Strategic thinking and business innovation: Abduction as cognitive element of leaders’ strategizing

Abstract

Leaders' strategic thinking, or mental processes, are the cognitive foundation of business innovation. Business innovation is a difficult endeavor. For leaders, the path from strategic thinking to effective innovation is complex and full of obstacles. 'Strategic thinking research' investigates cognitive factors that foster innovation, focusing mainly on leaders' deductive or inductive reasoning and their rational choices. However, leaders' rationality is bounded and their strategic thinking is a mix of rationality and insight. Therefore, strategic thinking research should investigate both the rationality and intuition that can support business innovation.Given this, the study proposes a theoretical model describing strategic thinking that draws on Peirce's theory of abduction. Leaders' strategic thinking is shown to be similar to the cognitive process of hypothesis formation, and to follow both logical rules and intuitive insights. The proposed model provides guidelines that allow rationality and intuition to go hand in hand, and thus together support the real-world processes of leaders' strategizing. The proposed model is tested by employing the semi-standardized laddering technique on a sample of strategic leaders of service companies.