Abstract
Rapid innovation, shortened product life cycles and fierce competition place great pressures on top managers to make fast strategic decisions. However, a key question in strategic decision‐making research is whether decision speed helps or harms decision quality, and there is a shortage of theory and evidence concerning the consequences of decision speed across different environmental contexts. We develop new theory by considering the effects of decision speed on decision quality under conditions of environmental munificence, under conditions of dynamism, and under the joint conditions of munificence and dynamism. We test our theory through analysis of multi‐informant survey data drawn from top management teams and secondary databases, in 117 UK firms. Our findings demonstrate that munificence is the central generative mechanism which moderates the relationship between decision speed and decision quality, and markedly alters the previously theorized positive effects of decision speed in dynamic contexts.
Highlights
Fierce competition, rapid innovation, and shortening product life cycles place great pressures on top management teams (TMTs) to make strategic decisions rapidly (Yang and Meyer, 2015; Dykes et al, 2019), and decision speed is at the forefront of academic and practitioner debate (Hsieh et al, 2019)
We calculated the significance of the marginal effects of decision speed on decision quality over the range of environmental dynamism and we find that decision speed has a significant and positive effect on decision quality at values of dynamism +1 standard deviation (SD) above the mean (t = 1.98, p < 0.05) and at high levels of dynamism (t = 2.08, p < 0.05)
We address the key question of whether decision speed helps or harms decision quality
Summary
Rapid innovation, and shortening product life cycles place great pressures on top management teams (TMTs) to make strategic decisions rapidly (Yang and Meyer, 2015; Dykes et al, 2019), and decision speed is at the forefront of academic and practitioner debate (Hsieh et al, 2019). A central and unanswered question in strategic decision‐making research, is whether decision speed helps or harms decision quality. Since the external environment is complex and multidimensional (Bradley et al, 2011; Rosenbusch et al, 2013; Elbanna et al, 2020), we contend that strategic decision‐making theory can be advanced by considering environmental dynamism and munificence jointly, rather than separately (Elbanna, 2006). Considering only dynamism or munificence in isolation risks an overly simplified, incomplete account of the relationship between decision speed and decision quality (Goll and Rasheed, 1997; Shepherd and Rudd, 2014). We adopt a contingency approach, viewing the efficacy of fast decision‐making as being dependent on prevailing environmental conditions
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