This study examines the origin of the strategic innovation that changed the face of financial services-Charles Merrill's financial supermarket business model-through three well-known and largely juxtaposed conceptual models of strategic foresight. Our study, whose purpose, business historical focus, and structure mirrors Graham Allison's famous "Conceptual Models of the Cuban Missile Crisis," allows us to make three contributions. First, it sharpens our understanding of the models we used in the study. Second, it provides the foundations of an integrated view and model of strategic foresight that suggests disciplined strategic foresight is possible, understandable, and replicable within some precise boundaries. Finally, it suggests directions for future behavioral strategy work. Evolution Cum Agency: Toward a Model of Strategic ForesightAbstract: The study examines the origin of the strategic innovation that changed the face of financial services-Charles Merrill's financial supermarket business model-through three well-known and largely juxtaposed conceptual models of strategic foresight. Our study, whose purpose, business historical focus, and structure mirrors Graham Allison's famous "Conceptual Models of the Cuban Missile Crisis," allows us to make three contributions. First, it sharpens our understanding of the models we used in the study. Second, it provides the foundations of an integrated view and model of strategic foresight that suggests disciplined strategic foresight is possible, understandable, and replicable within some precise boundaries. Finally, it suggests directions for future behavioral strategy work.

Research Summary: This article explicitly introduces cognitive considerations into the treatment of strategic interactions, using the value-based framework as an extended example. Through real-world examples and prior empirical findings, it shows that many of the implicit assumptions of the framework are regularly violated in practice when actors simplify their complex realities into incomplete, inaccurate mental models. These violations lead to outcomes that are often contrary to the predictions of the classical framework. As initial steps toward developing a cognitively grounded theory of strategic interactions, the article characterizes the core components of strategic mental models that might form the foundation of such a theory and then lays out some open questions that this theory would need to address. These questions, when answered, can point to novel cognitive capabilities. Managerial Summary: This article argues that a realistic analysis of interactions between strategic agents requires us to include the mental models, that is, belief systems, of those agents into the analysis. Real-world examples and prior empirical findings are used to show that if such mental models are not accounted for, the outcomes predicted by the analysis could be quite different from those obtained in reality. The article identifies a few key aspects of these strategic mental models that deserve attention. It also identifies a few central questions that, when answered, could allow firms to develop novel cognitive capabilities that confer competitive advantage. K E Y W O R D Scognition, cognitive capabilities, strategic interactions, strategic mental models, value-based strategy

Research summary: Mental models, reflecting interdependencies among managerial choice variables, are not always correctly specified. Mental models can be underspecified, missing interdependencies, or overspecified, containing nonexistent interdependencies. Using a simulation model, we find that under‐ and overspecification have opposite effects on exploration, and thereby, performance. The effects are also opposite, depending on whether a manager controls all choice variables. The mechanism underlying our results is a feedback loop: misspecified mental models influence managerial learning about the effectiveness of choices; this learning guides how the environment is explored, which in turn, affects which information will be generated for future learning. We explore implications of these results for strategic management and introduce the notion of “cognitive fit” between the mental model of the decision‐maker and the strategic environment. Managerial summary: Managers often rely on mental models to guide their decision‐making. These mental models, however, are often misspecified, that is, more or less complex than the situation managers are facing. Using a simulation model, we study the consequences of such misspecified mental models. We find that the performance implications of misspecified mental models crucially depend on whether the manager controls all choice variables. We identify situations in which simpler mental models are better than overly complex ones, and vice versa. Copyright © 2015 John Wiley & Sons, Ltd.

Research summary:This article proposes an approach for modeling competitive interactions that incorporates the costs to firms of changing strategy. The costs associated with strategy modifications, which we term "repositioning costs," are particularly relevant to competitive interactions involving major changes to business strategies. Repositioning costs can critically affect competitive dynamics and, consequently, the implications of strategic interaction for strategic choice. While the literature broadly recognizes the importance of such costs, game-theoretic treatments of major strategic change, with very limited exceptions, have not addressed them meaningfully. We advocate greater recognition of repositioning costs and illustrate with two simple models how repositioning costs may facilitate differentiation and affect the value of a firm's capability to reduce repositioning costs through investments in flexibility. Managerial summary:This article illustrates how the decision to make a strategic change is affected by both the cost to the firm of making the various strategy modifications, as well as the cost to its rivals of changing their strategies in response. These "repositioning costs" are important because they shape the responses each competitor would likely make to a move by the other competitor, and should be anticipated when considering an initial change to one's own strategy. The paper shows how repositioning costs can be used strategically to facilitate differentiation, and to assess the value of potential investments in flexibility.

We explore a novel mechanism of network change that occurs when a firm acquires another one and inherits its network ties. Such 'node collapse' can radically restructure the network in one transaction, constituting a revolutionary change compared to the incremental effect of tie additions and deletions, which have been the focus of prior research. We explore several properties of node collapses: their efficacy in helping firms achieve superior network positions, the externalities they impose on other network actors, and how they provide exclusive control over both internal and network resources. Using a simulation in which actors compete to acquire one another, we model network dynamics driven by node collapses. We find that node collapses directly affect the performance of the acquirer and indirectly that of other actors, and that the direction of network evolution hinges on the degree to which firms pursue internal vs. network synergies through node collapses.