Managerial and Organizational Cognition

Conceptual Overview

Herbert Simon's seminal contribution, Administrative Behavior, laid the foundations of modern cognitive theory and research in organizational settings. In this volume, he introduced the notion of bounded rationality, the idea that actors are unable to take decisions in a completely rational manner due to fundamental information processing limitations. Nevertheless, they strive for rationality within the limits of their cognitive capacities.

The classical theory of organizational decision making is predicated upon four untenable key assumptions, namely (1) that the decision maker has knowledge of the alternatives for action; (2) that the decision maker has knowledge of the consequences of the alternative actions; (3) that there is a consistent preference ordering, or set of values, against which these alternatives can be compared; and (4) that there is a decision rule by which a single alternative can be selected. Unfortunately, organizational life is such that decision makers have neither full information or knowledge nor the competence and capacities to process the myriad of information that is readily available. Rather, they construct simplified representations of reality and, once formulated, these mental representations act as filters through which incoming information is subsequently processed. Overreliance on such top-down knowledge structures can yield a number of deleterious consequences, including stereotypic thinking and a refusal to disconfirm cherished hypotheses. In turn, this may lead to biased and inappropriate decisions. Conversely, when mental representations are well organized, characterized by sophisticated linkages among information-rich constructs, individuals will be able to selectively attend to the most meaningful events in their environments, to encode and retrieve data more effectively, to make accurate and reliable judgments, and to solve problems more readily.

The field of cognitive science has shed much light on how knowledge is represented in the mind, and the types of computations carried out on these representations, in such activities as remembering, perceiving, reasoning, problem solving, and decision making. Not surprisingly, therefore, much of the research effort in MOC has been devoted to operationalizing the notion of mental representations, primarily through the use of cognitive mapping techniques, in an attempt to understand the ways in which knowledge structures both enable and inhibit individual and collective adaptation. For example, a number of studies have investigated the nature and role of managers' mental representations of business competition in strategy formulation and the evolution of competitive structures in industries. This body of work has revealed major blind spots in competitor awareness, both individually and collectively, and has demonstrated the inability of strategists to revise their conceptions of rivalry in line with significant shifts in the contingencies confronting their organizations.

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