Cognitive aspects

Libby Weber and Jessica Jeesoo Kim

Chapter 12 in A Guide to Key Theories for Strategic Management, 2026, pp 207-225 from Edward Elgar Publishing

Abstract: This chapter reviews the cognitive perspective in strategic management and explains how an expanded bounded rationality assumption enhances our understanding of firm-level decision-making and competitive advantage. Building on Simon's foundational insights, we describe how information-processing limitations and systematic cognitive distortions shape strategic choices made by CEOs, top management teams, and other organizational actors. We examine key cognitive mechanisms, including heuristics, biases, mental models, frames, motivations, emotions, and aggregation processes, and illustrate how they influence strategic decisions related to governance, resource allocation, adaptation, and competitive positioning. We also show how integrating the cognitive perspective into traditional strategic management theories, such as agency theory, transaction cost economics, the resource-based view, and dynamic capabilities, generates novel questions and new predictions. Overall, the chapter highlights how cognition provides a realistic and psychologically grounded lens for explaining firm heterogeneity, strategic behavior, and the development of sustainable competitive advantage.

Keywords: Cognitive Perspective; Bounded Rationality; Behavioral Strategy; Heuristics And Biases; Managerial Cognition; Strategic Decision-making (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035342846
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