ENHANCING MENTAL MODELS IN STRATEGIC DECISION MAKING

ENHANCING MENTAL MODELS, ANALOGICAL TRANSFER, AND PERFORMANCE IN STRATEGIC DECISION MAKING
MICHAEL SHAYNE GARY,1
* ROBERT E. WOOD,
2
and TRACEY PILLINGER
1
1
Australian School of Business, University of New South Wales, Sydney, New South
Wales, Australia
2
Melbourne Business School, Carlton, Victoria, Australia

Abstract:

Recent research suggests that managers often make strategic decisions in novel situations by
utilizing past experiences to reason by analogy. However, there is substantial evidence that
decision makers often fail to identify and apply knowledge about one situation to a similarly
structured situation. Two experimental studies investigated the mechanisms impacting knowledge
transfer from one managerial situation (the source) to an analogous situation. The results show
that exposure to variation in the source situation improves transfer performance. Variation
decreases performance in the short term but improves learning and increases analogical transfer.
Higher performance on and systematic search of the source situation also increase transfer
performance. These results yield important implications for enhancing analogical transfer in
strategic decision making and for future research on reasoning by analogy.

Copyright2012
John Wiley & Sons, Ltd.

INTRODUCTION

The process by which managers make sense of new
or changing environments to determine strategic
decisions is a central topic in strategy. Managers
may face novel contexts as a result of corporate
diversification into new areas, extensive change in
the competitive environment, or because the managers themselves move to new firms and/or industries. Recent research suggests that managers often
make strategic choices in novel situations by utilizing their knowledge derived from past learning
and experiences—their mental models—to reason
by analogy (Gavetti, Levinthal, and Rivkin, 2005;
Gavetti and Rivkin, 2005).
Keywords: analogy; mental models; knowledge transfer;
cognitive frames; schema
*Correspondence to: Michael Shayne Gary, Australian School
of Business, University of New South Wales, Sydney, NSW
2052, Australia. E-mail: sgary@unsw.edu.au
There is substantial evidence that mental models influence decision making through managers’
efforts to match strategic choices to their understanding of the business environment (Gary and
Wood, 2011; Hodgkinsonet al., 1999; Kaplan,
2008; Poracet al., 1995; Reger and Palmer, 1996;
Tripsas and Gavetti, 2000). However, there has
been very little attention given thus far to understanding how and when managers can make effective use of analogies drawn from their existing
mental models when faced with new or changing
contexts. Prior strategy research suggests that the
application of analogies from a familiar problem to
a novel situation can shape strategic problem definitions, reduce complexity and uncertainty, and
produce fresh insights (Duhaime and Schwenk,
1985; Gavettiet al., 2005). While highlighting the
potential benefits of analogical reasoning, strategy
scholars have also acknowledged that transferring
existing knowledge through analogical reasoning
processes can mislead decision makers into an

Copyright2012 John Wiley & Sons, Ltd.

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