Cognitive biases in decision-making: applications on strategic management and rationality improvement

Abstract

Every decision is faced with the unknown. Decisions with strategic density, more than others, carry by themselves a greater burden of responsibility on the firm performance, crucial to obtain the positive results desired by both managers and shareholders. The scope, space of states of strategies formulation and implementation is, customarily wide, and still, the game is open with other forces of the internal and external environment acting. Many studies have shown that the decision-making, formulation and implementation process, considered in moments as part of the strategy process set, comprises emotional and rational phases. In the decision there are mixtures of emotions, intuitions and empirical elements that in the construction of the process present cognitive biases. The decision maker's previous experiences, the brain circuits involved, notably, somatic markers will be involved in the process. While these biases can creatively contribute to the decision-making process, it is always possible, if not often, that undesired (negative) outcomes derive from this interference of cognitive "guessing" in decision-making. This essay seeks to define cognitive biases in strategic management and how they can influence managers in the decision-making process. This article seeks to analyze the commonalities between the analyzed authors of strategy that deal with the theme. The research also seeks to list the cognitive biases most cited by these authors, with the aim of highlighting which should be considered possibly the most relevant to the decision-making process.