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Mental Frames and Organizational Decision-making: Facing the Challenges of Change

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  • Lamprinakis, Lampros
  • Fulton, Murray E.
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    Abstract

    Adjusting to the strategic, business and economic changes requires efficient decision-making procedures which can in turn be highly affected by the underlying mental frames that the leaders of the organization hold. This article examines the impact of these mental frames on decision-making with respect to a specific attribute of a decision-making process: the belief that a CEO of a co-operative holds regarding member commitment. The analysis develops a simple theoretical model that shows how the co-op CEO’s obsolete mental frame creates distortions on decision making that can have negative effects on co-op’s strategic decisions and its market share. The starting point of the analysis is the case of the Saskatchewan Wheat Pool (SWP) – a Canadian grain handling, agri-food processing and marketing company that had little success in adapting to the changing economic environment of the Canadian agriculture.

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    Bibliographic Info

    Paper provided by European Association of Agricultural Economists in its series 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland with number 114407.

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    Date of creation: 2011
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    Handle: RePEc:ags:eaae11:114407

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    Keywords: Industrial Organization;

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    1. Ernst Fehr & Armin Falk, . "Psychological Foundations of Incentives," IEW - Working Papers 095, Institute for Empirical Research in Economics - University of Zurich.
    2. Baron, Robert A., 2000. "Counterfactual thinking and venture formation: The potential effects of thinking about "what might have been"," Journal of Business Venturing, Elsevier, vol. 15(1), pages 79-91, January.
    3. J B Heaton, 2002. "Managerial Optimism and Corporate Finance," Financial Management, Financial Management Association, vol. 31(2), Summer.
    4. Tversky, Amos & Kahneman, Daniel, 1986. "Rational Choice and the Framing of Decisions," The Journal of Business, University of Chicago Press, vol. 59(4), pages S251-78, October.
    5. Brian J. Loasby, 2001. "Organisation as Interpretative Systems," Revue d'Économie Industrielle, Programme National Persée, vol. 97(1), pages 17-34.
    6. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
    7. Palich, Leslie E. & Ray Bagby, D., 1995. "Using cognitive theory to explain entrepreneurial risk-taking: Challenging conventional wisdom," Journal of Business Venturing, Elsevier, vol. 10(6), pages 425-438, November.
    8. Busenitz, Lowell W. & Barney, Jay B., 1997. "Differences between entrepreneurs and managers in large organizations: Biases and heuristics in strategic decision-making," Journal of Business Venturing, Elsevier, vol. 12(1), pages 9-30, January.
    9. Lang, K.A. & Fulton, Murray E., 2004. "Member Commitment and the Market and Financial Performance of the Saskatchewan Wheat Pool," CAFRI: Current Agriculture, Food and Resource Issues, Canadian Agricultural Economics Society, issue 05.
    10. Fulton, Murray E. & Larson, Kathy A., 2009. "The Restructuring of the Saskatchewan Wheat Pool: Overconfidence and Agency," Journal of Cooperatives, NCERA-210, vol. 23.
    11. Witt, Ulrich, 2000. "Changing Cognitive Frames--Changing Organizational Forms: An Entrepreneurial Theory of Organizational Development," Industrial and Corporate Change, Oxford University Press, vol. 9(4), pages 733-55, December.
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