Strategic Intelligence: Experimental Evidence on the Role of Cognition in Competitive Performance

Abstract

Pursuing sources of entrepreneurial and competitive advantage, researchers have been exploring cognition. We examine how cognitive capabilities affect competitive performance, drawing on two constructs rooted in psychology and economics: analytic skill, or the ability to solve abstract problems, and strategic intelligence – the ability to competitors’ mindset and use it for advantage. Using incentivized laboratory experiments, we behaviorally measure the constructs in participants, then let them compete for cash in a highly competitive market. Although the market is designed to eliminate any advantage stemming from structure or resources, some participants do much better than others. We trace performance differences to heterogeneity in analytic skill and strategic IQ. The best performers are those who are not only capable, but also understand how capable their competitors are.