Strategic Thinking PDF

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ENGTEC-1439; No. of Pages 13
J. Eng. Technol. Manage. xxx (2015) xxx–xxx
Contents lists available at ScienceDirect
Journal of Engineering and Technology

Management
journal homepage: www.elsevier.com/locate/jengtecman
Strategic thinking and business innovation:

Abduction as cognitive element of leaders’ strategizing
Armando Calabrese *, Roberta Costa
Department of Enterprise Engineering, University of Rome ‘‘Tor Vergata’’, Viale del Politecnico 1, 00133 Rome, Italy
A R T I C L E I N F O A B S T R A C T
Article history: Leaders’ strategic thinking, or mental processes, are the cognitive foundation of business
Received 6 September 2013 innovation. Business innovation is a difficult endeavor. For leaders, the path from strategic
Received in revised form 3 June 2015 thinking to effective innovation is complex and full of obstacles. ‘Strategic thinking
Accepted 30 June 2015
research’ investigates cognitive factors that foster innovation, focusing mainly on leaders’
deductive or inductive reasoning and their rational choices. However, leaders’ rationality
Keywords:
is bounded and their strategic thinking is a mix of rationality and insight. Therefore,
Strategizing
strategic thinking research should investigate both the rationality and intuition that can
Strategic thinking
Strategic cognition support business innovation.
Abduction Given this, the study proposes a theoretical model describing strategic thinking that
Service innovation draws on Peirce’s theory of abduction. Leaders’ strategic thinking is shown to be similar to
the cognitive process of hypothesis formation, and to follow both logical rules and
intuitive insights. The proposed model provides guidelines that allow rationality and
intuition to go hand in hand, and thus together support the real-world processes of leaders’
strategizing. The proposed model is tested by employing the semi-standardized laddering
technique on a sample of strategic leaders of service companies.
ß 2015 Elsevier B.V. All rights reserved.
1. Introduction
The formulation of company strategy is a decision-making process based on human and organizational cognitive
processes, for the purpose of achieving market success (Gavetti et al., 2005; Gavetti, 2012; Barney, 1986). It is the cognitions
of the company leaders that form the basis of the strategies (DeWit and Meyer, 2004; Whittington, 2003; Gavetti, 2012).
‘Strategizing’ is part of the leaders’ exercise of decision-making. Although there is no precise definition of the term, the
traditional consensus is that it involves the exercise of leaders’ rationality for the development of management plans (Porter,
1998; Hax and Majluf, 1996). However, certain scholars stress that the exercise of leaders’ insight and intuition must be
included as part of the concept (Bailey et al., 2000; Mintzberg, 1994; Hamel and Prahalad, 1989).
Strategizing research has drawn from a variety of source data and applied a mixture of methods, such as case studies,
ethnographic protocols, surveys, simulations and psychosocial analysis (Floyd et al., 2011). The cross-fertilization of
different approaches has been beneficial in advancing managerial knowledge about strategizing (Zahra and Newey, 2009).
One of the lines of research deals with ‘strategic cognition’ (SC) (Porac and Thomas, 2002), which focuses on the specific
* Corresponding author.
E-mail address: calabrese@dii.uniroma2.it (A. Calabrese).
http://dx.doi.org/10.1016/j.jengtecman.2015.06.001
0923-4748/ß 2015 Elsevier B.V. All rights reserved.
Please cite this article in press as: Calabrese, A., Costa, R., Strategic thinking and business innovation: Abduction as
cognitive element of leaders’ strategizing. J. Eng. Technol. Manage. (2015), http://dx.doi.org/10.1016/j.jengtec-
man.2015.06.001
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2 A. Calabrese, R. Costa / Journal of Engineering and Technology Management xxx (2015) xxx–xxx
mental processes in strategy formulation and implementation. SC refers, in particular, to the ‘linkages between cognitive
structures and decision processes with respect to strategy formulation and implementation’ (Porac and Thomas, 2002: 165).
A successful strategy ‘is about being different [. . .] and deliberately choosing a different set of activities to deliver a unique
mix of value’ (Porter, 1996: 64). In fact, it is the leaders’ ability to think differently that favors the exploitation of unexplored
business opportunities, and the generation of innovative and profitable business ideas. Research that investigates
the principle cognitive processes that permit leaders to take an innovative role, capable of generating effective strategies,
is thus particularly useful (Gavetti, 2012).
The current study explores strategizing through the application of Peirce’s theory of abduction (Brogaard, 1999;
Hoffmann, 1999; Paavola, 2004; Magnani, 2004). It develops a model in which leaders’ strategizing is described as a process
of inference, resembling multiple hypothesis formation and the selection of one or more alternatives from an infinite range
of options. The study presents arguments demonstrating that, in keeping with this model, strategizing is subject to both
rational principles and intuitive insights (Brogaard, 1999). The study also includes an exploratory test, involving a sample
of strategic leaders of service companies, which investigates the reliability of the proposed theoretical model.
The next section of the paper reviews the literature on strategizing, while Section 3 presents the research method.
Section 4 develops the strategizing model, employing Peirce’s theory of abduction. Section 5 reports an experiment
carried out in service companies, testing the proposed model. Finally, Sections 6 and 7 discuss some of the managerial
implications arising from the findings and provide a summary of the conclusions.
2. Literature review
2.1. Definition of strategizing
Strategizing is a cognitive or decisional process that leaders undertake for the successful management of their companies
(Jarzabkowski, 2005; Whittington, 2006; Greco et al., 2013; Gavetti, 2012). The concept refers to the exercise of logic and
activities, practices and organizational routines (such as data analysis, meetings, discussions), by means of which a strategy
is decided, either deliberately or through its simple emergence (Mintzberg, 1978; Johnson et al., 2003; Maitlis and Lawrence,
2003; Hendry et al., 2010).
Human cognition is at the origin of all strategies. Cognition allows the selection of information, the interpretation of
events, and thus the identification of strategies. Hence, strategic cognition composes the very foundation of strategy
formulation and implementation (March and Simon, 1958; Kaplan and Tripsas, 2008): ‘. . .the cognitive perspective in
strategy, or SC, ascribes causal importance to structures and processes of cognition in the explanation of strategy and, hence,
the competitive advantage of firms. SC highlights how cognitive structures and processes develop in organizations, how
these structures and processes generate business definitions and corporate and business strategies, and how they lead to
major strategic initiatives’ (Narayanan et al., 2011: 307).
The company must ultimately develop business excellence through its managers’ operational competencies; however, it
is the leaders’ SC that permits the innovation of new value propositions (Combs et al., 2011; Gavetti, 2012). Thus, the
investigation of SC serves in understanding how and why business innovation can actually take place (Pandza, 2011).
Studying SC is particularly important for understanding how to support innovation in service companies, since in
these contexts, basic research and technical-scientific development offer less possibility as a basis for strategy innovation
(Ostrom et al., 2010).
In the light of the above, the following research questions arise: How does SC work? How does SC generate innovation?
What are the respective roles of the leaders and environmental forces in generating innovation? And finally, how can
companies encourage innovation?
The following section identifies the main building blocks of SC, to lay the foundations for answering the research
questions.
2.2. Basics of SC
The cognitive factors affecting strategizing include: leaders’ bounded rationality (Simon, 1957), their knowledge and
experience (Shi and Prescott, 2011), their dominant logic (Kwee et al., 2011) and their attitude to seizing market
opportunities (Poole and Van de Ven, 1989). In addition, social factors (Rouleau and Balogun, 2011; Pandza, 2011; Santos-
Vijande et al., 2012) and resources limitations (Bradley et al., 2011; Combs et al., 2011) also affect strategizing.
Strategic leaders can support their own decision-making processes and overcome the cognitive, social and resource
limitations affecting their strategizing (Bradley et al., 2011). Discursive acts (Rouleau and Balogun, 2011), inductive and
creative sense-making (Pandza, 2011), visionary thinking (Gavetti, 2012) and intrinsic motivation make leaders proactive
and more free in their strategizing (Garud et al., 2010; Vergne and Durand, 2010; Gavetti, 2012).
Leaders and their organizational or competitive environment can influence one another through mutual interactions
(Smircich and Stubbart, 1985). In fact the environment and the leader’s role have reciprocal impacts on SC (McKinley, 2011;
Kwee et al., 2011; Shi and Prescott, 2011), and their favorable balance achieves quality in strategy making (Gavetti, 2012;
Jippes et al., 2013). We thus see two opposing truths in SC: the leaders’ SC influences their reference environment, and at the
same time is subject to it (Porac et al., 2011). First, environmental forces, such as market and technological constraints,
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influence leaders’ decision-making (Bradley et al., 2011; Combs et al., 2011; Hannan et al., 2007). However, at the same time,
leaders through their own attitudes (such as propensity to innovation, leadership attitudes, visionary thinking, long-term
orientation) are also able to change the environment (Poole and Van de Ven, 1989), and hence to create the conditions to
outperform their competitors (Bradley et al., 2011; Gavetti, 2012). Leaders’ knowledge, vision, passion, accumulated
experience and propensity to innovation can lessen the influence of environmental forces on their decisions (Garud et al.,
2010; Williamson et al., 2013). As a result, both leaders’ cognitive processes and environmental forces can have determining
influence in strategic choices (Damanpour and Wischnevsky, 2006XPandza, 2011; Gavetti, 2012).
3. Research method
The current research is conducted in two stages. First, we provide a summary analysis of both Peirce’s theory of abduction
and of strategizing. The analysis leads to the preparation of a model describing the cognitive processes of leaders’ strategizing,
according to the Peirce’s theory of abduction (Section 4). Second, we apply the semi-standardized laddering technique to test
the proposed model (Section 5). The laddering technique allows the discovery of identifiable or non-identifiable assumptions
and patterns that underlie the hidden cognitive processes that people employ in dealing with their environment (Perry et al.,
1999). The technique is used to reveal connections between decisions and their causes, identifying means-end chains by
repeatedly questioning respondent about the whys of their decisions. Laddering technique is particular useful in probing
and ultimately ‘peeling back the layers’ of the cognitive processes of strategic leaders’ decision-making (Hunt, 2003; Reynolds
and Gutman, 1988). Researchers have applied the laddering technique to examine problems similar to that analyzed in
this study, in domains such as services management (Gruber et al., 2006, 2009), relationship marketing (Paul et al., 2009),
sales management (Deeter-Schmelz et al., 2002) and business-to-business relationships (Henneberg et al., 2009).
4. The role of abduction in strategizing: a generative model
4.1. Definition of abduction
Strategizing can proceed by either deductive or inductive reasoning. At the corporate level, strategizing resembles
deduction. For example, asset allocation involves deductive reasoning, with its effectiveness depending on the accuracy of
the decisional assumptions and information. At the operational level, strategizing resembles induction. For example,
market-oriented or change-management projects are based on inductive reasoning, moving from specific instances to
general rules (Regnér, 2003).
But are deduction or induction sufficient for the leaders who must produce the innovation behind strategies? If not, what
is the cognitive source of innovative strategies?
Peirce argued that human reasoning is performed by means of deduction, induction and abduction. He explained these
three processes through his now-classic ‘example of the beans’:
Deduction.
Rule. – All the beans from this bag are white.

Case. – These beans are from this bag.
Result. – These beans are white.
Induction.
Case. – These beans are from this bag.

Abduction.
Case. – These beans are from this bag. (Peirce, 1878: 472).
Abductive reasoning ‘[. . .] consists in examining a mass of facts and in allowing these facts to suggest a theory. In this way
we gain new ideas; but there is no force in the reasoning. The second kind of reasoning is deduction, or necessary reasoning.
It is applicable only to an ideal state of things, or to a state of things insofar as it may conform to an ideal. It merely gives a new
aspect to the premises [. . .]. The third way of reasoning is induction, or experimental research. Its procedure is this.
Abduction having suggested a theory, we employ deduction to deduce from that ideal theory a promiscuous variety of
consequences to the effect that if we perform certain acts we shall find ourselves confronted with certain experiences. We
then proceed to try these experiments, and if the predictions of the theory are verified, we have a proportionate confidence
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that the experiments that remain to be tried will confirm the theory. I say that these three are the only elementary modes of
reasoning there are’ (Peirce, 1905: 8.209).
Deductive and inductive strategizing are, respectively, a rational and an experimental activity. They are not able to add
new ideas to managerial cognitions. It is abductive strategizing that generates innovative ideas: ‘a mass of facts is before us.
We go through them. We examine them. We find them a confused snarl, an impenetrable jungle. We are unable to hold
them in our minds. We endeavor to set them down upon paper; but they seem to be so multiplex intricate that we can
neither satisfy ourselves that what we have set down represents the facts, nor can we get any clear idea of what it is
that we have set down. But suddenly, while we are poring over our digest of the facts and are endeavoring to set them
into order, it occurs to us that if were to assume something to be true that we do not know to be true, these facts would
arrange themselves luminously. That is abduction [. . .]’ (Peirce, 1903: 282–283).
But, what is abductive logic? Is such logic sufficient for the genesis of new ideas? Are its processes similar to those of
strategizing? And ultimately, does the application of abductive logic theory allow the discovery of new and worthwhile
knowledge about strategizing?
The answers to each of these research questions are provided in the next three subsections and in Section 5.
4.2. Abductive logic
Abduction serves in all forms of knowledge development, from scientific discoveries to acts of perception. Abduction
occurs whenever a human being innovates: it takes place when a ‘chicken just born picks up the right sort of corn [. . .]. The
truth is that the whole fabric of our knowledge is one matted felt of pure hypothesis confirmed and refined by induction. Not
the smallest advance can be made in knowledge beyond the stage of vacant staring, without making abduction at every step
[. . .]’ (Peirce, 1901: 899–900).
All types of abduction, from scientific discovery to perception, work in the same way (Brogaard, 1999; Hoffmann, 1999;
Paavola, 2004; Magnani, 2004). In the current study we analyze the creativity of abduction at the perceptual level, because it
is the most familiar form of abduction for the leaders involved in strategy-making.
A perceptual judgment [PJ] is formed through the following process.
An observation stage [OS]: a well-recognized kind of object, M, has for its ordinary predicates ‘a’, ‘b’, ‘c’, indistinctly
recognized;
A creative stage [CS]: ‘the suggesting object, S, has these same predicates ‘a’, ‘b’, ‘c’;
The formalization stage [FS]: ‘hence, S is of the kind M’ (Pierce, 1891: 302).
A perceptual judgment occurs at different levels: that of the whole process [OS + CS + FS], and of each activity composing
it, or OS, CS, FS. The whole process represents the logical structure of perception, whilst OS is the observation stage of
perception, CS is the creative stage of perception, and FS is the formalization stage of perception.
The heart of any perceptive judgment is the creative stage of perception [CS], but simultaneously, any perceptual
judgment is the result of the whole process of perception [OS + CS + FS]. Human perception is the result of a virtuous circle
and of continuous regress (Hoffmann, 1999). The recursive structure of abductive reasoning is represented in
Fig. 1. Abduction occurs at both stage number III – in going from perceptions (II) to perceptual judgements (IV) – and
in the perceptual judgment itself (IV). Abduction generates outcomes (e.g. new knowledge or innovation) (V) that are
consequences of the whole abduction cycle (I–V) (Fig. 1):
4.3. Abduction in the generation of ideas
The model presented in Fig. 1 cannot explain the creative stage of abduction or the birth of new ideas. The creative stage of
perception [CS] depends on the analysis of sensory data according to existing knowledge (Hoffmann, 1999). In point of fact,
three steps are necessary to identify object ‘S’ as a kind of ‘M’:
to perceive an object S and its ordinary predicates [OS];

to think about an object characterized with the same predicates, M [CS];
to associate M to S [FS].
The genesis of a new idea depends on a sort of knowledge management that a person employs throughout abduction
(Zheng et al., 2010). New knowledge is generated by previous knowledge: ‘every reasoning involves another reasoning,
which in its turn involves another, and so on ad infinitum’ (Peirce, 1899: 135). In addition, new ideas are born from analogies
that allow the use of previous knowledge (Hoffmann, 1999): ‘nothing unknown can ever become known except through
its analogy with other things known’ (Peirce, 1902: 287). Analogies trigger a kind of cognitive knowledge management
or ‘association by resemblance’ (Peirce, 1898). Analogies lie on a continuum, ranging from perfect analogies to problematic
ones, and the majority of analogies are in the middle of the range. Nevertheless, they are useful for generating new
ideas (Gavetti and Rivkin, 2005).
The creative stage of abduction depends on recursive logic based both on people’s knowledge and on their ability to
analogically associate different domains. Hence, the model of Fig. 1 has to be improved by introducing both analogical
reasoning and knowledge selection, as shown in Fig. 2.
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Fig. 1. The recursive structure of abduction.
4.4. Similarities between abduction and strategizing
Abduction is a means of reaching new knowledge and results through selection among potential hypotheses (Brogaard,
1999), and must therefore be carried out according to strategic principles. In fact it would be meaningless to initiate a process
of abductive inference without placing it within the context of a research strategy. Thus, as seen in Fig. 3, abduction must
work toward a clear aim or objective (Hintikka, 1998).
Both abduction and strategizing are processes of selecting from a theoretically infinite numbers of options, under
strategic principles. Abduction and strategizing are similar inferential processes characterized by the same logical
determinism and generative insights (Anderson, 1986; Hintikka, 1998). Therefore, both abduction and strategizing are
recursive logical processes guided by strategic principles, relying on the knowledge of the actors and their ability to
analogically associate different domains (Fig. 3).
5. The laddering experiment
This section reports on a test to determine the reliability of our model (Fig. 3) as a representation of leaders’ strategizing.
The test applies laddering technique, which is conducted through semi-structured interviews. According to the literature,
the research sample must be composed by at least twenty individuals that demonstrate the characteristics of interest
(leaders’ successful strategizing), regardless of the resulting demographic composition (gender, age, etc.) (Reynolds and
Olson, 2001; van Rekom and Wierenga, 2007; Henneberg et al., 2009). Consequently, the twenty strategic leaders in our
sample (65% male, 35% female; age 27–53 years) were selected by a non-probabilistic convenience sampling procedure (Hair
et al., 2003), from three Italian banks operating at the European level. The individuals composing the sample hold leadership
roles in their businesses’ strategic decision-making. They are the heads or deputy heads of the departments of human
resources, planning, operations and control, and corporate social responsibility. Within the sample, two of the banks are
represented by seven managers each, while the third bank is represented by six managers. Laddering interviews were made
to the leaders of successful companies, on the premise that successful companies are managed by successful leaders. The
cost/income ratio (meaning the ratio between operating costs and gross financial margin) is the main indicator for
identifying successful service companies. The lower the value expressed by the ratio, the greater is the overall efficiency of
a service (Gronroos and Ojasalo, 2004). As a reference, the biggest European banks have an average cost/income ratio
of 61.9% (IBA, 2010). The sample of leaders for the current study is from banks demonstrating the lowest cost/income ratio
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[(Fig._2)TD$IG]
Fig. 2. The role of knowledge and analogical reasoning in the recursive structure of abduction.
in the sector (from 58% to 60%). These banking groups are thus characterized by successful corporate strategies, and for this,
successful leaders.
The first question addressed to the twenty leaders was as follows: ‘What are the cognitive paths that you follow to create
innovative and successful strategies?’ The leaders’ responses to this first question were the starting point for the laddering
questions, which continued to work backwards in the subjects’ reasoning, revealing the means-end structure of their
approach to strategizing. The leaders were interviewed until they either gave circular answers or were not able to answer
the interviewers’ further probing. Verification questions were included in the questionnaire to test the validity and
consistency of the answers.
Any explicit or implicit meta-theoretical assumptions held by the interviewers can influence the results from laddering
technique (Creswell, 2003). For this reason, the authors revealed their meta-theoretical assumptions to the interviewed
leaders (Sayer, 2000). Given this precaution, the technique does not lead to positivist or interpretative results, and instead
collects relevant knowledge and experimental data that permit a realistic understanding of the cognitive aspect of leaders’
strategizing.
Strategic cognition (SC) concerns the mental processes involved in strategy formulation and implementation. Leaders’ SC
can be analyzed by its antecedents, its typologies and its outcomes (Rajagopalan et al., 1993; Hutzschenreuter and
Kleindienst, 2006; Hodgkinson and Clarke, 2007). The ‘SC Antecedents’, ‘SC Typologies’ and ‘SC Outcomes’ in turn consist of a
number of building blocks.
There are 10 main SC Antecedents affecting leaders’ strategizing: external environmental factors (i.e. ‘industry
competitive dynamics’), internal organizational factors (i.e. ‘vision’, ‘routines’, ‘organization size’), decisional (i.e. ‘decision
urgency’ and ‘decision complexity’) and personal characteristics (i.e. ‘educational background’, ‘experience’, ‘competence’,
‘personality’) (Rajagopalan et al., 1993; Narayanan et al., 2011) (see Table 1).
There are 11 main SC Typologies: ‘employee collective understandings’ and ‘mental patterns affecting organizational
operations’ (Feldman and Rafaeli, 2002); ‘strategy frames’ (Huff, 1990, 2006) and ‘cognitive attitudes that leaders employ
for filtering and understanding information’ (Walsh, 1995); ‘strategy formulation’ and ‘implementation’ (Mintzberg, 1978;
Simon, 1947), as well as ‘scanning’, ‘sense making’, ‘sense selling’ and ‘decision-making’ (Gioia et al., 1994; Dutton et al., 2001);
and finally, ‘human intuition by analogical reasoning’ (Nutt, 1998; Khatri and Ng, 2000; Gavetti et al., 2005) (see Table 1).
There are 8 main SC outcomes: characteristics of leaders’ strategizing (‘quality’, ‘speed’ and ‘risk of a decision’), their
strategic moves (‘competitive options’, ‘resource allocation’) and their economic outcomes (‘stock market price’,
‘profitability’, ‘revenues’) (Jarzabkowski et al., 2007) (see Table 1).
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Fig. 3. Knowledge, analogical reasoning and strategic principles in the recursive structure of abduction.
According to the literature on strategizing and abduction (Sections 2–4), it is possible to hypothesis that the SC
Antecedents are the analogs of both steps II (i.e. ‘knowledge’) and IV (i.e. ‘strategic principles’) of the model in Fig. 3. In
addition, the SC Typologies and the SC Outcomes are respectively the analogs of step V (i.e. ‘cognitive and analogical
reasoning’) and step VII (i.e. ‘perceptual judgments or decisions’) of the model (Reynolds and Gutman, 1988). Four strategy
scholars performed a content analysis to test the robustness of these hypotheses. Content analysis is a reliable and widely
used methodology for analysing written and non-written communication, by means of objective, systematic and
quantitative classification of its content (Neuendorf, 2002; Krippendorff, 2004).
Table 1
Summary of the SC building blocks.
SC Antecedents SC Typologies SC Outcomes

Knowledge and strategic principles Cognitive and analogical reasoning Decision outcomes
1. Industry competitive dynamics 11. Employee collective understanding 22. Decision quality
2. Vision/strategic principles 12. Employee cognitive patterns for performing organizational tasks 23. Decision speed
3. Organizational routines (Feldman and Rafaeli, 2002) 24. Decision risk
4. Organizational size 13. Strategy frames 25. Competitive options
5. Decision urgency (Huff, 2006) 26. Resource allocation
6. Decision complexity 14. Manager cognitive attitudes for filtering and 27. Profitability
understanding available information
7. Manager educational background, (Walsh, 1995) 28. Revenues
8. Manager experience 15. Strategy formulation 29. Stock market price
9. Manager competence 16. Strategy implementation (Jarzabkowski et al., 2007)
10. Manager personality (Mintzberg, 1978; Simon, 1947)
(Rajagopalan et al., 1993; 17. Intuition by analogical reasoning
Narayanan et al., 2011)
(Khatri and Ng, 2000; Nutt, 1998; Gavetti et al., 2005; Gavetti, 2012)
18. Scanning
19. Sense-making
20. Sense-selling
21. Decision-making
(Gioia et al., 1994; Dutton et al., 2001)
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[(Fig._4)TD$IG]
Fig. 4. The relationships within the recursive structure of abduction, SC Antecedents, SC Typologies and SC Outcomes.
Table 1 presents the outcome of the content analysis, summarizing the SC building blocks: the 10 SC Antecedents (which
are equivalent to both ‘knowledge and strategic principles’), the 11 SC Typologies (equivalent to ‘cognitive and analogical
reasoning’) and the 8 ‘SC Outcomes (equivalent to ‘perceptual judgments or decisions’). The table is prepared through the
four experts’ agreement on the analogy between the building blocks of abduction (steps II, IV, V and VII of Fig. 4) and those of
the SC Antecedents, SC Typologies and SC Outcomes. The experts’ concordance was assessed through their inter-coder
reliability. Inter-coder reliability is the degree of concordance among independent experts in clusterizing contents, and is
measured through the ReCal31 tool by calculating the Krippendorff’s alpha, which is the most suitable index for measuring
reliability of a coding. The lower bound of the Krippendorff’s alpha is 80%; accordingly, values greater than 80% show a
satisfactory concordance among coders (Neuendorf, 2002; Krippendorff, 2004). In this experiment the overall inter-coder
reliability is 82.7%.
The dashed rectangles in Fig. 4 are a graphic representation of the association of the abduction building blocks (steps II, IV,
V and VII of Fig. 4) with the SC Antecedents, SC Typologies and SC Outcomes.
The experiment proceeded by building an implications matrix, or square matrix, registering the frequency of direct
and indirect associations among the 29 SC building blocks indicated by the interviewing process. The matrix aggregates
the means-end chains of the 20 respondents, shows the frequency of connections among the SC building blocks,
and summarizing the leaders’ cognitive structure (Table 2) (Deeter-Schmelz et al., 2002).
Next, we use a hierarchical value map (HVM) to diagram the data of the implication matrix (Fig. 5). The nodes of the map
represent the 29 SC building blocks (SC Antecedents, SC Typologies and SC Outcomes), while the lines indicate their links. The
HVM depicts the means-end chains of the SC building blocks at a cutoff level of five (meaning that relations between SC
building blocks are mentioned by at least five leaders) (Christensen and Olson, 2002).
The HVM shows five SC Outcomes out of eight (i.e. decision quality, decision speed, competitive options, profitability and
revenues), 11 SC Typologies out of 11 (i.e. employee collective understanding, employee patterns for performing
organizational tasks, strategy frames, manager cognitive attitudes for filtering and understanding available information,
strategy formulation, strategy implementation, intuition and analogical reasoning, scanning, sense-making, sense-selling,
decision-making) and 10 SC Antecedents out of 10 (i.e. industry competitive dynamics, vision, strategic principles,
organizational routines, organizational size, decision urgency, decision complexity, manager educational background,
manager experience, manager competence, manager personality).
The HVM plot reveals that the 29 SC building blocks can be classified into three main clusters (Fig. 5), respectively: SC
Antecedents, in the first column of Fig. 5; SC Typologies, in the second column; SC Outcomes, in the third column.
The HVM depicts the logical order of the three clusters of activities characterizing leaders’ strategizing, from left to right:
SC Antecedents, SC Typologies and SC Outcomes. The mapping reveals the same sequential order as the gray bullet points of
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Table 2
The implications matrix (the number before the period is the frequency of direct connection; the number after the period is the frequency of indirect connection).
A. Calabrese, R. Costa / Journal of Engineering and Technology Management xxx (2015) xxx–xxx
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
1. Knowledge of industry competitive 5.00 11.07 8.03 11.02 15.07 13.06 9.07 13.03 6.04 7.07 5.05
dynamics
2. Vision, strategic principles 7.09 6.01 8.04 7.03 14.05 8.04 9.06
3. Organizational routines 9.04 3.04 7.08 5.01 8.01 9.04 7.04 11.12 13.09
4. Organizational size 7.06 17.05
5. Decision urgency 6.03 10.03 6.04 19.07 15.02
6. Decision complexity 5.03 7.05 14.09 11.03
7. Manager educational background 7.05 12.02 13.04 9.45 9.03 7.05 6.03 5.06 5.04 6.07 5.09 6.04
8. Manager experience 9.07 6.02 10.07 11.09 14.04 9.03 11.05 7.04 8.03 7.02 11.07 13.02
9. Manager competence 11.02 13.06 9.08 11.04 13.04 10.01 7.09 8.03 10.12 12.07
10. Manager personality 2.05 5.06 6.05 13.06 9.04 6.09
11. Employee collective understanding 18.03
12. Employee patterns for performing 8.07 9.03 9.04
organizational tasks
13. Strategy frames 9.01 7.02
14. Manager cognitive attitudes for 12.06 8.02 6.05
filtering and understanding available
information
15. Strategy formulation 7.06 5.01 7.04
16. Strategy implementation 10.03 8.01
17. Intuition and analogical reasoning 13.02 12.05 11.06
18. Scanning 9.04 7.02
19. Sense-making
20. Sense-selling 8.02
21. Decision-making 7.05
22. Decision quality
23. Decision speed
24. decision risk
25. Competitive options
26. Resource allocation
27. Profitability
28. Revenues
9
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[(Fig._5)TD$IG]
Fig. 5. The hierarchical value map: means-end chains of content codes.
the Fig. 4 model. Thus the model can be considered a satisfactory representation of the cognitive processes that the
20 interviewed leaders employ in their strategizing (Fig. 5).
6. Discussion and implications
Business innovation starts from the generation of new ideas which, as we have seen, requires the process of abduction.
Nevertheless, few strategy studies have been devoted to analyzing the anticipatory logic and cognitive drivers of new idea
generation (Helfat et al., 2007; Teece, 2007; Gavetti, 2012). Yet, ‘rewards that can come from changing a game may be far
greater than those from maintaining the status quo’ (Brandenburger and Nalebuff, 1995: 58). Therefore it is useful to
understand the cognitive drivers that can disrupt the status quo and generate new business ideas.
The general importance of leaders’ cognition in strategizing has already been established (O’Reilly and Tushman, 2008).
The current study has addressed the specific cognitive paths that strategic leaders can employ for generating innovative
business ideas. The application of the abduction perspective in the study of strategizing offers new insights into the cognitive
processes of leaders’ strategizing. In the preceding sections, we have seen that strategizing is analogous to hypothesis
formation, meaning the selection of one or more alternatives from an infinite range of options. It is thus a process controlled
by both logical rules and intuitive insights. Further, it is a dynamic and evolutionary process, performed according to forms
of knowledge management and association by resemblance. The innovation function of leaders’ strategizing depends on
a recursive logic working from their existing knowledge and on their ability to analogically associate the different domains
of the knowledge according to strategic principles.
This line of research provides three significant contributions to the literature.
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First, understanding leaders’ strategizing requires an investigation of both the rational and intuitional dimensions of SC.
The identification of the main cognitive drivers of innovation provides a nuanced conception of the relationships between
strategic thinking and innovation. We have seen that in strategizing, deductive and inductive rationality both complement
the role of intuition. However, our research also suggests that when innovation is required as part of the strategizing process,
then intuition, or abductive logic, could in some cases be alternative cognitive process to deductive or inductive rationality.
Indeed, if a leader enacts her or his strategizing mainly by deductive or inductive rationality, the leader’s cognitions could
be quite limited, and the resulting strategies would potentially be ineffective as regards innovation. Thus far, our discussions
have separated the logic of abduction of deduction and induction. Nevertheless, if we consider there is an overlap between
deductive and inductive rationality and abduction in every person, we can perceive the potential of mutually enriching
influences between the two types of process. In fact, it is the complementarity of the processes that permits leaders to manage
knowledge and information with increased awareness and rationality, and so to engage in innovation and seize opportunities.
Second, the model proposed in Fig. 3 permits management to counter the potential deterioration of innovation capacities.
Given that individual and organizational innovation capacities can dissipate over time, the proposed model permits the
company to monitor the cognitive drivers of innovation, and so support their determining factors. Another aspect of
innovation management revealed by the model is that a firm that draws on both rationality and abduction might benefit by
using a switching strategy: relying more on rationality when innovation is high and shifting toward abduction when leaders’
and organizational innovation is low.
Third, the proposed model provides a unique approach for supporting business innovation. We now understand that the
cognitive source of innovation is seated in the leaders’ ability to manage their existing knowledge, applying cross-
disciplinary analogies according to strategic principles. By cross-fertilizing between knowledge domains according to
strategic goals, leaders can raise the probability of resource re-combinations and breakthrough innovations. The potential
advantages of abduction would be unavailable in the case that the leaders have only narrow fields of knowledge. On the
contrary, when leaders are highly trained in a broad spectrum of fields, their firms can use this to advantage. Continuous and
broad spectrum training of the leaders can be helpful in better establishing the firm’s capacities for innovation. Moreover, the
selection of leaders with both abductive and deductive-inductive orientations can be helpful, with the former enriching the
potential context for innovation, and the latter serving in implementing and protecting the firm’s competitive advantage.
Also, when leaders’ knowledge and analogical reasoning are low, a firm may find itself exposed to competitive risk, and
would need to manage its actions in response.
The proposed model has further implications for human resource management. For example, if one person has an
abduction orientation and another one has a more rational orientation, then their relationship could be characterized by low
trust and commitment: the firm would have to be attentive to the risk of sterile relationships.
7. Conclusions
Innovation is a difficult endeavor. The path from strategizing to effective performance is complex and full of obstacles for
leaders. It is possible to exceed these obstacles through focusing on leaders’ rational choices and deductive reasoning (Porter,
1996). But, leaders are bounded by their rationality (Simon, 1957), and their strategizing is a mix of both rationality and insight.
The fact that leaders operated by bounded rationality means that they will perform strategizing according to simplified
cognitive patters. These simplified patterns allow them to manage the daunting complexity characteristic of their decision-
making, nevertheless they must still support and permit leaders to create successful strategies.
The proposed conceptual model of strategizing (Fig. 4) identifies the main factors driving leaders’ strategizing and their
mutual relations. Leaders must cope with many aspects (e.g. information, data) for strategizing. Rationality is not sufficient
for managing such aspects, and leaders have to go beyond the limits of their rationality. As stated by the theory of abduction,
leaders’ knowledge, their strategic principles and their analogical reasoning are particularly powerful approaches for
orienting leaders’ bounded rationality toward innovation. In view of this, both specialized and multidisciplinary training
programs can improve leaders’ attitudes to innovating their business, through providing them a broad spectrum of
knowledge and improving their ability to employ analogies. In addition, leaders’ rotation across companies and industries
can be similar prerequisites for improving strategy innovation. Analogies with previous knowledge are especially powerful
in dealing with complex choices for which deductive or inductive approaches to decisions fail to guide organizational
adaptation effectively. Therefore, complex choices can benefit from the prescriptions of the proposed model.
Finally, cognition in complex worlds inevitably requires simplification. Indeed, both academics and practitioners
typically apply simplification in both conceiving and implementing strategizing (e.g. the common ‘two-by-two’ matrices)
because the bounded character of decision-makers’ rationality is insufficient for dealing with all the information involved in
complex decisions (Gavetti et al., 2005). The proposed model, by identifying leaders’ knowledge, their strategic principles
and their analogical reasoning as the main cognitive determinants of strategizing, is a further example of such useful
simplification, in this case departing from purely rational approaches and introducing useful, manageable elements of
further sophistication.
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G Model

ENGTEC-1439; No. of Pages 13

J. Eng. Technol. Manage. xxx (2015) xxx–xxx

Contents lists available at ScienceDirect

Journal of Engineering and Technology

Strategic thinking and business innovation:

2.1. Deﬁnition of strategizing

4. The role of abduction in strategizing: a generative model

4.1. Deﬁnition of abduction

Rule. – All the beans from this bag are white.

Rule. – All the beans from this bag are white.

4.2. Abductive logic

4.3. Abduction in the generation of ideas

to perceive an object S and its ordinary predicates [OS];

Fig. 1. The recursive structure of abduction.

4.4. Similarities between abduction and strategizing

5. The laddering experiment

SC Antecedents SC Typologies SC Outcomes

Fig. 5. The hierarchical value map: means-end chains of content codes.

6. Discussion and implications

Potrebbero piacerti anche

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G Model

ENGTEC-1439; No. of Pages 13

J. Eng. Technol. Manage. xxx (2015) xxx–xxx

Contents lists available at ScienceDirect

Journal of Engineering and Technology

Strategic thinking and business innovation:

2.1. Deﬁnition of strategizing

4. The role of abduction in strategizing: a generative model

4.1. Deﬁnition of abduction

Rule. – All the beans from this bag are white.

Rule. – All the beans from this bag are white.

4.2. Abductive logic

4.3. Abduction in the generation of ideas

 to perceive an object S and its ordinary predicates [OS];

Fig. 1. The recursive structure of abduction.

4.4. Similarities between abduction and strategizing

5. The laddering experiment

SC Antecedents SC Typologies SC Outcomes

Fig. 5. The hierarchical value map: means-end chains of content codes.

6. Discussion and implications

Potrebbero piacerti anche

to perceive an object S and its ordinary predicates [OS];