Conceptualizing Processes of Strategic Change. The Contribution of an Attention-Based View to Strategy Formulation

Master's Thesis, 2015

128 Pages, Grade: 1,7


Table of Contents

List of abbreviations

List of figures

1. Introduction

2. Literature Review Strategic Management
2.1 Definitions
2.1.1 Definition of Strategic Management
2.1.2 Definition of Strategy
2.1.3 Definition of Strategic Change
2.1.4 Definition of/Differences between Strategic Process and Strategic Content
2.2 Definition of Strategy Formulation and the Concept of Corporate Strategy
2.3 Strategic Choice Under Conditions of Bounded Rationality
2.4 Deliberate and Emergent Strategies
2.5 Consensus in Strategy Formulation
2.6 Issue Selling to Top Management and understanding Strategic Agenda Building
2.7 Preliminary Conclusion

3. The Contribution of the Attention-Based View of the Firm to Strategy Formulation
3.1 Definition of Attention
3.2 The Carnegie School: Assumptions and Theoretical Pillars
3.2.1 Bounded Rationality
3.2.2 Specialized Decision-Making Structures
3.2.3 Conflicting Interests and Cooperation
3.3 The Attention-Based View of the Firm
3.3.1 The Three Principles of the ABV of the firm
3.3.2 A Model of Situated Attention and Firm Behavior
3.4 An Attention-Based Theory of Strategy Formulation
3.5 Strategic Framework and Specific Research Questions

4. Empiricism
4.1 The Contribution of the Focus of Attention to Strategy Formulation
4.1.1 Cognition, Capabilities, and Incentives: Assessing Firm Response to the Fiber-Optic Revolution (Kaplan 2008)
4.1.2 Cognition and Renewal: Comparing CEO and Organizational Effects on Incumbent Adaptation to Technical Change (Eggers & Kaplan 2009)
4.1.3 Competing for Attention in Knowledge Markets: Electronic Document in a Management Consulting Company (Hansen & Haas 2001)
4.1.4 An Attention-Based View of Service Orientation in the Business Strategy of Manufacturing Companies (Gebauer 2009)
4.1.5 Environmental Context, Managerial Cognition and Strategic Action: An Integrated View (Nadkarni & Barr 2008)
4.2 The Contribution of Situated Attention to Strategy Formulation
4.2.1 Competition and Beyond: Problems and Attention Allocation in the Organizational Rulemaking Process (Sullivan 2010)
4.2.2 Attention Allocation to Multiple Goals: The Case of For-Profit Social Enterprises (Stevens et al. 2014)
4.2.3 Commanding Board of Director Attention: Investigating How Organizational Performance and CEO Duality affect Board Members’ Attention to Monitoring (Tuggle et al. 2010)
4.2.4 International Attention and Multinational Enterprise Performance (Bouquet et al. 2009)
4.3 The Contribution of the Structural Distribution of Attention to Strategy Formulation
4.3.1 How Global Strategies Emerge: An Attention Perspective (Bouquet & Birkinshaw 2011)
4.3.2 Weight Versus Choice: How Foreign Subsidiaries Gain Attention from Corporate Headquarters (Bouquet & Birkinshaw 2008)
4.3.3 The Plurality of Institutional Embeddedness as a Source of Organizational Attention Differences (Hung 2005)
4.3.4 Attention as the Mediator between Top Management Team Characteristics and Strategic Change: The Case of Airline Deregulation (Cho & Hambrick 2006)
4.3.5 Toward a Theory of Intraorganizational Attention Based on Desirability and Feasibility Factors (Baretto & Patient 2013)
4.3.6 Polychronicity in Top Management Teams: The Impact on Strategic ecision Processes and Performance of New Technology Ventures (Souitaris & Maestro 2010)
4.3.7 The Integration Journey: An Attention-Based View of the Merger and Acquisition Integration Process (Yu et al. 2005)
4.3.8 Additional Empirical Studies

5. Discussion (Including Limitations and Implications)

6. Conclusion



List of Abbreviations

illustration not visible in this excerpt

List of Figures

Figure 1: Base disciplines that support strategy content and strategy process research

Figure 2: Andrew’s (1971) Model of strategy formulation and implementation

Figure 3: Hambrick and Mason’s (1984) Model of Strategic Choice Under Conditions of Bounded Rationality

Figure 4: Mintzberg and Waters’s (1985) Types of Strategy

Figure 5: Mintzberg and Waters’s (1985) Types of Strategy

Figure 6: Dess and Origer’s (1987) Process Model of Consensus in Strategy Formulation

Figure 7: Dutton’s (1986) Framework of the elements in the issue context and their effect on agenda building

Figure 8: Ocasio’s (1997) Model of Situated Attention and Firm Behavior

Figure 9: Ocasio and Joseph’s (2005) Attentional Processing in Organizational Channels

Figure 10: Strategic Framework of Selective Organizational Attentional Processing

1. Introduction

How and why do organizations change? These questions have been an enduring and central quest of management scholars and many other disciplines.[1] To find answers concerning these questions, it is indisputable that executives need to develop strategies in order to reach their goals and successfully respond and adapt to the environment while facing ‘change’. Or as Ocasio (1997) put it, “explaining how firms behave is one of the fundamental issues or questions that define the field of strategy (…) and the contribution it makes to the theory and practice of management.”[2] When companies are faced with environmental or internal changes, some organizations start changing their strategies[3] and others do not.[4] Accordingly, in this paper we will view strategic change as the firm’s alignment with its external environment[5] and with internal organizational issues. Hence, the starting point for why organizations take action concerns the environment within which the company operates.

Over the past decades, managers and scholars assumed that the environment needed to be assessed, observed and enacted in order to gain information, process this information and to formulate a strategy to reach future goals and push the firm’s overall performance. The most popular assumptions within the strategy formulation literature are that “the appropriateness of a firm’s strategy can be defined in terms of its fit, match, or congruence with the environmental or organizational contingencies facing the firm.”[6] Thus, the environment inhibits global competitive pressure, dynamics and uncertainty because of the current ongoing internationalization of firms and their willingness and need to expand and invest in emergent markets in order to survive gain profits. The ongoing revolution and upcoming research stream called Industry 4.0, which is highlighting the importance for and the influence of the internet (e.g. the Internet of Things) on firms, is just one of the examples that shows how firms have to cope with and adapt to the complex environments.[7] Since, for example, the internet improves the information gathering process concerning environmental and internal organizational issues, the actual scarce resource within the firm becomes the managers’ amount of attention that they allocate to “searching for, sorting through, and interpreting the available information.”[8] Finally, as Simon (1997) stated, “a wealth of information creates a poverty of attention”[9] and therefore, this paper will mainly focus on and examine the term attention.

The attention construct, being the main focus of this paper, will serve to answer the broad research questions of how firms behave and more specifically, how they determine why and how to respond to or anticipate changes in their environment or internal processes. In particular, I will propose Ocasio’s (1997) attention-based view (ABV) of the firm and investigate its contribution to strategy formulation. In order to answer the broad research question, I will first define the main terms of this paper in chapter two and also give a literature review about the topic of strategic (change) management. Beginning with chapter three, I will add the definition of the term attention, continue with proposing the main assumptions and contributions of the Carnegie School. Thereafter, I will focus on the ABV of the firm only while proposing a detailed introduction of this still underdeveloped theory, especially when it comes to empirical testing and researchers trying to apply Ocasio’s (1997) ABV of the firm in practice. Moreover, I will conclude chapter three with my own developed strategic framework called ‘Selective Organizational Attentional Processing’ and then propose four specific research questions which I will investigate in chapter four. My strategic framework specifically combines and integrates proposed theories from chapter two with the ABV of the firm, serving to investigate the contribution of an ABV to strategy formulation. I will propose 18 empirical studies, 16 of them in detail, in the empiricism chapter four which examines the three core principles of the ABV of the firm – the structural distribution of attention, situated attention and the focus of attention – and show potential impacts on strategy formulation, strategic change, decision making and firm performance. Since the ABV of the firm was first developed in 1997, it can still be treated as an underdeveloped construct in terms of empirical evidence. Furthermore, the ABV of the firm is a very abstract theory which can be applied in different ways depending on the researchers’ subjective interpretations. Nevertheless, this theoretical model opens the ‘black box’ of managers’ attention distribution and allocation and ultimately tries to answer the question of how firms behave. Based on my strategic framework and the paper’s four specific research questions, the results of the empirical studies in chapter four will be discussed and critically reflected in the discussion part (chapter five) of this paper. I will not only discuss each paper’s results, I will also propose their limitations and finally derive implications for managers and future researchers regarding the ABV of the firm of the paper. Also, I will refer the results to my strategic framework and the four specific research questions in order to discuss if the questions have been answered or not. Overall, my motivation and intention for composing this paper is to give detailed insights into the construct of attention and to reveal how essential it is for managers when it comes to decision making and formulating a strategy. In strategic management literature, the question of what decision makers do in order to adapt to changing environments and what they do when it comes to strategy formulation was directed towards the actual contents of strategies. As we will see later on, the focus of this paper will be on the strategic process of how managers allocate their attention towards certain environmental and organizational stimuli and why they attend to them and not to other stimuli. Therefore, the topic of this paper includes different research foci, such as Strategic Management (e.g. Organizational Behavior), Psychology and Sociology which shows the multi-disciplinarity of the ABV of the firm.

After having discussed the major findings of the empirical studies, this paper will conclude with chapter six where I will shortly summarize the paper’s main findings and indicate whether or not the four specific research questions could have been answered. At the end of this paper, an appendix with a summary table will be given to view the main results of each empirical study of chapter four.

2. Literature Review Strategic Management

In this section, I will define the keywords and main terms of the title of my paper – “Conceptualizing Processes of Strategic Change: The Contribution of an Attention-Based View to Strategy Formulation” – in order to avoid any confusion about the meanings. Furthermore, a literature review in the field of strategic (change) management will be given, and the main streams which evolved in the literature over the years will be described in detail. It will provide the reader with an overview, and it will help him or her to understand the main contributions which have been made over the past 70 years. Last but not least, I will narrow down the topic in chapter three and clearly point out why the focus of this paper will be on “the contribution of an attention-based view to strategy formulation”.

2.1 Definitions

In the following, the terms strategic management, strategy, strategic change, and the differences between strategy process/content will be determined and defined.

2.1.1 Definition of Strategic Management

Defining broad terms is always difficult, and this immediately becomes clear when we observe the phrase ‘strategic’. But first of all, what does strategic management actually mean? The review of Nag et al. (2007) focused on a clear definition since the literature lacks a coherent identity.[10] Furthermore, I will adapt the three main definitions by Nag et al. (2007) regarding the term strategic management:

1) “Developing an explanation of firm performance by understanding the roles of external and internal environments, positioning and managing within these environments and relating competencies and advantages to opportunities within external environments.
2) Strategic management is the process of building capabilities that allow a firm to create value for customers, shareholders, and society while operating in competitive markets.
3) The study of decisions and actions taken by top executives/TMTs [Top management teams] for firms to be competitive in the marketplace.”[11]

These three definitions will play an important role in the subsequent sections since they give us a broad overview of the overall topic of this paper.

2.1.2 Definition of Strategy

Since Jemison (1981) argues that contributors to the field of strategic management come from sociology, organizational theory, psychology, social psychology, organizational behavior and political science[12], it is logical that the term strategy will include many different definitions as well. Nevertheless, we start defining strategy with Chandler’s definitions coming from management theory as “ …the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.”[13] Mintzberg (1978) adds “that all these definitions treat strategy as (a) explicit, (b) developed consciously and purposefully, and (c) made in advance of the specific decisions to which it applies. In common terminologies, a strategy is a “plan.”[14] Moreover, Quinn (1998) adds the terminology that “a strategy is the pattern or plan that integrates an organization’s major goals, policies and action sequences into a cohesive whole. A well-formulated strategy helps to marshal and allocate an organization’s resources into a unique and viable posture based on its relative internal competencies and shortcomings, anticipated changes in the environment and contingents moves by intelligent opponents.”[15] Especially the last part of this definition will directly lead us to the next defined term: strategic change.

2.1.3 Definition of Strategic Change

In the strategic (change) management literature, confusion about terminologies, particularly regarding the term change, is apparent. Nevertheless, I will try to demonstrate why it is difficult to define these broad terms, and I will also try to make clear distinctions. Quinn et al. (1998) wrote that “Strategy itself is really about continuity, not change: it is concerned with imposing stable patterns of behavior on an organization (…). But to manage strategy is frequently to manage change – to recognize when a shift of a strategic nature is possible, desirable, necessary, and then to act.”[16] This idea of distinguishing the terms strategy and managing strategy (managing change) – which ultimately leads to strategic change – makes sense because it reveals the dynamic nature of the environment. Moreover, another more scientific definition of strategic change might help to understand these various differences. Following Pettigrew (1985), “strategy is realized in practice through consistency in a stream of actions and decisions over time”[17] and concluding that “the actions and decisions in questions are those which revolve around the mobilization of organizational resources to exploit environmental opportunities and/ or defend against threats (…) [then] the strategic change process is defined as the actions and decisions that are executed to realize strategic intentions.”[18] Hereby, strategic intent[ion][19] equals the term strategy formulation – which is the process of corporate executives analyzing the organization and environment to choose the appropriate strategy.[20] Additionally, Agarwal and Helfat (2009) define strategic renewal (could be seen as strategic change) as the “replacement of attributes of an organization that have the potential to substantially affect its long-term prospect.”[21] As demonstrated so far, defining the various keywords related to the title of this paper is complex due to the numerous meanings used within the literature, but it is important to make the differences clear from the beginning. Nonetheless, in this paper strategic change will mainly refer to “non-routine, non-incremental and discontinuous change”[22] which shows the dynamic character of the term.

2.1.4 Definition of/Differences between Strategic Process and Strategic Content

To continue with the definition section, I would like to distinguish the strategy process research from the strategy content research. It is particularly important to do so since the main focus of this paper will be on the strategy process research. To begin, what is a process? A process is “the flow of information through interrelated stages of analysis toward the achievement goals.”[23] In the following, I would like to explain the distinction between process/content research adapted from the paper by Chakravarthy and Doz (1992). I will also apply their overview, which allows the reader to get an idea about the focus of the paper. Therefore, it will help to understand the subsequent theories that will be explained later in the paper.

Strategy content research is about the company’s strategic positions that lead to optimal performance under a dynamic and varying environmental context. In contrast, strategy process research tries to answer the questions of how a firm’s strategic position is influenced by its administrative systems and decision processes. Furthermore, the two streams can be distinguished in three constructs which are (i) focus, (ii) disciplinary basis, and (iii) methodologies.

(i) focus: strategy content research “addresses the scope of the firm (combination of markets in which a firm competes) and the ways of competing within individual markets (business-level, competitive strategies).”[24] Moreover, it investigates the influence of the company’s resources on performance. It does not describe how a firm is able to achieve and maintain such resource positioning and this is where the process research arises.

(ii) disciplinary basis: strategy process research includes a wider range of contributions, and it also includes and accepts bounded rational and as well as extra rational behaviors of organizational actors. Content research only deals with the interface between the firm and its environment, while process research deals with the behavioral interactions of individuals, groups, or units within or between companies. All in all, the strategy process research has a broader disciplinary basis.

(iii) methodologies: to make it short, strategy content research can use secondary published data but for strategy process research the so called ‘black box’ has to be opened which needs a wider range of methods such as questionnaire surveys, field studies, and action research as well as longitudinal studies.[25] To finish this section, the matrix (Figure 1), adapted from Chakravarthy and Doz (1992)[26], will show the clear distinction between strategy content /process research and will also lead to a first broad overview of the focus of this paper. It serves as a starting point for further theories that will be explained in the next chapters.

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Figure 1: Base disciplines that support strategy content and strategy process research

2.2 Definition of Strategy Formulation and the Concept of Corporate Strategy

While trying to find a perfect definition for the term strategy formulation, I realized that in order to explain this term it is easiest to refer to Andrew’s concept of corporate strategy. In his eyes, “corporate strategy is the pattern of decisions in a company that determines and reveals its objectives, purposes, or goals, produces the principal policies and plans for achieving those goals, and defines the range of business the company is to pursue, the of economic and human organization it is or intends to be, and the nature of the of the economic and noneconomic contribution it intends to make to its shareholders, employees, customers, and communities.(…)[and] ‘corporate strategy’ usually applies to the whole enterprise,(…).”[27] Moreover, Andrews (1980) views corporate strategy as “an organization process, in many ways inseparable from the structures, behavior, and culture of the company in which it takes place.”[28] His contribution, therefore, is based on this process of corporate strategy where he abstracts two important aspects, strategy formulation and strategy implementation. Adding my own perspective of strategy formulation as simply being the formulation of the firm’s strategy and viewing strategy implementation “in terms of the integrating structure of necessary to realize a given strategy”[29] will serve as a better understanding if we have a look at Andrews’ (1971) model of strategy formulation and implementation (Figure 2)[30].

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Figure 2: Andrews’ (1971) Model of strategy formulation and implementation

As we can see, there are different components of strategy formulation which we have to take into consideration in order to formulate the corporate strategy. This ultimately serves as the precondition for successful strategy implementation. Nevertheless, the main focus of this paper is clearly on strategy formulation which will be explained in the following.

Obviously, Andrews (1971) sees strategy formulation as deciding what to do. Identifying opportunities and risks are the preconditions of actual choice or strategy making. What he calls economic strategy stands for the strategic alternative which is the result of matching opportunities and corporate capabilities while adding a certain kind of objectively measured risk. The second step in determining the company’s resources highlights what the company can do regarding ability and power and in contrast to what a company might do in terms of environmental opportunities. Moreover, strategy formulation also depends on personal values; especially worth mentioning are the values and aspirations of the CEO (Chief executive officer) which will highly influence what a company actually wants to do. Finally, adding the forth component of non-economic responsibilities to society includes an ethical aspect which varies a lot over the different industries. Strategists have to fulfill the predominant expectations of the society in order to successfully formulate the corporate strategy which ultimately shows what a company should do. In real life, strategy formulation and implementation are interrelated, but since the focus of this paper is only on the process of strategy formulation as the unit of analysis, I think that Andrews’ (1971) model made the distinction and the relations between the terms very clear.[31] Nevertheless, the term strategy formulation could also be defined – like previously mentioned – as the process of corporate executives analyzing the organization and environment to choose the appropriate strategy.[32]

In the subsequent sections, a literature review of the main streams in strategic management will be given. I will illustrate a comprehensive thread throughout my paper in order to guide the reader and connect different strategic theories which will ultimately lead to the development of my strategic framework in chapter three. I want to highlight, again, the focus of this paper which is “the contribution of an attention-based view to strategy formulation”, but in order to fully understand the development and the connection of these two major streams it is required to have a prior understanding of the contributions in strategic management over the past 70 years.

2.3 Strategic Choice Under Conditions of Bounded Rationality

Even though it is way beyond the scope of this paper to fully explain this theoretical model in detail, it is still worth mentioning the basic ideas behind it since the model had a huge impact on the strategic management literature. Basically, the theory states that firm’s strategic choices and performance (outcomes) can be predicted by top managers’ (‘upper echelon’) background characteristics like e.g. tenure, education and age.[33] Nonetheless, these managerial characteristics will not be our focus – I will rather propose and explain shortly their strategic choice model which will play a major role in the subsequent chapters of this paper. First of all, their model is based on human limits of choice (complex decisions are the outcome of behavioral factors), including people being bounded rationally by strategic choices they make that mainly stems from the Carnegie School’s assumptions (will be explained later in chapter three).[34] Important to note is that the choices are called strategic since they are majorly important to the organization and complex which underpins the focus on upper (top) management.[35] Now, I will explain the main terms and the basic ideas of the model of Strategic Choice Under Conditions of Bounded Rationality (Figure 3).[36]

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Figure 3: Hambrick and Mason’s (1984) Model of Strategic Choice Under Conditions of Bounded Rationality

Every decision-maker has his or her own cognitive base (knowledge or assumptions about e.g. alternatives or future events) and his or her own personal values defined as “principles for ordering consequences or alternatives according to preference”[37]. In total, both terms together are called the “givens”[38] that a manager brings to a situation (with potential stimuli) he or she is attending to. The key idea of the model is that these “givens” help to filter managers’ perceptions of these environmental and organizational stimuli to gain an understanding of what is going on and ultimately what has to be done in order to make a decision. Since the situation is far too complex, decision-makers cannot attend to and scan all these stimuli and therefore, the manager’s field of vision (this is where the attention is directed to) is limited. Moreover, the manager will continue to filter the stimuli since he or she selectively perceives only some of the stimuli within his or her own field of vision. As a result of this filtering-system, the selected information of the situation will be interpreted and serve as managerial perceptions (of the environment or organization) as the basis of strategic choices. Values can either directly enter into strategic choices or they can affect managerial perceptions first since “theoretically a decision maker can arrive at a set of perceptions that suggest a certain choice but discard that choice on the basis of values.”[39] In this paper, we will focus on managers’ attention flow and its allocation and distribution in order to formulate a strategy and to make a strategic choice. In summary, the main argument of the upper echelons theory is that “executives' experiences, values, and personalities greatly influence their interpretations of the situations they face and, in turn, affect their choices.”[40]

2.4 Deliberate and Emergent Strategies

As Chakravarthy & Doz (1992) stated, “another stream of work in this area [strategic decision processes] is that by Mintzberg who questions whether strategic decision making in firms is even boundedly rational [which will be fully explained in chapter three].”[41] Therefore, the paper of Mintzberg and Waters (1985) is about the process of strategy ‘formation’ (we will treat formation as formulation) and is particularly focused on distinguishing deliberate (realized as intended) from emergent (patterns realized without any former intentions) strategies.[42] I will now briefly explain deliberate and emergent strategies and also show some examples of strategies that Mintzberg and Waters (1985) derived from their investigations. To start, let us have a look at Figure 4.[43]

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Figure 4: Mintzberg and Waters’s (1985) Types of Strategy

In order for a strategy to be fully deliberate, three requirements exist. First, there is a need for precise intentions which is concretely articulated before taking action. Second, firms stand for collective action which needs required, common, or shared intentions across all employees. Third, theses shared intentions must be realized exactly as intended (no interference with external forces and perfectly predictable environment). In conclusion, finding only deliberate strategies in practice is unlikely but some strategies come very close.[44] Regarding emergent strategies, there must be consistency over time (no consistency means unrealized strategy since the intention is not met) without any intention. Therefore, we could predict that strategies are in some ways both deliberate and emergent rather than one alone[45] and now I will propose ‘some real-world’ strategies. I chose the planned strategy (rather than deliberate) and the consensus strategy (rather than emergent). In the type called planned strategy, managers formulate their precise intentions in order to implement the strategy ‘surprise-free’. Only in this special case, when clear intentions (formally controlled) and an acquiescent environment exists, can the “classic distinction between 'formulation' and 'implementation' hold up.”[46] Hence, a planned strategy is a plan to avoid any confusion within the formulation and implementation process. On the contrarily, the consensus strategy does not need any direction or control since in this case strategies originate in consensus and mutual adjustments when actors converge on omnipresent emerging patterns.[47] It is beyond the scope of this paper to explain every single one of Mintzberg and Water’s (1985) ‘real-world’ strategies. Nevertheless, I want to point out their key message of the paper which was mainly written to open up thinking about strategy formation. They proposed that for future research, strategy formulation processes should be investigated and viewed as a “function of the structure and context of organizations.”[48] For the purpose of this paper – the contribution of an ABV to strategy formulation – this suggestion will play a major role when we will have a look at the subsequent theories proposed in this paper. As a conclusion and in Mintzberg and Water’s (1985) view, the main difference between the deliberate and emergent strategy is that “the latter opens up this notion of 'strategic learning'.”[49] Furthermore, they argue that emergent strategies and consequentially, strategic learning (see Figure 5), “is especially important when an environment is too unstable or complex to comprehend, or too imposing to defy.”[50] As we see in Figure 5, strategy formation includes both deliberate and emergent components which implies for managers to realize both intentions and also (and often simultaneously) respond to unfolding patterns of actions, which we can call strategic learning.[51]

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Figure 5: Mintzberg and Waters’s (1985) Model of Strategic Learning

Accordingly, it is very important to note that the feedback loop stands for the learning process which means that, through the identification of emerging and unintended strategies, managers’ intentions can change.

2.5 Consensus in Strategy Formulation

Before explaining the actual model of consensus in strategy formulation, I would like to create a connection to the previously described theories to demonstrate why I picked this order of theory-explanation and also to show that the consensus model includes a lot of the previously described theories and builds up on them. Referring to the Concept of Corporate Strategy (Andrews 1980), it was noticeable that he and other writers like Chandler (1962) did not distinguish between objective settings and the determination of competitive methods.[52] Simon (1957) began to put an interdependence of means and ends in consideration and therefore, Schendel & Hofer (1979) defined and separated these two constructs in the following manner:

“First, it is clear that ends and means are distinct concepts. Since the terms 'goals' and 'objectives' have been used to describe the former concept, it would be redundant to use the term 'strategy' to apply to both….Second, it is clear that some organizations do formulate their desired ends (goals and objectives) separately from the means (strategy) they will use to achieve these ends. Finally,…research on structured problem solving and decision making indicates that superior performance occurs when the different steps of problem solving are considered separately.”[53]

Based on this definition, I will determine strategy (means) formulation in this paper as shorter-term actions in order to reach the firm’s desired future goals. This is consistent with what Bourgeois mentioned: “strategy makers should concentrate on reaching consensus concerning means rather than ends (corporate goals) when formulating strategies.”[54] Now I will propose and explain the process of consensus in strategy formulation (Figure 6)[55] adapted from Dess & Origer (1987) and show how different assumptions and theories of previously cited authors (in this paper) will come together in this model and make sense. Furthermore, parts of this process model (in particular: the moderating factors, perception of the environment, and consensus building in strategy formulation and the components adopted from Andrews (1971) will be combined and put together in chapter three within my strategic framework in order to investigate ‘ the contribution of an attention-based view to strategy formulation’.

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Figure 6: Dess and Origer’s (1987) Process Model of Consensus in Strategy Formulation

It is not the purpose of this paper to fully explain this theoretical model in detail. However, I will broadly explain the model in order to understand the quintessence of the consensus in strategy formulation. What does consensus actually mean and what does it stand for? Dess and Origer (1987) view consensus as the agreement of all parties to a group decision[56], and I adapt the definition that consensus “occurs only after deliberation and discussion of pros and cons of the issues, and when all (not a majority) of the managers are in agreement… (…and…) …each member of the group must be satisfied as to the ultimate course of action to be taken.”[57] Furthermore, the “strategy formulation process usually does not begin in a vacuum or from scratch. In an ongoing organization, constraints exists that affect and guide the current formulation process”[58] and “strategy formation over periods of time appears to follow distinct regularities which may prove vital to understanding the process.”[59] These terminologies allow me to connect the terms of consensus and strategy formulation which will ultimately lead to the hypothesis that consensus (between managers) on issues (perceived through the assessment of the environment) is needed and a precondition for successful strategy formulation. Later, in chapter three, we will see why consensus about issues will play such an important role in determining and formulating the corporate strategy of a company.

Herbert Simon (1957) first began to point out that strategy formulation is dependent on consensus-building among TMT (Top Management team)-members within a firm.[60] Additionally, Ansoff (1965) also added that consensus on an appropriate set of objectives is important as an integral part of the strategy formulation process.[61] As consistent with previous theoretical models, the environmental assessment could serve as a predecessor activity to the formulation of a company’s objectives and competitive methods, as already shown in Andrews’ model of corporate strategy. Moreover, “for a given organization, the environment is “enacted” through members’ attention to segments of the environment.”[62] The term attention will be explained in detail in chapter three when the attention-based theory of the firm is introduced. The second box in the model, called the perception of the environment, is influenced by different moderating factors such as individual differences as well as by organizational characteristics and stands for; it not only explains how the environment is perceived by managers, but also how the consensus-building process of strategy formulation will open up.[63] At this point it is important to mention that these moderating factors will be replaced by the components of the ABV of the firm in chapter three, which is the main focus of this paper. Nevertheless, the term organizational characteristics is consistent with parts of the ABV, and putting the different components together will lead to a new understanding of actual strategy formulation since the importance of the term attention will be highlighted. As seen in the upper-echelons models of Hambrick and Mason (1984), executives’ perceptions of the environment may vary with individual differences or repertoires and their functional-track orientation is expected to have an impact on their strategic choice. Furthermore, “the organization’s system for obtaining and processing information and political processes among top managers influence perceptions and preference orderings.”[64] The model shows that the perception of the environment has an effect on the strategy formulation while being moderated by the previously described factors. The box of strategy formulation includes and adapts the components of Andrews (1971) as well as the component of consensus building among top managers which is both a part and a precondition of successful strategy formulation. Additionally, since a high level of consensus also leads to a shared understanding among managers for a given strategy, it will facilitate the implementation[65] and we will also assume that this shared understanding will ultimately lead to a better performance. Either way, Strategy Formulation will have an effect on the performance, but like I mentioned earlier, the performance is not the core of this paper. Nevertheless, we will see later in the empiricism, chapter four, that several studies focused on the firm’s performance which shows that interrelationships between strategy processes and firm performance exist[66]. The findings during my research reassured that it is sometimes (or actually quite often) very difficult if not to say impossible to distinguish between the various constructs in strategic management. This is why I want the reader to keep in mind that the research studies explained in chapter four will not always directly contribute to strategy formulation only. Hence, various authors have measured the impact and contribution of an ABV to firm performance or to strategic changes in general. Therefore, I want to clarify in advance that the main unit of analysis in this paper will be the ABV of the firm and accordingly, the proposed empirical studies in chapter four will primarily investigate the ABV. Since the ABV is a very abstract theoretical model and it does also not incorporate “the” fundamental theoretical model of strategy formulation within the strategic management literature, I will treat both terms as open constructs which allows me, later on, to apply various empirical studies in the context of my strategic framework.

The general research question of this paper is how firms behave and why they behave that way. Accordingly, the purpose of this paper is to investigate how managers actually make decisions, how the attention-based view of the firm contributes to strategy formulation and in the end, how it ultimately affects firm performance. In this paper, I am interested in investigating how a strategy is formulated and how the strategic processes within a firm contribute to the formulation. Therefore, the purpose of the paper is not the actual content of what is being formulated, and the implementation will not be the focus as well. Moreover, Andrews (1980) has recognized the interactive nature of strategy formulation and strategy implementation[67]. Several authors also agreed that the end result of the process of strategy formulation should lead to the development of appropriate structures and systems, and it should also ensure its successful implementation through the allocation of resources. Therefore, Dess (1987) summarized that “the outcome of the process of strategy formulation is of little use if it is not properly implemented and resources required to implement a given strategy act as constraints on future strategy.”[68] I’m aware of this interactive nature, and it should be clear and obvious for successful managers that implementation of the formulated strategy needs to be realized, otherwise strategic change will fail. Nevertheless, in chapter three I will present a model that directly contributes to strategy formulation. Due to the versatility of the model, only the steps relevant to this thesis will be elaborated. But since the model is still underdeveloped and since I will be the first who combines Dess and Origer’s (1987) model of consensus of strategy formulation with Ocasio’s (1997) model of the ABV of the firm, this paper will contribute to further research and highlight the importance of the micro-context of strategy formulation.

2.6 Issue Selling to Top Management and understanding Strategic Agenda Building

After previously having described a multi-level character model of strategic change[69], I will now come to the last proposed strategic management stream in this paper, and I will describe the agenda building process including the “issue selling to top manager” perspective during strategic change.[70] In the literature, this perspective originated with strategic issue diagnosis (SID) as a process in decision making. Accordingly, Dutton et al. (1983) stated that, “SID refers to those activities and processes by which data and stimuli are translated into focused issues (e.g. attention organizing acts) and the issues explored (e.g. acts of interpretation).”[71] Building on this foundation of SID, Dutton further stated that the term agenda building “refers to the process through which strategic issues gain decision-makers’ attention and are legitimated in the organization.”[72] Moreover, it is about strategic issues that receive collective attention – defined as “the allocation of information processing capacity and resources to an issue”[73] – in the firm. To show that allocation has occurred, managers should be able to name an issue, show commitment in spending time on the issue as well as collect necessary information about the issue and to reach consensus of its existence.[74]

The main thought of the issue selling and agenda building perspective is that firms adapt to, change and respond to their environment by “interpreting and acting on issues.”[75] Since the focus of this paper is clearly on the ABV of the firm and the process of attention allocation in general, I would like to point out that the term issue will be of prime importance in order to understand the theories and ideas proposed here. Accordingly, I will treat issues – which represent organizational actions that are tied to sets of concerns – as a starting point of strategic change. Thus, issues are “events, developments, and trends that an organization's members collectively recognize as having some consequence to the organization.”[76] Depending on how issues are interpreted, different issues will gain a different amount of attention and will consequently reflect various concerns that are observed by level of importance to the organization.[77] Traditional decision-making has “used the end point of a process - a choice or an absence of choice - as the defining referent and described who and what were involved in producing a certain pattern of action…(and)…typically, researchers define a decision and trace backward from that point to find interpretations for it and actions relevant to it.”[78] Contrarily, this paper focuses on issues that are rather forward looking. Hence, a focus on issues typically refers to a “datum, fact, or event” which is of concern for the firm and this issue recognition serves as a starting point in order to proceed and to “find relevant actions and interpretations.”[79] Distinguished from the “garbage can model” of decision making[80] – where an issue focus also exists to highlight how important the allocation of attention and contextual sensitivity is –the focus on issues treated it in this paper “is open to changes in issue interpretations over time.”[81] Before I propose and explain the agenda building framework, it is critical to note that we will only focus on the corporate level’s agenda building since this will be our unit of analysis for the strategy formulation investigation. Consequently, this view is consistent with arguments of the literature (congruent with the previously described model by Hambrick and Mason (1984) that a “relatively small number of persons at top levels of organizations play a major role in interpretation processes and organizational action.”[82] Moreover, the agenda building view and the issue perspective stems from different treatments of attention allocation to issues in the literature. One the one hand, attention was treated as the allocation of information processing capacity and resources to an issue[83] and on the other hand, psychologists, for instance, viewed and determined individual attention allocation in terms of being dependent on the characteristics of the perceiver (e.g., their schema in memory[84] ) and characteristics of the stimulus (e.g., an issue’s vividness). Dutton (1986) stated that the chosen set of issues creates the agenda –“a structure that limits and orders an array of issues for top level decision makers in organizations [– and] by focusing on the process by which this issue set is created, new insights on the process of strategy formulation and change are gained.”[85] Hence, we already developed an understanding about the focus of this paper that concentrating on issues as a starting point for attention will ultimately contribute to strategy formulation. Since Dutton’s model (Figure 7)[86] of the issue context affecting the agenda building seems to be consequential for the further understanding of theories in this paper, I will now describe the main parts of the model and also shortly explain the what “issue selling” means.

illustration not visible in this excerpt

Figure 7: Dutton’s (1986) Framework of the elements in the issue context and their effect on agenda building

The main proposition of the agenda building model is that only when individuals are aware of an issue can the issue be placed on the agenda (Issue Exposure) and that they also need to be involved with the issue (Issue Interest). They both result out of the combined effect of Issue Salience – the perceived attributes of an issue­–and (Issue Sponsorship) – the political foundation of an issue, and both constructs are themselves moderated by the agenda structure which represents the size and variety of items that are already on the firm’s agenda. Therefore, it is significant that decision-makers function in a mediating role of what issues will receive attention, since they are the people who have to place it on the agenda. Also, issues have different magnitudes which resemble their perceived impact on the firm’s strategic goals.[87] Hence, I want to highlight the importance of decision-makers’ perceptions since they will play a main role in the development of my strategic framework later on and are also congruent with the previously described model from Dess and Origer (1987), who accentuated perception of the environment. Also, issues could be either abstractly or simply defined or ‘labeled’, and this labeling, as a result of decision makers’ cognitions, could have a great effect on organizational action. Accordingly, “if labeling a strategic issue is communicated by individuals who are highly trusted, consensus about the labeling is more likely […and…] when there is a greater degree of consensus among decision makers, the link between individual cognitions and organizational actions is strengthened.”[88] Therefore, consensus is necessary and needed in order place issues on the agenda. Consequently, any issue “varies in how important, abstract, simple and immediate it is perceived to be.”[89] Also, so-called “issue sponsors” also play a major role in making an issue become part of the agenda since, for example, their (high up) strategic position within a firm could considerably influence a decision maker’s opinion about an issue. Indeed, individuals having this influential power are “likely to be more successful in generating consensus that an issue is a broadly recognized and of high interest, i.e., a legitimate concern.”[90] Again, consensus seems to be a critical factor in placing issues on the agenda. Even though it is beyond the scope of this paper to explain this model of agenda building, it has rich implications for the subsequently described theories – especially regarding the ABV of the firm.

Based on the agenda building perspective, Dutton and Ashford (1993) developed a general issue-selling process in order to show how individuals within a firm – with a focus on middle managers – sell strategic issues to top managers. Since middle management is highly involved in participating in the strategic agenda-building process[91], top managers are very interested in understanding the middle-managers’ perception of the context of issues in order to improve the decision-making process within the company.[92] Therefore, in this paper I will adapt the statement of Kingdom (1990) about issues and the unit of analysis: “We're talking here not about how issues get decided, nor about how decisions are implemented and what impacts they have, but rather how issues come to be issues in the first place.”[93] As already mentioned, the middle managers act as the intersection between the operational and lower-level units and the top-management. They also have more access to resources than the lower level employees but less control over their resources than the upper level management have.[94] Kanter (1982) perfectly described the middle-managers’ role during the issue-sell process with these words: “Because middle managers have their fingers on the pulse of operations, they can also conceive, suggest and set in motion new ideas that managers may not have thought of.”[95] Concluding, I want point out that the middle-managers play an important role during the identification phase of organization decision-making. This phase consists both of the issue recognition, in which “opportunities, problems, and crises are recognized and evoke decision activity” and issue diagnosis, in which “management seeks to comprehend the evoking stimuli and determine cause-effect relationships for the decision situation.”[96] Nevertheless, middle-managers should not only sell issues by themselves but also provide solutions for recognized issues in order to successfully gain the top mangers’ attention. Without providing solutions, issue-selling doesn’t really do anything for an organization and even the issue finding process will be difficult. Accordingly, “Solutions produce problems by providing the framework within which problems can be stated.”[97] This issue-solution matching process will play a paramount role in the subsequent chapter when I will propose the attention-based view of the firm with its contribution to strategy formulation.

2.7 Preliminary Conclusion

At this point, I have proposed and summarized some of the most cited streams in strategic management literature. It is not the goal of this paper to fully describe every single theoretical model. Consequently, I wanted to put the main emphasis on these theoretical models which will play an important role and serve as predecessors for the development of my strategic framework in chapter three. Also, I still want the reader to keep in mind that the aim of this thesis is to answer the broad research question of how firm’s behave and why they behave the way they do with a clear focus on the former part – the how-question – with a focus on the construct of attention. Accordingly, I will introduce the attention construct in the next chapter and I will also connect the previously presented theories with the ABV of the firm (the main focus of my paper). Also, I will present the core principles and key pillars of the Carnegie School very broadly since the Attention construct is built on parts of these assumptions and because the Carnegie School greatly impacted the strategic management and organizational behavior literature. From this point on, I will primarily talk about the term attention which is the main unit of analysis. First, I will start with the definition of attention, and I will complete chapter three with the development of the strategic framework as well as the specific research questions of this paper.

3. The Contribution of the Attention-Based View of the Firm to Strategy Formulation

As previously described, I will now introduce the ABV of the firm as the main theoretical construct of this paper. This chapter will serve as the foundation for the development of my strategic framework and also refer to previously presented theories and models in chapter two. I will now start with the definition of the term attention.

3.1 Definition of Attention

Do you know what attention actually is? Could you define it? During my research, I realized that this is not as simple as it sounds. Nonetheless, I start with some suggestions for how to define the term attention. To begin with, William James (1890) applied a very psychological view as he wrote:

“Everyone knows what attention is. It is the taking possession by the mind, in clear and vivid form, of one out of what seem several simultaneously possible objects or trains of thought. Focalization, concentration of consciousness are of its essence. It implies withdrawal from some things in order to deal effectively with others ,and is a condition which has a real opposite in the confused, dazed, scatterbrained state which in French is called distraction, and Zerstreutheit in German.”[98]

Moreover, Herbert Simon (1947) stated that:

“Organization and institutions provide the general stimuli and attention-director that channelize the behaviors of the members of the group, and that provide the members with the intermediate objectives that stimulate action.”[99]

Last but not least, Moray (1969) suggested seven distinct uses of the term attention do exist including:

“the concentration of mental resources as a way to improve task performance; the act of vigilance, in which a person monitors the environment in the hope of detecting something; selective filtering; oriented search; activation; and set, whereby an attending actor demonstrates a readiness to respond in a certain way.”[100]

Also, I want to avoid creating any confusion about the term attention and that is why I would like to distinguish attention from information. No longer is the scarce resource for almost every firm these days “information; it is processing capacity to attend to information. Attention is the chief bottleneck in organizational activity, and the bottleneck becomes narrower and narrower as we move to the tops of organizations” (Simon 1973, p. 270).”[101] It is necessary to fully understand what attention stands for because the model of the attention-based view of the firm from Ocasio (1997) will be explained in the following. Therefore, we will adapt his definition of attention which will guide us through the next chapters and will also clarify what attention actually is. In Ocasio’s (1997) view, attention is defined to encompass the “noticing, encoding, interpreting, and focusing of time and effort by organization decision-makers on both

(a) issues; the available repertoire of categories for making sense of the environment: problems, opportunities, and threats; and
(b) a nswers: the available repertoire of action alternatives: proposals, routines, projects, programs, and procedures.”[102]

This definition of attention shows that this paper will focus on organizational attention and therefore, on an organizational setting. Nevertheless, the previously shown definition stems from and is consistent with a psychological view that something (an event, trend, idea, category, etc.) that occupies the consciousness of individuals creates attention.[103]

3.2 The Carnegie School: Assumptions and Theoretical Pillars

In this chapter, I will propose and summarize the three core principles and the four key pillars of the Carnegie School trio – consisting of Simon (Administrative Behavior 1947), March and Simon (Organizations 1958) and Cyert and March (A Behavioral Theory of the Firm 1963). In particular, the focus will be on Simon since the subsequently proposed theoretical model of the attention-based view of the firm (Ocasio 1997) will mainly build on his perspectives. Basically, the three premises of the Carnegie School are “[(1)] organizations as the ultimate object of study, [(2)] decision making as the privileged channel for studying organizations, and [(3)] behavioral plausibility as a core principle underlying theory building.”[104] Regarding (1), Cyert and March (1963, p. 1) stated:

“Our articles of faith are simple. We believe that, in order to understand contemporary economic decision making, we need to supplement the study of market factors with an examination of the internal operation of the firm to study the effects of organizational structure and conventional practice on the development of goals, the formation of expectations and the execution of choices.”[105]

Therefore, organizations are seen as social institutions[106] and also as “systems of coordinated action among individuals and groups whose preferences, information, interests, or knowledge differ”[107]. Moreover and regarding (2), decision-making is central to organizational actions and outcomes as we can see in the Simon's (1943) dissertation (later Administrative Behavior) outline:

“Deciding is a fundamental element in any purposive activity. Making decisions about both substantive and procedural matters is one of the most important tasks of the administrator. This dissertation will examine the role of decision-making in the administrative process.”[108]

Last but not least regarding (3), Simon’s book, Administrative Behavior, built upon the real-world organizations analysis by Barnard (1938) while adding a psychological and sociological view to explain organizational decisions through a behavioral perspective. Hence, one of the key assumptions of the Carnegie School is that organizations create a set of “economic, political, and social mechanisms to resolve individual and organizational goals.”[109] Building on these three core principles, I will now derive the four key assumptions and pillars of the Carnegie school with a special focus on the pillar of bounded rationality since it will play a major role in the subsequent chapters of this thesis.

3.2.1 Bounded Rationality

The Carnegie School is often cited for its breakthrough in ignoring perfect rationality and adding behavioral and psychological assumptions while studying organizational decision making which was highly influenced by Simon’s (1955, 1956) work on a model of man and firm behavior. Accordingly, March (1978) noted:

“Simon added the idea that the list of constraints on choice should include not only external factors in the environment but also some properties of human beings as processors of information and problem solvers. He called attention to human limits on memory and computing power, viewing them as obvious restrictions on full rationality.”[110]

Derived from these limits of human rationality, bounded rationality was born. Based on Simon’s formulation of the term, rationality limits were the results of limited individual knowledge, selective attention (guided by the environment) of decision making and incomplete preferences.[111] Later on, the term satisficing was added which described that “decision makers, in turn, do not optimize over this latent choice set, but rather stop searching when they identify an alternative that satisfies their various performance criteria.”[112] As we already saw in Hambrick and Mason’s (1984) model, bounded rationality plays a major role in strategic management and, in particular, in the literature stream that tries to explain firm behavior. Therefore, the assumption of bounded rationality will play a major role in this thesis.

Standardized Operating procedures:

As pillar number two of the Carnegie School, standardized practices serve to economize on bounded rationality. Accordingly, March and Simon (1958) observed that “an environmental stimulus may evoke immediately from the organization a highly complex and organized set of responses [...which is] simply a program.”[113] A standard program is therefore a fixed response to an environmental stimuli or problem.[114]

3.2.2 Specialized Decision-Making Structures

The third pillar of the Carnegie School shows that firms – as collective entities – have internal communication and decision making structures. For instance, the “presence of hierarchical authority” is an essential structure within a firm.[115] Regarding the focus of my thesis, the structure of attention amongst actors[116] becomes important in order to answer the questions regarding how time and energy will be allocated within the firm (when attending to a broad set of issues and stimuli). Accordingly, Simon (1947) noted that “organizations and institutions provide the general stimuli and attention-directors that channelize the behaviors of the members of the group, and that provide those members with the intermediate objectives that stimulate action.”[117] The importance of this statement will become clear when we look at the ABV of the firm.

3.2.3 Conflicting Interests and Cooperation

A fourth pillar is the perspective that participants (employees) within firms have conflicting interests, goals and knowledge which ultimately impacts the cooperation in collective action.[118] March and Simon (1958) say that conflict “occurs when an individual or group experiences a decision problem” and generally, the term is associated with a “breakdown in the standard mechanisms of decision-making so that an individual or group experiences difficulty in selecting an action alternative.”[119] According to the Carnegie School, reaching cooperation among conflicting parties is a primary goal of any organization. To conclude, the fourth key assumption of the Carnegie School says that “conflicts within organizations are never fully resolved.”[120]

3.3 The Attention-Based View of the Firm

The central argument of Ocasio’s (1997) theoretical model is that firm behavior is a result of how companies channel and distribute the attention of their decision-makers. The main assumptions are built on Herbert Simon’s (1947) perspectives on firm behavior including theories of rational choice, human’s (bounded) rationality and limited attentional capability and capacity. Also, the view of Dosi et al. (2000) is that organizations influence individual decision processes by allocating and distributing certain environmental stimuli which channel the attention that decision-makers attend to or ignore.[121] Ultimately, the attention perspective brings up a completely new perspective by actually questioning the reasons for how firms behave. Also important is the fact that firm behavior for Simon is “both a cognitive and a structural process, as decision-making in organizations is the result of both the limited attentional capacity of humans and the structural influences of organizations on individual’s attention.”[122] Additionally, in information-rich contexts that are characterized by a large supply of information, which is nowadays usually the case in strategy departments of firms since the increasing availability of (electronic) information and databases, the scarce resource is typically not information but rather the amount of attention that individual scan allocate to searching for, sorting through, and interpreting the available information.[123] As Simon (1997) argued, “a wealth of information creates a poverty of attention.”[124] Therefore, the main focus of this conceptual paper will be on attention as a highly scarce resource, especially when it comes to decision-making of managers who ultimately formulate the strategy of a company. Moreover, since previous attention research did not focus on Simon’s dual emphasis on structure and cognition, Ocasio (1997) was the first author who actually proposed to bring Simon’s attention perspective back and this led to his theoretical model that I will explain in a little bit. Based on Simon’s perspectives and some adjustments throughout the decades, Ocasio (1997) developed a multilevel process of so-called attentional processing which is shaped by individuals, organizations and the environment. To avoid any confusion in this paper, when we talk about the term attention (which we will do a lot), we actually mean organizational attention – which will be the focus of this paper.[125] Now, I will introduce the 3 Principles of the attention-based view of the firm.

3.3.1 The Three Principles of the ABV of the Firm

Ocasio (1997) developed three interrelated theoretical premises with the purpose of explaining firm behavior, which itself is explained by how firms distribute and regulate the attention of their decision-makers. These 3 principles include:

(1) Focus of Attention: What decision-makers do (their behavior) depends on what issues and answers they focus their attention on;
(2) Situated Attention: What issues and answers decision-makers focus on depends on the situation they find themselves in; and
(3) Structural Distribution of Attention: The behavior and the attention of decision-makers depend on structural conditions of the firm.[126]

Since these meta-theoretical principles will be a main component in my later developed, Strategic Framework, it makes sense to shortly explain them in detail.

(1) Focus of Attention:

Decision-makers will be selective in the external stimuli they attend to because only a limited set of elements they focus their time and energy on will enter their consciousness. Therefore, selective attention is also a critical principle of the ABV and serves as an antecedent of the focus of attention.[127] Hence, the principle of selective attention suggests that individuals, organizations, and industries will selectively attend to some issues or events while ignoring others. In the literature of attention perspectives, selective attention is also associated by its enactment in the environment.[128] Accordingly, Weick (1979) stated that “enactment emphasizes that managers construct, rearrange, single out, and demolish many of the objective features of their surroundings.”[129] Consequently, the environment is actively assessed by enactment through the “imposition of schemas and causal maps on the objects of action.”[130]

When the attention is focused, it facilitates the perception of issues and answers (e.g. of the environment) that the decision-maker is currently attended to which leads to neglecting other issues and answers. As consistent with the upper-echelon model of Hambrick and Mason (1984), environmental issues will be filtered and individuals focus their attention only on a limited set of issues and answers since they are selective in what they attend to.[131]

(2) Situated Attention:

To create a connection, the focus of attention is highly influenced by the characteristics of the situation individuals finds themselves in and this situated attention itself directly influences the behavior of individuals. Through an experiment, Cialdini et al. (1990) discovered that the characteristics of the situation in terms of littering highly influenced the littering norms and behaviors of individuals. Moreover, the construct of situated attention is part of the level of social cognition and it “link[s] how individuals think and decide in any particular situation, and how the organization and its environment shape the situations that individual find themselves in.”[132] Keep in mind that situational attention stands for the interplay of the environmental and the organization context in shaping individuals’ focus of attention. Moreover, a multitude of contextual factors could belong to and shape the principle of situated attention. For example, Greve (2003) noted that there were empirical results which showed that “performance relative to aspiration level[s] functions as a “master switch” that affects a wide range of organizational behaviors.”[133] I will use this principle as a very open construct which allows me to investigate various components that belong to this principle of situated attention in order to derive results of how it will contribute to strategy formulation.

(3) Structural Distribution of Attention:

This principle indicates that (1) the focus of attention and (2) the situated attention depend on how the organization distributes and controls the allocation of issues, answers, and decision-makers with explicit company activities, communications and procedures. Furthermore, Simon painted an early picture of the attention-based view when he described organizational behavior as a complex network of attentional processes.[134] According to his views, he concludes that “major decisions were made neither by the board nor by any officer, nor formally by any group; they evolved through the interactions of many decisions both of individuals and by committees or boards”[135]. Therefore, the “firm’s economic and social structures create, channel, and distribute the attention of decision-makers into discrete processes and organizational actions.”[136] As a result, decisions are a product of the interactions among these specific attentional processes.[137]

The three principles of the ABV of the firm leads us to the development and description of Ocasio’s (1997) model of situated attention and firm behavior. Even though it is beyond the scope of this paper to explain every single step of the model, it is of importance to explain the main components. These components support my strategic framework and provide the reader with a better understanding of what will be investigated in the empirical studies in chapter four. Last but not least, I would like to highlight one more time that the three principles previously explained will play a major role in my upcoming strategic framework since the ABV of the firm will be the main focus of this paper.

3.3.2 A Model of Situated Attention and Firm Behavior

Based on the three theoretical principles, Ocasio (1997) presents an attention-based view of the firm as a model of situated attention and firm behavior (Figure 8).[138]

Before I explain each component of this model, I need to adapt Ocasio’s (1997) descriptions and basic assumptions of how the three principles of the ABV of the firm interact in this model since they are will be the main focus of my paper. Therefore, I cannot just paraphrase their meanings since Ocasio (1997) is the founder of this theoretical model.

illustration not visible in this excerpt

Figure 8: Ocasio’s (1997) Model of Situated Attention and Firm Behavior

Hence, the three principles are described and adapted from Ocasio (1997, p. 192) in the following.

“1. Focus of attention: (5b) Decision-makers focus their attention on a limited set of issues and answers; (5c) the issues and answers they attend to and enact determines what they do.

2. Situated attention: The attention of decision-makers is situated in the firm's procedural and communication channels. The situational context of these channels includes: (la) the environmental stimuli for decision-making; (2) the embodiment of issues and answers in cultural symbols, artifacts, and narratives; and (5a) the interactions among participants in the channel. The context and characteristics of the firm's procedural and communication channels interact to shape the availability and saliency of the repertoire of issues and answers (3).

3. Structural distribution of attention ; The rules, resources, players, and social positions of the firm generate a distributed focus of attention among decision-makers participating in the firm's procedural and communication channels. The distribution of issues, answers, and decision-makers within the various channels depends on how these attention structures: (4a) generate a set of values that order the importance and relevance of issues and answers; (4b) channel and distribute decision-making into a concrete set of communications and procedures; (4c) provide decision-makers with a structured set of interests and identities that shape their understanding of the situation and motivate their actions.”[139]

Now, I will roughly explain the six main components of the model since the empirical studies in chapter four will refer to and investigate the components of the model. Afterwards, an attention-based theory of strategy formulation will be shortly explained which serves as the precondition of the development of my strategic framework with its specific research questions by combining the theoretical models of chapter two and three.


[1] Van de Ven et al. (1995), p. 510

[2] Ocasio (1997), p. 1997; also see Rumelt et al. (1994).

[3] See e.g. Wiersema & Bantel (1993)

[4] See e.g. Goodstein & Boeker (1991)

[5] Rajagopalan & Spreitzer (1997), p. 49 ; also see Van de Ven & Poole (1995)

[6] Zajac et al. (2000), p. 429 ; also see Andrews (1971); Hofer and Schendel (1978)

[7] Brettel et al. (2014), p. 37

[8] Hansen & Haas (2001), p. 1; also see Ocasio (1997)

[9] Simon (1997), p. 40

[10] Nag et al. (2007), p. 935

[11] Nag et al. (2007), p. 946

[12] Jemison (1981), p. 633

[13] Chandler (1962), p. 13

[14] Mintzberg (1978), p. 935

[15] Quinn et al. (1998), p. 5

[16] Quinn et al. (1998), p. 757

[17] Pettigrew (1985), p. 438

[18] Hardy (1995), p. 5

[19] see Hamel & Prahalad (1989)

[20] Andrews (1980), p. 25

[21] Agarwal & Helfat (2009), p. 282

[22] Dutton & Duncan (1987), p. 108; from Tichey (1983)

[23] Pearce & Robinson (2011), p. 16

[24] Montgomory et al. (1989), p. 159

[25] See Chakravarthy & Doz (1992), pp. 5-7

[26] Chakravarthy & Doz (1992), p. 7

[27] Andrews (1980), p. 18

[28] Andrews (1980), p. 24

[29] Dess & Origer (1987), p. 327

[30] Adapted from Adzobu (2014), p. 49 but originally from Andrews (1980) p. 28

[31] Andrews (1980), p. 25

[32] Andrews (1980), p. 25

[33] Hambrick & Mason (1984), pp. 193 & 196

[34] Hambrick & Mason (1984), p. 194

[35] Hambrick & Mason (1984), p. 194

[36] Hambrick & Mason (1984), p.195

[37] Hambrick & Mason (1984), p. 195

[38] See March & Simon (1958)

[39] Hambrick & Mason (1984), p. 195; Hambrick (2007), p. 334

[40] Hambrick (2007), p.334

[41] Chakravarthy & Doz (1992), p. 8

[42] Mintzberg & Waters (1985), p. 257

[43] Mintzberg & Waters (1985), p. 258

[44] Mintzberg & Waters (1985), p. 258

[45] Mintzberg & Waters (1985), p. 258

[46] Mintzberg & Waters (1985), p. 259

[47] Mintzberg & Waters (1985), pp. 267 & 270 (see table)

[48] Mintzberg & Waters (1985), p. 269

[49] Mintzberg & Waters (1985), p. 270

[50] Mintzberg & Waters (1985), p. 271

[51] Mintzberg & Waters (1985), p. 271

[52] Dess (1987), p. 259

[53] Schendel & Hofer (1979), p 97

[54] Bourgeois (1980), p. 227

[55] Dess & Origer (1987), p. 324

[56] Dess & Origer (1987), p. 313

[57] Holder (1976), p.307

[58] Hrebiniak & Joyce (1984), p. 37

[59] Mintzberg (1978), p. 941

[60] Dess (1987), p. 265

[61] Dess (1987), p. 265

[62] Dess & Origer (1987), p. 325; also see Weick (1979)

[63] Dess & Origer (1987), p. 325-326

[64] Dess & Origer (1987), p. 326

[65] Dess & Origer (1987), p. 327

[66] Dess & Origer (1987), p. 328

[67] Andrews (1980), p. 24

[68] Dess (1987), p. 266

[69] Dutton (1986), p. 3; also see Bower (1972); Burgelman (1982)

[70] See Dutton and Duncan 1987; Dutton 1986(1988), Dutton and Ashford 1993; Dutton et al. 1997; Dutton et al. 2001

[71] Dutton et al. (1983), pp. 307 - 308

[72] Dutton (1986), p. 3

[73] Dutton (1986), p. 4; also see Simon (1971)

[74] Dutton (1986), p. 4

[75] Dutton & Dukerich (1991), p. 518; also see e.g., Daft & Weick (1984); Dutton (1988) ; Dutton & Duncan (1987); Milliken (1990)

[76] Dutton & Dukerich (1991), p. 51

[77] Dutton & Dukerich (1991), p. 519

[78] Dutton & Dukerich (1991), p. 519; see e.g. Mintzberg et al. (1976); Nutt (1984)

[79] Dutton & Dukerich (1991), p. 519

[80] See Cohen et al. (1972)

[81] Dutton & Dukerich (1991), p. 519

[82] Dutton (1986), p. 4; also see Daft & Weick (1984); Hambrick & Mason (1984)

[83] Dutton (1986), pp. 4-5; also see March & Olsen (1976); Simon (1971)

[84] Dutton (1986), p. 5; See Taylor & Crocker (1980)

[85] Dutton (1986), p. 6

[86] Dutton (1986), p. 8

[87] Dutton (1986), pp. 6-8

[88] Dutton & Dukerich (1987), p. 77; also see O'Reilly (1983); Schwenk (1984)

[89] Dutton (1986), p. 9

[90] Dutton (1986), p. 10

[91] See e.g. Dutton (1996)

[92] Dutton et al. (1997), p. 411

[93] Kingdon (1990), p. 1; found in Dutton & Ashford (1993), p. 397

[94] Dutton & Ashford (1993), p. 398; also see e.g. Izraeli (1975)

[95] Kanter (1982), p. 96

[96] Mintzberg et al. (1976), p. 253

[97] Spector & Kitsuse (1977), p. 84

[98] William James (1890), pp. 403-404,

[99] Herbert Simon (1947), pp. 100-101

[100] Bouquet & Birkinshaw (2008), p. 579, see Moray (1969)

[101] Yadav et al. (2007), p. 85; also see Simon (1973), p. 270

[102] Ocasio (1997), p. 189

[103] Fiske & Taylor (1984), p. 184

[104] Gavetti et al.(2007). p. 523

[105] Cyert & March (1963), p. 1

[106] See March & Simon (1958),

[107] March & Simon (1993), p. 2

[108] Gavetti et al. (2007), p. 525

[109] Gavetti et al. (2007), p. 526

[110] March (1978), p. 859

[111] Gavetti et al. (2007), p. 526

[112] Gavetti et al. (2007), p. 526

[113] March & Simon (1958) p. 141

[114] Gavetti et al.(2007). P. 527

[115] Gavetti et al.(2007). P. 527, also see Barnard (1938); Weber (1947)

[116] March & Olsen (1976)

[117] Simon (1947), p. 100-101

[118] Gavetti et al. (2007), p. 527

[119] March & Simon (1958), p.112

[120] Gavetti et al. (2007). P. 528

[121] Ocasio (1997), p. 187

[122] Ocasio (1997), pp. 187-188

[123] See Ocasio (1997)

[124] Simon (1997), p. 40

[125] Ocasio (1997), pp. 187-188

[126] Ocasio (1997), p. 188

[127] Hoffman & Ocasio (2001), p. 414; see Simon (1947); Fiske & Taylor (1991); Ocasio (2001)

[128] Hoffman & Ocasio (2001), p. 415; see Weick (1979), Ocasio (2001).

[129] Weick (1979), p. 164

[130] Hoffman & Ocasio (2001), p. 415

[131] Ocasio (1997), p. 190

[132] Ocasio (1997), p. 191

[133] Greve (2003), p 696

[134] Simon (1947), p. 220

[135] Simon (1947), p. 222

[136] Ocasio (1997), p 191

[137] Ocasio (1997), p 191

[138] Ocasio (1997), p 192

[139] Ocasio (1997), p 192

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Conceptualizing Processes of Strategic Change. The Contribution of an Attention-Based View to Strategy Formulation
University of Hannover  (Personal und Arbeit)
International Management
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Florian Körner (Author), 2015, Conceptualizing Processes of Strategic Change. The Contribution of an Attention-Based View to Strategy Formulation, Munich, GRIN Verlag,


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