The Development of Strategic Cognition: Performance & Inequality

Abstract

Strategy scholars have long supposed that individual cognition can boost competitive advantage, but causal evidence is scarce. Here we empirically explore the competitive role of strategic cognition as expressed in two competencies: strategic intelligence and analytic skill. We begin by documenting their heterogeneous distribution, even among those trained in management. Then, we introduce highly competitive markets, in which participants vie for cash. We find that performance is well predicted by the skills. Next, we ask whether some form of strategic cognition can be developed to affect performance. We introduce a simple treatment, anchored in strategy theory. Treated participants perform much better than the control group. What is more: Markets with treated participants manifest lower inequality in individual outcomes. If cognitive skills can be developed, it can herald a prescriptive approach to the development of better strategists — and better markets.