How much does performance matter in strategic decision making?

Abstract

Purpose – The purpose of this paper is to explore the influence of two aspects of firm performance: financial and business performance and organizational effectiveness, on three dimensions of the strategic decision-making process, rationality, intuition, and political behavior. Design/methodology/approach – The empirical study goes well beyond the common anecdotal observations or reflections on strategic decision-making by utilizing a mixed-methods approach. Based on a multi-method field study, 286 Egyptian managers who participate in making strategic decisions are surveyed; and 36 semi-structured interviews are conducted. Findings – The results suggest that strategic decision-making in high-performing firms is more rational and less intuitive and political. Interestingly, they also show that organizational effectiveness is a stronger predictor of strategic decision-making process dimensions than of financial and business performance. Research limitations/implications – In Egypt, a widespread suspicion of academic research adds to the frequent difficulty of obtaining completed questionnaires from more than one senior manager in a company. Moreover, because of the difficulty of collecting objective financial data, subjective measures are used to gauge performance. Further research should test the generalizability of our results in narrowly defined samples, e.g. the banking industry or the automotive industry. Practical implications – The results highlight the importance of performance in strategic decision making and seem to support the “culture free” argument advancing the position that cultural differences may not have a significant impact on the influence of performance on the strategic decision-making process. Originality/value – Although scholars have posited organizational performance as an important contextual variable influencing the process of strategic decision making, this influence is not well understood or articulated, especially in the Egyptian setting. This paper contributes to filling this gap.