PERSPECTIVE—Toward a Behavioral Theory of Strategy

This paper offers an analytical structure to pinpoint the behavioral roots of superior performance, where “behavioral” denotes “being about mental processes.” Such roots are identified in behavioral deviations from market efficiency. The causes of these deviations are behavioral factors that bound firms' ability to pursue and compete for superior opportunities. Because these bounds are systematic and diffused among firms, they ensure that latent opportunities are not competed away. In this setting, the behavioral bases of superior performance stem from a superior ability to overcome focal behavioral bounds. This analytical structure is used to identify the mental processes especially important to firm performance that strategic leaders can reliably manage. Its key insight is that superior opportunities are cognitively distant. They rarely correspond to common ways of thinking. The reason for this is that it is necessary to overcome strong behavioral bounds to pursue these opportunities. This insight contrasts with mainstream behavioral approaches to strategy, which focus on the virtues of local action, and it has two implications: the behavioral essence of superior performance corresponds to strategic leaders' superior ability to manage the mental processes necessary to pursue cognitively distant opportunities; and pursuing the cognitively distant implies a more expansive conception of strategic agency (e.g., the role of strategic leaders) than is acknowledged by mainstream behavioral approaches to strategy. The challenges posed by this conception require a model of human cognition that goes beyond the understanding of bounded rationality that is diffused in current behavioral strategy research. The second part of the paper assesses the traits of a model of human mind that can support the behavioral conception of strategic agency advocated and proposes a unified model of the human mind that centers on associative processes.