Factors Influencing Strategic Decision-Making Processes

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: ([email protected]) 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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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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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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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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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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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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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 × × × 414

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Informatio Formal n Support Ideologies Planning System

× × ×

×

× × ×

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Van Bruggen et al , 1998 Nooraie 2001 Nooraie 2007

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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 420

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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. References Amason, A.C. (1996). Distinguishing the effects of functional and dysfunctional conflict on strategic decision making: resolving a paradox for top management teams. Academy of Management Journal. 39, 123-148. 423

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