Problem Formulation and its Role on Innovative Strategies: Evidence from the Field

Abstract

Important tasks of top managers are to formulate their strategic problems and develop and implement innovative strategies. Since strategic problems are complex and ill-structured, previous research claims that problem formulations or theories on underlying causes of problems identify central factors of such problems and allow for valuable strategies. Still, existing research does not clarify which types of or features of problem formulations would result in innovative strategies that solve strategic problems in novel and useful ways. This paper draws on complexity theory and innovation research to claim that top managers benefit from strategic problem formulations that identify a comprehensive set of causes and theorize relationships among the causes. Comprehensiveness in strategic problem formulation ensures that top managers do not ignore relevant causes. Causal dependency or the relationships among the causes allow for overarching and focused theories on underlying causes. This paper offers the first large-scale tests of the relationships between problem formulation and strategies using managerial samples. A longitudinal study and a field experiment included in this paper uses samples of top managers and find support for the importance of causal dependency and comprehensiveness in strategic problem formulation. The theoretical clarity and empirical insights advance existing research on behavioral strategy and strategic problem-solving literature, which had relied on simulations, case studies, and theories to debate which problem formulations allow for valuable strategies.