Cognitive Biases in Strategic Decision-Making

Kenneth Midtgård and Marcus Selart ()
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Kenneth Midtgård: Department of Strategy and Management, Norwegian School of Economics, Helleveien 30, 5045 Bergen, Norway
Marcus Selart: Department of Strategy and Management, Norwegian School of Economics, Helleveien 30, 5045 Bergen, Norway

Administrative Sciences, 2025, vol. 15, issue 6, 1-29

Abstract: This article examines to what degree organizations use strategies that focus on maximizing shareholder value (Theory E) as opposed to strategies emphasizing the development of organizational capability (Theory O). Our main goal is to investigate the extent to which cognitive biases influenced strategic decision-making pertaining to organizational change. Strategic decision-making and organizational change both have a great impact on collaborative behavior. A survey was developed that measured different aspects of the cognitive perspective in strategic decision-making. It was distributed to managers of several medium-sized organizations in Scandinavia ( n = 119). The results indicate that managers used mixed strategies (Theory E and O). The results also reveal that illusions of control together with beliefs about change processes skewed the application of strategies towards Theory E. The theoretical and practical implications of the results were finally discussed, expanding the cognitive perspective in strategic decision-making.

Keywords: cognitive biases; strategic decision-making; strategic choice; organizational change; consultant-client relationship (search for similar items in EconPapers)
JEL-codes: L M M0 M1 M10 M11 M12 M14 M15 M16 (search for similar items in EconPapers)
Date: 2025
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