International Journal of Academic Research in Business and Social Sciences
July 2012, Vol. 2, No. 7
ISSN: 2222-6990
Factors Influencing Strategic Decision-Making
Processes
Mahmood Nooraie
Ph. D. In Management , Islamic Azad University, Abhar Branch, Iran
Email: (mnoor20@yahoo.com)
Abstract
Decision-making is one of the most important functions of managers in any kind of
organization. Among different manager's decisions strategic decision-making is a complex
process that must be understood completely before it can be practiced effectively. Those
responsible for strategic decision-making face a task of extreme complexity and ambiguity.
For these reasons, over the past decades, numerous studies have been conducted to the
construction of models to aid managers and executives in making better decisions
concerning the complex and highly uncertain business environment. In spite of much work
that has been conducted in the area of strategic decision-making especially during the
1990's, we still know little about strategic decision-making process and factors affecting it.
This paper builds on previous theoretical and empirical studies to determine the extent to
which contextual factors impact the strategic decision-making processes. Results showed
that researches on contextual factors effecting strategic decision-making process are either
limited or have produced contradictory results, especially studies relating decision’s
familiarity, magnitude of impact, organizational size, firm’s performance, dynamism,
hostility, heterogeneity, industry, cognitive diversity, cognitive conflict, and manager’s need
for achievement to strategic decision-making processes. Thus, the study of strategic
decision-making process remains very important and much more empirical research is
required before any definitive conclusion can be reached.
1. Introduction
The recent years have witnessed rapid changes in information technology, the new world
economic order, the coming of the new regional power and many others. All these changes
have presented on the one hand a very dynamic world of increased population, inflation,
social consumption, and on the other hand limited scarce resources. In such a complex and
fast changing business environment, managers are faced with a multitude of decisions every
day. They have to make decisions even if they are not willing to do so. Pearce II & Robinson
(1989) indicated that decision-making is inevitable, because to explicitly avoid making a
decision is in itself to make a decision. Toffler (1980) in his book entitled The Third Wave
indicated that to make too many decisions, too fast, about too many strange unfamiliar
problems introduce a new element into management, forcing executives already nervous in
unpredictable environment to make more and more decisions and at a faster and faster
pace.
Among manager's different decisions strategic decisions are very important and play very
vital roles in any organization.
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July 2012, Vol. 2, No. 7
ISSN: 2222-6990
This study explores strategic decision-making process and factors affect the processes. The
choice to focus on strategic decisions is due to its nature and significance. Strategic
decisions are long term, highly unstructured, complex, and inherently risky and have great
impact on the future of the organization. Strategic decisions are those important decisions
that typically require a large amount of organizational resources, and firm‘s environment
consideration. In strategic decisions, top management usually plays a central role, in making
the decisions (Hofer & Schendel, 1978). These decisions influence organizational direction,
administration, and structure (Christensen et al., 1982).
Since strategic decision not only affects the organization in which they are taken but also
the society (Colignon & Cray, 1980), it is not surprising that strategic decision-making
process has been heavily researched (Amason, 1996). in spite of the crucial role of strategic
decisions the strategy process research has not departed significantly from a stage of being
based on” (Papadakis et al, 1998). “Mature paradigms and incomplete
assumptions”(Eisenhardt & Zbarack, 1992).
2. Literature Review (Strategic Decision-making)
The first step in the evolution of strategic management was taken in the late 1950's, when
firms developed a systematic approach to deciding where and how the firm will do its future
business (Ansoff, 1984). A strategy is a pattern in the organization's important decisions and
actions, and consists of a few key areas or things by which the firm is distinguished from
others (Digman, 1986). To Drucker, strategy is a purposeful action while to Mintzberg it is a
plan, a ploy, a pattern, a position, and a perspective (five Ps). Strategic management is
defined as the set of decisions and actions resulting in the formulation and implementation
of strategies designed to achieve the objectives of an organization (Pearce II & Robinson,
1985).
According to Schwenk (1988) strategic decisions are ill structured, non-routine, and
important to the firm, in which top management usually plays a central role (Hofer &
Schendel, 1978). Strategic decision-making is incremental and interdependent, shaped by a
variety of contextual influences arising from past events, present circumstances, and
perspectives of the future (Quinn, 1980; March, 1981; Das, 1986; Neustadt & May, 1986).
One of the central features of strategic decisions is their lack of structure (Mintzberg et al.,
1976) mainly due to the complexity of the strategic problems (Mason & Mitroff, 1981).
Gamble and Thompson (2009) found that a company's strategy consists of competitive
moves and approaches management has developed to attract and please customers,
conduct operations, grow the business, and achieve performance objectives.
2.1 Strategic Issues
Strategic issues can be defined as developments, events and trends having the potential to
impact an organizational strategy (Ansoff, 1980; Dutton & Duncan, 1987). These issues can
represent problems or opportunities to decision makers. They are important because they
affect an organization's ability to achieve its goals or objectives (Dutton & Duncan, 1987).
Decision-making on strategic issues generally is treated as strategic decisions and therefore
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July 2012, Vol. 2, No. 7
ISSN: 2222-6990
deserves strategic management consideration. According to Pearce II & Robinson (1994)
strategic issues typically have the following characteristics:
 Require large amount of the firm's resources,
 Often affect the firm's long term prosperity,
 They are future-oriented,
 Usually have multifunctional consequences,
 They require consideration of the firm's external environment, and
 Require top-management decisions.
2.2 Factors Affecting Strategic Decision-Making Process
Different theoretical models of strategic decision processes, which reflect different
conceptions of organization, have been suggested by various literatures (e.g. Mintzberg,
1973; Chaffee, 1985; Lyles & Thomas, 1988; Hart, 1992). These models that definitely differ
substantially in terms of their underlying assumption(s) about the decision context and the
characteristics of decision process are usually influenced by different factors. The factors
affecting the strategic decision-making in particular the different stages and process can be
classified into four major categories.
1. Decision-specific characteristics,
2. Internal organizational characteristics,
3. External environmental characteristics, and
4. Management team's characteristics.
2.2.1. Decision-Specific Characteristics
With respect to my literature review, there is limited research dealing with the relationship
between strategic decision-making process and decision specific characteristics.
Rajagopalan et al. (1993) believed that the relationships between decision specific factors
and decision process characteristics have received very limited attention in past research.
According to Papadakis et al. (1998) “our understanding, however, of the impact of
decision-specific characteristics on organizational decision-making process is still quite
limited”.
Research (e.g., Dean & Sharfman, 1993; Dutton, 1993; Papadakis et al., 1998) on decisionmaking process recommends that managers in various organizations or even within the
same organization may view the same internal or external problem quite differently. Thus
the nature of the decision itself may be important and influences the strategic decisionmaking processes. From among 121 studies, which have been conducted in terms of
contextual factors influencing strategic decision-making process, decision specific
characteristics have received very limited attention (20 percent). Following are the major
dimensions of decision specific characteristics which impact strategic decision-making
process
Decision’s Familiarity
Decision’s familiarity refers to the degree that the decision problem is clear to the decisionmaker.
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July 2012, Vol. 2, No. 7
ISSN: 2222-6990
Papadakis et al. (1998) did not find any relationship between decision’s familiarity and
characteristics of the decision-making process. On the other hand, Fahey (1981) found that
decision’s frequency (a proxy to familiarity) influences the extent of rationality and
politicization in the decision-making process. According to Nooraie (2011) familiarity is
negatively and significantly related to rationality of the strategic decision-making process,
but it is positively and significantly related to politicization in the strategic decision-making
process (Nooraie, 2001).
Decision’s Magnitude of Impact
Decision’s magnitude of impact refers to the extent that the decision will impact various
parts of the organization. Papadakis et al. (1998) and Hickson et al. (1986) found that
decision’s magnitude of impact positively and significantly influences the extent of the
rationality and decentralization in the decision-making process. On the other hand, some
literature (e.g. Dean and Sharfman, 1993) claimed that the importance of strategic decision
is not related to the rationality of the decision. And the result of investigation that was
conducted by Nooraie (2008) indicates that decision magnitude of impact is significantly
associated with the level of rationality in the strategic decision-making process. And also
there is a positive relationship between decision magnitude of impact and decentralization
in the decision-making process (Nooraie, 2001)
Threat/crisis or Opportunity
If a decision is perceived as a crisis, different actions will be taken than if the decision is
perceived as an opportunity (Jackson & Dutton, 1988). Frederickson (1985) claimed that
when decisions are interpreted as threats as opposed to opportunities, actions taken in
making strategic decisions are characterized by greater comprehensiveness. According to
Papadakis et al. (1998) threat/crisis is positively related to the extent of decentralization in
the decision-making process. This is supported by Dutton, (1986) who claimed threat/crisis
is related to decentralization. However, a number of studied (e.g. Milburn, 1983) found that
when crisis become actual, this relationship will be changed to centralized.
Risky Decisions
Risky decisions are those decisions that have major impact on organizational effectiveness,
high cost and difficult to reverse (Schilit, 1987). In their study of 329 strategic decisions,
Schilit and Paine (1987) concluded that the higher the riskiness/return, the greater is the
duration of the process, the level of negotiation, and the alliance/coalitions. Carter (1971)
found that decision context in terms of criticalness to decision makers, significantly
influences the decision process characteristics.
Decision’s Complexity
Astley et al. (1982) in a research that was carried out with respect to decision specific
characteristics contended that decision’s complexity is positively related to the extent of
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ISSN: 2222-6990
centralization in the decision-making process. This supports Fahey (1981), who found that
the decision process varies in terms of decision’s complexity.
Type of Decisions
Papadakis et al. (1998) suggested that new business investment and investment in
marketing are significantly and negatively associated with the extent of
rationality/comprehensiveness in the decision-making process, but positively related to the
extent of decentralization. This support Fahey (1981) who found that type of decision
explains the nature of the decision-making process. What follows is further empirical
evidence supporting the impact of decision specific characteristics on strategic decision
process.
Sinha (1990) claimed that decision’s characteristics significantly influence planning system
and therefore, influence the decision-making process. According to Cray et al. (1991) the
matter for decision may explain the kind of process that should be followed. Langley (1990)
suggested that pattern in decision-making processes and the use of formal analysis are
related to the nature of issues faced by organization. Rajagopalan et al. (1993) claimed that
decision specific factors such as urgency, risk, motive and complexity influence the strategic
decision making process.
Table 1 tabulates past studies on decision specific characteristics and strategic decisionmaking process.
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July 2012, Vol. 2, No. 7
ISSN: 2222-6990
Table 1 Studies on decision specific characteristics and strategic decision-making process
Decision-specific
Familiarit
Information
characteristic
y
Magnitu
Threat/Crisi
source /
Studies
Frequenc de
Urgenc s/
Complexit
problem
y
of impact y
Opportunity Riskiness y
Motive classification
Carter, 1971
×
Fahey, 1981
×
×
Astley et at, 1982
×
Frederickson, 1985
×
×
Pinfield, 1986
×
Volkema, 1986
×
Hickson et al, 1986
×
Schilit & Paine, 1987
×
×
Schilit, 1987
×
Jackson & Dutton, 1988
×
Papadakis et at, 1998
×
×
×
×
Cray et al, 1991
Dean & Sharfman, 1993
×
Nooraie 2001
×
×
Nooraie 2008
×
Nooraie, 2009
×
* Type of decision (e.g. new business development investment, investment in capital…
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Type of
decision
×
×*
×
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July 2012, Vol. 2, No. 7
ISSN: 2222-6990
2.3 Internal Organizational Characteristics
The results of literature review in terms of internal organizational characteristics indicate
that research relating to organizational factors such as slack, past strategies, and power
have received very limited attention in previous research, while studies relating
organizational size to decision-making process have produced contradictory results.
Following are major internal organizational factors influencing strategic decision-making
process.
Organizational Structure and Power
Organizational structure can be described in many ways. Some researches (e.g. Van de Ven,
1976; Frederickson, 1986) define organizational structure as the degree of formalization,
integration and centralization. A review of the body of research indicates that research
agenda in organizational structure has been broadly carried out since 1990. Miller (1987)
found that formal integration is positively related to the extent of rationality and interaction
in the decision-making process, especially in successful and innovative firms. Miller et al.
(1988) claimed that there is a positive relationship between decision-making rationality and
formalization but negative relation between decision-making rationality and centralization.
Wally and Baum (1994) concluded that the more centralized a firm's decision making
structure, the faster the pace at which executives will evaluate an alternative; also the more
formalized a firm's decision-making structure the slower the pace at which executive will
evaluate an alternative. With regard to power distribution, Bourgeois and Eisenhardt (1988)
found that the centralization of power positively influences the extent of politicization in the
strategic decision-making process. Langley (1990), who investigated the relationship
between strategic decision-making process and different organizational models such as
machine bureaucracy, and adhocracy, found that patterns in decision-making processes
were related to organization structure, and leadership style.
Organizational Size
Organization size is another factor that influences strategic decision-making process.
Duhaime and Baird (1987) found that smaller business units usually have greater
involvement in the decision process than managers of large units. my literature review
indicates that studies relating organizational size to strategic decision process have
produced contradictory results; for example Fredrickson & Iaquinto (1989) and Child (1972)
claimed that organizational size is positively related to the extent of
rationality/comprehensiveness in the decision-making process, while Dean & Sharfman
(1993) found no such a relationship. Nooraie (2001) suggested that organizational size is
positively associated with rationality and decentralization of the strategic decision-making
process but it is negatively related to politicization in the strategic decision-making.
Organizational Performance
Eisenhardt (1989) claimed that decision speed is positively related to firm’s performance.
Eisenhardt & Bourgeois (1988) found that firm’s performance is negatively related to the
extent of politicization of the decision-making process. This finding supports that of Dean
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and Sharfman (1996), who found a negative relationship between decision-making
effectiveness and the extent of politicization in the decision-making process. In their study
of organizational performance, Papadakis et al. (1998) suggested that return on asset is
positively related to the extent of rationality/comprehensiveness and hierarchical
decentralization in the decision-making process. This is in line with the results presented by
Bourgeois and Eisenhardt (1988), who suggested that in high velocity environments, the
greater the delegation the better the performance of the firm and also with that of Dean
and Sharfman (1996) who found a positive relationship between decision-making
effectiveness and the extent of rationality in the decision-making process but at the same
time contradicts with some literature (e.g. Fredrickson, 1985) that found a negative
relationship between firm’s performance and the extent of comprehensiveness in the
decision-making process in unstable environment.
Organizational Slack
Organization slack, defined as a cushion of resources, helps organizations cope with
environmental changes and unexpected events. In my literature review I could not find any
empirical study relating slack to strategic decision-making process except the work of
Sharfman and Dean (1997) that concluded a positive relationship between slack and
flexibility in strategic decision-making process and Nooraie (2007) who found positive
relationship between organizational slack and the level of rationality in the strategic
decision-making process. What follows is further evidence supporting the impact of internal
organizational factors on strategic decision-making process.
Rajagopalan et al. (1993) indicated that past strategies influence the decision-making
process characteristics. With respect to formal planning, Sinha (1990) found that the
organization planning system is significantly affected by decision characteristics while a
formal planning system appears to have a positive influence on the extent of
rationality/comprehensiveness in the decision-making process (Papadakis et al., 1998).
Several studies have been carried out in terms of organizational information system
especially during 1990's. Molloy and Schwenk (1995) examined the relationships
between the use of computer-assisted information processing and strategic decisionmaking process and noticed that the use of information technology does improve both
the efficiency and, more importantly, the effectiveness of the decision-making process.
A quasi-experiment was conducted by Smith and Hayne (1997), in which a group makes
business decisions under time pressure, where half of the groups enjoyed the benefits of
decision support system and the other half had no access to a decision support system.
They found that the presence of time pressure was negatively related to quality of decisionmaking for both the supported and non-supported subgroups.
Van Bruggen et al. (1998) investigated the impact of the marketing decision support system
on the decision-making process and found that the use of the system improves decision
process, performance and quality and reduces the susceptibility to using the anchoring and
adjustment heuristics especially under low time pressure.
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Shrivastava and Grant (1985) concluded that the nature of strategic decision-making process
is associated with organizational learning system.
Organizational ideology influences the nature of the decision-making process in several
ways: it provides basis for problem identification, objective setting, and alternatives
generation. This makes it easier for managers to agree on which objectives are legitimate
and what alternatives are worth pursuing (Beyer, 1981; Brunsson, 1982). Regarding the link
between ideology and decision-making flexibility, Donaldson and Lorsch (1983) indicated:
“An interrelated pattern or system of beliefs in each company provides corporate managers
with a framework for thinking about complex and uncertain choice, it sets important limits
on the strategic choice these managers are willing to make the interrelated wholeness of
these beliefs creates a powerful psychological constraint on top management’s specific
choices”. Table 2 summarizes studies on internal characteristics and strategic decisionmaking processes.
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Table 2 Studies on internal characteristics and strategic decision-making process
Internal characteristics
Performa
Strategie
Structure Power Size
Slack
nce
s
Studies
Cyert & March, 1963
×
Bourgeois, 1981
×
Beyer, 1981
Brunsson, 1982
Donaldson & Lorsch, 1983
Shrivastara & Graunt, 1985 ×
Miller, 1987
×
Duhaime & Baird, 1987
×
Bourgeois & Eisenhardt,
×
×
1988
Bourgeois & Eisenhardt,
×
1988
Miller et. at., 1988
×
Frederickson & Iaquinto,
×
×
1989
Sinha, 1990
Langley, 1990
×
Dean & Sharfman, 1993
×
Wally & Baum, 1994
×
Molloy & Schwenk, 1995
Smith & Hayne, 1997
Sharfman & Dean, 1997
×
Papadakis et at, 1998
×
×
×
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Informatio
Formal
n Support Ideologies
Planning
System
×
×
×
×
×
×
×
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Van Bruggen et al , 1998
Nooraie 2001
Nooraie 2007
415
×
×
×
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2.4 External Environmental Characteristics
My review of literature in relation to external environmental factors reveals certain
important gaps. Most of previous studies have focused on one aspect of the external
characteristics (e.g. stability). Factors such as hostility, velocity, heterogeneity, and
uncertainty have received relatively little attention while researches relating environmental
dynamism and hostility to strategic decision-making process have produced contradictory
results. In the 21st century, managers of any organization must cope with a dynamic world
(Cook & Russell, 1981). According to Priem et al. (1995) firms usually are faced with an
environmental continuum ranging from stable to dynamic. In terms of environmental
factors that influence strategic decision-making process, the dimensions of dynamism,
hostility, heterogeneity, and stability were found to be significant.
Environmental Dynamism
Environmental dynamism refers to the rate of change, absence of pattern and
unpredictability of the environment (Dess & Beard, 1984). Based on these characteristics,
environmental dynamism as an important factor influencing strategic decision-making
process has been considered by several literatures.
Some of these studies (e.g. Frederickson, 1984; Frederickson and Mitchell, 1984;
Frederickson & Iaquinto, 1989) claimed that there is a negative relationship between the
extent of rationality/comprehensiveness in the decision-making process and performance in
unstable environment and positive relationship in stable environment. In contrast Bourgeois
(1985) found that in high velocity environment, effective firms use rational decision-making
process. On the same note Miller and Friesen (1983), Eisenhardt (1989), and Bourgeois and
Eisenhardt (1988) suggested that an increase in environmental dynamism is accompanied by
an increase in the extent of rationality in the decision-making process. This is in line with
Nooraie (2001) who suggested the same and Priem et al. (1995) who defined that the extent
of rationality in strategic decision-making process is positively related to performance in
dynamic environments, while less rationality is associated with high performance in stable
environments.
Environmental Opportunity/Threat,
Dean and Sharfman (1993) viewed that there is a negative relationship between competitive
threat and the extent of rationality in the strategic decision-making and also between
competitive threat and flexibility in strategic decision-making.
Environmental Hostility
Environmental hostility is the extent that the situations in which firms are faced with price,
production and distribution competition, severe regulatory restrictions, shortage of
resources, and unfavorable market demand (Miller & Friesen, 1983). According to Miller and
Friesen (1983) environmental hostility is positively related to the extent of analysis in
strategic decision-making while Papadakis et al. (1998) did not find such a relationship. The
results of another study indicated that there is positive relationship between environmental
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hostility and rationality in the decision-making but it has negative relationship with
decentralization and politicization of the strategic decision-making (Nooraie, 2001).
Environmental Heterogeneity
Heterogeneity is the extent to which the elements of environment are dissimilar. Miller and
Friesen (1983) did not find any significant relationship between environmental
heterogeneity and the extent of analysis in decision-making process, while some studies
(e.g. Smart & Vertinsky, 1984) found a positive relationship between heterogeneity and the
extent of rationality/comprehensiveness in the decision-making process. On the other hand
Miller and Friesen (1983) and Langly & Rue (1980) suggested that environmental
heterogeneity is positively related to the extent of decentralization in the decision-making
process.
Uncertainty
Rajagopalan et al. (1993) described that uncertainty, beside other factors such as complexity
and munificence exerts significant influence on the strategic decision process. According to
Dean and Sharfman (1993) uncertainty is negatively related to the extent of rationality in
the decision-making process. In addition to the above factors Barney and Ouchi (1986)
concluded that the industry's structure is a major determinant of the profitability in the
industry and thus serve as a powerful influence on strategic decision-making process, while
Wally and Baum (1994) found that industry's structure do not appear to influence the
strategic decision-making process. Table 3 displays a summary of the studies on external
environmental characteristics and strategic decision-making process.
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Table 3 Studies on external characteristics and strategic decision-making process
Opportunity Certainty/
External factors
Stability/
Heterogenei Hostilit
/
Uncertaint Velocity
Studies
Instability
ty
y
Threat
y
Lindsay & Rue, 1980
×
Miller & Frisen, 1983
×
×
Frederickson & Mitchell, 1984 ×
Frederickson, 1984
×
Smart & Vertinsky, 1984
×
Frederickson, 1985
×
Bourgeois, 1985
×
×
Barney & Ouch, 1986
Grinyer et al, 1986
×
Bourgeois III & Eisenhardt, 1988
×
Eisenhardt, 1989
Frederickson & Iaquinto, 1989 ×
Judge & Miller, 1991
×
Sharfman & Dean, 1991
×
Hitt & Tyler, 1991
Dean & Sharfman, 1993
×
Wally & Baum 1994
Priem et at, 1995
Sharfman & Dean, 1997
×
×
Papadakis et at, 1998
×
×
Nooraie 2001
×
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Industrie Dynamis
s
m
×
×
×
×
×
×
×
×
×
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2.5 Top Management Team Characteristics
The results of my literature review indicate that research relating executive experience;
cognitive conflict and affective conflict, consensus, and need for achievement to nature of
the strategic decision-making process are very limited. A few studies that have tested the
impact of the manager’s need for achievement and cognitive diversity on strategic decisionmaking process have produced opposite results. Upper echelon theory proposed by
Hambrick and Mason (1984) essentially argues that strategic choice is partially predicted by
executives' characteristics. The following are the major factors, which affect strategic
decision-making process in terms of top management team characteristics.
Risk Propensity
Several strategic decision researches focused on the relationship between risk and strategic
decision-making processes (e.g. Williams, 1965; Gupta, 1984; Barid & Thomas, 1985). Wally
and Baum (1994) found that decision-makers high tolerance for risk and a strong propensity
to act promote completion of the strategic decision-making process, this support
Eisenhardt’s (1989) proposition that fast strategic decision-making requires executives to
possess the confidence to act. Executive's risk propensity was not found to be a significant
moderator between objective criteria and strategic decision (Hitt & Tyler, 1991). According
to Papadakis et al. (1998) there is a negative relationship between executive’s risk
propensity and rule formalization. Based on Nooraie (2001) manager's risk propensity is
negatively associated with rationality of the strategic decision-making process however, it is
positively associated with decentralization and politicization in the decision-making
processes.
Education and Experience
According to Hambrick and Mason (1984) the amount, but not the type, of manager’s
education is positively related to innovation while the years of service of a top management
team negatively impact the decision-making process in terms of product innovation, this
support Nahavandi and Malekzadeh (1993) and also Schwenk (1984) suggestion that
individual characteristics affect the heuristics and cognitive maps used to make strategic
decisions.
Consensus
Consensus, defined as general agreement among all or most, is viewed as an important
outcome of group decision-making (Dess & Priem, 1995). Whyte (1989) suggested that
based on initial preference of members, the primary task of the group is to produce
consensus, and consensus among top management team can create both positive and
negative consequences. Some studies (e.g. Dess, 1987; Bourgevios, 1987) suggested that
consensus is positively related to firm’s performance while others (e.g. Bourgevios, 1985)
found negative relationship. Dess and Priem (1995) indicated that consensus might result in
common understanding and a strong commitment to strategic decision-making.
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Age
Hambrick and Mason (1984) suggested that an executive's age is negatively related to
propensity to risk; for example younger managers are more likely to make risky decision
than the older one. Hitt and Barr (1989) indicated that managers' age has a negative impact
on compensation decisions and Hitt and Tyler (1991) found that in addition to the level of
education and experience, managers' age significantly moderates the relationship between
objective criteria and strategic evaluation of recruited candidates.
Cognitive Diversity
Cognitive issues have been considered in different studies. Cognitive diversity is defined in
terms of differences in beliefs and preferences held by members of the team (Miller et al.,
1998). Individual differences among strategic decision-makers affect strategic decisionmaking activities (Hambrick & Finkelstein, 1987; Hitt & Tyler, 1991; Keats & Hitt, 1988).
Wally and Baum (1994) indicated that individual differences among executives are
important to the pace at which strategic decision-making occurs and they found that
manager’s cognitive ability is positively related to decision-making pace. Among studies in
terms of cognitive diversity some for example Bantel and Jackson (1989) found that
diversity is positively related to executive creativity while some others (e.g. O’ Reilly et al.,
1993) argued that higher levels of diversity result in less communication, leading to less
effective executive decision-making. In a similar vein, Miller et al. (1998) found that
cognitive diversity, preference diversity, and belief diversity among top management team
negatively influences the extent of comprehensiveness in the strategic decision-making
process.
Cognitive Complexity
Cognitive complexity is a variable that defines the structural complexity of an individual's
cognitive system (Schnier, 1979). According to Hambrick and Finkelstein (1987) managers
with greater cognitive complexity have greater discretion in strategic choice. Furthermore,
the extent of experience of top management team is positively related to administrative
complexity (Hambrick and Mason, 1984).
Cognitive Conflict and Affective Conflict
Amason (1996) claimed that cognitive conflict that emerges during strategic decisionmaking process improves decision quality but affective conflict on the other hand produces
lower quality decisions.
Need for Achievement
As proposed by Miller et al. (1988) chief executive's need for achievement positively
influence the extent of the rationality in the decision-making process while Papadakis et al.
(1998) did not find such a relationship. This is in line with Nooraie (2001) who concluded the
same. What follows is further empirical evidence supporting the impact of top management
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characteristics on strategic decision-making process. According to Schilit and Pain (1987)
middle level managers are more likely to use systematic approach in strategic decisionmaking process than the lower level managers. This supports Lyles and Mitroff (1980) that
suggested the higher up the managers in organizational hierarchy; the more likely they are
to utilize a rational process in their decision-making. Table 4 shows studies on top
management team characteristics and strategic decision-making process.
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Table 4 Studies on top management team characteristics and strategic decision-making process
Management
team
Cognitiv
Risk
Level of Level of
Cognitive
characteristics
Consens
e
propensi educati experienc
Age
Complexit
us
diversit
ty
on
e
y
Studies
y
Williams, 1965
×
Gupta, 1984
×
Barid & Thomas, 1985
×
Wally & Baum, 1994
×
×
Eisenhardt, 1989
×
Hitt & Tyler, 1991
×
×
×
×
×
Papadakis et at, 1998
×
×
Nahavandi & Malekzadeh, 1993
×
Miller et at, 1988
Dess & Priem, 1995
×
Hambrick & Mason, 1984
×
Hitt & Barr, 1989
×
Hambrick & Finkelstein, 1987
×
×
Bantel & Jackson, 1989
×
Keats & Hitt, 1988
×
O'reilly et at, 1993
×
Miller et at, 1998
×
Amason, 1996
Frederickson & Mitchell, 1984
×
Nooraie 2001
×
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Cognitive
Executive
Affective & need
for
Conflict
achievement
×
×
×
×
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3. Conclusions
Based on my literature review on strategic decision-making processes and factors effect it
following conclusions can be made.

Decision-making is one of the most important functions of the managerial job thus, the
primary duty of managers is decision-making.

In terms of the decision-making process I noted that there are numerous approaches to
decision-making. In spite of general similarities among them, there are some real differences
that result in a lack of conceptual consensus.

The most important models of decision-making are defined as (1) The rational or
classical model, which is based on quantitative disciplines, (2) The organizational model, which
is based on both behavioral and quantitative analysis, and (3) The political model, which is
almost totally behavioral.

Despite the literature, our knowledge of strategic decision-making process is limited.

The impact of contextual factors and strategic decision-making process on decisionmaking process outputs is quite unclear.

Considerable work has been carried out in the past decades focusing on factors affecting
strategic decision processes. Research in this area has shown progress; however much more
empirical research is required before any definitive conclusions can be reached.

Researches on factors effecting strategic decision-making process are either limited or
have produced contradictory results in other words studies relating: decision’s familiarity,
magnitude of impact, organizational size, firm’s performance, dynamism, hostility,
heterogeneity, industry, cognitive diversity, cognitive conflict, and manager’s need for
achievement to strategic decision-making process have produced contradictory results.
Most of the researchers except Papadakis et al. (1998) have focused on the effects of a limited
number of factors involving one dimension of contextual factors on strategic decision-making
process (e.g. Fredrickson, 1984; Eisenhardt & Bourgeois, 1988; Priem et al., 1995) rather than in
an integrative manner. In my literature review I could find one empirical study conducted by
Papadakis et al. (1998) that focused on all the dimensions simultaneously. However they have
not examined the effects of the organizational slack, and level of top management team
experience on decision-making process, while they did not test the impact of strategic decisionmaking process on quality of the decision-making process output.

According to Papadakis et al. (1998) “in spite of the crucial role of strategic decisions the
strategy process research has not departed significantly from a stage of being based on”;
“Mature paradigms and incomplete assumptions”(Eisenhardt & Zbarack, 1992 p.17). Thus, the
study of strategic decision-making process remains very important (Astley et al., 1982) and
much more empirical research is required before any definitive conclusion can be reached.
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