Opportunity Evaluation in Organizations: A Social Psychological Model

Abstract

We develop a formal model of social psychological influences on collective opportunity evaluation in organizations. We use the model to analyze how group social and cognitive dynamics shape the ability to evaluate strategic opportunities accurately, in stable and dynamic environments and for organizations with different learning capabilities and processes. We find that the ability to choose good opportunities and forgo bad ones depends on the socio-cognitive position of the leaders of evaluation groups, relative to the knowledge of other organizational members and the external environment, and how they involve others in evaluation decisions. Surprisingly, we find that in dynamic environments using cognitively central members of the organization to aggregate individuals’ judgments is more effective than relying on experts and that homophily can be an effective way to collect others’ assessments. Overall, our analysis provides a more dynamic, networked and relational view of opportunity evaluation in organizations. We discuss implications for research on information aggregation in organizations and top management teams.