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Strategie Management Journal
Strat. Mgmt. 7., 32: 1484-1499 (2011)
Published online Early View in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/smj.969
Received 20 January 2009; Final revision received 3 July 2010
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Neurostrate gy 1485
The following section discusses new opportuni- general managers influence the activities and per-
ties and potential contributions of neuroscience to formance of firms. This is evident, for example, in
strategy, and the next section discusses weaknesses strategy research on upper echelons (Hambrick and
and limitations. The paper then proposes specific Mason, 1984), executive perceptions (Sutcliffe,
research agendas in neurostrategy, and appraises 1994; Starbuck and Milliken, 1988), risk prefer-
the prospects of brain science for advancing ences (March and Shapira, 1992), beliefs (Den-
rell, 2008), cognitive schema (Prahalad and Bettis,
research and practice in strategic management.
1986), attention (Ocasio, 1997), causal attributions
(Powell, Lovallo, and Caringal, 2006), competitor
THE CASE FOR NEUROSTRATEGY perception (Zajac and Bazerman, 1991) and aspi-
rations (Mezias, Chen, and Murphy, 2002). To the
Brain localization is an ancient science, extent
traceable
that cognition, affect, and social perception
at least to Hippocrates and the Roman physi-
are seated in the central nervous system and brain,
cian Galen, whose localization theory came
strategyfrom
researchers should welcome opportunities
inspecting the brains of sheep. In the modern era,the contributions of behavioral neuro-
to explore
Marie- Jean-Pierre Flourens (1794-1867) localized
science.
brain function by damaging a part of the brain
But what are those contributions, exactly? The
and observing behavioral deficits, a method knownof this section draws examples from
remainder
as experimental ablation; Jean Baptisteneuroeconomics
Bouillaud and other fields to explore the
(1796-1881) located speech in the frontal lobes
potential upside of neurostrategy. Three potential
contributions
and pioneered the theory of lateral asymmetry (dif- are discussed: construct validation,
ferences in the left and right hemispheres); and and informing strategy practice.
theory testing,
Paul Broca (1824-1880) located speech in the part
of the left frontal lobe now known as Broca' s area.
In the present day, neuroscientists study brain Construct validation
localization at several levels of analysis -
molecular, cellular, systemic, and behavioral.Strategy theories often use unobserved psycho-
Behavioral neuroscience includes disciplines such logical constructs to explain observed behavior.
as neuroeconomics and neuromarketing, which For example, Fiegenbaum and Thomas (1988)
inferred the existence of loss aversion in a sam-
link activity in the brain to reputation, status,
cooperation, trust, and altruism (social neuro- ple of U.S. executives based on COMPUSTAT
science); learning, perception, memory, and deci-data. One of the ways neuroscience contributes to
sion making (cognitive neuroscience); and feel- social research is by linking unobserved mental
ings, passions, sentiments, and motivational states constructs such as loss aversion with physiological
(affective neuroscience). Clearly, some of these events in the brain. For example, it is conceiv-
areas address research problems in strategic man-able that the psychologist's concept of loss aver-
agement and suggest the possibility of linking sion would give no clear pattern of brain activity
strategy and neuroscience. or would give different patterns of brain activity
The case for neurostrategy relies on strategy'sunder conditions regarded as theoretically simi-
long-standing emphasis on general managers. Thelar. Tom et al. (2007) investigated this question
Academy of Management defines business pol- and found evidence that loss aversion is neurally
icy and strategy as 'the field concerned with theencoded in the striatum and ventrolateral prefrontal
roles and problems of general managers and thosecortex (PFC). Such evidence does not prove the
who manage multibusiness firms or multifunc-existence of a mental state called 'loss aversion;'
tional business units.' Nag, Hambrick, and Chenhowever, in combination with behavioral findings,
(2007: 944) defined strategy as 'the major intended it provides prima facie support for the construct
and emergent initiatives taken by general man- validity of loss aversion and facilitates further
agers on behalf of owners, involving utilization of hypothesis development in prospect theory (Fox
resources, to enhance the performance of firms in and Poldrack, 2009; Hsu et al, 2009; DeMartino,
their external environments.' Camerer, and Adolphs, 2010).
Strategic management rests on the assumption Another important mental construct in behav-
that the thoughts, feelings, and social relations of ioral strategy is willingness to pay. A consumer's
Copyright © 2011 John Wiley & Sons, Ltd. Strat. Mgmt. J., 32: 1484-1499 (2011)
DOI: 10.1002/smj
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1486 Т. С Powell
social psychology,
willingness to pay derives from perceptions of sub- theorists debated for many
jective value or of differentiation years
in the firm'speople's mental images are mainly
whether
products and services. In strategic pictorial or language based. The debate could
management,
not be of
willingness to pay is essential to theories resolved
com-using traditional methods, but
petitive advantage, such as the resource-based
researchers using fMRI and brain lesioning showed
view, which explain the excess of willingness to
that mental images are formed in the visual cor-
pay over the firm's opportunity costs. Is will- the pictorial theory (Willingham
tex, supporting
ingness to pay a valid psychological and Dunn, 2003). In economics, Camerer (2008)
construct?
Research in neuroeconomics has linked arguedwilling-
that neural evidence may offer the best
ness to pay with specific regions of the of
means brain,
reconciling theories of ambiguity aver-
implicating the ventromedial PFC in sionthe neural
- that is, the reluctance to choose when pay-
encoding of willingness to pay across offs or probabilities
a wide spec- are ambiguous. According to
Camerer (2008:
trum of products, activities, and experimental con-372), 'the point of such tests is not
ditions, including the valuation of junk food, cash,
to establish the neuroscience of ambiguity-aversion
and charitable contributions (Padoa-Schioppa andthat may interest neuroscientists).
per se (although
Assad, 2006, 2008; Chib et al, 2009; Plassmann, The point is to use brain evidence to adjudicate
O'Doherty, and Rangel, 2007; Hare et al, 2010). empirically among theories which are particularly
The findings show that subjective valuation uses difficult to distinguish using the market-prediction
a common neural currency, providing prima facie test (for ordinary types of data).'
evidence of the construct validity of willingness A key research topic in behavioral strategy is
to pay. causal attribution, and many research questions
In social psychology, Willingham and Dunn remain open (Staw, 1975; Bettman and Weitz,
(2003) argued that neural evidence can help estab- 1983; Salancik and Meindl, 1984). For example,
lish the separability of mental constructs. For it is unclear whether self-serving attributions stem
example, many psychologists regarded aggres- from errors in information processing, the need for
sion and passivity as extremes on one spectrum self-esteem, or deliberate impression management
of behavior, but others regarded them as sepa- (Powell et al, 2006). Brain research on attribu-
rate constructs. The debate could not easily be tion is still in its infancy, but an fMRI study
resolved by traditional means, but fMRI evidence by Harris, Todorov, and Fiske (2005) found that
showed that decisions to approach and withdraw dispositional attribution (the fundamental attribu-
engaged different parts of the brain, providing sup- tion error) recruits brain regions similar to those
port for the latter view. Similarly, Amodio and of mentalization, suggesting that people explain
Devine (2006) showed that prejudice and stereo- causation by mentalizing the views of human
typing, although conceptually related, involved dif- actors. Neural evidence also shows that differences
ferent neural activations; Ersner-Hershfield, Wim- in American and Asian attributions (Americans
mer, and Knutson (2009) showed that tempo- tend to make more dispositional attributions) are
ral discounting increased as people differentiated linked to cultural differences in automatic and con-
between present and future selves; and neural trolled processing (Mason and Morris, 2010). Neu-
evidence showed that racism and sexism acti- ral research on attribution needs further attention
and offers a promising method for explaining the
vate different parts of the brain, suggesting differ-
ent psychological foundations (Dovidio, Pearson,
psychological foundations of attributional errors.
Many researchers have examined the escala-
and Orr, 2008). Given the prevalence of bipolar
tion of commitment to failing strategies (Staw,
constructs in strategic management - exploration-
1981; Zajac and Bazerman, 1991), but its psycho-
exploitation, cost-differentiation, cooperation-
logical
competition - strategy researchers may find that motivations remain unclear - for example,
escalation
neuroscience offers new ways of establishing con- could stem from attribution errors, jus-
struct validity and separability. tifying past commitments, the need for decision
consistency, or a genuine expectation of future
payoffs (Schwenk and Tang, 1989). Using neu-
Theory testing
ral evidence, Campbell-Meiklejohn et al (2008)
found
In some circumstances, neural evidence may that escalations of commitment correlated
help
with in
adjudicate theoretical debates. For example, brain activity in areas of medial PFC and
Copyright © 201 1 John Wiley & Sons, Ltd. Strat. Mgmt. /., 32: 1484-1499 (201 1)
DOI: 10.1002/smj
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Neurostrategy 1487
anterior cingulate cortex consistent with a genuine known that dlPFC encodes uncertainty and updates
expectancy of positive rewards. They also found experience with new facts and that the insula reg-
that loss chasing had a strong appetitive compo- isters negative emotions associated with taste and
nent, not unlike the cravings of cocaine depen- odor, particularly disgust. Together, the findings
dency. Decisions not to escalate involved cortical suggested that low offers in the ultimatum game
areas associated with uncertainty avoidance and induce neural conflict between executive cognition
disgust, suggesting that escalation involves at least in PFC and visceral disgust in the insula, mediated
two separate neural systems. The debate is not yet by information processing in the ACC.
resolved, but neural evidence will play a key role
in testing alternative explanations.
Informing strategy practice
In some cases, neuroscience has assisted both in
construct validation and theory testing. For exam- Practitioners in applied fields like law, market-
ple, behavioral economists have used games such ing, and politics have begun to integrate neuro-
as prisoner's dilemma and the ultimatum game to science with management and professional prac-
study the role of trust and social norms in compet- tice. Lawyers use brain scans to show the mental
itive interactions. In the ultimatum game (Giith, capacities of defendants, and jury consultants use
Schmittberger, and Schwarze, 1982), player A is neural evidence to predict punishment and retri-
given $10 to divide in some proportion between bution in jury decisions (Samson, 2007). Neuro-
player A and player B, and player В can then marketing consultants use bran scans to evalu-
accept or refuse the proposal. For example, player ate consumers' cognitive and emotional responses
A may propose to keep $8 and give $2 to B. If to product features, packaging, and promotional
В accepts, A gets $8 and В gets $2; if В refuses, campaigns (Knutson et al, 2007; McClure et a/.,
both players get nothing.1 2004). Neural studies of politically conservative
A review of experimental results for the ultima- and liberal voters enable candidates to target vot-
tum game found that, on average, player A offered ers' cognitive orientations (Westen et al, 2006;
more than $4 to player В and if the offer was less Knutson et al, 2006; Amodio et al, 2007).
than $2, В refused about half the time (Camerer, Can neuroscience inform strategy practice? One
2003). These results support the behavioral view area of potential contribution is behavioral self-
that people do not act out of pure economic self- control (Hare, Camerer, and Rangel, 2009). Behav-
ioral economists have long noted that decision
interest, but also take account of social norms and
fairness. However, behavioral experiments could makers behave as though they have multiple
not establish the psychological validity of moti- selves - for example, a reflective and fairly ratio-
vations like punishment and fairness or establish nal 'planner-self with long time horizons and an
clear links between these motivations and observed impulsive and unreflective 'doer-self with lim-
behavior. For example, it was unclear whether sub- ited capacity for delayed gratification (Thaler and
jects refused low offers out of revenge, disgust, or Shefrin, 1981; Schelling, 1984; Ainslee, 1975).
perceived injustice. In economics, multiple-selves models have been
In a widely cited study, Sanfey et al. (2003) used to explain addiction, procrastination, and self-
used fMRI scans to observe brain activity in 19 binding commitments (Elster, 1985; Hoch and
participants in 30 rounds of an ultimatum game. Loewenstein, 1991). In general management deci-
In the fMRI analysis, subjects who received low sions, poor self-command manifests in problems
offers showed increased activity in three areas of like temporal myopia, excessive risk taking, eth-
the brain: dorsolateral PFC, anterior cingulate cor- ical malfeasance, and escalations of commitment
tex (ACC), and the anterior insula. The magnitude (Levinthal and March, 1993). In the firm as a
of insula activations increased with the perceived whole, poor self-command gives rise to costly
unfairness of the offers and was greater for unfair organization structures, controls, and incentives
offers from humans than from computers. It is (Postřel and Rumelt, 1992).
Multiple-selves theories are consistent with gen-
eral frameworks of neural organization, such as
1 If A is purely self-interested and believes В is the same, A the triune brain model, and automatic (X-system)
will propose a large sum for A and just enough for В so that
B's share is positive- that is, $9.99 to A and $.01 to B. If В is versus reflective (C-system) processing. The ques-
purely self-interested, В will accept any positive offer. tion for strategy practice is whether executives can
Copyright © 201 1 John Wiley & Sons, Ltd. Strat. Mgmt. J., 32: 1484-1499 (201 1)
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1488 Т. С. Powell
learning,
control the C-system in a way that down and emotional processing - associated
regulates
with cognitive
negative emotions in X-system structures like the mindfulness. In psychology, mind-
fulness
amygdala. Neural evidence is beginning implies the capacity to override auto-
to emerge,
and three areas - affect labeling, reappraisal, matic cognitionand
by engaging with alternative points
mindfulness - have attracted the most attention. of view (Langer, 1997). In organization studies,
Some psychologists believe that people can con-mindfulness does not imply the denial of routines
trol negative feelings by the technique of 'affector automatic cognition, but the capacity to deploy
labeling' - that is, by writing their negative feel-
them in strategic context (Weick, Sutcliffe, and
ings on paper (Wilson and Schooler, 1991). How-Obstfeld, 1999; Levinthal and Rerup, 2006).
ever, the underlying psychological mechanisms Research on mindfulness has grown dramati-
of this method remained unclear. Neuroscience cally in recent years, and has produced a subindus-
has begun to shed new light on the neural ori-try of popular books, institutes, and executive sem-
gins and impacts of affect labeling. For example,
inars (Carroll, 2007). In a review of theory and
Hariri, Bookheimer, and Mazziotta (2000) foundresearch, Brown, Ryan, and Cresswell (2007) con-
that affect labeling reduced activity in the amyg-
cluded that clinical and experimental mindfulness
dala, and Lieberman et al. (2007) found that writ-
interventions nearly always improve short-term
ing negative emotions on paper activated an area of
cognition and well-being, but that further research,
PFC (right ventrolateral PFC) which, in turn, led
withto the aid of brain scanning and other neural
a dampening of negative response in the amygdala.
methods, is needed to establish their lasting effects.
Moreover, studies show that affect labeling is more
Neuroimaging studies so far suggest that, whereas
effective than other techniques. For example, try-
control subjects engage brain regions associated
ing to suppress negative emotions does not dampen
with subjective emotional response, trained mind-
the amygdala, and talking about negative emo-
fulness practitioners engage regions such as dor-
tions can make the situation worse by heightening
solateral PFC and somatosensory cortex, which
arousal in the amygdala, insula, and cingulatesupport
cor- emotional regulation and external sense
tex (Goldin et al, 2008; Ochsner and Gross, 2005;
perception (Farb et al, 2007; Färb etal, 2010).
Gross and John, 2003). Neural research will play a key role in estab-
These results are suggestive, but affect labeling
lishing whether managers can improve long-term
does not address the deep and persistent emotional
emotional regulation through learned mindfulness
pressures facing senior managers in large organiza-
(Rock, 2009).
tions. A more substantial method of self-regulation
involves reframing problems into new emotional
contexts - for example, reframing a new market
THE CASE AGAINST
entrant as both threat and opportunity, or view-
NEUROSTRATEGY
ing global expansion from the perspective of the
host country. This method, known as reappraisal,
allows people to detach themselves from anxi- Many observers predict a bright future for inte
eties, resentments, and other negative emotions disciplinary neuroscience. In law, Chorvat
McCabe
that inhibit creative problem solving (Gross, 1998). (2004: 1735) predicted that neuroscie
will 'tell us how to significantly enhance com
Reappraisal involves more complex mental opera-
ance with law at a minimal cost and to encour
tions than affect labeling (Lieberman et al, 2007),
and neural studies show that reappraisal engages forms of social interaction. This research
better
more areas of PFC, while down-regulating amyg-will probably completely change the way we view
nearly every area of law.' In economics, Zak
dala arousal using right ventrolateral PFC (Ochsner
et al, 2004; Schaefer et al, 2003). (2004: 1746) argued that "neuroeconomics pro-
Executive judgment derives from experience, vides a unified framework to measure physiolog-
intuition, tacit knowledge, emotional maturity,ical
andactivity during the process of choice, and in
sensitivity to ambiguity and context (Vickers, doing so opens a window into human nature.' In
1965; Priem and Cycyota 2001; Tichy and Ben- executive leadership, Rock and Schwartz (2007:
nis, 2007; Kahneman and Klein, 2009). Weber 2-3) wrote that 'scientists have gained a new, far
and Johnson (2009) linked judgment to a cluster more accurate view of human nature and behav-
of psychological processes - memory, attention, ior change. . .Managers who understand the recent
Copyright © 201 1 John Wiley & Sons, Ltd. Strat. Mgmt. J., 32: 1484-1499 (2011)
DOI: 10.1002/smj
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Neurostrate gy 1489
breakthroughs in cognitive science can lead and and the second-order constructs of social psy-
influence mindful change.' chology that have first-order constructs embedded
in them (e.g., stereotyping, conformity). There is
At the same time, some social scientists remain
unconvinced. For example, Gul and Pesendorfer no 'stereotyping lobe' in the brain, even though
stereotyping remains an essential construct in
(2008) argued that neuroscience cannot test eco-
nomic models because economic models make social psychology. By analogy, researchers in neu-
rostrategy will not find brain regions devoted to
no predictions about the brain. Economists typ-
ically concern themselves with observed condi-market entry or resource allocation. According to
tions and choices - for example, the impact ofWillingham
a and Dunn (2003: 668), 'the concepts
that social psychologists use have a theoretical
tax increase on savings - and not with interven-
integrity
ing processes. In summarizing the challenge fac- of their own and should not be aban-
ing neuroeconomists, Bernheim (2009: 38) argueddoned in favor of constructs that may be local-
izable but that will not be functional in a social
that 'most economists are not convinced by vague
theory. . .Social psychology should reserve its right
assertions that a deeper understanding of decision
making processes will lead to better models of to develop theoretical constructs that may not be
localizable.'
choice.'
If strategy constructs do not map conveniently
Similar suspicions could be raised about neu-
onto the brain, there is a risk that neurostrategy
rostrategy. It could be argued, for example, that
could divert scarce financial and human resources
neurostrategy cannot answer strategy questions
from more productive uses. Dovidio et al. (2008)
because strategic management asks no questions
argued, for example, that large investments in neu-
about the brain. On the other hand, such objec-
roimaging research on racial discrimination can
tions seem to beg the main question, which is divert social researchers from macro-level stud-
whether strategy should be asking questions about
ies of racism's cultural and social origins. The
the brain. Moreover, the analogy from economicsauthors also cautioned social scientists not to be
to strategy is imperfect. Strategy researchers have
seduced by the impressive explanatory reduction-
always been concerned with intervening decision
ism of hard science, arguing that neural data, espe-
processes, giving them equal weight with strate-
cially high-resolution brain scans, have a presen-
gies and outcomes (Hofer and Schendel, 1978;tational allure that masks logical inconsistencies.
Fredrickson and Mitchell, 1984). If neuroscience
The authors cited experiments by Weisberg et al.
gives genuine insight into the mechanisms of(2008) in which researchers described psychologi-
strategic choice, then it has direct relevance tocal phenomena to neuroscience students and naïve
strategy research.
subjects and then explained them using either irrel-
A more serious concern is that neuroscience is evant neuroscience data or no neuroscience data.
reductionist and, therefore, unhelpful in explain- Both the students and naïve subjects found irrel-
ing collective behavior. Although strategic man- evant neural data more convincing than no neural
agement deals with general managers and other data.
individuals, most of its key phenomena - market A significant problem in data interpretation is
entry, acquisition, international expansion, etc. - reverse inference: the practice of using neural mea-
occur at the level of the firm, strategic group, sures such as blood oxygénation levels to infer
or industry. Strategy has traditionally taken the mental states for which a particular region of the
firm and industry as its primary units of anal- brain is 'known' - for example, using amygdala
ysis (Rumelt et al., 1994), and its leading theo- signals to infer fear or insula signals to infer dis-
retical influences - industrial organization, insti- gust. As Poldrack (2006) noted, the fact that fMRI
tutional theory, the resource-based view, evolu- experiments elicit a BOLD signal in the brain does
tionary views, etc. - make few or no assumptions not imply that subjects actually experienced psy-
about individual psychology. chological events associated with that part of the
Another aggregation problem is that strategy brain.2 For example, the amygdala is associated not
constructs may not be localizable in the brain. In
social psychology, Willingham and Dunn (2003)
2 BOLD is the acronym for 'blood oxygénation level dependent
distinguished between the first-order constructs effect,' the ratio of oxygenated to deoxygenated blood cells,
of cognitive psychology (e.g., attention, memory) which is the quantity measured in fMRI scans.
Copyright © 201 1 John Wiley & Sons, Ltd. Strat. Mgmt. J., 32: 1484-1499 (201 1)
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1490 Т. С. Powell
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Neurostrategy 1491
guessing. . .that is, that these forms of words make particular has acted as a silent benefactor to behav-
no sense?'3 ioral strategy.
In future years, strategy researchers will find that
neuroscience is increasingly called upon to resolve
THE FUTURE OF NEUROSTRATEGY debates in behavioral strategy. Behavioral strate-
gists have good reasons to familiarize themselves
The sometimes vehement tone of the neuro-
with the relevant neuroscience and to explore
how neural methods can assist in construct valida-
skeptics can be interpreted either as a reaction
tion, theory testing and improved strategy practice.
against exaggerated claims in the scientific and
Many strategy researchers who focus on firms and
popular press or as evidence that neuroscience has
industries may prefer to take a 'wait and see' atti-
captured the attention of social scientists and must
tude toward brain research, and this is understand-
be taken seriously. In either case, the debate will
able. But researchers who do not keep informed of
not be resolved by arguments. In the short run,
developments in behavioral neuroscience will find
neuroscience will continue to ride a steep growth
themselves facing theoretical claims and empirical
curve in the social sciences, and its long run contri-
data they do not understand.
butions will be assessed on a timescale of decades.
Some behavioral strategists may want to become
What does it all mean for strategic manage-
actively involved in empirical neuroscience. Link-
ment? Taking an optimistic view, one could argue
ing neuroscience with strategic management
that strategy is well positioned to benefit from
involves a steep learning curve and long lead
neuroscience for two reasons. First, behavioral
times in resource accumulation and interdisci-
strategy has always taken a cognitive view of
plinary relationship building. Before applying neu-
executive judgment and decision making; whether
ral evidence to strategy problems, researchers need
researchers focus on strategic decision biases or
to avoid duplicating prior efforts by understand-
cognitive schema, neural evidence can be inter-
ing the current state of play in neuroeconomics
preted through existing theoretical paradigms. Sec-
and related fields. At the same time, they need to
ond, there is a lot of neural evidence available.
create links with researchers in disciplines like eco-
Strategy researchers interested in competitive posi-
nomics and experimental psychology, which have
tioning have access to neural studies on social
strong communities of neuroscience expertise and
norms and punishment in competitive interactions
cumulative research agendas in behavioral neuro-
(Knoch et я/., 2010); researchers interested in deci- science.
sion making under risk have access to studies Behavioral strategists should also familiarize
on the roles of trust (Baumgartner et al, 2009) themselves with research methods in neuroscience.
and reputation (Izuma, Saito, and Sadato, 2008); Although much of the attention has fallen on brain
researchers interested in loss aversion and refer-
imaging, neuroscientists use a wide range of tech-
ence point framing have access to neural data nologies and methods. For example, transcranial
on prospect theory (Fox and Poldrack, 2009). In magnetic stimulation (TMS) temporarily disrupts
short, behavioral neuroscience has left a large
neural firing in a specific part of the brain, allow-
trove of neural evidence to be mined for insights
ing researchers to determine whether the region
in strategic management, and neuroeconomics in is causally necessary to the task at hand. Behav-
ioral neuroscientists increasingly use multimethod
3 Bennett and Hacker's (2003) critique draws on a comment by designs - for example, Blankenburg et al. (2010)
Wittgenstein (1958: section 281) in Philosophical Investigations: combined TMS with fMRI scanning to study the
'Only of a human being and what resembles (behaves like) a
effects of parietal cortex on attention processing in
human being can one say: it has sensations; it sees, is blind;
hears, is deaf; is conscious or unconscious.' Not all predicates the visual cortex, and Hsu et al. (2005) combined
are limited in this way - e.g., it is not logically absurd to fMRI scanning with a lesion method to study risk
claim that a person is sunburned and her arm is sunburned; or
and ambiguity. It is also possible to link fMRI
that she is in Europe and her brain is in Europe. The critique
applies to psychological predicates: 'it makes no sense to ascribe
evidence with non-neural methods, such as hor-
psychological predicates (or their negations) to the brain, save mone ratios or electromyography (EMG), which
metaphorically. . .The resultant combination of words does not detects electrical potentials in muscle tissue - for
say anything that is false; rather, it says nothing at all, for it
lacks sense' Bennett and Hacker (2003: 71). For a materialist example, Chapman et al. (2009) found that moral
reply, see Dennett (2007). disgust in an ultimatum game activated the same
Copyright © 201 1 John Wiley & Sons, Ltd. Strat. Mgmt. J., 32: 1484- 1499 (201 1)
DOI: 10.1002/smj
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1492 Т. С. Powell
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Neurostrate gy 1493
correlates of outgroup discrimination, conformity, and the corresponding mental states can only be
and related phenomena (Amodio, 2008). inferred.
Strategic management researchers focus on This is the kind of strategy problem where neu-
group processes that influence strategic decisionsroscience can make a difference. For example, it
in firms. In this area, strategy researchers have is possible to modify a trust game so that, rather
discipline-specific expertise and a set of distinc- than bargaining for themselves, subjects bargain on
tive research questions. For example, decisions inbehalf of one or more constituents who can either
large firms rarely fall to a lone decision maker, be known to the subject (for tests of social iden-
but involve a top management team comprised tification) or unknown (for tests of accountability)
of senior executives representing product divisions and who either share in the subject's payoffs or
or functional areas (Hambrick and Mason, 1984).do not share. The research design goes beyond
These executives bargain for resources and iden- existing trustee-based studies, involving a stylized
tify in various ways with the goals of the firm, the version of behavioral experiments on constituent
subunits to which they are accountable, and theirrepresentation, with repeated iterations and modi-
fications for fMRI scanning. Previous studies have
own private aspirations. This makes it difficult for
established a baseline for the neural encoding of
top management teams to reach optimal decisions
for the firm and raises key questions about strategy
cooperation, competition, and trust in interactive
experiments using prisoner's dilemmas, ultimatum
process and practice.
games, and trust games (Fehr and Camerer, 2007),
Some of these questions have been studied in
and results can be compared with these baselines.
behavioral experiments, such as how top manage-
For example, it is known that the neural processing
ment team members juggle the interests of the
of subjective rewards gives a different pattern of
firm with those of the divisions or functions they
brain activations from the pattern associated with
represent. Blake (1959) called this the problem
moral reasoning, or of regarding another person as
of 'organizational statesmanship,' or 'loyalty ver-
part of the self (Dovidio et al, 2008). The problem
sus logic' (Blake and Mouton, 1961), and social
of constituent representation has many applications
psychologists ran many experiments to examine
in strategy and organization, and neural methods
what happens when people try to optimize a joint
offer a viable way of advancing this stream of
decision while bargaining for resources on behalfresearch.
of constituents. For example, Blake and Mouton
(1961) and Benton and Druckman (1974) found
Attention
that people bargain more competitively when rep-
resenting constituents, and Duck and FieldingAttention is a shared topic of interest in strategic
(2003) found that constituents prefer representa- management (Ocasio, 1997) and cognitive neu-
tives who vigorously defend the group's position, roscience (Posner, 2004). In strategy, attention
even at the expense of other groups or the joint raises questions in problem identification (Star-
optimum. buck and Milliken, 1988; Lyles, 1981); prob-
These findings are interesting, but would be lem solving (Newell and Simon, 1972; Bower,
more useful to strategy researchers if they showed 1967); resource allocation (Bower, 1970; Ansoff,
the mental states of constituents and representa- 1965); strategic issue diagnosis (Dutton, Fahey,
tives. This would allow researchers not only to and Narayanan, 1983); and organizational mind-
explain what happened, but to predict behavior fulness (Levinthal and Rerup, 2006; Weick and
in experimental manipulations and real decision Sutcliffe, 2006). Strategy researchers interested in
contexts. A top management team member might executive or group attention will find that these
show loyalty to constituents for many reasons: topics offer many points of contact with cognitive
psychological identification with subunit goals, neuroscience.
perceived accountability to constituents, or dis-
gust with the firm; and constituents might choose
Exploration and exploitation
subunit loyalty over firm statesmanship out of
self-interest, social comparison, ingroup bias, or Exploration and exploitation have been studied in
identification with their representative. These con- animal, machine, and human learning (Krebs and
ditions can be hard to adjudicate behaviorally, Kacelnik, 1984; Kaelbling, Littman, and Moore,
Copyright © 2011 John Wiley & Sons, Ltd. Strat. Mgmt. J., 32: 1484-1499 (2011)
DOI: 10.1002/smj
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Neurostrate gy 1495
Copyright © 2011 John Wiley & Sons, Ltd. Strat. Mgmt. J., 32: 1484-1499 (2011)
DOI: 10.1002/smj
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1496 Т. С. Powell
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