The Interaction of Uncertainty, Threat and Opportunity During Strategic Issue Diagnosis

Abstract

In strategic issue diagnosis, dimensions of perceived uncertainty (effect and response) have been linked with elements of environmental interpretation (threat and opportunity) and each cognitive perception has been proposed to impact managers’ response. However, research examining the implied interactions between these perceptions has lagged. To examine these interactions, we theorized and tested using a scenario-based vignette study, where MBA students were asked to diagnose and respond to the strategic issue of NAFTA renegotiations. Consistent with our predictions, the relationship between uncertainty and response was contingent on perception of opportunity and threat, providing robust evidence for the presence of interactions across hypotheses. Our findings lend empirical support for conceptual frameworks suggesting the existence of links between uncertainty, interpretation, and response during strategic issue diagnosis.