NEUROSTRATEGY: AN ADVANCE THROUGH THE PARADIGM EPISTEMOLOGICAL IN STRATEGIC MANAGEMENT?

Author:Ascher, David
Position:Report - Abstract
 
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INTRODUCTION

The strategic management has passed through a revolution in the last 10 years with the introduction of new analytical tools in the decision-making process, many of them coming from neuroscience and that promise to revolutionize the way to see the strategic decision-making from economic models to an individual model and these advances could allow further study in several fields within the applied social sciences. Together with this, a new approach has been used in strategy management, the "neurostrategy" (Powell, 2014; Cristofaro, 2017). According to Powell (2011), it is a new way to analyze the behavior of human beings, by the use of neuroeconomics approach, which is leading business schools to conduct many types of research in marketing, economics, finance, leadership and human resource management and finally the strategic management.

The term neurostrategy is relatively recent and it appeared firstly in scientific journals by Powell (2011) and until now there is no significant amount of researches done on the subject, which opens paths for a limited interpretation of what means neurostrategy- related studies. Since strategic management theories focused on the economic vision of the company, this type of research (neurostrategy) in decision-making is a fresh air once it brings a look back not only to the individuals but also to their brains (Polowczyk, 2012).

The economic vision adopted widely by researchers in strategic management set the organization as the unit of analysis and has four fundamental paradigms: (i) based on the Porterian view of industry and economy and the competitive forces (Porter, 2004), where the industry is who determines the strategy of the company; (ii) the paradigm which covers the transaction costs, using the transaction theory of Williamson (1979) rooted in Coase (1937) along with the Theory of Agency by Jensen & Meckling (1976); (iii) the resource- based view (Peteraf, 1993; Rumelt, 1997; Wernerfelt, 1984) which comes from Penrose (1959); (iv) the vision linked to evolutionary innovation and entrepreneurship. As Polowczyk (2012), these four basic theories of strategic management do not explain the inhomogeneity of human behavior.

Teece et al. (1997) remain open this discussion, raising the fifth paradigm in decision-making expressed as dynamic capabilities (Prahalad & Hamel, 1990). Differently, from others, the dynamic capability approach based on a Schumpeterian overview, but it also does not take into consideration the usage of psychological, behavioral and neurological issues on decision-making. In addition, Powell (2014) explains that, in spite of the organizations being populated by living creatures and sentimental thinking, theories around the strategic management are interpersonal, such as those linked to the dynamic capabilities, even when their results point to an individualization instead of standardization, those strategic management theories still treat people through a massification and homogeneous way.

It is vital to seek out for new forms of study of decision-making on strategic management to allow new answers to challenges that remain without a more scathing confirmation, such as: Why have the same strategy different results when various managers apply it? Why do entirely different strategies bring the same effect? Why the strategy did does not follow the plan, the organization remains succeeds?

These questions, commonly done with the organizations as a unit of analysis set, seem to become increasingly close to finding their answers in the individuals and now, together with the advances highlighted by neuroscience, within the brains of these people. This paper aimed to bring significant contributions to the field of neurostrategy and strategic management by three main contributions: (i) the most critical stands out for the relevance of the topic, because it is a new approach to strategic management that uses the most modern tools to study the brain and unlike the others, it uses the brain as the object of study; (ii) by expanding studies over the recent scientific literature, in order to reduce the gap on the neurostrategy, turning it into an important pathfinder to new researchers who want to start studies in neurostrategy and: (iii) bringing new concepts from other areas, such as neurobiology, neurochemistry and cognitive processes, as further technical frameworks, which could highlights new paradigms in the field of study of decision-making on strategic management by correlating this area to the cognitive neuroscience.

Based on the research contributions the following research question was prepared: Which were the approaches to neurostrategy or cognitive neuroscience and decision- making on strategic management found in the context of the research published in international journals and relevant studies?

Thus, this study analyzed the approaches on articles which use "neurostrategy" and other keywords such as "cognitive neuroscience", "decision-making" and "strategic management", in the context of research published in international journals. It is important to note that because of the novelty of the subject, the previous search did not find articles with the same evaluation proposal or some systematic review about neurostrategy, which consolidated the originality of this theme. However, this paper used as a primary approach for new study fields on applied science done by Gippel (2013) which explores the topic neurofinance and other new sciences in the area of finance.

To reach the main objectives, it presents a systematic review process that sought to revisit and organize the concepts underlying to cognitive neuroscience and decision- making on strategic management, exploring the confluence of these two important science fields. Together with this, the creation of essential theoretical background for new researchers in decision-making on strategic management using the tools and theories presented by cognitive neuroscience was another important aspect of this work.

This study is divided into six sections: (i) this introduction; (ii) the theoretical fundaments analyzing the etymology of neurostrategy term and the main concepts that pervade this new study; (iii) the methodological procedures used to do this review of articles; (iv) the differences between behavioral strategy and neurostrategy in the light of their epistemological developments, seeking to understand the limits of neurostrategy and behavioral strategy fields; (v) additional analysis addressing the paths and challenges of neurostrategy as a field of study in strategic management and; (vi) conclusions and recommendations of this work for future studies in neurostrategy.

THEORETICAL BACKGROUND

Decision-Making in the Strategic Management: The Rational to the Quasi-Rational and Emotional

Decision-making on strategic management is a cognitive process and leading to a choice and a renounced by the agent. Within this context, a decision should be guided by the premise of bounded rationality (Simon, 1947). With the advances in the study of strategic management, it is still accepted that two agents, where both have similar information and knowledge, take the expected (and similar) rational decisions. As proof of the immutability of this precept, in the paradigms of the strategy proposed by Teece et al. (1997), the rationality is given as a premise and not as a parameter, which reinforced the concept that rationality should always be present in strategic decision-making.

Authors like Klein (1999); Eisenhardt (1989) had already written about elements that affect the rationality in the process, among them the intuition. Even Herbert Simon (1986) sought to understand the heterogeneity of decisions by putting issues of complexity, of interpretation and of reflection, to give a personal character to the decision-making process. Chandler (1962) had already included the intuition as a form of behavior that distinguished the performance of executives. However, he named intuition as a "functional" about a management view.

Other relevant focus about decision-making on strategic management seeks to understand of heterogeneous behavior through the analysis of the mental processes using studies of heuristics and biases of decision-making (Tversky & Kahneman, 1974), where the different decisions happen due to the individual construction of mental shortcuts and cognitive biases, which is the basis of Prospect Theory (Kahneman & Tversky, 1979) with a focus on cognitive limitation of the person? The strategic management is an integrated and coordinated set of commitments and actions intended to explore the essential skills for a competitive advantage (Hitt, Hockinsson & Ireland, 2011). To Powell (2011) "strategic management rests on the assumption that the thoughts, feelings and social relations of general managers influence the activities and performance of firms."

Despite the administrative processes and their respective studies exist since the 19th century, according to Chandler (1962), only after WWII, by the necessity for better and faster answers within a sophisticated, integrated and dynamic business community, the study of strategic management took place as a necessary discipline in the management schools.

The decisions are pillars of the strategy (Powell, 2011) and the history of decision-making on strategic management is surrounded of impersonality, both in the questions as the answers (Laureiro-Martinez et al., 2015; Powell, 2014).

The expected bounded rationality of decision-makers links to the core concept of Homo Economicus, Stuart Mill (19th century), where men seek to maximize the return of their actions and to minimize the risk linked to this. For decision-making, rationality is a term that has many meanings, but for philosophy, it means the conscious use of reason and logic (Da Rocha & Rocha, 2011) and as a process of rational decision-making, it should be grounded in logic...

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