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Theory-Driven Strategic Management Decisions

Author

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

Abstract

This paper studies managerial decisions under uncertainty for which past data are not available. It shows that choosing a good theory and state space might make a larger difference in performance than solving optimally the ``wrong'' decision problem. Therefore, developing and testing alternative theories can be a key source of competitive advantage. The paper also shows that decision makers should experiment with more uncertain theories, because testing the "boundary" models of these theories elicit more informative signals that generates larger belief updating. The paper provides microfoundations to the theory-based view of the firm and explains why performance heterogeneity and competitive advantage is created by exploring theories with higher variance.

Suggested Citation

  • Gambardella, Alfonso & Camuffo, Arnaldo & 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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