Rational heuristics: the ‘simple rules’ that strategists learn from process experience

Abstract

While much research indicates that organizational processes are learned from experiences, surprisingly little is known about what is actually learned. Using a novel method to measure explicit learning, we track the learned content of six technology‐based ventures from three diverse countries as they internationalize. The emergent theoretical framework indicates that firms learn heuristics. These heuristics have a common structure centered on opportunity capture and are learned in a specific developmental order. This results in a deliberately small, yet increasingly strategic, portfolio of heuristics. Broadly, we contribute to the psychological foundations of strategy by highlighting the rationality of heuristics as strategy, capability creation as the cognitive transition from novice to expert heuristics, and simplification cycling as a critical dynamic capability for sustaining competitive advantage. Copyright © 2011 John Wiley & Sons, Ltd.

Dynamic capabilities and organizational performance: The mediating role of innovation

“…Second and more subtle, while sensing capability has significant impact on technological innovation, it does not affect market innovation. The reason behind this may be that the executives tend to use brilliant improvisation (Winter, 2003) and simple rules (Bingham & Eisenhardt, 2011) rather than sensing routines to facilitate market innovation because it is more fluid than technological innovation (Zhou, Yim, & Tse, 2005). For example, because market innovation is designed for new or emerging markets, it requires more creative improvisation.…”

Top management teams and the performance of entrepreneurial firms

“…The third study combines statistical analyses with inductive, multiple-case studies to explore how top management teams learn as they engage in essential, repeated process activities such as developing new products, making acquisitions, and entering new countries (e.g., Bingham et al 2007;Bingham and Eisenhardt 2011). The setting is an in-depth examination of internationalization by 12 U.S., Singaporean, and Finnish entrepreneurial firms.…”

“…Jay Bourgeois and I gathered the field data on the strategic decision making processes of entrepreneurial teams, and published several papers jointly (e.g., Bourgeois and Eisenhardt 1988;Eisenhardt and Bourgeois 1988;Eisenhardt et al 1997) in addition to my sole-authored work (Eisenhardt 1989a(Eisenhardt , 1990. I worked with Christopher Bingham and Nathan Furr in the study of simple rules (e.g., Bingham et al 2007;Bingham and Eisenhardt 2011), building on my work with Donald Sull (Eisenhardt and Sull 2001;Sull and Eisenhardt 2012) and Shona Brown Eisenhardt 1997, 1998). Jason Davis, Christopher Bingham and I collaborated on the simulation study (Davis et al 2009).…”

Attention and Entrepreneurial Cognition

“…High decision speed has been linked to exceptional performance (Bourgeois and Eisenhardt 1988;Bingham and Eisenhardt 2011;Eisenhardt 1989; for an exception, see Perlow et al 2002). Managers who make quick decisions enable their firms to act on opportunities before they vanish (Baum and Wally 2003;Stevenson and Gumpert 1985).…”

“…Individuals may improve the speed of their decisions by using information that is real-time, developing and considering a greater number of alternatives, relying on intuition that is based on their experiences, and using techniques that actively resolve potential conflicts (Eisenhardt 1989). Moreover, the speed of making decisions increases when decision makers are younger (Forbes 2005), employ heuristics for opportunity recognition (Bingham and Eisenhardt 2011), utilize routines to guide their decision making (Helfat and Peteraf 2003), trust in their own intuition (Miller and Ireland 2005;Wally and Baum 1994), and rely on past experiences (Forbes 2005).…”