons and information processing perspectives. We also identify the implications for future research on strategic leadership and managerial cognition in complex and dynamic contexts.

摘要

由于信息处理能力所限，人类决策难以绝对理性，即使是CEO等高级管理者也难以避免在战略决策过程中的信息“滤镜”。为了帮助CEO突破有限理性之局限，本文提出一个新的概念——CEO反思能力，即CEO致力于观察、获取、解读、整合多元化信息，反复思考以满足企业发展需求的高阶认知能力。本文首先基于两组高管样本，开发和验证了CEO反思能力的三因素量表。随后通过对213家中国中小企业的CEO-高管的两阶段配对问卷的分析发现：CEO反思能力与企业可持续绩效（包含环境、社会和经济三个维度）显著正相关，且战略决策周密性和CEO行为复杂性在二者关系中发挥中介作用。本文对动态环境下的战略领导力与管理认知研究具有启发意义。

Аннотация

Оптимальное или рациональное принятие решений невозможно из-за нехватки информации, а также ограниченных мыслительных возможностей человека (March, Simon, 1958; March, 1978). Эта ограниченная рациональность служит фильтром при принятии решений среди руководителей предприятий (Hambrick & Mason, 1984). В данной работе, мы предлагаем концепцию рефлексивной способности генерального директора в качестве поведенческой когнитивной способности, которая может в некоторой степени преодолеть всеобъемлющее влияние ограниченной рациональности при принятии управленческих решений. На основе метода Хинкина (1998) и двух выборок из руководителей, мы разработали и применили трехмерную модель измерения рефлексивной способности генерального директора. В результате двухэтапного опроса руководителей и их подчиненных в 213 китайских компаниях малого и среднего бизнеса, мы проверили и подтвердили три гипотезы о том, как рефлексивная способность генерального директора связана с показателями устойчивого развития (включая экономические, социальные и экологические аспекты) посредством регулирующих механизмов, которые заключаются во всеобъемлющем характере стратегических решений и в сложности поведения генерального директора. Мы обсуждаем вклад этого исследования в научную литературу о руководстве высшего звена и перспективах обработки информации. Мы также определяем значение этой работы для будущих исследований по стратегическому руководству и управленческому мышлению в сложных и динамичных условиях.

Resumen

La toma de decisiones óptima o racional no es posible debido a las restricciones de información y los límites en capacidades de computación de los humanos (March y Simon, 1958; March, 1978). Esta racionalidad limitada sirve como un proceso de filtrado en la toma de decisiones de los ejecutivos (Hambrick y Mason, 1984). En este estudio, proponemos el concepto de la capacidad reflexiva del director general como una capacidad cognitiva orientada al comportamiento que se puede superar hasta cierto punto la limitación dominante de la racionalidad limitada en la toma de decisiones de los ejecutivos. Siguiendo el método de Hinkin (1998) y dos muestras de ejecutivos, desarrollamos y validamos una medida tridimensional de la capacidad reflexiva de los directores generales. Con base en dos encuestas a directores generales y sus subordinados en 213 pequeñas y medianas empresas chinas, pusimos a prueba y confirmamos tres hipótesis sobre cómo la capacidad reflexiva de los directores generales se relaciona con el desempeño de la sostenibilidad de la empresa (incluyendo las dimensiones económicas, sociales y ambientales) mediante los mecanismos de mediación de lo exhaustivo de las decisiones estratégicas y la complejidad comportamental del director general. Discutimos la contribución de este estudio a la literatura sobre las perspectivas de los escalones superiores y el procesamiento de información. También identificamos las implicaciones para la investigación futura sobre liderazgo estratégico y cognición general en contextos complejos y dinámicos.

Keywords

bounded rationalityCEO reflective capacityfirm sustainability performancemanagerial cognitionupper echelons theoryCEO反思能力有限理性企业可持续绩效高阶理论管理认知ограниченная рациональностьрефлексивная способность генерального директорапоказатели устойчивого развития компанииуправленческое мышлениетеория высших эшелоновracionalidad limitadacapacidad reflexiva del director generaldesempeño de la sostenibilidad de la empresacognición gerencialteoría de los escalones superiores
Type
Special Issue Article
Information
Management and Organization Review , Volume 17 , Special Issue 4: Remembering James G. March , October 2021 , pp. 777 - 814
Open Practices
Open data
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press on behalf of The International Association for Chinese Management Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

This article has earned an Open Data badge for transparent practices. The data and materials are available at <https://osf.io/g27zy>.

ACCEPTED BY Senior Editor Mooweon Rhee

References

REFERENCES

Anderson, J. R. 1982. Acquisition of cognitive skill. Psychological Review, 89(4): 369–406.CrossRefGoogle Scholar
Anderson, J. C., & Gerbing, D. W. 1988. Structural equation modeling in practice: A review and recommended two-step approach. Psychological Bulletin, 103(3): 411–423.CrossRefGoogle Scholar
Atuahene-Gima, K., & Li, H. 2004. Strategic decision comprehensiveness and new product development outcomes in new technology ventures. Academy of Management Journal, 47(4): 583–597.Google Scholar
Bansal, P., & Roth, K. 2000. Why companies go green: A model of ecological responsiveness. Academy of Management Journal, 43(4): 717–736.Google Scholar
Barney, J. 1991. Firm resources and sustained competitive advantage. Journal of Management, 17(1): 771–792.CrossRefGoogle Scholar
Biere, J. 1961. Complexity-simplicity as a personality variable in cognitive and preferential behavior. In Fiske, D. W. & Maddi, S. (Eds.), Functions of varied experience: 355–379. Homewood, IL: Dorsey.Google Scholar
Bromiley, P., & Rau, D. 2016. Social, behavioral, and cognitive influences on upper echelons during strategy process: A literature review. Journal of Management, 42(1): 174–202.CrossRefGoogle Scholar
Calori, R., Johnson, G., & Sarnin, P. 1994. CEOs’ cognitive maps and the scope of the organization. Strategic Management Journal, 15(6): 437–457.CrossRefGoogle Scholar
Chen, J., & Nadkarni, S. 2017. It's about time! CEOs’ temporal dispositions, temporal leadership, and corporate entrepreneurship. Administrative Science Quarterly, 62(1): 31–66.CrossRefGoogle Scholar
Cho, T. S., & Hambrick, D. C. 2006. Attention as the mediator between top management team characteristics and strategic change: The case of airline deregulation. Organization Science, 17(4): 453–469.CrossRefGoogle Scholar
Choi, I., Koo, M., & Choi, J. A. 2007. Individual differences in analytic versus holistic thinking. Personality and Social Psychology Bulletin, 33(5): 691–705.CrossRefGoogle ScholarPubMed
Cohen, W. M., & Levinthal, D. A. 1990. Absorptive capacity: A new perspective on learning and innovation. Administrative Science Quarterly, 35(1): 128–152.CrossRefGoogle Scholar
Cyert, R. M., & March, J. G. 1963. A behavioral theory of the firm. Englewood Cliffs, NJ: Prentice-Hall.Google Scholar
Daft, R. L., & Weick, K. E. 1984. Toward a model of organizations as interpretation systems. Academy of Management Review, 9(2): 284–295.CrossRefGoogle Scholar
Daudelin, M. W. 1996. Learning from experience through reflection. Organizational Dynamics, 24(3): 36–48.CrossRefGoogle Scholar
Delaney, J. T., & Huselid, M. A. 1996. The impact of human resource management practices on perceptions of organizational performance. Academy of Management Journal, 39(4): 949–969.Google Scholar
Dewey, J. 1938. Experience and education. New York: Macmillan.Google Scholar
Eggers, J. P., & Kaplan, S. 2009. Cognition and renewal: Comparing CEO and organizational effects on incumbent adaptation to technical change. Organization Science, 20(2): 461–477.CrossRefGoogle Scholar
Eggers, J. P., & Kaplan, S. 2013. Cognition and capabilities: A multi-level perspective. Academy of Management Annals, 7(1): 295–340.CrossRefGoogle Scholar
Eisenhardt, K. M. 1989. Making fast strategic decisions in high-velocity environments. Academy of Management Journal, 32(3): 543–576.Google Scholar
El Akremi, A., Gond, J. P., Swaen, V., De Roeck, K., & Igalens, J. 2018. How do employees perceive corporate responsibility? Development and validation of a multidimensional corporate stakeholder responsibility scale. Journal of Management, 44(2): 619–657.CrossRefGoogle Scholar
Elkington, J. 1998. Cannibals with forks: The triple bottom line of sustainability. Gabriola Island: New Society Publishers.Google Scholar
Finkelstein, S., Hambrick, D. C., & Cannella, A. A. 2009. Strategic leadership: Theory and research on executives, top management teams, and boards. New York: Oxford University Press.Google Scholar
Forbes, D. P. 2007. Reconsidering the strategic implications of decision comprehensiveness. Academy of Management Review, 32(2): 361–376.CrossRefGoogle Scholar
Foss, N. J., & Weber, L. 2016. Moving opportunism to the back seat: Bounded rationality, costly conflict, and hierarchical forms. Academy of Management Review, 41(1): 61–79.CrossRefGoogle Scholar
Fredrickson, J. W. 1984. The comprehensiveness of strategic decision processes: Extension, observations, future directions. Academy of Management Journal, 27(3): 445–466.Google Scholar
Gavetti, G. 2012. Perspective–Toward a behavioral theory of strategy. Organization Science, 23(1): 267–285.CrossRefGoogle Scholar
Gavetti, G., & Levinthal, D. 2000. Looking forward and looking backward: Cognitive and experiential search. Administrative Science Quarterly, 45(1): 113–137.CrossRefGoogle Scholar
Grant, A. M. 2001. Rethinking psychological mindedness: Metacognition, self-reflection, and insight. Behaviour Change, 18(1): 8–17.CrossRefGoogle Scholar
Grant, A. M., Franklin, J., & Langford, P. 2002. The self-reflection and insight scale: A new measure of private self-consciousness. Social Behavior and Personality: An International Journal, 30(8): 821–835.CrossRefGoogle Scholar
Hahn, T., Preuss, L., Pinkse, J., & Figge, F. 2014. Cognitive frames in corporate sustainability: Managerial sensemaking with paradoxical and business case frames. Academy of Management Review, 39(4): 463–487.CrossRefGoogle Scholar
Hambrick, D. C., & Brandon, G. L. 1988. Executive values. In Hambrick, D. C. (Ed.), Strategic management policy and planning, Vol. 2. The executive effect: Concepts and methods for studying top managers: 3–34. New York: Elsevier Science/JAI Press.Google Scholar
Hambrick, D. C., & Mason, P. A. 1984. Upper echelons: The organization as a reflection of its top managers. Academy of Management Review, 9(2): 193–206.CrossRefGoogle Scholar
Hart, S. L., & Quinn, R. E. 1993. Roles executives play: CEOs, behavioral complexity, and firm performance. Human Relations, 46(5): 543–574.CrossRefGoogle Scholar
Hayes, A. F. 2009. Beyond Baron and Kenny: Statistical mediation analysis in the new millennium. Communication Monographs, 76(4): 408–420.CrossRefGoogle Scholar
Hayes, A. F. 2013. Introduction to mediation, moderation, and conditional process analysis: A regression-based approach. New York: Guilford Press.Google Scholar
Healey, M. P., Vuori, T., & Hodgkinson, G. P. 2015. When teams agree while disagreeing: Reflexion and reflection in shared cognition. Academy of Management Review, 40(3): 399–422.CrossRefGoogle Scholar
Helfat, C. E., & Peteraf, M. A. 2015. Managerial cognitive capabilities and the micro-foundations of dynamic capabilities. Strategic Management Journal, 36(6): 831–850.CrossRefGoogle Scholar
Hilden, S., & Tikkamäki, K. 2013. Reflective practice as a fuel for organizational learning. Administrative Sciences, 3(3): 76–95.CrossRefGoogle Scholar
Hinkin, T. R. 1998. A brief tutorial on the development of measures for use in survey questionnaires. Organizational Research Methods, 2(1): 104–121.CrossRefGoogle Scholar
Hitt, M. A., & Tyler, B. B. 1991. Strategic decision models: Integrating different perspectives. Strategic Management Journal, 12(5): 327–351.CrossRefGoogle Scholar
Hodgkinson, G. P., & Healey, M. P. 2011. Psychological foundations of dynamic capabilities: Reflexion and reflection in strategic management. Strategic Management Journal, 32(13): 1500–1516.CrossRefGoogle Scholar
Hooijberg, R., Hunt, J. G., & Dodge, G. E. 1997. Leadership complexity and development of the Leaderplex Model. Journal of Management, 23(3): 375–408.CrossRefGoogle Scholar
Huff, A. S., Huff, J. O., & Barr, P. S. 2000. When firms change direction. Oxford, NY: Oxford University Press.Google Scholar
International Institute for Sustainable Development. 1992. Business strategy for sustainable development: Leadership and accountability for the ’90s. Winnipeg: Deloitte & Touche & Business Council for Sustainable Development.Google Scholar
Kelloway, E. K. 1998. Using LISREL for structural equation modeling: A researcher's guide. Thousand Oaks, CA: Sage.Google Scholar
Kim, S., Karlesky, M. J., Myers, C. G., & Schifeling, T. 2016. Why companies are becoming B corporations. Harvard Business Review, June 17: 2–5.Google Scholar
Kocmanová, A., & Šimberová, I. 2014. Determination of environmental, social and corporate governance indicators: Framework in the measurement of sustainable performance. Journal of Business Economics and Management, 15(5): 1017–1033.CrossRefGoogle Scholar
Kolb, D. A. 1984. Experiential learning: Experience as the source of learning and development. Englewood Cliffs, NJ: Pearson FT Press.Google Scholar
Kolb, A. Y., & Kolb, D. A. 2009. The learning way: Meta-cognitive aspects of experiential learning. Simulation & Gaming, 40(3): 297–327.CrossRefGoogle Scholar
Laureiro-Martínez, D., & Brusoni, S. 2018. Cognitive flexibility and adaptive decision-making: Evidence from a laboratory study of expert decision makers. Strategic Management Journal, 39(4): 1031–1058.CrossRefGoogle Scholar
Li, P. P., Leung, K., Chen, C. C., & Luo, J. D. 2012. Indigenous research on Chinese management: What and how. Management and Organization Review, 8(1): 7–24.CrossRefGoogle Scholar
Lieberman, M. D., Gaunt, R., Gilbert, D. T., & Trope, Y. 2002. Reflexion and reflection: A social cognitive neuroscience approach to attributional inference. Advances in Experimental Social Psychology, 34(1): 199–249.CrossRefGoogle Scholar
Ling, Y., Simsek, Z., Lubatkin, M. H., & Veiga, J. F. 2008. The impact of transformational CEOs on the performance of small-to medium-sized firms: Does organizational context matter? Journal of Applied Psychology, 93(4): 923–934.CrossRefGoogle ScholarPubMed
Liu, D., Fisher, G., & Chen, G. 2018. CEO attributes and firm performance: A sequential mediation process model. Academy of Management Annals, 12(2): 789–816.CrossRefGoogle Scholar
March, J. G. 1978. Bounded rationality, ambiguity, and the engineering of choice. The Bell Journal of Economics, 9(2): 587–608.CrossRefGoogle Scholar
March, J. G. 2010. The ambiguities of experience. Ithaca, NY: Cornell University Press.CrossRefGoogle Scholar
March, J. G., & Simon, H. A. 1958. Organizations. Oxford: Wiley.Google Scholar
Martin, M. M., & Rubin, R. B. 1995. A new measure of cognitive flexibility. Psychological Reports, 76(2): 623–626.CrossRefGoogle Scholar
Miller, C. C. 2008. Decisional comprehensiveness and firm performance: Towards a more complete understanding. Journal of Behavioral Decision Making, 21(5): 598–620.CrossRefGoogle Scholar
Nadkarni, S., & Barr, P. S. 2008. Environmental context, managerial cognition, and strategic action: An integrated view. Strategic Management Journal, 29(13): 1395–1427.CrossRefGoogle Scholar
Narayanan, V. K., Zane, L. J., & Kemmerer, B. 2011. The cognitive perspective in strategy: An integrative review. Journal of Management, 37(1): 305–351.CrossRefGoogle Scholar
Nisbett, R. E., Peng, K., Choi, I., & Norenzayan, A. 2001. Culture and systems of thought: Holistic versus analytic cognition. Psychological Review, 108(2): 291–310.CrossRefGoogle ScholarPubMed
Ocasio, W. 1997. Towards an attention-based view of the firm. Strategic Management Journal, 18(S1): 187–206.3.0.CO;2-K>CrossRefGoogle Scholar
Ou, A. Y., Tsui, A. S., Kinicki, A. J., Waldman, D. A., Xiao, Z., & Song, L. J. 2014. Humble chief executive officers’ connections to top management team integration and middle managers’ responses. Administrative Science Quarterly, 59(1): 34–72.CrossRefGoogle Scholar
Patzelt, H., & Shepherd, D. A. 2011. Recognizing opportunities for sustainable development. Entrepreneurship Theory and Practice, 35(4): 631–652.CrossRefGoogle Scholar
Peng, K., & Nisbett, R. E. 1999. Culture, dialectics, and reasoning about contradiction. American Psychologist, 54(9): 741–754.CrossRefGoogle Scholar
Podsakoff, P. M., MacKenzie, S. B., Lee, J. Y., & Podsakoff, N. P. 2003. Common method biases in behavioral research: A critical review of the literature and recommended remedies. Journal of Applied Psychology, 88(5): 879–903.CrossRefGoogle ScholarPubMed
Quinn, R. E. 1984. Applying the competing values approach to leadership: Toward an integrative framework. In Hunt, J. G., Hosking, D. M., Schriesheim, C. A., & Stewart, R. (Eds.), Leaders and managers: International perspectives on managerial behavior and leadership: 10–27. New York: Pergamon Press.CrossRefGoogle Scholar
Russo, M. V., & Fouts, P. A. 1997. A resource-based perspective on corporate environmental performance and profitability. Academy of Management Journal, 40(3): 534–559.Google Scholar
Sagiv, L., Arieli, S., Goldenberg, J., & Goldschmidt, A. 2010. Structure and freedom in creativity: The interplay between externally imposed structure and personal cognitive style. Journal of Organizational Behavior, 31(8): 1086–1110.CrossRefGoogle Scholar
Schneider, W., & Shiffrin, R. M. 1977. Controlled and automatic human information processing: I. Detection, search, and attention. Psychological Review, 84(1): 1–66.CrossRefGoogle Scholar
Schumpeter, J. A. 1950. Capitalism, socialism, and democracy, 3rd ed. New York: Harper Torchbooks.Google Scholar
Scott, W. A. 1962. Cognitive complexity and cognitive flexibility. Sociometry, 25(4): 405–414.CrossRefGoogle Scholar
Seibert, K. W., & Daudelin, M. W. 1999. The role of reflection in managerial learning. Westport, CT: Quorum.Google Scholar
Sharma, S. 2000. Managerial interpretations and organizational context as predictors of corporate choice of environmental strategy. Academy of Management Journal, 43(4): 681–697.Google Scholar
Shiffrin, R. M., & Schneider, W. 1977. Controlled and automatic human information processing: II. Perceptual learning, automatic attending and a general theory. Psychological Review, 84(2): 127–190.CrossRefGoogle Scholar
Simon, H. A. 1957. Models of man: Social and rational. Oxford: Wiley.Google Scholar
Simon, H. A. 1997. Models of bounded rationality: Empirically grounded economic reason (Vol. 3). Cambridge, MA: The MIT Press.CrossRefGoogle Scholar
Thomas, J. B., Clark, S. M., & Gioia, D. A. 1993. Strategic sensemaking and organizational performance: Linkages among scanning, interpretation, action, and outcomes. Academy of Management Journal, 36(2): 239–270.Google ScholarPubMed
Tsui, A. S., Wang, H., Xin, K., Zhang, L., & Fu, P. P. 2004. “Let a thousand flowers bloom”: Variation of leadership styles among Chinese CEOs. Organizational Dynamics, 33(1): 5–20.CrossRefGoogle Scholar
Tsui, A. S., Zhang, Y., & Chen, X. P. 2017. Leadership of Chinese private enterprises: Insights and interviews. London: Palgrave.CrossRefGoogle Scholar
Turker, D. 2009. Measuring corporate social responsibility: A scale development study. Journal of Business Ethics, 85(4): 411–427.CrossRefGoogle Scholar
Tversky, A., & Kahneman, D. 1986. Rational choice and the framing of decisions. Journal of Business, 59(4): 251–278.CrossRefGoogle Scholar
VandeWalle, D. 1997. Development and validation of a work domain goal orientation instrument. Educational and Psychological Measurement, 57(6): 995–1015.CrossRefGoogle Scholar
Waldman, D. A., Wang, D., & Fenters, V. 2019. The added value of neuroscience methods in organizational research. Organizational Research Methods, 22(1): 223–249.CrossRefGoogle Scholar
Wally, S., & Baum, J. R. 1994. Personal and structural determinants of the pace of strategic decision making. Academy of Management Journal, 37(4): 932–956.Google Scholar
Wang, H., Zhang, W., Xin, K. R., & Tsui, A. S. 2011. Between the behavior of strategic leadership and the effectiveness of organizational operation: The intermediary role of the organizational culture. Management World, 09: 93–99+102–104+187 (In Chinese).Google Scholar
Wei, L. Q., & Wu, L. 2013. What a diverse top management team means: Testing an integrated model. Journal of Management Studies, 50(3): 389–412.CrossRefGoogle Scholar
Wong, E. M., Ormiston, M. E., & Tetlock, P. E. 2011. The effects of top management team integrative complexity and decentralized decision making on corporate social performance. Academy of Management Journal, 54(6): 1207–1228.CrossRefGoogle Scholar
Zajac, E. J., & Bazerman, M. H. 1991. Blind spots in industry and competitor analysis: Implications of interfirm (mis) perceptions for strategic decisions. Academy of Management Review, 16(1): 37–56.CrossRefGoogle Scholar
Zhang, X., & Bartol, K. M. 2010. Linking empowering leadership and employee creativity: The influence of psychological empowerment, intrinsic motivation, and creative process engagement. Academy of Management Journal, 53(1): 107–128.CrossRefGoogle Scholar
Zyung, D. 2017. Essays on CEO cognitive complexity: Effects on corporate strategy, performance, and survival. Unpublished doctoral dissertation Rice University, Houston, Texas.Google Scholar