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Similarity Judgments In Strategy Formulation: Role, Process And Implications

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  • MOSHE FARJOUN
  • LINDA LAI

Abstract

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.

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  • Moshe Farjoun & Linda Lai, 1997. "Similarity Judgments In Strategy Formulation: Role, Process And Implications," Strategic Management Journal, Wiley Blackwell, vol. 18(4), pages 255-273, April.
    • Handle: RePEc:bla:stratm:v:18:y:1997:i:4:p:255-273
    DOI: 10.1002/(SICI)1097-0266(199704)18:43.0.CO;2-J
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    Cited by:

    1. Robert Coles & Gerard P. Hodgkinson, 2008. "A Psychometric Study of Information Technology Risks in the Workplace," Risk Analysis, John Wiley & Sons, vol. 28(1), pages 81-93, February.
    2. Giovanna Magnani & Antonella Zucchella & Dinorà Eliete Floriani, 2015. "Relativity and asymmetry in distance. The role of strategic distance in the internationalization decisions of Brazilian and Italian firms," DEM Working Papers Series 111, University of Pavia, Department of Economics and Management.
    3. Cheng, Shu-Ling & Chang, Hae-Ching, 2009. "Performance implications of cognitive complexity: An empirical study of cognitive strategic groups in semiconductor industry," Journal of Business Research, Elsevier, vol. 62(12), pages 1311-1320, December.

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