In This Article Decision Making

  • Introduction
  • Introductory Works
  • Textbooks
  • Journals
  • Future Directions in Strategic Decision Making

Management Decision Making
by
Philip Bromiley, Devaki Rau
  • LAST REVIEWED: 15 May 2017
  • LAST MODIFIED: 26 July 2017
  • DOI: 10.1093/obo/9780199846740-0004

Introduction

Decision making, in its broadest sense, is a vast area of research that spans many disciplines, including psychology, economics, political science, and management. Researchers examine decision making at various levels of analysis (individuals, groups, organizations, and nations). They study decisions that range from the trivial (e.g., choices among gambles paying small amounts of money) to the very important (e.g., decisions risking nuclear war). Some scholars attempt to describe or explain actual decisions while others emphasize how individuals should make decisions. Decisions may result in a variety of outcomes that occur over a variety of time spans. The decision maker(s) may make similar types of decisions either repeatedly (e.g., a banker assessing loan applications) or once in a lifetime (e.g., a merger). This article focuses on strategic decision making in an organizational context. Strategic decisions are decisions that critically influence the future of an organization. A description is given of three fundamental theoretical perspectives—the behavioral theory of the firm, behavioral decision theory, and agency theory—that researchers typically use to study strategic decision making in organizations. Discussion is provided of two additional perspectives on decision making, namely, top management teams and cognition. These latter two approaches, while not unified by a central theory, are, nevertheless, widely used for examining and predicting strategic decisions. Strategic decisions usually involve risk. This article therefore examines the treatment of risk by the various studies in this area. It concludes with a look at some Future Directions for Strategic Decision Making research.

Introductory Works

Examples of strategic decisions include Walmart’s decision to expand into Africa by buying Massmart, the South African retailer; Ford’s decision to sell Volvo to Geely, a Chinese competitor; and RBS’s decision in 2007, just before the collapse of the financial markets, to acquire a rival, ABN Amro. Strategic decision-making researchers have examined this topic from a variety of perspectives (see Bromiley and Rau 2011 and Nutt and Wilson 2010 for overviews of research in this area). A number of studies, such as Cray, et al. 1991; Mintzberg and Waters 1985; and Mintzberg, et al. 1976 describe the characteristics of strategic decisions and the processes that organizations use to make them. Other studies attempt to predict the kinds of decisions that decision makers will make, often emphasizing the role of risk and uncertainty.

  • Bromiley, Philip, and Devaki Rau. “Strategic Decision Making.” In APA Handbook of Industrial and Organizational Psychology. Vol. 1, Building and Developing the Organization. Edited by Sheldon Zedeck, 161–182. Washington, DC: American Psychological Association, 2011.

    E-mail Citation »

    Provides a comprehensive review of the literature on strategic decision making.

  • Cray, David, Geoffrey R. Mallory, Richard J. Butler, David J. Hickson, and David C. Wilson. “Explaining Decision Processes.” Journal of Management Studies 28.3 (1991): 227–251.

    DOI: 10.1111/j.1467-6486.1991.tb00946.xE-mail Citation »

    Describes and explains some of the common decision-making processes in organizations. Discusses three types of decision processes: sporadic, fluid, and constricted.

  • Mintzberg, Henry, Duru Raisinghani, and André Theoret. “The Structure of ‘Unstructured’ Decision Processes.” Administrative Science Quarterly 21.2 (1976): 246–275.

    DOI: 10.2307/2392045E-mail Citation »

    Presents detailed data on the processes underlying a sample of strategic decisions.

  • Mintzberg, Henry, and James Waters. “Of Strategies, Deliberate and Emergent.” Strategic Management Journal 6.3 (1985): 257–272.

    DOI: 10.1002/smj.4250060306E-mail Citation »

    Presents the idea that strategic choice leads to real-world strategies, which fall somewhere between deliberate (or intended) strategies and emergent strategies. Emergent strategies are patterns of action that are realized despite (or without) intentions.

  • Nutt, Paul C., and David C. Wilson, eds. Handbook of Decision Making. Hoboken, NJ: Wiley, 2010.

    E-mail Citation »

    This book contains a collection of articles by prominent scholars in the field of strategic decision making. It provides a good overview of the key issues and perspectives that dominate the research in this area.

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