Cognitive Style and the Management of Small and Medium-Sized Enterprises

Abstract

A long-standing dilemma in theories of management surrounds the question of whether effective managerial action is better served by ‘rational analysis’ or ‘creative intuition’. In the present article, analysis and intuition are conceived within a framework of cognitive style in which a distinction is drawn between the processing of information (rational and intuitive) and the organizing of information in memory (local and global). Such styles are thought to affect a range of management behaviours (including decision-making). The relationship between managers’ cognitive styles and firm performance was examined from a contingency perspective in which environmental instability was hypothesized as moderating the relationship between style and performance. The study was based upon data obtained from owner-managers and managing directors of small and medium-sized firms in two contrasting sectors. There was a positive relationship between intuitive decision style and contemporaneous financial and non-financial performance that did not appear to be moderated by environmental instability. Furthermore, a statistically significant relationship between intuitive decision style and subsequent financial performance was observed. The implications of these findings for theories of cognitive style, the management of small and medium-sized enterprises, and for the practice of management development in such firms are discussed.