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Beyond Bounded Rationality: CEO Reflective Capacity and Firm Sustainability Performance

Published online by Cambridge University Press:  23 March 2021

Yingya Jia ,
Anne S. Tsui  and
Xiaoyu Yu
Yingya Jia*
Affiliation:
Shanghai University, China
Anne S. Tsui
Affiliation:
Arizona State University, USA University of Notre Dame, USA Peking University, China Fudan University, China
Xiaoyu Yu*
Affiliation:
Shanghai University, China
*
Corresponding author: Yingya Jia ([email protected]) and Xiaoyu Yu ([email protected])
Corresponding author: Yingya Jia ([email protected]) and Xiaoyu Yu ([email protected])
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Abstract

Optimal or rational decision making is not possible due to informational constraints and limits in computation capability of humans (March & Simon, 1958; March, 1978). This bounded rationality serves as a filtering process in decision making among business executives (Hambrick & Mason, 1984). In this study, we propose the concept of CEO reflective capacity as a behavior-oriented cognitive capability that may overcome to some extent the pervasive limitation of bounded rationality in executive decision-making. Following Hinkin's (1998) method and two executive samples, we developed and validated a three-dimensional measure of CEO reflective capacity. Based on two-wave surveys of CEOs and their executive-subordinates in 213 Chinese small-medium sized firms, we tested and confirmed three hypotheses on how CEO reflective capacity is related to a firm's sustainability performance (including economic, societal, and environmental dimensions) through the mediating mechanisms of strategic decision comprehensiveness and CEO behavioral complexity. We discuss the contribution of this study to the literature on the upper echelons and information processing perspectives. We also identify the implications for future research on strategic leadership and managerial cognition in complex and dynamic contexts.

摘要

由于信息处理能力所限，人类决策难以绝对理性，即使是CEO等高级管理者也难以避免在战略决策过程中的信息“滤镜”。为了帮助CEO突破有限理性之局限，本文提出一个新的概念——CEO反思能力，即CEO致力于观察、获取、解读、整合多元化信息，反复思考以满足企业发展需求的高阶认知能力。本文首先基于两组高管样本，开发和验证了CEO反思能力的三因素量表。随后通过对213家中国中小企业的CEO-高管的两阶段配对问卷的分析发现：CEO反思能力与企业可持续绩效（包含环境、社会和经济三个维度）显著正相关，且战略决策周密性和CEO行为复杂性在二者关系中发挥中介作用。本文对动态环境下的战略领导力与管理认知研究具有启发意义。

Аннотация

Оптимальное или рациональное принятие решений невозможно из-за нехватки информации, а также ограниченных мыслительных возможностей человека (March, Simon, 1958; March, 1978). Эта ограниченная рациональность служит фильтром при принятии решений среди руководителей предприятий (Hambrick & Mason, 1984). В данной работе, мы предлагаем концепцию рефлексивной способности генерального директора в качестве поведенческой когнитивной способности, которая может в некоторой степени преодолеть всеобъемлющее влияние ограниченной рациональности при принятии управленческих решений. На основе метода Хинкина (1998) и двух выборок из руководителей, мы разработали и применили трехмерную модель измерения рефлексивной способности генерального директора. В результате двухэтапного опроса руководителей и их подчиненных в 213 китайских компаниях малого и среднего бизнеса, мы проверили и подтвердили три гипотезы о том, как рефлексивная способность генерального директора связана с показателями устойчивого развития (включая экономические, социальные и экологические аспекты) посредством регулирующих механизмов, которые заключаются во всеобъемлющем характере стратегических решений и в сложности поведения генерального директора. Мы обсуждаем вклад этого исследования в научную литературу о руководстве высшего звена и перспективах обработки информации. Мы также определяем значение этой работы для будущих исследований по стратегическому руководству и управленческому мышлению в сложных и динамичных условиях.

Resumen

La toma de decisiones óptima o racional no es posible debido a las restricciones de información y los límites en capacidades de computación de los humanos (March y Simon, 1958; March, 1978). Esta racionalidad limitada sirve como un proceso de filtrado en la toma de decisiones de los ejecutivos (Hambrick y Mason, 1984). En este estudio, proponemos el concepto de la capacidad reflexiva del director general como una capacidad cognitiva orientada al comportamiento que se puede superar hasta cierto punto la limitación dominante de la racionalidad limitada en la toma de decisiones de los ejecutivos. Siguiendo el método de Hinkin (1998) y dos muestras de ejecutivos, desarrollamos y validamos una medida tridimensional de la capacidad reflexiva de los directores generales. Con base en dos encuestas a directores generales y sus subordinados en 213 pequeñas y medianas empresas chinas, pusimos a prueba y confirmamos tres hipótesis sobre cómo la capacidad reflexiva de los directores generales se relaciona con el desempeño de la sostenibilidad de la empresa (incluyendo las dimensiones económicas, sociales y ambientales) mediante los mecanismos de mediación de lo exhaustivo de las decisiones estratégicas y la complejidad comportamental del director general. Discutimos la contribución de este estudio a la literatura sobre las perspectivas de los escalones superiores y el procesamiento de información. También identificamos las implicaciones para la investigación futura sobre liderazgo estratégico y cognición general en contextos complejos y dinámicos.

Keywords

bounded rationalityCEO reflective capacityfirm sustainability performancemanagerial cognitionupper echelons theoryCEO反思能力有限理性企业可持续绩效高阶理论管理认知ограниченная рациональностьрефлексивная способность генерального директорапоказатели устойчивого развития компанииуправленческое мышлениетеория высших эшелоновracionalidad limitadacapacidad reflexiva del director generaldesempeño de la sostenibilidad de la empresacognición gerencialteoría de los escalones superiores
Type
Special Issue Article
Information
Management and Organization Review , Volume 17 , Special Issue 4: Remembering James G. March , October 2021 , pp. 777 - 814
Open Practices
Open data
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press on behalf of The International Association for Chinese Management Research

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This article has earned an Open Data badge for transparent practices. The data and materials are available at <https://osf.io/g27zy>.

ACCEPTED BY Senior Editor Mooweon Rhee

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