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Theory-Driven Strategic Management Decisions

Author

Listed:
  • Camuffo, Arnaldo
  • Gambardella, Alfonso
  • Pignataro, Andrea

Abstract

This paper studies strategic decisions under uncertainty for which past data are not available. It provides microfoundations of the theory-based view of the firm by showing that the strategic problem starts with the selection of theories rather than choosing actions and that theories are selected through experiments. The value of experimenting with theories increases with the number of theories and with their uncertainty. Moreover, uncertainty makes theories super-additive -- that is, experimenting with a more uncertain theory increases the benefits of experimenting with other more uncertain theories. The paper also shows that decision-makers should experiment with more "surprising" theories because in this case experiments are more informative and enable more learning. A leading example helps to illustrate our concepts throughout the paper.

Suggested Citation

  • Camuffo, Arnaldo & Gambardella, Alfonso & Pignataro, Andrea, 2022. "Theory-Driven Strategic Management Decisions," CEPR Discussion Papers 17664, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17664
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    More about this item

    Keywords

    Decision problem;

    JEL classification:

    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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