Environment and SDMProcess REVIEW 2014

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International Journal of Management Reviews, Vol. 16, 340364 (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 characteristics. This literature review also develops an illustrative framework that incorporates 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
Strategic decisions (SDs) can be ill-structured, nonroutine, 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-inChief, and the anonymous reviewers for their helpful and
insightful comments on earlier drafts of this work.
involves information gathering, developing alternatives 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 systematic 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 fragmented understanding, and left SDMP scholars
unable to identify the key contextual influences on
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Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA
Context in Strategic Decision-Making

the SDMP (Papadakis and Barwise 1997). Inconsistencies 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 interactions between contextual variables and SDMP
characteristics, because such interactions have significant 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 contextual 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 valuable for understanding aspects of organizational
341
behaviour (Miller 2010). However, certain authors
(e.g. Mintzberg and Waters 1990) suggest that examining decisions can be a hindrance to understanding
organizational processes, because individual decisions 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 processes, 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 categories of contextual variables from an extensive literature 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 relationship between SDMP characteristics and SDMP outcomes (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 categories 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 decisionmaking; these journals were then searched individually 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
2013 British Academy of Management and John Wiley & Sons Ltd.
Constricted
Sporadic
Fluid
Technocratic
Assessment/perceptions of risk
Tolerance of ambiguity/uncertainty
Change in comprehensiveness
Level of aggression
Agreement about comprehensiveness
Flexibility
Participation
Rule formalization
Use of financial reporting
Conflict
Problem solving dissension
Lateral communication
Hierarchical decentralization
Political behaviour/politicization
Intuition/intuitive synthesis
Comprehensiveness
Rationality
SDMP Characteristics
Figure 1. Contextual variables in SDMP research: an illustrative framework of extant research
The External Environment

(Table 3)
Dynamism
Velocity
Munificence
Hostility
Instability
Uncertainty
Firm Characteristics
(Table 4)
Power centralization
Structure
Size
Performance/Slack resources
Other (external control,
corporate control, formal
planning systems)
Strategic Decision Specific

Characteristics
(Table 2)
Matter
Uncertainty
Motive
Importance
Time pressure
Top Management Team

(Table 1)
Demographics (tenure,
education, diversity, age)
Cognitive diversity/style
Personality
Other (meta-cognition, potency,
polychronicity, aggressive
philosophy)
Contextual Variables
performance/quality
New product
Decisiveness
Performance
Organizational
decisions
Erratic strategic
Commitment
Speed
Quality
Effectiveness
SDMP Outcomes
Moderating effects
Direct effects
342
N.G. Shepherd and J.M. Rudd

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 characteristics, 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 outcomes (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 critically review the empirical literature relating to each
of the four categories of contextual variables to highlight the underlying themes, issues, tensions and
debates in the field. We structure this review according to studies examining the direct effects of contextual variables on SDMP characteristics, to those
examining the direct effects on SDMP outcomes and
to those examining the moderating effects of contextual 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 limitations of decision-makers that restrict their ability to
collect and analyse all relevant information and identify 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 antecedents of SDMP characteristics and outcomes, with
no studies examining their moderating influence on
the SDMP characteristicsoutcomes relationships.
In the current section, we review articles that
examine the direct effects of TMT demographic and
psychometric variables on SDMP characteristics, as
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 organization, 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 involvement in the SDMP (termed hierarchical decentralization), CEO tenure does not significantly affect
other important and frequently studied SDMP characteristics 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, Masters 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 firms overall strategy. While TMT
education level influences rationality and comprehensiveness, Papadakis et al. (1998) determined
Papadakis and
Barwise (2002)
Simons et al. (1999)
Papadakis et al.
(1998)
Miller et al. (1998)
Wally and Baum

(1994)
Nutt (1993)
Nutt (1990)
CEO tenure, risk

propensity, need for
achievement and
education. TMT
education and
competitive
aggressiveness
TMT level of education

and aggressive
philosophy. CEO risk
propensity, education,
and need for
achievement
TMT demographic
diversity
CEO cognitive ability,

tolerance for risk,
propensity to act, and
use of intuition
TMT cognitive diversity
Cognitive style
77 firms with 500 or fewer

employees
159 executives from 45 firms in
stable and unstable
environments
79 top executives and 89 middle
managers
CEO need for

achievement
Executive intra-firm
tenure, executive team
continuity
Cognitive style
Fredrickson and
Iaquinto (1989)
62 executives
Cognitive style
Henderson and Nutt

(1980)
Miller et al. (1988)
Field-based; cross-sectional; mail

survey; recent SD made by the
firms
Field study; cross-sectional;

semi-structured interviews;
archival data; recent SDs made
by the firms
70 SDs from 38 Greek

manufacturing companies

by the firms
Laboratory simulation;
hypothetical scenarios
survey; hypothetical
scenario-based policy
capturing
survey of actual SDMPs
Field-based; cross-sectional;
surveying actual SDMPs
Field-based; longitudinal;
hypothetical scenario-based
interviews
Design
57 TMTs from electronic

component manufacturing
firms
106 chief administrators of Texas

hospitals, 38 CEOs and 85
TMTs from various industries
manufacturing firms
151 CEOs
152 executives
Sample
Methodology
TMT variables
Study
Table 1. A summary of empirical research examining the TMT as a contextual variable in SDMP research
Correlation and
regression
analysis
Decision comprehensiveness partially mediates the effects of

job-related diversity on performance. TMT debate moderates
(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
CEO demographic characteristics are positively related to
hierarchical decentralization. CEO need for achievement has
a weak and negative association with hierarchical
decentralization. CEO risk propensity has no association
with the SDMP. TMT education and competitive
aggressiveness are positively related to comprehensiveness
and lateral communication
TMT and CEO variables influence financial reporting,

formalization, lateral communication, hierarchical
decentralization and only weakly comprehensiveness in
the SDMP. TMT and CEO variables do not influence
politicization or problem-solving dissension in the SDMP
Correlation and
regression
analysis
Regression analysis
TMT cognitive diversity has a negative effect on SDMP

comprehensiveness
Changes in executive team tenure and continuity are positively

associated with changes in the comprehensiveness of the
SDMP
Decision style is a key factor in explaining the likelihood of
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
Executives with a flexible style are aggressive, with a high
tolerance for ambiguity and uncertainty
CEO cognitive ability, use of intuition, tolerance for risk and
propensity to act are associated positively with speedy
decisions
Cognitive style is an important factor in the decision to adopt a

capital expansion project and the assessment of risk
CEO need for achievement positively influences rationality
Regression analysis
Structural equation
modelling
ANOVA
Structural equation
modelling
Correlation and
regression
analysis
ANOVA
ANOVA
Analysis
Findings
344
Founder-manager age
and prior venture
experience
TMT age, tenure, and

education level
Cognitive style
TMT polychronicity
CEO meta-cognition
TMT potency
Forbes (2005)
Goll and Rasheed

(2005)
Hough and ogilvie

(2005)
Olson et al. (2007a)
Olson et al. (2007b)
Souitaris and
Maestro (2010)
Mitchell et al.
(2011)
Clark and Maggitti

(2012)
54 TMTs of high-technology
companies
64 CEOs of technology firms
129 TMTs from new technology

ventures
252 Chinese executives
TMTs from 85 hospitals
749 executives
159 Manufacturing firms
98 founder-managers
(entrepreneurs) of Internet
start-ups
Field-based experiment;
hypothetical choices; mail
survey
interviews; mail survey of
actual SDMPs
Field-based; cross sectional;

firms
firms

firms
on-line and mail survey;
by the firms
survey; archival data; actual
SDMPs
Laboratory-based behavioural
simulation
Regression analysis
Conjoint analysis
Regression analysis
Regression analysis
Regression analysis
Structural equation
modelling
Regression analysis
Regression analysis
TMT potency is positively related to SD speed. TMT potency

partially mediates the relationship between TMT experience,
knowledge, interaction process and SD speed
Executives who use both intuition and objective information

make higher quality decisions, while those who take time to
make socially acceptable decisions are indecisive and
perceived to be ineffective
Cognitive diversity has a positive relationship with task
conflict, and competence-based trust strengthens this
relationship. Task conflict mediates the relationship between
cognitive diversity and SD understanding, commitment and
quality
Cognitive diversity has a negative relationship with SD
commitment and quality, and the relationships are
moderated by affect-based and cognition-based trust
TMT polychronicity has a positive effect on SD speed and a
negative effect on SDMP comprehensiveness. SD speed and
comprehensiveness partially mediate the relationship
between TMT polychronicity and financial performance
The SDs made by CEOs with greater metacognitive experience
are less erratic
Average tenure and education level of the TMT is positively

related to rationality, but average age is not
Firms make faster SDs when managed by older

founder-managers and by those with prior venture
experience

345
346
that CEO education level affects only the use of

financial reporting information. Highly educated
CEOs make greater use of financial reporting information in the SDMP; however, CEO education level
does not significantly influence any other characteristics of the SDMP, such as comprehensiveness
(Papadakis and Barwise 2002; Papadakis et al.
1998).
ogilvie 2005; Priem et al. 1999). While methodologically convenient, using demographic variables leaves
a black box (Lawrence 1997) of unexplained TMT
cognitions, values and perceptions that influence
SDs.
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 measures (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 characteristics of the SDMP such as rationality, comprehensiveness, hierarchical decentralization and the
use of financial reporting information. However, jobrelated TMT demographic diversity variables appear
to influence comprehensiveness more than non-jobrelated demographic diversity variables. It is also
apparent that TMT and CEO demographics exert different 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 examining 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 construct 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
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 comprehensiveness (Miller et al. 1998) and to increase
task conflict (Olson et al. 2007a). Miller et al. (1998)
found that cognitively diverse TMTs are less comprehensive; 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 organization, 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 anothers competence, the effects of cognitive diversity on task conflict are stronger. Hence,
these two studies show that cognitive diversity
diminishes comprehensive analysis and the consideration of multiple decision options and, instead,
gives rise to conflict and disagreement during the
SDMP.
Direct effects of TMT psychometric variables on

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 MyersBriggs Type
Indicator, Henderson and Nutt (1980) and Nutt
(1993) discovered that executive cognitive style
influenced the level of aggression, tolerance of ambiguity 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 MyersBriggs 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 cognitive style determines the type of data and the mode of
data processing used in the SDMP. However, while

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 individual. It is important for future research to determine 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 characteristics, 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 environment 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 characteristic. 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 featured in the literature include polychronicity and
aggressive philosophy. Souitaris and Maestro (2010)
studied TMT polychronicity, which refers to the
TMTs tendency to move focus simultaneously and
intermittently from one task to another. The results
show that TMT polychronicity leads to faster decisions, but the TMTs are less comprehensive in their
347
SDMP. Also, an aggressive TMT philosophy (determination 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 rationality. Top management team tenure, education, demographic 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 frequently 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 important questions concerning whether a focus on an individual, 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 ogilvies (2005) laboratory experiment, using the MyersBriggs Type
Indicator to measure executive cognitive style, shows
that cognitive style influences decision quality, decisiveness (the number of problems addressed) and
perceived effectiveness (team members perceptions
of one anothers ability to complete tasks). According to Hough and ogilvies (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 consistent SDs. Also, Olson et al. (2007b) show that cognitive diversity has a negative effect on SD quality and
commitment. Top management teams that disagree
about the strategic goals and priorities of the organization, 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 anothers 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). Contradictory 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 tolerance 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 variables 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 influence of the TMT on the SDMP. Theory development
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 variables on only one SDMP characteristic, often comprehensiveness 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 contribution 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 variables alongside other categories of contextual variables. 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 relative 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 environment, 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 questioned how reliably these demographic proxies actually 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

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 mediating SDMP characteristics in studies that specify
direct effects of the TMT on SDMP outcomes. It is
fundamentally important to measure actual mediating decision processes to fully understand the
causal relationships between contextual variables, SDMP characteristics and SDMP outcomes.
Studies specifying direct effects of the TMT on
SDMP outcomes do not account for the actual processes 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 obtaining 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 demonstrates the significant effects that SD-specific characteristics 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.
349
Direct effects of SD-specific characteristics on
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, negotiation, discontinuity, centralization and duration.
However, while the Hickson et al. (1986) categorization conceptualizes politicality as being an antecedent, 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. Fredricksons
(1985) laboratory experiment showed that, while the
MBA sample were more comprehensive when faced
Elbanna and
Child (2007b)
Elbanna and
Child (2007a)
Ashmos et al.
(1998)
Papadakis et al.
(1998)
Sharfman and
Dean (1997a)
Dean and
Sharfman
(1993)
As that of Elbanna
and Child (2007a)
Magnitude of impact,
threat/crisis,
uncertainty,
pressure,
familiarity, planned
vs. ad hoc
Decision importance,
decision
uncertainty, and
decision motive
Opportunity/threat
Importance,
contention of
objectives and
uncertainty
Uncertainty
Decision motive
(problems and
opportunities)
Vortex, tractable and
familiar decision
matters
Fredrickson
(1985)
Hickson et al.
(1986)
Strategic decision
specific variables
Study
As that of Elbanna
and Child (2007a)
Executives from 169

Egyptian
manufacturing
companies
Executives from 52
organizations
70 SDs from 38
Greek
manufacturing
firms
57 SDs in 25
companies
57 SDs in 24
companies
150 SDs in 30
organizations
321 MBA students

and 116 executives
Sample
Methodology
As that of Elbanna and Child

(2007a)

drop-off survey; recent
SDs made by the firms
Field study; structured

interviews; cross-sectional;
recent SDs made by the
firms
Field study; structured
interviews; cross-sectional;
recent SDs made by the
firms
Field study; hypothetical
scenarios; mail survey
archival data; recent SDs
made by the firms
Case studies; longitudinal;

multi-method; recent SDs
made by the firms
Laboratory study;
Design
As that of
Elbanna and
Child (2007a)
Correlation and
regression
analysis
Regression
analysis
Correlation and
regression
analysis
Regression
analysis
Content,
correlation, and
discriminant
analysis
Regression
analysis
MANOVA
Analysis
Decision motive (crisis) moderates (strengthens) the positive

relationship between rationality and SD effectiveness, and
moderates (strengthens) the negative relationship between
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
Strategic decision-specific characteristics have a significant
influence on the rationality of the strategic decision-making
process. Strategic decision-specific characteristics explain more
variance in rationality than does the external environment, but
less than firm characteristics
The hypothesis that participation in the SDMP would be greater

for opportunities than for threats is not supported
Strategic decision-specific characteristics significantly influence
the characteristics of the SDMP more than TMT, external
environmental and firm contextual variables
Uncertainty is positively associated with flexibility in the SDMP
Uncertainty is negatively related to rationality in the SDMP.

Contention of objectives and importance are not significantly
related to rationality
MBA students decision processes are affected by the decision

motive; but the decision processes of executives are not. MBA
students were more comprehensive when faced with a problem
Vortex matters result in sporadic processes, tractable matters
result in fluid processes, and familiar matters result in
constricted processes
Findings
Table 2. A summary of empirical research examining strategic decision-specific characteristics as a contextual variable in SDMP research
350

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 involvement). 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 pervasive implications for the organization and its
operations, decision-makers engage in comprehensive SDMPs, using financial information, involving
management from multiple levels and communicating 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 organizations 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 hierarchical 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 influence 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 positively related to comprehensiveness (Papadakis et al.
1998), but the importance of the SD is not related to
rationality (Dean and Sharfman 1993). Such contradictory results highlight the need for the careful
and consistent definition and operationalization of
not only SD-specific characteristics, but also SDMP
characteristics.
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 negative 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 uncertainty 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 outcomes, rational processes are more likely to produce
effective SDs.
SD-specific characteristics summary
Empirical evidence suggests that SD-specific characteristics 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 specifically 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 indicate 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 Childs (2007a) study and the relative importance of SD-specific characteristics as
antecedents of SDMP characteristics, a systematic
programme of research examining SD-specific characteristics is warranted. Such research should model
SD-specific characteristics as antecedents of different 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
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, decisionmakers are less likely to gather and analyse information, 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.
High-velocity, dynamic and unstable environments. High-velocity environments are characterized 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 highlight how organizations use real-time information,
and simultaneously consider multiple SD alternatives 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 meansends relationships, and/or the
outcomes of the actions (Mitchell et al. 2011, pp.
687688). 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. Environmental 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 comprehensiveness (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. Certainly, the lack of significant findings in Papadakis
et al. (1998) for both environmental hostility and
dynamism raises doubts over the veracity of the environmental determinism perspective (Aldrich 1979;
Hannan and Freeman 1977). Also, the work of
Elbanna and Child (2007b) challenges the significance 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 predictors 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
External
environment
variables
Unstable environment
Stable environment
High-velocity
environment
Unstable and stable

environments
High-velocity
environment
High-velocity
environment
Competitive threat
Environmental
dynamism
Environmental
instability and
favourability
Unstable and stable

environments
Competitive threat
Environmental
munificence and
dynamism
Environmental
heterogeneity,
dynamism and
hostility
Study
Fredrickson and Mitchell

(1984)
Fredrickson (1984)
Bourgeois and Eisenhardt

(1988)
Fredrickson and Iaquinto

(1989)
Eisenhardt (1989)
Judge and Miller (1991)
Dean and Sharfman (1993)
Priem et al. (1995)
Dean and Sharfman (1996)
Iaquinto and Fredrickson

(1997)
Sharfman and Dean (1997a)
Goll and Rasheed (1997)
Papadakis et al. (1998)

manufacturing firms
62 large manufacturing
firms
65 firms in stable and

unstable
environments
57 SDs in 25 companies
101 manufacturing
firms
Executives from 32
organizations in the
biotechnology,
hospital and textiles
industries
159 executives from 45

firms in stable and
unstable
environments
8 microcomputer firms

firms in an unstable
environment
firms in a stable
environment
Sample
Methodology

semi-structured interviews; archival
data; recent SDs made by the firms
Correlation and
regression analysis
Correlation; regression
analysis
Regression analysis
Correlation and
regression analysis
Field-based; longitudinal; hypothetical

scenario-based interviews
Field study; structured interviews;
cross-sectional; recent SDs made by
the firms
Field study; cross-sectional; mail
Regression analysis
Field study; longitudinal; structured

interviews; actual SDs being made
by the firms
Correlation and
regression analysis
Regression analysis
Correlation and
regression analysis

Field study; cross-sectional; structured

interviews; recent SDs made by the
firms
survey; actual SDMPs
Content analysis
Multiple case study; longitudinal;

multi-method; actual SDMPs
Correlation and
regression analysis

Environmental munificence and dynamism moderate the

relationship between rationality and performance.
Rationality is more strongly associated with
performance in environments high in munificence and
dynamism than in other environments
No significant effects of environmental dynamism and
hostility on any of the SDMP characteristics are
identified. Environmental heterogeneity has a negative
effect on problem-solving dissension.
There is a positive relationship between SDMP rationality

and firm performance in a dynamic environment, but no
such relationship exists for firms facing stable
environments
Environmental instability does not moderate the
relationship between rationality and decision
effectiveness. Environmental favourability has a greater
influence on decision effectiveness in unstable
environments than it does in stable environments
Firms in an industry with an unstable environment exhibit
more agreement about the comprehensiveness of the
SDMP than do their counterparts in a stable industry
Competitive threat is negatively related to flexibility in the
SDMP
Competitive threat is negatively related to rationality
In high-velocity environments, executives make fast SDs

using more information, and develop more alternatives.
Fast decisions based on this pattern of behaviour leads
to superior performance in high velocity environments
Decision speed is associated with high performance in
high-velocity environments, and the strength of this
relationship increases as environmental velocity
increases
In high-velocity environments, effective firms use rational

SDMPs, and the greater the political actions among the
TMT, the poorer the performance of the firm
Comprehensiveness is negatively related to performance in
an unstable environment, and positively related to
performance in a stable environment
As that of Fredrickson
and Mitchell (1984)
Content analysis
Comprehensiveness is positively associated with

performance in a stable environment
Correlation
Field-based experiment; cross

sectional; hypothetical
As that of Fredrickson and Mitchell
(1984)
Comprehensiveness is negatively related to performance in

an unstable environment
Analysis
Findings
Design
Table 3. A summary of empirical research examining the external environment as a contextual variable in SDMP research

353
External
environment
variables
Environmental
instability
Environmental
dynamism and
munificence
Environmental
dynamism
Demand uncertainty and

technology
uncertainty
Environmental
munificence
Environmental
uncertainty, and
environmental
munificencehostility
As that of Elbanna and

Child (2007a)
Environmental
dynamism and
hostility
Study
Khatri and Ng (2000)
Baum and Wally (2003)
Hough and White (2003)
Atuahene-Gima and Li
(2004)
Goll and Rasheed (2005)
Elbanna and Child (2007a)
Elbanna and Child (2007b)
Mitchell et al. (2011)
Table 3. Continued
As that of Elbanna and Child (2007a)
Field-based experiment; hypothetical

choices; mail survey
64 CEOs of technology
firms
Conjoint analysis

Child (2007a)
Correlation and
regression analysis
Field study; cross-sectional; drop-off

survey; recent SDs made by the
firms
Executives from 169

Egyptian
manufacturing
companies

Child (2007a)
Regression analysis
Regression analysis

survey; archival data; actual
SDMPs
Field study; cross-sectional; survey;

recent SDs made by the firms
373 Chinese technology

firms
ANOVA; correlation;
regression analysis
Structural equation
modelling
ANOVA and regression

analysis
Analysis
159 manufacturing
companies
Laboratory-based behavioural
simulation

survey; hypothetical scenario-based
policy capturing
318 CEOs
400 decisions from 54

executive teams

survey; actual SDMPs
Design
221 companies
Sample
Methodology
A positive relationship exists between intuitive synthesis

and organizational performance in an unstable
environment, and a negative relationship exists in a
stable environment
Environmental dynamism is positively related to SD
speed. Environmental munificence is positively related
to SD speed. SD speed mediates the effects of
environmental dynamism and munificence on firm
performance
The hypothesis that there is a positive relationship between
rationality and decision quality in dynamic
environments, and a non-significant relationship
otherwise, is not supported
The relationship between SDMP comprehensiveness and
new product performance is negatively moderated by
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
The relationship between rationality and performance is
strong and positive in high-munificence environments,
but is negative and not significant in low-munificence
environments
The positive relationship between rationality and SD
effectiveness is stronger in low-munificence
environments than in high-munificence environments.
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
The external environment has a significant influence on
the rationality of the strategic decision-making process,
although the relative importance of the external
environment is less than SD-specific and firm
characteristics
In dynamic environments, managers make less erratic
SDs; in hostile environments managers make more
erratic SDs. Environmental dynamism and hostility
interact to cause managers to make less erratic SDs
Findings
354

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 environmental 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 munificence (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 identify 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 analysing information, and developing and evaluating multiple 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 incomplete 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 instability (Dean and Sharfman 1996) and rationality and
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 highvelocity environments from the unstable environments 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 highvelocity environments, and not in medium- or lowvelocity environments. A tentative conclusion may be
reached that an organizations 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 characteristics 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 environments 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 comprehensive 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 information 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 characteristics 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 intuition. Bourgeois and Eisenhardt (1988) reveal that
political behaviour causes poor organizational performance 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 environments. 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 velocity, 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 comprehensiveness on performance. Similarly, studies
examining the implications of rationality in munificent 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-
ence seems to be primarily a moderating one, influencing the relationship between SDMP characteristics 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 comprehensiveness, 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 comprehensiveness and organizational performance. Such
research should focus on the implications of comprehensiveness and SD speed combined, under different 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 concerning 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 detection of three-way interactions shown to be important by Goll and Rasheed (1997). Furthermore,
future research may also benefit from careful attention 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 comprehensiveness and SDMP outcomes. Therefore, a
focus on the different types of uncertainty, instability, 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 characteristics and outcomes. Also, we review studies
that examine the moderating effects of firm characteristics on the relationship between SDMP characteristics and outcomes. Firm characteristics featured
in this section include power centralization, structure, size, performance, slack resources, external

control, corporate control and planning formality
(see Figure 1 and Table 4).
Direct effects of firm characteristics on
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 formalized 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 evidence 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 organizations. However, Papadakis et al. (1998) found no
association between size and politicization. Similarly, 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.
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 performance 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 organizations 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, performance also provokes politics and conflict over how
best to use these resources. Fredricksons (1985)
laboratory experiment was unable to reach a conclusion concerning the effects of performance on
comprehensiveness. MBA students were more comprehensive when organizational performance was
poor compared with when performance was excellent, whereas the sample of executives exhibited no
differences according to performance. Also,
Iaquinto and Fredrickson (1997) found no significant 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 characteristics 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 organization, 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 organizations are comprehensive and political, whereas privately 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
Miller (1987)
Slack resources
Rule orientation
Planning formality, performance,

corporate control, size
Organicity
Organizational structure
(centralization of strategic
management, decentralization
of operations management,
formalization of routines,
informalization of
non-routines)
Organizational size and
performance
As that of Elbanna and Child

(2007a)
Sharfman and Dean

(1997a)
Ashmos et al. (1998)
Papadakis et al.
(1998)
Covin et al. (2001)
Baum and Wally

(2003)
Elbanna and Child

(2007a)
Elbanna and Child

(2007b)
Centralization and formalization
Wally and Baum

(1994)
Organization size and past

performance
External control, organization size
Dean and Sharfman

(1993)
Iaquinto and
Fredrickson (1997)
Size
Fredrickson and
Iaquinto (1989)
Bourgeois and
Eisenhardt (1988)
Eisenhardt and
Bourgeois (1988)
Eisenhardt (1989)
Performance
Organizational structure
(formalization, integration,
decentralization and
complexity)
Fredrickson (1985)

Child (2007a)
Executives from
169 Egyptian
manufacturing
companies
318 CEOs
96 manufacturing firms
Executives from 52
organizations
manufacturing firms
65 firms in stable
and unstable
environments
151 CEOs

firms in stable and
unstable
environments
321 MBA students and

116 executives
97 small and
medium-sized firms
Sample
Methodology
Firm characteristics
variables
Study
As that of Elbanna and Child (2007a)
Field study; cross-sectional; drop-off

survey; recent SDs made by the
firms

policy capturing

Field study; structured interviews;

cross-sectional; recent SDs made by
the firms
Field study; hypothetical scenarios;
mail survey


interviews; recent SDs made by the
firms
policy capturing

Laboratory study; hypothetical

scenarios
interviews; actual SDMPs
Design
As that of Elbanna
and Child
(2007a)
Correlation and
regression
analysis
Structural equation
modelling
Regression analysis
Correlation and
regression
analysis
Regression analysis
Correlation and
regression
analysis
Regression analysis
Structural equation
modelling
Correlation,
ANOVA and
regression
analysis
Regression analysis
Content analysis
Content analysis
Content analysis
Regression analysis
MANOVA
Analysis
Table 4. A summary of empirical research examining firm characteristics as a contextual variable in SDMP research
The positive relationship between rationality and SD effectiveness is weaker for companies
with high performance than for those with low performance. The negative relationships
between intuition and SD effectiveness, and between political behaviour and SD
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
Firm characteristics have a significant influence on the rationality of the strategic
decision-making process. The relative importance of firm characteristics in explaining
variance in rationality is greater than both the external environment and SD-specific
characteristics
Participation of internal stakeholder groups in the SDMP is greater in organizations that are
less rule-orientated than in organizations that are more rule-orientated
Planning formality has a positive influence on comprehensiveness, lateral communication
and politicization. Performance (return on assets) is positively associated with
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
In high-technology environments, intuitive SDMPS are more positively related to
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
Centralization of strategic management and decentralization of operations management
are positively related to SD speed. Formalization of organizational routines and
informalization of non-routines are positively related to SD speed. SD speed mediates the
relationship between centralization and formalization, and firm performance
The more centralized a firms decision-making structures are, the faster the pace at which
executives will evaluate an acquisition candidate. The more formalized a firms
decision-making structures are, the slower the pace at which executives will evaluate an
acquisition candidate
Changes in organization size are negatively related to TMT agreement about the
comprehensiveness of the SDMP. No association is found between past performance and
agreement about the comprehensiveness of the SDMP
Slack resources are found to have a positive effect on the openness dimension of flexibility
in the SDMP, but have no significant effect on the recursiveness dimension
Higher levels of external control are associated with less rational procedures in strategic
decision-making. Organization size has no significant relationship to rationality
The data indicate no pattern linking decision speed to either qualitative or quantitative
indicators of power centralization
As firms increase in size, the comprehensiveness of their SDMPs increases
The greater the power centralization in the chief executive, the greater the level of political
behaviour among the TMT
Political SDMPs arise from power centralization
MBA students decision processes are affected by performance, but the decision process of
executives are not. When performance is poor, MBA students are more comprehensive
Formalization and integration are positively related to SDMP rationality, interaction and
proactiveness. Decentralization is positively related to SDMP interaction and
proactiveness. Complexity is not related to the SDMP
Findings
358

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 different 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 measures of performance such as profit growth, but
would result in the organizations 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 characteristics on SD speed. While Eisenhardts (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 influences organization performance. In high-technology
environments, intuitive SDMPs lead to high levels of
organization performance among firms with organic
structures (characterized by open communication
359
and few rules and procedures). Covin et al. (2001)
also determined that in low-technology environments, 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 structures are configured to best fit their external environments (Covin et al. 2001).
Elbanna and Child (2007a) found that the positive influence of rationality on SD effectiveness is
moderated by organizational performance (using a
perceptual measure of both financial and nonfinancial organizational performance), such that in
high-performing organizations the influence is
weaker. Additionally, the negative influences of
intuition and political behaviour on SD effectiveness are weaker for companies with high performance. 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 planning also influence rationality, comprehensiveness
and political behaviour. However, organizational performance has produced confounding results, with
return on assets and growth in profits each influencing different SDMP characteristics. Careful theory
development is required to disentangle the differing
effects of alternative measures of organizational performance (Papadakis et al. 1998). Because performance has been used as a proxy for slack resources,
future research should consider using direct measures of slack resources to examine its effects on
SDMP characteristics, as well as its moderating
influence on the relationship between SDMP characteristics 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 interactions among firm characteristics and contextual
variables such as the external environment that
360
are highlighted by Covin et al. (2001) as having 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 capabilities 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 multitheoretic models and the moderating effects of contextual variables. We also address the methodological
implications, which include the importance of large
samples and multivariate analysis, measurement reliability, 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 consensus 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 contextual 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, comprehensiveness, intuition and political behaviour are a
parsimonious set of constructs that adequately repre-
sent two perspectives underpinning the SDMP literature, namely synoptic-formalism and incrementalism. 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 comprehensiveness 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 development 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 hindered the coherent development of theory. Future
research should seek to replicate, or at least control
for, some of the significant variables and relationships identified in this review. For example, decision
speed has significant implications for performance (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 comprehensiveness 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.

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 associated each of the four categories of contextual variables with a theoretical perspective. For example, the
TMT is associated with the upper echelons perspective (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 relationship 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
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 techniques well suited to such analysis.
Measurement reliability. Measures of SD-specific
characteristics have suffered from low levels of internal 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 organizations, 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 concepts 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 contextual 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 contextual 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 contextual variables from each of the four categories to
determine their relative influence, and also model
contextual variables as moderators of the SDMP
characteristicsoutcomes relationship, as well as
antecedents of the SDMP. The important methodological implications arising from this review highlight 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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International Journal of Management Reviews, Vol. 16, 340364 (2014)

The Influence of Context on the Strategic

Corresponding author email: n.shepherd@aston.ac.uk

Context in Strategic Decision-Making

Approach to the review

Agreement about comprehensiveness

Use of financial reporting

Problem solving dissension

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

The External Environment

Strategic Decision Specific

Top Management Team

Context in Strategic Decision-Making

The top management team

Simons et al. (1999)

Miller et al. (1998)

Wally and Baum

CEO tenure, risk

TMT level of education

CEO cognitive ability,

77 firms with 500 or fewer

CEO need for

Henderson and Nutt

Field-based; cross-sectional; mail

Field study; cross-sectional;

70 SDs from 38 Greek

Field study; cross-sectional;

57 TMTs from electronic

106 chief administrators of Texas

Decision comprehensiveness partially mediates the effects of

TMT and CEO variables influence financial reporting,

TMT cognitive diversity has a negative effect on SDMP

Changes in executive team tenure and continuity are positively

Cognitive style is an important factor in the decision to adopt a

TMT age, tenure, and

TMT cognitive diversity

TMT cognitive diversity

Goll and Rasheed

Hough and ogilvie

Olson et al. (2007a)

Olson et al. (2007b)

Clark and Maggitti

64 CEOs of technology firms

129 TMTs from new technology

252 Chinese executives

TMTs from 85 hospitals

159 Manufacturing firms

Field-based; cross sectional;

Field-based; cross-sectional; mail

TMT potency is positively related to SD speed. TMT potency

Executives who use both intuition and objective information

Average tenure and education level of the TMT is positively

Firms make faster SDs when managed by older

Context in Strategic Decision-Making

N.G. Shepherd and J.M. Rudd

that CEO education level affects only the use of

TMT demographic diversity. TMT demographic

Cognitive diversity. Cognitive diversity refers to

Direct effects of TMT psychometric variables on

Cognitive style. Cognitive style describes how

Context in Strategic Decision-Making

N.G. Shepherd and J.M. Rudd

who use both intuition and objective information