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International Journal of Management Reviews, Vol. 16, 340–364 (2014)

DOI: 10.1111/ijmr.12023

The Influence of Context on the Strategic

Decision-Making Process: A Review of
the Literature
Neil Gareth Shepherd and John Maynard Rudd
Marketing Group, Aston Business School, Aston University, Aston Triangle, Birmingham B4 7ET, UK
Corresponding author email: n.shepherd@aston.ac.uk

This paper critically reviews the strategic decision-making process literature, with a
specific focus on the effects of context. Context refers to the top management team,
strategic decision-specific characteristics, the external environment and firm charac-
teristics. This literature review also develops an illustrative framework that incorpo-
rates these four different categories of contextual variables that influence the strategic
decision-making process. As a result of the variety and pervasiveness of contextual
variables featured within the literature, a comprehensive and up-to-date review is
essential for organizing and synthesizing the extant literature to explicate an agenda for
future research. The purpose of this literature review is threefold: first, to critically
review the strategic decision-making process literature to highlight the underlying
themes, issues, tensions and debates in the field; second, to identify the opportunities
for future theory development; and third, to state the methodological implications
arising from this review.

Introduction involves information gathering, developing alterna-

Strategic decisions (SDs) can be ill-structured, non-
routine, uncertain and pervasive. They cut across
organizational functions, entail a significant financial
outlay, and have profound, long-term implications
for the organization (Eisenhardt and Zbaracki 1992;
Mintzberg et al. 1976; Shrivastava and Grant 1985).
While SDs are not always entirely different from
other organizational decisions, they ‘are towards one
end of a continuum, at the other end of which are the
trivial everyday questions’ (Hickson et al. 1986, p.
27). The strategic decision-making process (SDMP)
is described as a set of different characteristics, such
as rational, comprehensive, political; or as a
sequence of activities (Goll and Rasheed 2005) that
The authors would like to thank Kamel Mellahi, Editor-in-
Chief, and the anonymous reviewers for their helpful and
insightful comments on earlier drafts of this work.
tives and choosing among alternatives (Wally and
Baum 1994). Strategic decision-making process
research is of great importance, because the insights
that it provides can improve the effectiveness of SDs
made by executives, which ultimately contribute to
the success of organizations.
Context refers to the top management team
(TMT), strategic decision-specific characteristics,
the external environment and firm characteristics
(Sharfman and Dean 1997b), and the lack of a sys-
tematic treatment of contextual variables has resulted
in ‘an incomplete, and perhaps inaccurate, picture of
SDM (strategic decision-making)’ (Hough and
White 2003, p. 488). Most existing SDMP studies
have adopted an incremental approach to theory
development, and focused only on a limited number
of contextual variables. This has resulted in a frag-
mented understanding, and left SDMP scholars
unable to identify the key contextual influences on

© 2013 British Academy of Management and John Wiley & Sons Ltd. Published by John Wiley & Sons Ltd, 9600 Garsington
Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA
Context in Strategic Decision-Making
the SDMP (Papadakis and Barwise 1997). Inconsist-
encies among existing studies highlight the need for
future research to pay closer attention to context
(Elbanna and Child 2007b). For example, the effects
of SDMP comprehensiveness on organizational
performance remain unclear, with Fredrickson and
Mitchell (1984) finding negative effects, and
Bourgeois and Eisenhardt (1988) finding positive
effects. Closer scrutiny of context will reveal insights
that can help to reconcile such contradictory results.
Elbanna (2006, p. 14) emphasizes the need for this
review, stating that ‘we still know little about the role
of other contextual variables in the SDMP’, and that
‘a next logical step in this line of critical review
would be to review the role of contextual variables in
the SDMP’. Moreover, a priority for SDMP research
is to identify the extent to which variance in the
characteristics of the SDMP is explained by the
context in which it takes place (Papadakis et al.
1998; Rajagopalan et al. 1997). Similarly, Elbanna
and Child (2007b) and Pettigrew (2003) emphasize
that the rationality of the SDMP cannot be fully
understood without comprehension of its context.
Furthermore, it is vitally important to examine inter-
actions between contextual variables and SDMP
characteristics, because such interactions have sig-
nificant implications for SDMP outcomes, such as
the overall quality of a decision (Papadakis et al.
2010).
This paper critically reviews the SDMP literature
with a specific focus on the effects of contextual
variables, to provide an in-depth analysis of the
underlying themes, issues, tensions and debates in
the domain, and to identify priorities for future
research, together with the important methodological
implications. An illustrative framework of the con-
textual variables and their relationships with SDMP
characteristics and outcomes is presented (Figure 1).
The illustrative framework provides a scheme around
which this review is structured. Such a review
scheme allows the systematic identification of
themes and contributions, and allows the similarities
and discrepancies from such a diverse set of studies
to be discerned (Ginsberg and Venkatraman 1985).
Approach to the review
To ensure inclusiveness with regard to the literature
reviewed, this paper adopts an ontological framework
whereby the concept of a decision is viewed as valu-
able for understanding aspects of organizational
© 2013 British Academy of Management and John Wiley & Sons Ltd.
341
behaviour (Miller 2010). However, certain authors
(e.g. Mintzberg and Waters 1990) suggest that exam-
ining decisions can be a hindrance to understanding
organizational processes, because individual deci-
sions can be troublesome to identify. Actions can
occur without a formal decision having been made,
and organizations can take a particular course of
action in response to the external environment, rather
than as a result of a systematic decision process.
Ultimately, whether decisions are suitable subjects
for empirical enquiry or not, and whether researchers
can obtain objective knowledge of decision pro-
cesses, rests upon the ontology of the researcher
(Pettigrew 1990). The position taken in this paper is
that an understanding of SDMPs is possible, and is
useful for explaining differences in organizational
performance. However, such research is challenging,
in great part because of the complex influence of
context.
To conduct this review, and in keeping with
prior classifications (e.g. Papadakis et al. 1998;
Rajagopalan et al. 1993; 1997), we derived four cat-
egories of contextual variables from an extensive lit-
erature search: the TMT; SD-specific characteristics;
the external environment; and firm characteristics.
Each has either a direct effect on the characteristics
of the SDMP or a moderating effect on the relation-
ship between SDMP characteristics and SDMP out-
comes (see Figure 1). Some studies also specify
the direct effects of contextual variables on SDMP
outcomes.
Variables pertaining to each of the four categories
were identified through keyword searches of top
peer-reviewed academic journals in the ProQuest,
EBSCO, Emerald Full Text, JSTOR Business,
Science Direct and PsycArticles databases. Each
article was then allocated to one of the four catego-
ries of contextual variables. To ensure reliability, the
classification decisions were independently verified
by a senior academic familiar with the subject. To
assure the completeness of the search, the Social
Science Citation Index Journal Impact Factor was
used to identify top peer-reviewed journals that
commonly address the topic of strategic decision-
making; these journals were then searched indivi-
dually for articles featuring contextual variables.
Manual searches of multiple reference lists were also
conducted, and an electronic library catalogue was
searched to identify relevant books.
The search procedures generated a substantial
working list of articles. This list was narrowed to
specifically relevant articles by applying three strict
 342

Contextual Variables SDMP Characteristics SDMP Outcomes

Top Management Team
(Table 1)
• Demographics (tenure,
education, diversity, age)
• Cognitive diversity/style
• Personality
• Other (meta-cognition, potency,
polychronicity, aggressive
• Rationality
philosophy)
• Comprehensiveness
• Political behaviour/politicization
Strategic Decision Specific • Intuition/intuitive synthesis
Characteristics
• Lateral communication
(Table 2) • Effectiveness
• Matter • Hierarchical decentralization
• Quality
• Uncertainty • Problem solving dissension
• Speed
• Motive
• Use of financial reporting
• Importance • Commitment
• Time pressure • Rule formalization
• Erratic strategic
• Flexibility
decisions
• Agreement about comprehensiveness
The External Environment • Organizational
(Table 3) • Change in comprehensiveness Performance
• Dynamism • Conflict • Decisiveness
• Velocity
• Participation • New product
• Munificence
• Hostility • Level of aggression performance/quality
• Instability • Tolerance of ambiguity/uncertainty
• Uncertainty
• Assessment/perceptions of risk
• Technocratic
Firm Characteristics
(Table 4) • Sporadic
• Power centralization • Fluid
• Structure
• Constricted
• Size Direct effects
• Performance/Slack resources
• Other (external control, Moderating effects
corporate control, formal
planning systems)

Figure 1. Contextual variables in SDMP research: an illustrative framework of extant research

N.G. Shepherd and J.M. Rudd

© 2013 British Academy of Management and John Wiley & Sons Ltd.
Context in Strategic Decision-Making
criteria, and articles were included in the final list
only if they: (i) explicitly examine the direct effects
of a particular contextual variable on SDMP charac-
teristics, or (ii) explicitly examine the effects of a
particular contextual variable on the relationship
between SDMP characteristics and SDMP outcomes,
or (iii) explicitly examine the effects of a particular
contextual variable on SDMP decision-level out-
comes (e.g. decision speed, decision quality).
Articles were excluded if the main focus was not the
process of strategic decision-making.
This review is structured as follows. First, we criti-
cally review the empirical literature relating to each
of the four categories of contextual variables to high-
light the underlying themes, issues, tensions and
debates in the field. We structure this review accord-
ing to studies examining the direct effects of contex-
tual variables on SDMP characteristics, to those
examining the direct effects on SDMP outcomes and
to those examining the moderating effects of contex-
tual variables on the relationship between SDMP
characteristics and outcomes. Second, we discuss the
priorities for future theory development, and, third,
we state the methodological implications arising
from this review.
The top management team
The TMT is the dominant coalition of the most senior
executives who have responsibility for setting the
overall direction of the organization (Hambrick and
Mason 1984). Articles reviewed here are predicated
on the concept of bounded rationality, whereby SDs
are the product of behavioural influences, rather than
economic utility maximizing processes (Cyert and
March 1963; March and Simon 1958). Bounded
rationality acknowledges inherent cognitive limita-
tions of decision-makers that restrict their ability to
collect and analyse all relevant information and iden-
tify all possible alternatives (Griffith et al. 2012).
The TMT variables reviewed in this section include
demographic (tenure, education and diversity) and
psychometric variables (cognitive diversity, cognitive
style and personality) (see Figure 1 and Table 1). As
well, TMT variables feature predominantly as ante-
cedents of SDMP characteristics and outcomes, with
no studies examining their moderating influence on
the SDMP characteristics–outcomes relationships.
In the current section, we review articles that
examine the direct effects of TMT demographic and
psychometric variables on SDMP characteristics, as
© 2013 British Academy of Management and John Wiley & Sons Ltd.
343
well as articles that examine the direct effects of
these TMT variables on SDMP outcomes. Consistent
with prior treatment in the literature (e.g. Papadakis
and Barwise 2002; Papadakis et al. 1998), CEO
variables are included in this section, because the
CEO is cited as the most influential TMT member
(Hambrick and Mason 1984).
Direct effects of TMT demographic variables on
SDMP characteristics
Tenure. Tenure of the TMT and the CEO,
operationalized as length of service with an organi-
zation, has been found to influence the level of
rationality, comprehensiveness and the extent of
middle management participation in the SDMP. Goll
and Rasheed (2005) found that long-tenured TMTs
adopt rational SDMPs – they engage in continuous
proactive searches, undertake extensive analysis and
conduct formal planning. Empirical evidence also
indicates that, as the tenure of the TMT increases,
so too does comprehensiveness. Fredrickson and
Iaquinto (1989) term this phenomenon ‘creeping
rationality’, and, as tenure increases, TMTs engage in
ever more thorough situation diagnosis, generation
and evaluation of alternatives, and integration of the
decision into the overall strategy of the firm.
Though middle management in organizations led
by long-tenured CEOs have a higher level of involve-
ment in the SDMP (termed hierarchical decentrali-
zation), CEO tenure does not significantly affect
other important and frequently studied SDMP char-
acteristics such as comprehensiveness (Papadakis
and Barwise 2002; Papadakis et al. 1998). Hence,
the CEO may be the most powerful member of the
TMT (Hambrick and Mason 1984), yet the effect of
CEO tenure on SDMP comprehensiveness appears to
be less influential than that of TMTs.
TMT education level. TMT education level (e.g.
high school, undergraduate degree, Master’s degree)
influences rationality and comprehensiveness in
SDMP. Highly educated TMTs are more rational in
SDM, owing to the strengthened analytical ability
that results from increased education level (Goll and
Rasheed 2005). Similarly, Papadakis and Barwise
(2002) found that highly educated TMTs are more
comprehensive in situation diagnosis, alternatives
generation and evaluation, and integrating the
decision into the firm’s overall strategy. While TMT
education level influences rationality and com-
prehensiveness, Papadakis et al. (1998) determined
 344

Table 1. A summary of empirical research examining the TMT as a contextual variable in SDMP research
Study TMT variables Methodology Findings

Sample Design Analysis

Henderson and Nutt Cognitive style 62 executives Laboratory simulation; ANOVA Cognitive style is an important factor in the decision to adopt a
(1980) hypothetical scenarios capital expansion project and the assessment of risk
Miller et al. (1988) CEO need for 77 firms with 500 or fewer Field-based; cross-sectional; Structural equation CEO need for achievement positively influences rationality
achievement employees surveying actual SDMPs modelling
Fredrickson and Executive intra-firm 159 executives from 45 firms in Field-based; longitudinal; Correlation and Changes in executive team tenure and continuity are positively
Iaquinto (1989) tenure, executive team stable and unstable hypothetical scenario-based regression associated with changes in the comprehensiveness of the
continuity environments interviews analysis SDMP
Nutt (1990) Cognitive style 79 top executives and 89 middle Laboratory simulation; ANOVA Decision style is a key factor in explaining the likelihood of
managers hypothetical scenarios taking strategic action and the risk seen in this action.
Decisions made by executives are more style dependent than
those made by middle managers. Cognitive style determines
the type of data and mode of data processing used
Nutt (1993) Cognitive style 152 executives Laboratory simulation; ANOVA Executives with a flexible style are aggressive, with a high
hypothetical scenarios tolerance for ambiguity and uncertainty
Wally and Baum CEO cognitive ability, 151 CEOs Field-based; cross-sectional; mail Structural equation CEO cognitive ability, use of intuition, tolerance for risk and
(1994) tolerance for risk, survey; hypothetical modelling propensity to act are associated positively with speedy
propensity to act, and scenario-based policy decisions
use of intuition capturing
Miller et al. (1998) TMT cognitive diversity 106 chief administrators of Texas Field-based; cross-sectional; mail Regression analysis TMT cognitive diversity has a negative effect on SDMP
hospitals, 38 CEOs and 85 survey of actual SDMPs comprehensiveness
TMTs from various industries
Papadakis et al. TMT level of education 70 SDs from 38 Greek Field study; cross-sectional; Correlation and TMT and CEO variables influence financial reporting,
(1998) and aggressive manufacturing firms semi-structured interviews; regression formalization, lateral communication, hierarchical
philosophy. CEO risk archival data; recent SDs made analysis decentralization and – only weakly – comprehensiveness in
propensity, education, by the firms the SDMP. TMT and CEO variables do not influence
and need for politicization or problem-solving dissension in the SDMP
achievement
Simons et al. (1999) TMT demographic 57 TMTs from electronic Field-based; cross-sectional; mail Regression analysis Decision comprehensiveness partially mediates the effects of
diversity component manufacturing survey; recent SD made by the job-related diversity on performance. TMT debate moderates
firms firms (strengthens) the positive relationship between TMT
diversity and comprehensiveness. Interactions between more
job-related forms of diversity and debate have stronger
associations with comprehensiveness than less-job-related
forms of diversity
Papadakis and CEO tenure, risk 70 SDs from 38 Greek Field study; cross-sectional; Correlation and CEO demographic characteristics are positively related to
Barwise (2002) propensity, need for manufacturing companies semi-structured interviews; regression hierarchical decentralization. CEO need for achievement has
achievement and archival data; recent SDs made analysis a weak and negative association with hierarchical
education. TMT by the firms decentralization. CEO risk propensity has no association
education and with the SDMP. TMT education and competitive
competitive aggressiveness are positively related to comprehensiveness
aggressiveness and lateral communication
N.G. Shepherd and J.M. Rudd

© 2013 British Academy of Management and John Wiley & Sons Ltd.
 Forbes (2005) Founder-manager age 98 founder-managers Field-based; cross-sectional; Regression analysis Firms make faster SDs when managed by older
and prior venture (entrepreneurs) of Internet on-line and mail survey; founder-managers and by those with prior venture
experience start-ups archival data; recent SDs made experience
by the firms
Goll and Rasheed TMT age, tenure, and 159 Manufacturing firms Field-based; cross-sectional; mail Regression analysis Average tenure and education level of the TMT is positively
(2005) education level survey; archival data; actual related to rationality, but average age is not
SDMPs
Context in Strategic Decision-Making

Hough and ogilvie Cognitive style 749 executives Laboratory-based behavioural Structural equation Executives who use both intuition and objective information
(2005) simulation modelling make higher quality decisions, while those who take time to
make socially acceptable decisions are indecisive and
perceived to be ineffective
Olson et al. (2007a) TMT cognitive diversity TMTs from 85 hospitals Field-based; cross-sectional; mail Regression analysis Cognitive diversity has a positive relationship with task
survey; recent SD made by the conflict, and competence-based trust strengthens this
firms relationship. Task conflict mediates the relationship between
cognitive diversity and SD understanding, commitment and
quality
Olson et al. (2007b) TMT cognitive diversity 252 Chinese executives Field-based; cross sectional; Regression analysis Cognitive diversity has a negative relationship with SD
survey; recent SD made by the commitment and quality, and the relationships are

© 2013 British Academy of Management and John Wiley & Sons Ltd.
firms moderated by affect-based and cognition-based trust
Souitaris and TMT polychronicity 129 TMTs from new technology Field-based; cross-sectional; mail Regression analysis TMT polychronicity has a positive effect on SD speed and a
Maestro (2010) ventures survey; recent SD made by the negative effect on SDMP comprehensiveness. SD speed and
firms comprehensiveness partially mediate the relationship
between TMT polychronicity and financial performance
Mitchell et al. CEO meta-cognition 64 CEOs of technology firms Field-based experiment; Conjoint analysis The SDs made by CEOs with greater metacognitive experience
(2011) hypothetical choices; mail are less erratic
survey
Clark and Maggitti TMT potency 54 TMTs of high-technology Field-based; cross-sectional; Regression analysis TMT potency is positively related to SD speed. TMT potency
(2012) companies interviews; mail survey of partially mediates the relationship between TMT experience,
actual SDMPs knowledge, interaction process and SD speed
345
346
that CEO education level affects only the use of
financial reporting information. Highly educated
CEOs make greater use of financial reporting infor-
mation in the SDMP; however, CEO education level
does not significantly influence any other character-
istics of the SDMP, such as comprehensiveness
(Papadakis and Barwise 2002; Papadakis et al.
1998).
TMT demographic diversity. TMT demographic
diversity refers to heterogeneity in the age, tenure,
experience and education in the TMT, and has only
weak direct effects on comprehensiveness – defined
as thoroughness and inclusiveness in making and
integrating SDs (Simons et al. 1999). The same
study identified that interactions between job-related
demographic diversity measures (e.g. company
tenure diversity) and TMT debate (discussions
concerning how to approach the decision) are more
significant predictors of comprehensiveness than
interactions between non-job-related diversity meas-
ures (e.g. age diversity) and TMT debate.
The findings of the studies featuring TMT and
CEO tenure, education and demographic diversity
reviewed here show that demographic variables such
as tenure and education do significantly affect char-
acteristics of the SDMP such as rationality, compre-
hensiveness, hierarchical decentralization and the
use of financial reporting information. However, job-
related TMT demographic diversity variables appear
to influence comprehensiveness more than non-job-
related demographic diversity variables. It is also
apparent that TMT and CEO demographics exert dif-
ferent influences on SDMP characteristics. Certainly,
TMT demographic variables appear to be a stronger
influence on SDMP comprehensiveness than those of
the CEO.
A lack of significant results from studies examin-
ing CEO demographics brings into question the
focus on individual CEOs for explaining SDMP
characteristics. Hambrick and Mason (1984)
acknowledge that the TMT as a unit of analysis has
more explanatory power than the individual CEO,
because tasks such as SDM are rarely undertaken
exclusively by the CEO alone, but more often are
shared between members of the TMT. Also, the con-
struct validity of demographic variables has been
questioned in the literature, prompting calls to use
direct psychometric measures of TMT cognitive and
behavioural traits (e.g. cognitive diversity instead of
demographic diversity) to enhance the validity and
explanatory capability of research (e.g. Hough and
© 2013 British Academy of Management and John Wiley & Sons Ltd.
N.G. Shepherd and J.M. Rudd
ogilvie 2005; Priem et al. 1999). While methodologi-
cally convenient, using demographic variables leaves
a ‘black box’ (Lawrence 1997) of unexplained TMT
cognitions, values and perceptions that influence
SDs.
Direct effects of TMT psychometric variables on
SDMP characteristics
Cognitive diversity. Cognitive diversity refers to
differences in the preferences and beliefs of
TMT members concerning the strategic goals and
priorities of the organization (Miller et al. 1998).
Cognitive diversity has been found to reduce com-
prehensiveness (Miller et al. 1998) and to increase
task conflict (Olson et al. 2007a). Miller et al. (1998)
found that cognitively diverse TMTs are less com-
prehensive; instead, their SDMPs are characterized
by limited brainstorming, the consideration of a
narrow range of alternatives and restricted use of
quantitative analyses. Cognitive diversity also causes
task conflict, and, when TMT members disagree
about the strategic goals and priorities of the organi-
zation, the SDMP is characterized by discord and
differences in judgment (Olson et al. 2007a). The
same study also found that, when TMT members
trust one another’s competence, the effects of cogni-
tive diversity on task conflict are stronger. Hence,
these two studies show that cognitive diversity
diminishes comprehensive analysis and the consid-
eration of multiple decision options and, instead,
gives rise to conflict and disagreement during the
SDMP.
Cognitive style. Cognitive style describes ‘how
people perceive, think, solve problems, learn, and
relate to each other’ (Hough and ogilvie 2005, p.
421). Using laboratory simulations and measuring
cognitive style by applying the Myers–Briggs Type
Indicator, Henderson and Nutt (1980) and Nutt
(1993) discovered that executive cognitive style
influenced the level of aggression, tolerance of ambi-
guity and uncertainty, and assessment of risk in the
SDMP. Nutt (1990) also used a laboratory-based
simulation, measuring the cognitive style of 79
senior executives and 89 middle managers through
the Myers–Briggs Type Indicator. The study shows
that cognitive style determines the perceived risk in
making the SD, as well as the likelihood of taking
strategic action. The study also indicates that cogni-
tive style determines the type of data and the mode of
data processing used in the SDMP. However, while
Context in Strategic Decision-Making
these studies of cognitive style highlight its potential
importance, it remains unclear how cognitive style
influences the SDMP outside laboratory conditions
in situations where multiple members of the TMT are
involved in the SDMP, rather than just one indi-
vidual. It is important for future research to deter-
mine whether the cognitive styles of TMT members
interact to reinforce a particular style, or interact
such that a balance of styles is achieved (Hough and
ogilvie 2005). Also, the effects of cognitive style on
important and frequently studied SDMP characteris-
tics, such as comprehensiveness, are unknown.
Personality. Research has examined the effects of
CEO personality on the characteristics of the SDMP,
and has produced equivocal results. Miller et al.
(1988) found that CEOs with a higher need for
achievement (desire to attain success and accomplish
difficult tasks) are more rational in the SDMP
(increased planning, systematic scanning of the envi-
ronment and having explicit strategies). However,
Papadakis et al. (1998) found no significant effects
of CEO need for achievement on any of the SDMP
characteristics. Papadakis et al. (1998) do find,
however, that CEO risk propensity (willingness to
take risks) diminishes rule formalization in the
SDMP (standardized procedures and processes), but
does not significantly affect any other SDMP char-
acteristic. Furthermore, Papadakis and Barwise
(2002) were unable to find any significant effects of
CEO need for achievement or risk propensity on any
of the characteristics of the SDMP. The contradictory
conclusions of Miller et al. (1988) and Papadakis
et al. (1998) concerning CEO need for achievement
could be attributable to differences in the size of the
organizations sampled. Miller et al. (1988) focused
on small organizations, where the influence of the
CEO is likely to be pervasive, and the average
number of employees in organizations in this sample
was 111, compared with an average number of
employees of 730 in the organizations in the
Papadakis et al. (1998) and Papadakis and Barwise
(2002) studies.
Other TMT variables. Other TMT variables fea-
tured in the literature include polychronicity and
aggressive philosophy. Souitaris and Maestro (2010)
studied TMT polychronicity, which refers to the
TMT’s tendency to move focus simultaneously and
intermittently from one task to another. The results
show that TMT polychronicity leads to faster deci-
sions, but the TMTs are less comprehensive in their
© 2013 British Academy of Management and John Wiley & Sons Ltd.
347
SDMP. Also, an aggressive TMT philosophy (deter-
mination to beat competition) has been found to
result in increased SDMP comprehensiveness,
hierarchical decentralization, rule formalization and
lateral communication (participation of major
departments) (Papadakis and Barwise 2002;
Papadakis et al. 1998).
Theory development has clearly been hindered by
the fragmented nature of the studies reviewed here,
and many have focused solely on a single SDMP
characteristic, often comprehensiveness or rational-
ity. Top management team tenure, education, demo-
graphic diversity, cognitive diversity, polychronicity
and aggressive philosophy all significantly influence
the degree of comprehensiveness. However, the
effects of the CEO on SDMP characteristics are
unclear and, while the effects of TMT demographic
variables on multiple different SDMP characteristics
have been examined (e.g. Papadakis et al. 1998),
many of the psychometric variables such as cognitive
diversity have not been subjected to such systematic
scrutiny. Hence, given the limited number of studies
examining TMT variables such as cognitive diversity,
future research may extend this line of enquiry by
studying their effects on other important and fre-
quently studied SDMP characteristics such as
political behaviour, because strong disagreement
concerning strategic issues could conceivably result
in executives’ forming coalitions and using power to
promote their own perspectives.
The research reviewed in this section raises impor-
tant questions concerning whether a focus on an indi-
vidual, such as in the studies of cognitive style, is
appropriate when the SDMP is more often a group
decision process (Hambrick 2007). Therefore, to
complement the laboratory studies on cognitive
style, field-based research focused on teams appears
necessary. Future research examining the influence
of the CEO should focus on small organizations,
where SDM power is more centralized (Miller et al.
1988).
Direct effects of TMT variables on SDMP outcomes
Cognitive style. Hough and ogilvie’s (2005) labo-
ratory experiment, using the Myers–Briggs Type
Indicator to measure executive cognitive style, shows
that cognitive style influences decision quality, deci-
siveness (the number of problems addressed) and
perceived effectiveness (team members’ perceptions
of one another’s ability to complete tasks). Accord-
ing to Hough and ogilvie’s (2005) study, executives
348
who use both intuition and objective information
make higher-quality decisions, while those who take
the time to make socially acceptable decisions are
indecisive and are perceived to be ineffective.
Other TMT variables. The field experiment using
hypothetical choices developed by Mitchell et al.
(2011) found that CEO meta-cognition (reflection on
his or her own thinking) is negatively associated with
erratic SDs (inconsistent judgments that shape the
direction of the firm). It follows, therefore, that
CEOs who reflect on and attempt to control their
cognitive processes are likely to make more consist-
ent SDs. Also, Olson et al. (2007b) show that cogni-
tive diversity has a negative effect on SD quality and
commitment. Top management teams that disagree
about the strategic goals and priorities of the organi-
zation, therefore, are less likely to be committed to a
SD, and tend to make SDs that fail to achieve the
desired results. However, these effects are reduced
for TMTs who trust one another’s ability and
competence.
As well, several studies have examined the effects
of TMTs and CEOs on the speed of SDM, that is,
how rapidly all aspects of the SDMP are executed,
from the initial consideration of alternative courses
of action to the final commitment to act (Forbes
2005). Top management team polychronicity leads to
speedy SDM (Souitaris and Maestro 2010), and
TMT potency (TMTs’ perceptions of their ability to
perform tasks effectively) is also positively related to
SDM speed (Clark and Maggitti 2012). Contradic-
tory to the studies of CEO demographic variables
that found largely non-significant effects, Wally and
Baum (1994) set up a field-based experiment that
used hypothetical choices, and found that CEO tol-
erance for risk, cognitive ability, use of intuition and
propensity to act are all positively associated with
SDM speed. Furthermore, Forbes (2005) revealed
that younger executives (in their twenties and early
thirties) of new ventures make slower SDs than their
older counterparts. Hence, both TMT and CEO vari-
ables appear to be significant predictors of SD speed,
although the mediating processes that convert
these variables into outcomes (such as speed) remain
unexplained.
TMT summary
This section has revealed the very fragmented nature
of the findings from studies that examine the influ-
ence of the TMT on the SDMP. Theory development
© 2013 British Academy of Management and John Wiley & Sons Ltd.
N.G. Shepherd and J.M. Rudd
has been hindered because each TMT variable
usually features in no more than one or two studies,
and most studies focus on the effects of TMT vari-
ables on only one SDMP characteristic, often com-
prehensiveness or rationality. These problems are
compounded by the omission of mediating decision
processes, and variance in the level of analysis
adopted, with some at the organization level, some at
the individual and others at the decision level. While
studies reviewed here each make a valuable contri-
bution individually, a coherent body of theory has not
developed, and overall implications for theory and
practice remain unclear. The major conceptual and
methodological issues arising from this section are
each now discussed in further detail.
A significant conceptual issue for SDMP research
is the extent to which, relative to other contextual
factors, the TMT influences SDMP characteristics.
Yet few studies examine the influence of TMT vari-
ables alongside other categories of contextual vari-
ables. Studies examining the relative influence of
multiple categories of contextual variables either
show that the TMT and CEO have less influence on
SDMP characteristics (Papadakis and Barwise 2002)
or omit the TMT as a category – as in the case of
Elbanna and Child 2007b), who examined the rela-
tive influence of the external environment, firm
characteristics and SD-specific characteristics on
rationality. Determining the relative importance of
the TMT for explaining the SDMP compared with
SD-specific characteristics, the external environ-
ment, and firm characteristics should be a priority for
future research so as to identify the most pertinent
theories for SDMP research.
The use of demographic variables as proxies for
the underlying cognitive and behavioural traits of the
TMT has attracted criticism, and authors have ques-
tioned how reliably these demographic proxies actu-
ally represent the traits that they are purported to
(Miller et al. 1998; Priem et al. 1999). Despite the
difficulty of obtaining psychometric data from
TMTs, avoiding the use of demographic variables
in future research is recommended. Instead, to attain
greater construct validity and to improve the
explanatory ability of research, direct measures of
the constructs of interest should be obtained.
Another conceptual issue is that no existing
studies examine the moderating effects of the TMT
on the relationship between SDMP characteristics
and SDMP outcomes. This gap is notable, given the
empirical evidence showing how other contextual
variables interact with SDMP characteristics to
Context in Strategic Decision-Making
influence SDMP outcomes (Elbanna and Child
2007a). It is highly likely that the effects of SDMP
characteristics on SDMP outcomes are subject to the
influence of TMT variables (Papadakis et al. 2010).
For example, the potential for intuitive SDMPs to
positively influence SDMP outcomes may rest upon
the expertise of the TMT (Khatri and Ng 2000).
A final conceptual issue is omission of the medi-
ating SDMP characteristics in studies that specify
direct effects of the TMT on SDMP outcomes. It is
fundamentally important to measure actual mediat-
ing decision processes to fully understand the
causal relationships between contextual vari-
ables, SDMP characteristics and SDMP outcomes.
Studies specifying direct effects of the TMT on
SDMP outcomes do not account for the actual pro-
cesses that convert TMT characteristics into SDMP
outcomes.
Methodological issues include the need for future
research to examine the influence of TMTs, rather
than just CEOs, to increase the likelihood of obtain-
ing significant results (Hambrick 2007; Papadakis
and Barwise 2002). Research focused on CEOs
should select samples of small organizations where
SDM power is more centralized. Cognitive style
appears to be an important construct for explaining
SDMP characteristics and outcomes, but existing
studies are laboratory-based and use an individual
level of analysis. Field-based studies focused on the
cognitive styles of teams would shed further light on
its influence.
SD-specific characteristics
Strategic decision-specific characteristics are the
labels and categories that decision-makers attribute
to an SD, based on perceptions of stimuli
(Papadakis et al. 1998). Empirical evidence demon-
strates the significant effects that SD-specific char-
acteristics have on SDMP characteristics, relative to
the effects of other contextual variables (Elbanna
and Child 2007b; Hickson et al. 1986; Papadakis
et al. 1998). In this section, we review studies
of SD-specific characteristics that have featured
decision matter, uncertainty, motive, importance
and time pressure (see Figure 1 and Table 2).
Studies focusing on the direct effects of SD-specific
characteristics on SDMP characteristics are
reviewed first, followed by a review of the literature
examining the moderating effects of SD-specific
characteristics.
© 2013 British Academy of Management and John Wiley & Sons Ltd.
349
Direct effects of SD-specific characteristics on
SDMP characteristics
Decision matter. One of the major conclusions of
the seminal Bradford Studies is that the complexity
and politicality inherent in an SD determine the
process by which it is made (Hickson et al. 2001).
Three types of decision matter are identified –
vortex, tractable and familiar – that have differing
levels of complexity and politicality (Astley et al.
1982). Each of the three different decision matters
was found to lead to a different decision process,
characterized by varying levels of scrutiny, nego-
tiation, discontinuity, centralization and duration.
However, while the Hickson et al. (1986) categoriza-
tion conceptualizes politicality as being an anteced-
ent, other studies have modelled politicality as a
characteristic to describe the actual SDMP (e.g.
Dean and Sharfman 1996; Eisenhardt and Bourgeois
1988; Elbanna and Child 2007a; Papadakis et al.
1998). To ensure sufficient discriminant validity
between focal constructs, future research should
specify precisely whether politicality is a contextual
antecedent or a characteristic of the SDMP.
SD uncertainty. This diminishes rationality (Dean
and Sharfman 1993) and rule formalization
(Papadakis et al. 1998), but promotes flexibility
(Sharfman and Dean 1997a), politicization and
problem-solving dissension (Papadakis et al. 1998).
Thus, when there is uncertainty concerning the
actions that should be taken or the information
required to make a decision (Sonenshein 2007),
decision-makers are less inclined to gather and
analyse information (Dean and Sharfman 1993).
When making uncertain SDs, as well, coalitions are
formed, and bargaining takes place to overcome
internal resistance and disagreement (Papadakis
et al. 1998). However, decision-makers have also
been found to respond to SD uncertainty by being
open to new sources of information (Sharfman and
Dean 1997a).
SD motive. This refers to whether the SD is made in
response to an opportunity or a threat. Papadakis et al.
(1998) discovered that, when the SD is a response to a
threat, the SDMP is characterized by hierarchical
decentralization, as middle management become
involved to a greater extent. However, they found no
other significant effects of SD motive. Fredrickson’s
(1985) laboratory experiment showed that, while the
MBA sample were more comprehensive when faced
 Table 2. A summary of empirical research examining strategic decision-specific characteristics as a contextual variable in SDMP research
350

Study Strategic decision Methodology Findings

specific variables
Sample Design Analysis

Fredrickson Decision motive 321 MBA students Laboratory study; MANOVA MBA students’ decision processes are affected by the decision
(1985) (problems and and 116 executives hypothetical scenarios motive; but the decision processes of executives are not. MBA
opportunities) students were more comprehensive when faced with a problem
Hickson et al. Vortex, tractable and 150 SDs in 30 Case studies; longitudinal; Content, Vortex matters result in sporadic processes, tractable matters
(1986) familiar decision organizations multi-method; recent SDs correlation, and result in fluid processes, and familiar matters result in
matters made by the firms discriminant constricted processes
analysis
Dean and Importance, 57 SDs in 24 Field study; structured Regression Uncertainty is negatively related to rationality in the SDMP.
Sharfman contention of companies interviews; cross-sectional; analysis Contention of objectives and importance are not significantly
(1993) objectives and recent SDs made by the related to rationality
uncertainty firms
Sharfman and Uncertainty 57 SDs in 25 Field study; structured Regression Uncertainty is positively associated with flexibility in the SDMP
Dean (1997a) companies interviews; cross-sectional; analysis
recent SDs made by the
firms
Ashmos et al. Opportunity/threat Executives from 52 Field study; hypothetical Regression The hypothesis that participation in the SDMP would be greater
(1998) organizations scenarios; mail survey analysis for opportunities than for threats is not supported
Papadakis et al. Magnitude of impact, 70 SDs from 38 Field study; cross-sectional; Correlation and Strategic decision-specific characteristics significantly influence
(1998) threat/crisis, Greek semi-structured interviews; regression the characteristics of the SDMP – more than TMT, external
uncertainty, manufacturing archival data; recent SDs analysis environmental and firm contextual variables
pressure, firms made by the firms
familiarity, planned
vs. ad hoc
Elbanna and Decision importance, Executives from 169 Field study; cross-sectional; Correlation and Decision motive (crisis) moderates (strengthens) the positive
Child (2007a) decision Egyptian drop-off survey; recent regression relationship between rationality and SD effectiveness, and
uncertainty, and manufacturing SDs made by the firms analysis moderates (strengthens) the negative relationship between
decision motive companies political behaviour and SD effectiveness. Motive does not
moderate (weaken) the negative relationship between intuition
and SD effectiveness. The positive relationship between
rationality and SD effectiveness is found to be weaker for
low-uncertainty SDs than for high-uncertainty SDs. Uncertainty
does not moderate the negative relationships between intuition
and SD effectiveness and political behaviour and SD
effectiveness. Moderating effects of decision importance were
not supported
Elbanna and As that of Elbanna As that of Elbanna As that of Elbanna and Child As that of Strategic decision-specific characteristics have a significant
Child (2007b) and Child (2007a) and Child (2007a) (2007a) Elbanna and influence on the rationality of the strategic decision-making
Child (2007a) process. Strategic decision-specific characteristics explain more
variance in rationality than does the external environment, but
less than firm characteristics
N.G. Shepherd and J.M. Rudd

© 2013 British Academy of Management and John Wiley & Sons Ltd.
Context in Strategic Decision-Making
with a problem than when faced with an opportunity,
no significant effects were identified in the executive
sample. Similarly, Ashmos et al. (1998) were unable
to find any significant effects of SD motive on the
level of participation in the SDMP (the number of
people involved and the extent of their involve-
ment). Therefore, taken as a whole, these collective
results demonstrate only moderate support for SD
motive being a significant influence on SDMP
characteristics.
SD importance. Papadakis et al. (1998) studied the
magnitude of impact of an SD, and discovered that,
when the SD is expected to have profound and per-
vasive implications for the organization and its
operations, decision-makers engage in comprehen-
sive SDMPs, using financial information, involving
management from multiple levels and communicat-
ing across functions. Contrary to this, Dean and
Sharfman (1993) revealed that decision importance
was not significantly related to rationality. Hence,
whether or not the decision is critical to the organi-
zation’s future does not appear to determine the
extent of information gathering and analysis, but
does influence comprehensiveness, as well as the use
of financial reporting information, hierarchical
decentralization and lateral communication.
Time pressure. This leads to problem-solving
dissension in the SDMP, and reduces hierarchi-
cal decentralization and lateral communication
(Papadakis et al. 1998). Thus, when the SD is under
time pressure, there will be dissent, less involvement
of middle managers and restricted communication
across departments.
Overall, empirical evidence supports the view that
SD-specific characteristics have a significant influ-
ence on the characteristics of the SDMP (Elbanna
and Child 2007b; Papadakis et al. 1998). This has
important implications for studies adopting an
organizational level of analysis, which assumes that
organizations have SDMPs that are consistent
from one decision to the next. Also, the effects of
SD-specific characteristics appear to be nuanced. For
example, the magnitude of impact of the SD is posi-
tively related to comprehensiveness (Papadakis et al.
1998), but the importance of the SD is not related to
rationality (Dean and Sharfman 1993). Such contra-
dictory results highlight the need for the careful
and consistent definition and operationalization of
not only SD-specific characteristics, but also SDMP
characteristics.
© 2013 British Academy of Management and John Wiley & Sons Ltd.
351
Moderating effects of SD-specific characteristics
on the relationship between SDMP characteristics
and SDMP outcomes
Operationalizing rationality as the collection and
analysis of information, Elbanna and Child (2007a)
conclude that the positive relationship between
rationality and SD effectiveness (the extent to which
the decision achieves its objectives and avoids nega-
tive unintended consequences) is stronger for SDs
perceived as crises than for opportunities. Also, the
negative relationship between political behaviour and
SD effectiveness is stronger for SDs perceived as
crises than for opportunities. This evidence suggests
that rational SDMPs work best when faced with a
crisis and that, in such situations, political behaviour
will be even more detrimental to the effectiveness of
the SD. Finally, the authors determine that SD uncer-
tainty moderates the effects of rationality on SD
effectiveness, such that the positive influence of
rationality on SD effectiveness is weaker for low
uncertainty SDs than for high uncertainty SDs.
Therefore, when decision-makers are uncertain
about the information required and the likely out-
comes, rational processes are more likely to produce
effective SDs.
SD-specific characteristics summary
Empirical evidence suggests that SD-specific charac-
teristics may be one of the most significant influences
on SDMP characteristics, relative to other contextual
variables (Elbanna and Child 2007b; Hickson
et al. 1986; Papadakis et al. 1998). Despite this,
SD-specific characteristics are featured in only a
handful of studies, and only one empirical study spe-
cifically addresses their moderating influence on the
relationship between SD-specific characteristics and
outcomes. Hence, it is doubtful that the findings of
the studies reviewed here are generalizable. Also, it
remains unclear why, for example, the magnitude of
impact from an SD and SD importance each has
different implications for comprehensiveness and
rationality (Dean and Sharfman 1993; Papadakis
et al. 1998).
It is also apparent that many of the SD-specific
characteristics used in the studies reviewed here
suffer from low reliabilities, and several studies have
reported Cronbach alphas of between 0.54 and 0.63
(e.g. Elbanna and Child 2007a; Dean and Sharfman
1993; Papadakis et al. 1998). Low reliabilities indi-
cate high levels of random error in the measures,
which reduces the probability of detecting significant
352
relationships (Bagozzi 1994). Therefore, research
focusing on SD-specific characteristics will benefit
from measure development work to improve their
reliabilities.
Given the significant interactions detected in
Elbanna and Child’s (2007a) study and the rela-
tive importance of SD-specific characteristics as
antecedents of SDMP characteristics, a systematic
programme of research examining SD-specific char-
acteristics is warranted. Such research should model
SD-specific characteristics as antecedents of differ-
ent SDMP characteristics, and as moderators of the
relationships between SDMP characteristics and
SDMP outcomes, which would significantly help to
develop a more coherent body of theory.
The external environment
The external environment is the third category of
contextual variables, and in this section we first
review those empirical studies that examine the
direct effects of the external environment on SDMP
characteristics. Second, we review studies that test
the direct effects on SDMP outcomes and, finally, we
review those that feature the moderating effects of
the external environment on the relationship between
SDMP characteristics and SDMP outcomes. The
dimensions of the external environment reviewed in
this section include environmental hostility, velocity,
dynamism, instability, munificence and uncertainty
(see Figure 1 and Table 3).
Direct effects of the external environment on
SDMP characteristics
Hostile environments. Hostile environments are
threatening and dangerous, making it difficult to
stay afloat (Miller and Friesen 1983), and studies
have produced confounding results. Dean and
Sharfman (1993) and Sharfman and Dean (1997a)
conclude that in such environments, decision-
makers are less likely to gather and analyse infor-
mation, and are less open to new information.
However, Papadakis et al. (1998) were unable to
detect significant effects of environmental hostility
on any of the SDMP characteristics. Aside from
being contradictory, the results of these studies are
unexpected, given that in such environments the
implications of making an ineffective SD are severe
and, hence, more rational or comprehensive SDMPs
would be expected.
© 2013 British Academy of Management and John Wiley & Sons Ltd.
N.G. Shepherd and J.M. Rudd
High-velocity, dynamic and unstable environ-
ments. High-velocity environments are character-
ized by ‘rapid and discontinuous change in demand,
competitors, technology and/or regulation, such that
information is often inaccurate, unavailable, or
obsolete’ (Bourgeois and Eisenhardt 1988, p. 816).
Eisenhardt (1989) uses eight case studies of firms in
the high-velocity micro-computer industry to high-
light how organizations use real-time information,
and simultaneously consider multiple SD alterna-
tives in such environments. Dynamic environments
are very similar to high-velocity environments
(Baum and Wally 2003) and are characterized by a
‘highly unpredictable and unstable rate of change
and high levels of uncertainty about the state of
context, the means–ends relationships, and/or the
outcomes of the actions’ (Mitchell et al. 2011, pp.
687–688). However, Papadakis et al. (1998) is the
only empirical study to examine the direct effects of
environmental dynamism on SDMP characteristics,
and this study produced no significant effects. Envi-
ronmental instability, defined as ‘the extent to which
market demand and technology are rapidly changing
in a given industry’ (Dean and Sharfman 1996, p.
376), has been found to cause TMT members to
exhibit more agreement about the comprehensive-
ness (the actual process was not reported) of the
SDMP than in stable environments (Iaquinto and
Fredrickson 1997). Hence, in unstable environments,
executives are more likely to focus on the SDMP and
not become distracted by disagreements and debates.
Based on the studies reviewed here, it may be true
that the external environment is a less significant
influence on SDMP characteristics compared with
the other categories of contextual variables. Cer-
tainly, the lack of significant findings in Papadakis
et al. (1998) for both environmental hostility and
dynamism raises doubts over the veracity of the envi-
ronmental determinism perspective (Aldrich 1979;
Hannan and Freeman 1977). Also, the work of
Elbanna and Child (2007b) challenges the signifi-
cance of the external environment as a means for
explaining the characteristics of the SDMP; the
authors determine that SD-specific characteristics
and firm characteristics are more significant predic-
tors of rationality than the external environment is.
Direct effects of the external environment on
SDMP outcomes
Environmental dynamism. Mitchell et al. (2011)
use a field experiment with hypothetical choices to
 Table 3. A summary of empirical research examining the external environment as a contextual variable in SDMP research
Study External Methodology Findings
environment
variables
Sample Design Analysis

Fredrickson and Mitchell Unstable environment 109 executives from 27 Field-based experiment; cross Correlation Comprehensiveness is negatively related to performance in
(1984) firms in an unstable sectional; hypothetical an unstable environment
environment scenario-based interviews
Fredrickson (1984) Stable environment 152 executives from 38 As that of Fredrickson and Mitchell As that of Fredrickson Comprehensiveness is positively associated with
firms in a stable (1984) and Mitchell (1984) performance in a stable environment
environment
Bourgeois and Eisenhardt High-velocity 4 microcomputer firms Multiple case study; longitudinal; Content analysis In high-velocity environments, effective firms use rational
(1988) environment multi-method; actual SDMPs SDMPs, and the greater the political actions among the
TMT, the poorer the performance of the firm
Fredrickson and Iaquinto Unstable and stable 159 executives from 45 Field-based; longitudinal; hypothetical Correlation and Comprehensiveness is negatively related to performance in
(1989) environments firms in stable and scenario-based interviews regression analysis an unstable environment, and positively related to
unstable performance in a stable environment
environments
Context in Strategic Decision-Making

Eisenhardt (1989) High-velocity 8 microcomputer firms Multiple case study; longitudinal; Content analysis In high-velocity environments, executives make fast SDs
environment multi-method; actual SDMPs using more information, and develop more alternatives.
Fast decisions based on this pattern of behaviour leads
to superior performance in high velocity environments
Judge and Miller (1991) High-velocity Executives from 32 Field study; cross-sectional; Correlation and Decision speed is associated with high performance in
environment organizations in the semi-structured interviews; archival regression analysis high-velocity environments, and the strength of this
biotechnology, data; recent SDs made by the firms relationship increases as environmental velocity
hospital and textiles increases
industries
Dean and Sharfman (1993) Competitive threat 57 SDs in 24 companies Field study; cross-sectional; structured Regression analysis Competitive threat is negatively related to rationality
interviews; recent SDs made by the
firms

© 2013 British Academy of Management and John Wiley & Sons Ltd.
Priem et al. (1995) Environmental 101 manufacturing Field study; cross-sectional; mail Correlation and There is a positive relationship between SDMP rationality
dynamism firms survey; actual SDMPs regression analysis and firm performance in a dynamic environment, but no
such relationship exists for firms facing stable
environments
Dean and Sharfman (1996) Environmental 52 SDs in 24 companies Field study; longitudinal; structured Regression analysis Environmental instability does not moderate the
instability and interviews; actual SDs being made relationship between rationality and decision
favourability by the firms effectiveness. Environmental favourability has a greater
influence on decision effectiveness in unstable
environments than it does in stable environments
Iaquinto and Fredrickson Unstable and stable 65 firms in stable and Field-based; longitudinal; hypothetical Correlation and Firms in an industry with an unstable environment exhibit
(1997) environments unstable scenario-based interviews regression analysis more agreement about the comprehensiveness of the
environments SDMP than do their counterparts in a stable industry
Sharfman and Dean (1997a) Competitive threat 57 SDs in 25 companies Field study; structured interviews; Regression analysis Competitive threat is negatively related to flexibility in the
cross-sectional; recent SDs made by SDMP
the firms
Goll and Rasheed (1997) Environmental 62 large manufacturing Field study; cross-sectional; mail Correlation; regression Environmental munificence and dynamism moderate the
munificence and firms survey of actual SDMPs analysis relationship between rationality and performance.
dynamism Rationality is more strongly associated with
performance in environments high in munificence and
dynamism than in other environments
Papadakis et al. (1998) Environmental 70 SDs from 38 Greek Field study; cross-sectional; Correlation and No significant effects of environmental dynamism and
heterogeneity, manufacturing firms semi-structured interviews; archival regression analysis hostility on any of the SDMP characteristics are
dynamism and data; recent SDs made by the firms identified. Environmental heterogeneity has a negative
hostility effect on problem-solving dissension.
353
 354

Table 3. Continued
Study External Methodology Findings
environment
variables Sample Design Analysis

Khatri and Ng (2000) Environmental 221 companies Field study; cross-sectional; mail ANOVA and regression A positive relationship exists between intuitive synthesis
instability survey; actual SDMPs analysis and organizational performance in an unstable
environment, and a negative relationship exists in a
stable environment
Baum and Wally (2003) Environmental 318 CEOs Field-based; cross-sectional; mail Structural equation Environmental dynamism is positively related to SD
dynamism and survey; hypothetical scenario-based modelling speed. Environmental munificence is positively related
munificence policy capturing to SD speed. SD speed mediates the effects of
environmental dynamism and munificence on firm
performance
Hough and White (2003) Environmental 400 decisions from 54 Laboratory-based behavioural ANOVA; correlation; The hypothesis that there is a positive relationship between
dynamism executive teams simulation regression analysis rationality and decision quality in dynamic
environments, and a non-significant relationship
otherwise, is not supported
Atuahene-Gima and Li Demand uncertainty and 373 Chinese technology Field study; cross-sectional; survey; Regression analysis The relationship between SDMP comprehensiveness and
(2004) technology firms recent SDs made by the firms new product performance is negatively moderated by
uncertainty technology uncertainty, but is positively moderated by
demand uncertainty. The effect of SDMP
comprehensiveness on new product quality is positively
moderated by demand uncertainty, but is unaffected by
technology uncertainty
Goll and Rasheed (2005) Environmental 159 manufacturing Field-based; cross-sectional; mail Regression analysis The relationship between rationality and performance is
munificence companies survey; archival data; actual strong and positive in high-munificence environments,
SDMPs but is negative and not significant in low-munificence
environments
Elbanna and Child (2007a) Environmental Executives from 169 Field study; cross-sectional; drop-off Correlation and The positive relationship between rationality and SD
uncertainty, and Egyptian survey; recent SDs made by the regression analysis effectiveness is stronger in low-munificence
environmental manufacturing firms environments than in high-munificence environments.
munificence–hostility companies Munificence did not moderate the relationships between
intuition SD effectiveness and political behaviour and
SD effectiveness. Environmental uncertainty does not
moderate the relationship between SDMP characteristics
and SD effectiveness
Elbanna and Child (2007b) As that of Elbanna and As that of Elbanna and As that of Elbanna and Child (2007a) As that of Elbanna and The external environment has a significant influence on
Child (2007a) Child (2007a) Child (2007a) the rationality of the strategic decision-making process,
although the relative importance of the external
environment is less than SD-specific and firm
characteristics
Mitchell et al. (2011) Environmental 64 CEOs of technology Field-based experiment; hypothetical Conjoint analysis In dynamic environments, managers make less erratic
dynamism and firms choices; mail survey SDs; in hostile environments managers make more
hostility erratic SDs. Environmental dynamism and hostility
interact to cause managers to make less erratic SDs
N.G. Shepherd and J.M. Rudd

© 2013 British Academy of Management and John Wiley & Sons Ltd.
Context in Strategic Decision-Making
determine that environmental dynamism causes
CEOs to make fewer erratic SDs, that environmental
hostility causes CEOs to make more erratic SDs, and
that dynamism and hostility interact to cause CEOs
to make fewer erratic SDs. Thus, not only do envi-
ronmental dynamism and hostility exert different
effects, they interact to influence the outcomes of the
SDMP. Baum and Wally (2003) also use a field
experiment with hypothetical choices, and find that
environmental dynamism and environmental munifi-
cence (capacity to support growth) both cause CEOs
to make faster SDs. Both the Mitchell et al. (2011)
and Baum and Wally (2003) studies omit mediating
decision processes, which leaves unexplained the
actual decision processes that mediate the effects of
the external environment on decision speed and
whether the SD is erratic.
Moderating effects of the external environment on
the relationship between SDMP characteristics and
SDMP outcomes
High-velocity, dynamic and unstable environments.
A common theme in the literature has been to iden-
tify interactions between the external environment
and SDMP characteristics, and their influence on
SDMP outcomes. Several studies have shown that in
high-velocity or dynamic environments, rational and
comprehensive SDMPs are positively associated
with organizational performance (Bourgeois and
Eisenhardt 1988; Eisenhardt 1989; Priem et al.
1995). The basic tenet of these studies is that the
uncertainty inherent in such environments can be
mitigated by comprehensively gathering and analys-
ing information, and developing and evaluating mul-
tiple different decision options. However, there is
also empirical evidence to suggest that the opposite
is true, and that in such environments rational or
comprehensive approaches to SDM are of little
value, because information is unavailable, is incom-
plete or becomes obsolete rapidly. The field-based
experiments by Fredrickson and colleagues that use
hypothetical scenarios with executives show that, in
unstable environments, comprehensive SDMPs have
a negative effect on organizational performance.
These findings are also supported by Hough and
White (2003), who use a laboratory simulation to
show how rational SDMPs have no effect on decision
quality in dynamic environments. It should also be
noted, however, that no significant interactions were
found between rationality and environmental insta-
bility (Dean and Sharfman 1996) and rationality and
© 2013 British Academy of Management and John Wiley & Sons Ltd.
355
environmental uncertainty (Elbanna and Child
2007a).
There is a clear tension in the findings of Eisenhardt
and colleagues’ studies, as compared with those of
Fredrickson and colleagues’. This may be explained
by the ‘sharp and discontinuous change’ (Bourgeois
and Eisenhardt 1988, p. 816) that distinguishes high-
velocity environments from the unstable environ-
ments studied by Fredrickson and colleagues. Also, in
research that has revealed positive effects of SDMP
comprehensiveness in high-velocity environments, a
common theme is the importance of SD speed.
Eisenhardt (1989) highlights the ways in which
decision-makers consider multiple decision options
simultaneously, using real-time information to make
speedy SDs and to achieve superior organizational
performance. Similarly, Judge and Miller (1991) also
determine SD speed to be positively related to
organizational performance – though only in high-
velocity environments, and not in medium- or low-
velocity environments. A tentative conclusion may be
reached that an organization’s ability to engage in
SDMPs that are both comprehensive and fast leads to
high levels of organizational performance in rapidly
changing environments.
Environmental munificence. Other studies have
focused on how environmental munificence interacts
with rationality to influence SDMP outcomes, and
again no clear consensus exists. While Goll and
Rasheed (2005) show that rationality leads to high
levels of organizational performance in munificent
environments, Elbanna and Child (2007a) report that
rationality is most likely to result in an effective SD
in environments with low levels of munificence
where few opportunities for growth exist.
Empirical evidence also suggests that interactions
between the external environment and SDMP char-
acteristics may be even more complex than most
existing research allows for. Goll and Rasheed
(1997) show that not only does rationality benefit
organizational performance in dynamic and in
munificent environments, but the positive effects of
rationality on performance are strongest in environ-
ments high in both dynamism and munificence.
Environmental uncertainty. Atuahene-Gima and Li
(2004) adopt a sophisticated approach to modelling
the external environment to examine two types of
uncertainty: demand uncertainty and technology
uncertainty. Their results indicate that comprehen-
sive SDMPs benefit new product performance and
356
quality in the presence of demand uncertainty,
because organizations are able to mitigate such
uncertainty by searching for and analysing informa-
tion relating to customer demand and preferences.
However, in the presence of technology uncertainty,
comprehensive SDMPs are of little benefit, as
information relating to technology uncertainty
is dense, highly equivocal and difficult to collect
(Atuahene-Gima and Li 2004). These findings point
to a more nuanced interaction between SDMP char-
acteristics and the external environment than most
studies have modelled.
Other interaction effects involving the external
environment. Studies have also examined how the
external environment interacts with other SDMP
characteristics such as political behaviour and intui-
tion. Bourgeois and Eisenhardt (1988) reveal that
political behaviour causes poor organizational per-
formance in high-velocity environments, because it
distracts executives and causes delays (Eisenhardt
and Bourgeois 1988). Also, Khatri and Ng (2000)
studied intuitive synthesis (reliance on judgment,
experience, and ‘gut feelings’) in the SDMP and
found a positive relationship with organizational
performance in unstable environments, but they
observed a negative relationship in stable environ-
ments. These results suggest that intuitive synthesis
can help to overcome the limitations of rational and
comprehensive SDMPs in unstable environments,
perhaps because of its speed and ability to synthesize
information, but intuitive synthesis needs to be used
cautiously in stable environments (Khatri and Ng
2000).
External environment summary
Theory development has been hindered by the
absence of a single approach to conceptualizing and
measuring the external environment (Sharfman and
Dean 1991). Studies have used environmental veloc-
ity, instability and dynamism to capture the extent to
which the external environment is subject to rapid
and unpredictable change, which has produced
conflicting results concerning the effects of com-
prehensiveness on performance. Similarly, studies
examining the implications of rationality in munifi-
cent environments have produced contradictory
results. Also, relative to other contextual variables,
the external environment appears to have limited
direct effects on SDMP characteristics (Elbanna and
Child 2007b; Papadakis et al. 1998), and its influ-
© 2013 British Academy of Management and John Wiley & Sons Ltd.
N.G. Shepherd and J.M. Rudd
ence seems to be primarily a moderating one, influ-
encing the relationship between SDMP charac-
teristics and outcomes. In part, the contradictory
findings of the studies reviewed in this section
may be caused by some studies adopting an
organizational level of analysis and others focusing
on the decision level. Matters have been complicated
by differences in the SDMP characteristics used,
with some examining rationality and others compre-
hensiveness, and with the varying way in which these
constructs are operationalized.
There is a clear need to reconcile the conflicting
results of the Eisenhardt and Fredrickson studies,
concerning the relationship between comprehen-
siveness and organizational performance. Such
research should focus on the implications of com-
prehensiveness and SD speed combined, under dif-
ferent environmental conditions, because, despite
the apparent importance of speed in fast-changing
environments (Eisenhardt 1989), most studies omit
it. Also, future research may try to reconcile the
inconsistencies of other studies, such as those con-
cerning the implications of rationality in munificent
environments (Elbanna and Child 2007a; Goll and
Rasheed 2005) through measurement of multiple
different dimensions of the external environment
within a single study. This would enable the detec-
tion of three-way interactions shown to be impor-
tant by Goll and Rasheed (1997). Furthermore,
future research may also benefit from careful atten-
tion to modelling the external environment. The
approach adopted by Atuahene-Gima and Li (2004)
is rare, in that it examines the effects of alternative
types of environmental uncertainty (technology
and demand) on the relationship between com-
prehensiveness and SDMP outcomes. Therefore, a
focus on the different types of uncertainty, instabil-
ity, dynamism and velocity, such as customers,
competitors and technology, may provide fresh
insights.
Firm characteristics
In this section, we review the literature examining the
direct effects of firm characteristics on SDMP char-
acteristics and outcomes. Also, we review studies
that examine the moderating effects of firm charac-
teristics on the relationship between SDMP charac-
teristics and outcomes. Firm characteristics featured
in this section include power centralization, struc-
ture, size, performance, slack resources, external
Context in Strategic Decision-Making
control, corporate control and planning formality
(see Figure 1 and Table 4).
Direct effects of firm characteristics on
SDMP characteristics
Power centralization. Power centralized in the
hands of the CEO leads to political behaviour
(Bourgeois and Eisenhardt 1988; Eisenhardt and
Bourgeois 1988). Hence, when the CEO does not
distribute SDM power among members of the TMT,
team members form coalitions, pursue their own
agendas and, overall, act in a way that is destructive
to SDs (Bourgeois and Eisenhardt 1988).
Structure. Structure influences participation and
rationality in the SDMP. Ashmos et al. (1998) show
that organizations with fewer rules and standardized
operating procedures have greater participation of
multiple different internal stakeholders in the SDMP,
whereas, in organizations with formalized rules, the
SDMP is consistent and formulaic, with the same
small number of individuals involved. Furthermore,
Miller (1987) concludes that organizations with for-
malized systems and processes that use task forces
and committees will also favour rational SDMPs. For
the study, Miller (1987) adopts an organizational
level of analysis, and defines rationality as analysis,
systematic scanning of the environment and having
explicit strategies.
Size. Size is commonly operationalized as the
number of full-time employees, and empirical evi-
dence shows that certain SDMP characteristics vary
according to the size of the organization. Large
organizations are more comprehensive in their
SDMPs than small organizations (Fredrickson and
Iaquinto 1989; Papadakis et al. 1998), although the
effects of size on other SDMP characteristics are less
clear. Iaquinto and Fredrickson (1997) report that as
firms increase in size, TMT agreement about the
comprehensiveness of the SDMP diminishes – which
implies that levels of debate and disagreement
regarding the SDMP will increase in large organiza-
tions. However, Papadakis et al. (1998) found no
association between size and politicization. Simi-
larly, Dean and Sharfman (1993) were unable to
detect any relationship between size and rationality.
Overall, these findings suggest that, when firms
increase in size, so too does the comprehensiveness
of their SDMPs, but the implications of size for
rationality and political behaviour remain unclear.
© 2013 British Academy of Management and John Wiley & Sons Ltd.
357
Performance. Another line of empirical enquiry
has been to examine the effects of organizational
performance on SDMP characteristics, although
confounding results have emerged. Papadakis et al.
(1998) used two measures of organizational perfor-
mance and found that organizations generating a
high return on assets tend to have SDMPs that are
characterized by comprehensiveness, the use of
financial reporting information and hierarchical
decentralization, whereas the SDMPs of organiza-
tions experiencing profit growth are more political.
Papadakis et al. (1998) suggest that high levels of
organizational performance endow organizations
with resources to invest in comprehensive and
decentralized SDMPs that make greater use of
financial reporting information. However, perfor-
mance also provokes politics and conflict over how
best to use these resources. Fredrickson’s (1985)
laboratory experiment was unable to reach a con-
clusion concerning the effects of performance on
comprehensiveness. MBA students were more com-
prehensive when organizational performance was
poor compared with when performance was excel-
lent, whereas the sample of executives exhibited no
differences according to performance. Also,
Iaquinto and Fredrickson (1997) found no signifi-
cant effect of performance on TMT agreement
about comprehensiveness. Finally, Sharfman and
Dean (1997a) investigated the effects of slack
resources (resources intentionally kept beyond those
needed to meet operational commitments) on the
flexibility of the SDMP. Organizations with high
levels of slack resources were found to be open
to new ideas, to new sources of information, and
to decision-makers’ adopting new roles in the
SDMP.
Other firm characteristics. Other firm characteris-
tics affecting SDMP characteristics include the
degree of external control, type of corporate control
and planning formality. When the SDMP is subject to
the influence of individuals external to the organiza-
tion, the SDMP becomes less rational (Dean and
Sharfman 1993), thus highlighting the importance of
managerial discretion for rationality. Papadakis et al.
(1998) examined the type of corporate control and
found that the SDMPs of state-controlled organiza-
tions are comprehensive and political, whereas pri-
vately owned organizations are less comprehensive,
and rely less on financial reporting and formalized
rules. Also, organizations with formal planning
systems have greater lateral communication, and are
 Table 4. A summary of empirical research examining firm characteristics as a contextual variable in SDMP research
358

Study Firm characteristics Methodology Findings

variables
Sample Design Analysis

Fredrickson (1985) Performance 321 MBA students and Laboratory study; hypothetical MANOVA MBA students’ decision processes are affected by performance, but the decision process of
116 executives scenarios executives’ are not. When performance is poor, MBA students are more comprehensive
Miller (1987) Organizational structure 97 small and Field study; cross-sectional; structured Regression analysis Formalization and integration are positively related to SDMP rationality, interaction and
(formalization, integration, medium-sized firms interviews; actual SDMPs proactiveness. Decentralization is positively related to SDMP interaction and
decentralization and proactiveness. Complexity is not related to the SDMP
complexity)
Bourgeois and Power centralization 4 microcomputer firms Multiple case study; longitudinal; Content analysis The greater the power centralization in the chief executive, the greater the level of political
Eisenhardt (1988) multi-method; actual SDMPs behaviour among the TMT
Eisenhardt and Power centralization 8 microcomputer firms Multiple case study; longitudinal; Content analysis Political SDMPs arise from power centralization
Bourgeois (1988) multi-method; actual SDMPs
Eisenhardt (1989) Power centralization 8 microcomputer firms Multiple case study; longitudinal; Content analysis The data indicate no pattern linking decision speed to either qualitative or quantitative
multi-method; actual SDMPs indicators of power centralization
Fredrickson and Size 159 executives from 45 Field-based; longitudinal; hypothetical Correlation, As firms increase in size, the comprehensiveness of their SDMPs increases
Iaquinto (1989) firms in stable and scenario-based interviews ANOVA and
unstable regression
environments analysis
Dean and Sharfman External control, organization size 57 SDs in 24 companies Field study; cross-sectional; structured Regression analysis Higher levels of external control are associated with less rational procedures in strategic
(1993) interviews; recent SDs made by the decision-making. Organization size has no significant relationship to rationality
firms
Wally and Baum Centralization and formalization 151 CEOs Field-based; cross-sectional; mail Structural equation The more centralized a firm’s decision-making structures are, the faster the pace at which
(1994) survey; hypothetical scenario-based modelling executives will evaluate an acquisition candidate. The more formalized a firm’s
policy capturing decision-making structures are, the slower the pace at which executives will evaluate an
acquisition candidate
Iaquinto and Organization size and past 65 firms in stable Field-based; longitudinal; hypothetical Correlation and Changes in organization size are negatively related to TMT agreement about the
Fredrickson (1997) performance and unstable scenario-based interviews regression comprehensiveness of the SDMP. No association is found between past performance and
environments analysis agreement about the comprehensiveness of the SDMP
Sharfman and Dean Slack resources 57 SDs in 25 companies Field study; structured interviews; Regression analysis Slack resources are found to have a positive effect on the openness dimension of flexibility
(1997a) cross-sectional; recent SDs made by in the SDMP, but have no significant effect on the recursiveness dimension
the firms
Ashmos et al. (1998) Rule orientation Executives from 52 Field study; hypothetical scenarios; Regression analysis Participation of internal stakeholder groups in the SDMP is greater in organizations that are
organizations mail survey less rule-orientated than in organizations that are more rule-orientated
Papadakis et al. Planning formality, performance, 70 SDs from 38 Greek Field study; cross-sectional; Correlation and Planning formality has a positive influence on comprehensiveness, lateral communication
(1998) corporate control, size manufacturing firms semi-structured interviews; archival regression and politicization. Performance (return on assets) is positively associated with
data; recent SDs made by the firms analysis comprehensiveness, use of financial reporting and hierarchical decentralization.
Performance (profit growth) is associated with politicization and problem-solving
dissension. Comprehensiveness increases with size. State-owned enterprises are associated
with more comprehensive and political SDMPs; privately owned organizations are less
comprehensive, and rely less on financial reporting and rule formalization in the SDMP
Covin et al. (2001) Organicity 96 manufacturing firms Field study; cross-sectional; mail Regression analysis In high-technology environments, intuitive SDMPS are more positively related to
survey of actual SDMPs performance among firms that have organic rather than mechanistic structures. In low-tech
industries, technocratic SDMPs are more positively related to performance among firms
with organic structures than those with mechanistic structures
Baum and Wally Organizational structure 318 CEOs Field-based; cross-sectional; mail Structural equation Centralization of strategic management and decentralization of operations management
(2003) (centralization of strategic survey; hypothetical scenario-based modelling are positively related to SD speed. Formalization of organizational routines and
management, decentralization policy capturing informalization of non-routines are positively related to SD speed. SD speed mediates the
of operations management, relationship between centralization and formalization, and firm performance
formalization of routines,
informalization of
non-routines)
Elbanna and Child Organizational size and Executives from Field study; cross-sectional; drop-off Correlation and The positive relationship between rationality and SD effectiveness is weaker for companies
(2007a) performance 169 Egyptian survey; recent SDs made by the regression with high performance than for those with low performance. The negative relationships
manufacturing firms analysis between intuition and SD effectiveness, and between political behaviour and SD
companies effectiveness are weaker for companies with high performance than for those with low
performance. Size does not moderate any of the relationships between SDMP
characteristics and SD effectiveness
Elbanna and Child As that of Elbanna and Child As that of Elbanna and As that of Elbanna and Child (2007a) As that of Elbanna Firm characteristics have a significant influence on the rationality of the strategic
(2007b) (2007a) Child (2007a) and Child decision-making process. The relative importance of firm characteristics in explaining
N.G. Shepherd and J.M. Rudd

© 2013 British Academy of Management and John Wiley & Sons Ltd.
(2007a) variance in rationality is greater than both the external environment and SD-specific
characteristics
Context in Strategic Decision-Making
more comprehensive and political (Papadakis et al.
1998).
From this section of the review it is possible to
reach a number of tentative conclusions: (1) Power
centralization invokes political behaviour; (2) As
organizations increase in size, their SDMPs become
more comprehensive; (3) Organization structure
influences rationality, as well as who participates in
the SDMP, and; (4) Ownership, external control
and formal planning influence comprehensiveness,
rationality and political behaviour.
One particularly ambiguous area concerns the
effects of organizational performance on the SDMP,
with Papadakis et al. (1998) concluding that return
on assets and growth in profits each affect diff-
erent SDMP characteristics. However, adopting
measures of performance such as return on assets
and growth in profits may not reliably reflect the
actual levels of resources available for use by the
organization. For example, an organization could
be highly profitable, but also highly geared, with
significant annual cash outflows to repay its debt.
Such cash outflows would not be reflected in meas-
ures of performance such as profit growth, but
would result in the organization’s being resource
constrained. Furthermore, performance is unlikely
to be a valid proxy for other types of slack
resources (such as human resource slack) (Voss
et al. 2008).
Direct effects of firm characteristics on
SDMP outcomes
Studies have examined the direct effects of firm char-
acteristics on SD speed. While Eisenhardt’s (1989)
case studies do not reveal any link between power
centralization and SD speed, Wally and Baum (1994)
and Baum and Wally (2003) both demonstrated that,
when authority for SDM is centralized, SD speed
increases.
Moderating effects of firm characteristics on the
relationship between SDMP characteristics and
SDMP outcomes
Covin et al. (2001) identified an interaction between
intuitive and technocratic SDMPs, organization
structure and the external environment, which influ-
ences organization performance. In high-technology
environments, intuitive SDMPs lead to high levels of
organization performance among firms with organic
structures (characterized by open communication
© 2013 British Academy of Management and John Wiley & Sons Ltd.
359
and few rules and procedures). Covin et al. (2001)
also determined that in low-technology environ-
ments, technocratic SDMPs (using systematic
and quantitative analysis) lead to high levels of
organizational performance among firms with
organic structures. Thus, organizations need to
ensure that their SDMPs and organizational struc-
tures are configured to best fit their external environ-
ments (Covin et al. 2001).
Elbanna and Child (2007a) found that the posi-
tive influence of rationality on SD effectiveness is
moderated by organizational performance (using a
perceptual measure of both financial and non-
financial organizational performance), such that in
high-performing organizations the influence is
weaker. Additionally, the negative influences of
intuition and political behaviour on SD effective-
ness are weaker for companies with high perfor-
mance. While there is scant other empirical
evidence with which to compare these findings, it
does highlight a view that the effects of SDMP
characteristics on SD effectiveness are subject to
the influence of firm characteristics.
Firm characteristics summary
Firm characteristics exert a significant influence on
SDMP characteristics relative to other contextual
variables (Elbanna and Child 2007b). For instance,
power centralization affects political behaviour,
structure influences rationality and participation, and
size is significantly related to comprehensiveness.
External control, corporate control and formal plan-
ning also influence rationality, comprehensiveness
and political behaviour. However, organizational per-
formance has produced confounding results, with
return on assets and growth in profits each influenc-
ing different SDMP characteristics. Careful theory
development is required to disentangle the differing
effects of alternative measures of organizational per-
formance (Papadakis et al. 1998). Because perfor-
mance has been used as a proxy for slack resources,
future research should consider using direct meas-
ures of slack resources to examine its effects on
SDMP characteristics, as well as its moderating
influence on the relationship between SDMP charac-
teristics and SDMP outcomes. Additionally, future
research should examine the moderating effects
of other firm characteristics and, in particular,
should consider the possibility of three-way interac-
tions among firm characteristics and contextual
variables – such as the external environment – that
360
are highlighted by Covin et al. (2001) as hav-
ing significant implications for organizational
performance.
Despite calls in the literature for such research
(e.g. Eisenhardt 1989; Molloy and Schwenk 1995), it
is evident that no studies have examined firm capa-
bilities such as real-time information systems. The
absence of such research is particularly noteworthy,
given that the ability to make comprehensive and fast
SDs is vital to achieve superior levels of performance
in high-velocity environments (Eisenhardt 1989).
Such capabilities may rest upon the information
systems and technologies of the firm.
Conclusions
This review has highlighted the underlying themes,
issues, tensions and debates in the SDMP literature
regarding the direct and moderating influences of
context. In this section, we discuss the priorities for
future theory development. These include the need
for fewer constructs and for more careful modelling,
as well as the importance of examining multi-
theoretic models and the moderating effects of con-
textual variables. We also address the methodological
implications, which include the importance of large
samples and multivariate analysis, measurement reli-
ability, issues surrounding levels of analysis, and
qualitative research designs.
Priorities for future theory development
The need for fewer constructs and for more careful
modelling. An incremental approach to theory
building has resulted in a proliferation of constructs,
especially SDMP characteristics, and there is con-
sensus in the literature that ‘too much invention of
language’ (Bower 1997, p. 27) has hindered theory
development (Papadakis and Barwise 1997). This
review has identified significant differences in the
definitions and operationalizations of rationality and
comprehensiveness, and they are frequently used
interchangeably (Goll and Rasheed 1997, 2005;
Papadakis and Barwise 2002; Papadakis et al. 1998;
Priem et al. 1995). This is despite evidence that con-
textual variables such as SD importance and firm size
affect rationality and comprehensiveness differently.
To address problems with the overabundance of
SDMP characteristics, Elbanna (2006) and Elbanna
and Child (2007a) highlight how rationality, compre-
hensiveness, intuition and political behaviour are a
parsimonious set of constructs that adequately repre-
© 2013 British Academy of Management and John Wiley & Sons Ltd.
N.G. Shepherd and J.M. Rudd
sent two perspectives underpinning the SDMP litera-
ture, namely synoptic-formalism and incremen-
talism. Synoptic formalism stresses formal analysis
in the SDMP, and incrementalism views SDMPs as
subject to behavioural influences such as intuition
and politics (Eisenhardt and Zbaracki 1992;
Fredrickson and Mitchell 1984; Hart 1992; Hitt and
Tyler 1991). Elbanna (2006) and Elbanna and Child
(2007a) suggest that rationality and comprehensive-
ness are constructs that represent the synoptic formal
perspective, and political behaviour and intuition are
constructs that embody the incremental perspective.
Certainly, a common terminology and consistency in
the variables modelled would support the develop-
ment of a more coherent body of theory (Papadakis
and Barwise 1997). Furthermore, future research
should precisely define and operationalize rationality
and comprehensiveness, and should have a clear
theoretical rationale for including one or the other.
Including both in one study would enable researchers
to discern the relative influence of context on each of
them.
Lack of replication. Lack of replication has hin-
dered the coherent development of theory. Future
research should seek to replicate, or at least control
for, some of the significant variables and relation-
ships identified in this review. For example, decision
speed has significant implications for perfor-
mance (Eisenhardt 1989; Judge and Miller 1991);
despite this, most studies omit it. Similarly, studies
attempting to explain SDMP outcomes under certain
environmental conditions have focused on com-
prehensiveness or rationality. However, there is
considerable empirical evidence that SDMPs are
multi-dimensional, and SDMP outcomes are subject
to the influence of SDMP characteristics other than
just rationality, such as political behaviour (Dean and
Sharfman 1996). Closer attention to control variables
would lead to greater implicit replication.
Direct measures. Using demographics as proxies
for the underlying psychometric characteristics of
the TMT has received strong criticism, and Priem
et al. (1999) suggest that this approach sacrifices
construct validity for measurement reliability, and
forsakes explanation for prediction. Similarly, this
review identifies organizational performance being
used as a proxy for slack resources. To improve
methodological rigour and to develop theory with
greater explanatory power, future research should
use direct measures of contextual variables.
Context in Strategic Decision-Making
Mediating decision processes. Researchers should
include measures for actual decision processes. For
example, examining the effects of cognitive style on
decision outcomes neglects the mediating role of the
actual decision process. Because a decision-maker
has a rational cognitive style, it does not necessarily
follow that the actual SDMP will be rational; other
contextual variables may have a more significant
effect in determining the decision process (Bakken
and Haerem 2011). It is fundamentally important to
measure actual mediating decision processes to fully
understand the causal relationships between context,
SDMP process characteristics and SDMP outcomes.
The need for multi-theoretic models
Some authors (e.g. Elbanna and Child 2007b; Hitt
and Tyler 1991; Papadakis et al. 1998) have associ-
ated each of the four categories of contextual vari-
ables with a theoretical perspective. For example, the
TMT is associated with the upper echelons perspec-
tive (Hambrick and Mason 1984), and the external
environment is associated with the environmental
determinism perspective (Aldrich 1979; Hannan and
Freeman 1977). By including contextual variables
from each of the four categories, researchers can
compare the overall impact and predictive power of
each of these theoretical perspectives for explaining
variance in SDMP characteristics. While most
studies have focused on one category of contextual
variable, there is no theoretical rationale, as yet, to
propose that any category is more, or less, significant
than any other (Rajagopalan et al. 1993).
The moderating role of contextual variables
With the exception of the external environment, there
is scant empirical research examining the moderating
effects of other contextual variables on the relation-
ship between SDMP characteristics and outcomes,
and even research examining the moderating effects
of the external environment has produced conflicting
results. Furthermore, TMT variables are yet to be
featured as moderators. Models that incorporate both
SDMP characteristics and contextual variables as
moderators can predict more variance in outcome
variables, because the limited empirical evidence
that exists has shown such interactions to be highly
significant (Elbanna and Child 2007a).
Methodological implications
Large samples and multivariate analysis. ‘Most of
the managerially relevant SDM research is based on
© 2013 British Academy of Management and John Wiley & Sons Ltd.
361
a fairly small number of cases studied in depth’
(Papadakis and Barwise 1997, p. 296). The insights
provided by Bourgeois and Eisenhardt (1988),
Eisenhardt (1989), Eisenhardt and Bourgeois (1988),
Dean and Sharfman (1993, 1996), Papadakis and
Barwise (2002) and Papadakis et al. (1998) all draw
upon samples with 70 or fewer SDs from 38 or fewer
organizations. Therefore, to improve the external
validity and generalizability of SDMP research, there
is a need for large-sample field research (Papadakis
et al. 2010; Rajagopalan et al. 1993). If multiple
contextual variables, SDMP characteristics and
SDMP outcomes are to be modelled, larger sample
sizes will be essential to ensure that the ratio of cases
to predictor variables is sufficient. Multivariate
analysis comprises a set of statistical analysis tech-
niques well suited to such analysis.
Measurement reliability. Measures of SD-specific
characteristics have suffered from low levels of inter-
nal consistency, which indicates high levels of
random error. Unreliable measures make detecting
significant relationships less likely (Bagozzi 1994).
Given the empirical evidence suggesting that
SD-specific characteristics are potentially one of the
most significant contextual influences on the
SDMP, future research should seek to improve their
reliabilities.
Levels of analysis. Variance in the level of analysis
adopted has hindered theory development and makes
comparisons of findings difficult. While some studies
do focus on individual decisions, a large number
adopt an organizational level of analysis, assuming
that organizations have consistent SDMPs, despite
considerable empirical evidence showing that the
SDMP varies according to the individual SD being
made (Elbanna and Child 2007b; Hickson et al.
1986; Papadakis et al. 1998). A focus on individual
decisions is therefore recommended. Furthermore,
there is a lack of significant results from studies
examining the effects of CEO characteristics on the
SDMP. Unless the focus of research is small organi-
zations, it appears likely that the characteristics of the
TMT as a whole will have more significant effects on
the SDMP, rather than any one individual.
Qualitative research designs. To complement large
sample studies and to examine emerging con-
cepts such as non-conscious cognitive processes
(Hodgkinson and Healey 2011), SDMP researchers
could adopt methods commonly used by scholars in
362
other domains – particularly cognitive task analysis
(CTA) and critical incident technique (CIT) – to
probe incidents and uncover contextual influences on
the SDMP. For example, techniques such as CIT and
CTA can lead to a better understanding of the con-
textual variables that contribute to ‘intuitive hits and
misses’ (Hodgkinson and Sadler-Smith 2011, p. 60).
These types of techniques could be conducted with
multiple members of the TMT, creating potential to
uncover different perspectives from those involved in
the SDMP.
Summary
This review has identified four categories of con-
textual variables (TMT, SD-specific characteristics,
the external environment and firm characteristics)
that influence the SDMP, and provided an in-depth
analysis of the underlying themes, issues, tensions
and debates in the literature. To develop theory in
this important area, future research should take
greater care with modelling, and include mediating
decision processes, pay close attention to control
variables and use direct measures of contextual
variables. Future studies could also include contex-
tual variables from each of the four categories to
determine their relative influence, and also model
contextual variables as moderators of the SDMP
characteristics–outcomes relationship, as well as
antecedents of the SDMP. The important methodo-
logical implications arising from this review high-
light the importance that future research should use
large sample sizes and multivariate techniques,
improve measurement reliability, adopt a decisional
level of analysis and complement quantitative
studies with qualitative research.
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