Conscious and non-conscious cognition and emotions: Implications for the psychological micro-foundations of strategic management Gerard P. Hodgkinson Centre.

Conscious and non-conscious cognition and emotions: Implications for the psychological micro-foundations of strategic management Gerard P. Hodgkinson Centre for Organizational Strategy, Learning & Change (COSLAC) Copyright © Gerard P. Hodgkinson 2010

Aims Survey recent conceptual and methodological advances in psychology and related fields that have begun to provide a deeper understanding of intuition and related non-conscious, affective-cognitive processes Assess the implications of these developments for laying behaviourally plausible micro-foundations for the field of strategic management In so doing, constructively critique Teece's (2007) recent dynamic capabilities framework, offering countervailing psychological insights and prescriptions for organizational adaptation Copyright © Gerard P. Hodgkinson 2010

…a timely warning! “The hype about neuroscience we’re now seeing has happened before, with the original left brain/right brain research, which I helped pioneer. Our work got hugely distorted in the popular press, and it was impossible to find hard data for most of the claims that were being made. The failure to live up to the hype arguably obscured the real advances we did make...no one gains from a pseudoscientific approach to business, least of all managers. While I understand the appeal of bringing scientific rigor to this area of management, the quest for certainty could well devalue the intuition that managers traditionally rely on. In the end, investors pay managers to exercise good judgment, not to read scanner printouts.” M.S. Gazzaniga, The Brain as boondoggle, Harvard Business Review March-April, p. 66 (2006) Copyright © Gerard P. Hodgkinson 2010

The nature of intuition
Historically viewed as a junk science concept, at best on the fringes of respectability Now occupies important place in dual-process theories of cognition (both old and new variants), creativity research, behavioral decision making, personality and individual differences and social cognitive neuroscience Research and practical applications in all the applied domains of psychology (from industrial/organizational to educational to medical) and related fields (e.g. law, management) Copyright © Gerard P. Hodgkinson 2010

What intuition is not Instinct Insight Tacit knowledge Creativity
Implicit learning Implicit memory Copyright © Gerard P. Hodgkinson 2010

What intuition is not Instinct (basic reflex actions) Insight
Tacit knowledge Creativity Copyright © Gerard P. Hodgkinson 2010

What intuition is not Instinct (basic reflex actions)
Insight (eureka moment preceded by an incubation period) Tacit knowledge Creativity Copyright © Gerard P. Hodgkinson 2010

Insight (eureka moment preceded by an incubation period) Tacit knowledge (knowledge that is hard or impossible to verbalize) Creativity (intuition may help the creative process but it’s not the same thing) Copyright © Gerard P. Hodgkinson 2010

Yet popular writers and broadcasters frequently confuse intuition with these related but distinct phenomena Or try to blend them in unhelpful ways (e.g. ‘business instinct’, ‘gut instinct’, ‘intuitive insight’) Copyright © Gerard P. Hodgkinson 2010

So what is intuition? Knowing, without knowing why (Claxton, 2000)
Accompanied by strong somatic reaction and feeling of certitude Even when taking evasive action, people purporting its use report a feeling of ‘inner calm’ and certitude Typically intuitions occur in situations characterized by one or more of the following: Time pressure Information overload Insufficient information Acute danger Copyright © Gerard P. Hodgkinson 2010

Intuiting (the underlying process of intuition)
“A complex set of inter-related cognitive, affective and somatic processes, in which there is no apparent intrusion of deliberate, rational thought. Moreover, the outcome of this process (an intuition) can be difficult to articulate.” (Hodgkinson, Langan-Fox & Sadler-Smith, 2008, p. 4) Copyright © Gerard P. Hodgkinson 2010

Intuitions defined Dane and Pratt (2007: 40) defined intuitions as ‘affectively-charged judgments that arise through rapid, non-conscious, and holistic associations’ Three major elements: Cognitive Affective Somatic Copyright © Gerard P. Hodgkinson 2010

Early ‘Split Brain’ Neuroscience
Hemispheric specialization, predicated on the lateralization of function hypothesis Informed by Gazanniga and Sperry’s studies of so-called ‘split brain’ patients (commissurotomy) Strategy applications: * Mintzberg (1976) ‘Planning on the left side and managing on the right’, HBR * Taggart & Robey (1981) ‘Minds and Managers’, AMR

Intuition and conventional dual-process theory
Brain is a limited capacity processor of information (cf. Herbert Simon’s notion of bounded rationality) Two forms of processing: Automatic (less effortful, non-conscious) Controlled (effortful, conscious, analytical) Most processing occurs automatically (resource conservation) and is thus prone to bias Views intuition as an automated form of cognition (summed up by Simon’s notion of ‘analyses frozen into habit’) Hence intuition is a potential source of cognitive bias to be ironed out via decision-aiding techniques that force a switch from automatic to controlled, effortful processing Copyright © Gerard P. Hodgkinson 2010

The nature of intuition: An update
Conventional dual-process views of intuition are giving way to conceptions in which skilled decision makers draw upon conscious and non-conscious cognitive processes in parallel, which compete and operate in a dynamic interplay (cf. Evans, 2007, 2008) Advances in social cognitive neuroscience (and related developments in social cognition, cognitive psychology and neuroeconomics) increasingly support this shift in emphasis Copyright © Gerard P. Hodgkinson 2010

Hypothesized neural correlates of the C-system supporting reflective social cognition (analogous to controlled processing) and the X-system supporting reflexive social cognition (analogous to automatic processing) displayed on a canonical brain rendering from (A) lateral, (B) ventral, and (C) medial views. Note: the basal ganglia and amygdala are subcortical structures that are displayed here on the cortical surface for ease of presentation. (Source: Lieberman, MD, Annual Review of Psychology, Vol. 58. © 2007 by Annual Reviews. All Rights Reserved.)

Contemporary Developments in Social Neuroscience
Social Cognitive Neuroscience (SCN) Integrates social, cognitive, and neurological levels of analysis, thus avoiding charges of reductionism (Ochsner & Lieberman 2001) This interdisciplinary approach is changing views of a range of social phenomena, from the formation of political attitudes (Lieberman et al 2003) to the evolution of culture (Mesoudi et al 2006) Neuroeconomics Building on the above developments, this emerging field is questioning many of the psychological assumptions embedded in standard economic models Attempting to render theories of economic exchange more consistent with contemporary understanding of the human brain (Camerer 2005; Glimcher & Rustichini 2004; Loewestein, 2008; Sanfey et al. 2003) Copyright © Gerard P. Hodgkinson 2010

Contemporary Developments in Social Neuroscience
SCN and Neuroeconomics both posit interaction between two distinct cognitive systems (each multiple neural) Shift from ‘default-interventionist’ to ‘parallel-competitive’ dual-process models (Evans, 2008) Default interventionist dual-process theories posited the role of cortical/higher mental functions is to correct the ‘primitive’ limbic system’s automatic and affective responses (which are viewed as sources of bias and irrationality to be minimized) Automatic system provides default behaviors (e.g. automatic attitudes, intuitive judgments) that the analytical system refines Parallel-competitive models assume a more complex interaction between the systems, each operating simultaneously and competing Reflexive processes are not relegated to mere source of error and bias to be overcome with effort, but integral to human cognition and critical for skilled processes such as intuition (Lieberman, 2000) Copyright © Gerard P. Hodgkinson 2010

Other pertinent developments
The somatic marker hypothesis Memories embodied as resonating emotions activated in context-congruent situations (Bechara, 2004; Damasio, 1994) ‘Affective tags’ (Finucane et al., 2000) Positive & negative markers from individuals’ ‘affect pools’ tag to all mental images (Slovic et al., 2000) The affect heuristic and affect as information The body loop and as-if loop (Bechara, 2004) Decision making under uncertainty with the body loop Decision making under certainty with the fainter as-if loop Copyright © Gerard P. Hodgkinson 2010

Intuitive abilities, styles, and strategies
Intuition construed as quantifiable differences in task performance (i.e. ability; cf. Sternberg, 1997) Intuition construed as an enduring overarching preference of approach to information processing (i.e. cognitive style; cf. Allinson & Hayes, 1996) Intuition construed as a cognitive strategy, switchable at will (cf. Hogarth, 2001; Klein, 2003) Copyright © Gerard P. Hodgkinson 2010

Basic typology of contrasting cognitive strategies and styles
Source: G.P. Hodgkinson and I. Clarke, 2007, ‘Exploring the cognitive significance of organizational strategizing: A dual-process framework and research agenda,’ Human Relations, 60, Copyright © 2007 Sage Publications.

Intuitive ability Unresolved issue of accuracy of intuitive judgments
Intuition may be more useful for generating hypotheses that need further testing (Atkinson & Claxton, 2000). Sources of bias associated with intuitive heuristic judgments (representativeness, availability and anchoring and adjustment) well documented in the behavioural decision-making literature (e.g. Kahneman, Slovic, & Tversky, 1982). However, this lab-based research takes advantage of participants’ ignorance of arithmetical and statistical principles rather than focusing on their experience and knowledge and to require them to generate intuitively a final solution to a problem (Bowers et al., 1990). Copyright © Gerard P. Hodgkinson 2010

Rapid Primed Decision Making
RPD = two-step process (Klein, 1998: 24): decision makers ‘size up the situation to recognize which course of action makes sense’ evaluate that course of action via mental simulation Copyright © Gerard P. Hodgkinson 2010

Critique of RPD (Hodgkinson et al., 2008: pp. 7 - 8)
High face validity and seemingly corroborated by Klein’s own empirical findings, but… Klein is unclear about the degree of fidelity required of mental simulations to render them useful in the complex, time pressured, ‘life-or-death’ situations in which he claims they are typically deployed Given the basic restrictions of working memory capacity, these simulations must be of limited overall fidelity, but even allowing for the fact that they are typically constructed on the basis of just three variables and six transitions, it is difficult to envisage such simulations being mentally rehearsed in ‘real time’ in the manner envisaged by Klein Copyright © Gerard P. Hodgkinson 2010

Measuring intuition as cognitive style or strategy (ability?)
Rational-experiential inventory (REI: Epstein et al., 1996) Need for cognition (adapted from Cacioppo & Petty, 1982) Faith in intuition Revised form REI (Epstein et al., 1998) Rational ability (self-report) Rational engagement Experiential ability (self-report) Experiential engagement Recent psychometric studies fail to recover the ability-engagement distinction but strongly support the basic two-dimensional structure of the original REI (Hodgkinson et al, 2009b), commensurate with the underlying dual-process theory of Epstein and colleagues Copyright © Gerard P. Hodgkinson 2010

Future directions in the assessment of intuition
The study of intuitive episodes (lab and field) rather than self-reported preferences Use of critical incident technique and repertory grid/multidimensional scaling to reflect upon incidents where intuition seems to have been used effectively vs. ineffectively Cognitive task analysis/cognitive mapping/knowledge elicitation procedures in conjunction with time-pressured decision tasks Diary studies and related experience sampling methods fMRI (in conjunction with the above) Copyright © Gerard P. Hodgkinson 2010

Can intuition be manipulated?
$64,000 question Need to disentangle the process (intuiting) from the outcomes (intuitions) The short answer is we can probably facilitate the process but not control the outcomes (but we can nonetheless assess outcomes, both proximal to and distal from the decision episode) Create the enabling conditions in which skilled intuition is likely to occur and flourish (see Hodgkinson et al., 2009a, Long Range Planning) Copyright © Gerard P. Hodgkinson 2010

Error-free and correct Verbal and symbolic Egocentric and total
Intelligence is… Clear and conscious Logical and justified Error-free and correct Verbal and symbolic Egocentric and total Rapid and decisive AND fuzzy/vague AND unjustified AND experimental AND fantasy AND empathic AND slow / receptive Copyright © Gerard P. Hodgkinson 2010

Creative cognition Creative cognitions manifest as intuitions (intimations or feelings of knowing) operate at the other end of the speed continuum to the lightening-fast judgements that arise in response to the complex, time pressured situations of the type studied by NDM and expertise researchers Allowing for a period of incubation creates space for mental relaxation and the consequent removal of analytical blocks, for serendipitous associations to occur, and allow the slow spreading of activation trails that may throw up a new metaphor, perspective or connection that conjoins previously unrelated elements Copyright © Gerard P. Hodgkinson 2010

Creative cognition The intuitive facet of creativity is both a complex and ambiguous competency to recognise and assess It is also difficult to accommodate within organizational cultures and structures that scorn fallibility and prohibit experimentation, risk taking and departures from efficient standard operating procedures The creative cognitions which are one outcome of non-conscious, intuitive processes are, like their analytical counterparts, fallible, but nonetheless essential to the generation and exploration of novel ideas in preparing viable alternatives for success Copyright © Gerard P. Hodgkinson 2010

Significance for understanding & developing dynamic capabilities?
The economic, and to a lesser extent psychological, microfoundations of dynamic capabilities have received growing scholarly attention over recent years Teece’s (2007) contribution constitutes the most comprehensive framework to date for the analysis of capabilities development in organizations Teece posited three generic dynamic capabilities as the core foundations of the evolutionary and economic fitness of the business enterprise Copyright © Gerard P. Hodgkinson & Mark P. Healey 2010

Foundations of dynamic capabilities & business performance
SENSING SEIZING MANAGING THREATS/ TRANSFORMING Analytical Systems (and Individual Capacities) to Learn and to Sense, Filter, Shape, and Calibrate Opportunities Enterprise Structures, Procedures, Designs and Incentives for Seizing Opportunities Continuous Alignment and Realignment of Specific Tangible and Intangible Assets DYNAMIC CAPABILITIES Foundations of dynamic capabilities & business performance Adapted from Teece, ‘Explicating dynamic capabilities: The nature and microfoundations of (sustainable) enterprise performance.’ Strategic Management Journal, 28, p

Basic Thesis & Contribution
This framework currently downplays the significance of emotional/affective and non-conscious cognitive processes, especially intuition, in sensing, seizing and reconfiguring Accordingly, we revisit the psychological foundations of Teece’s framework to rectify this imbalance We develop countervailing psychological insights on the origins and development of dynamic capabilities, highlighting economic actors’ need to blend effortful forms of analysis with the skilled utilization of less deliberative, intuitive processes, thereby harnessing the cognitive and emotional capacities of individuals and groups Copyright © Gerard P. Hodgkinson & Mark P. Healey 2010

In sum… We challenge the key underlying psychological assumption implicit within Teece’s framework (and the writings of many contemporary strategic cognition scholars) that there is a single underlying dimension or continuum comprising conscious cognition versus non-conscious cognition and emotion/affect Non-conscious cognition & affect/emotion Conscious cognition Copyright © Gerard P. Hodgkinson & Mark P. Healey 2010

Rather… some affective and emotional triggers and associated responses are processed consciously, while others are processed non-consciously (cf. Bandura, 1986) Copyright © Gerard P. Hodgkinson & Mark P. Healey 2010

‘Hot cognition’ (Emotional/affective)
Subconscious/automatic Conscious/deliberative ‘Cold cognition’ Copyright © Gerard P. Hodgkinson & Mark P. Healey 2010

SENSING SEIZING MANAGING THREATS/ TRANSFORMING DYNAMIC CAPABILITIES Analytical Systems (and Individual Capacities) to Learn and to Sense, Filter, Shape, and Calibrate Opportunities Enterprise Structures, Procedures, Designs and Incentives for Seizing Opportunities Continuous Alignment and Realignment of Specific Tangible and Intangible Assets Foundations of dynamic capabilities & business performance Adapted from Teece, ‘Explicating dynamic capabilities: The nature and microfoundations of (sustainable) enterprise performance.’ Strategic Management Journal, 28, p

PROBLEM SEIZING MANAGING THREATS/ TRANSFORMING DYNAMIC CAPABILITIES In addition, learning, sensing, filtering, shaping & calibration involve intuition & other nonconscious cognitive processes and the use of affective & emotional processes Enterprise Structures, Procedures, Designs and Incentives for Seizing Opportunities Continuous Alignment and Realignment of Specific Tangible and Intangible Assets Foundations of dynamic capabilities & business performance Adapted from Teece, ‘Explicating dynamic capabilities: The nature and microfoundations of (sustainable) enterprise performance.’ Strategic Management Journal, 28, p

SENSING as FEELING and ANALYSIS SEIZING MANAGING THREATS/ TRANSFORMING DYNAMIC CAPABILITIES Systems and processes that enable and support the blending of analytical, intuitive & affective/ emotional information Enterprise Structures, Procedures, Designs and Incentives for Seizing Opportunities Continuous Alignment and Realignment of Specific Tangible and Intangible Assets Foundations of dynamic capabilities & business performance Adapted from Teece, ‘Explicating dynamic capabilities: The nature and microfoundations of (sustainable) enterprise performance.’ Strategic Management Journal, 28, p

Psychological Foundations of Sensing Revisited
Extant Foundations Supporting Literature(s) Revised Foundations Opportunity discovery and creation originate from the cognitive and creative (‘right brain’) capacities of individuals, requiring access to information and the ability to recognize, sense, and shape developments Entrepreneur-ship literature Organizational search (e.g. March & Simon, 1958; Nelson & Winter, 1982) Identifying and creating opportunities through searching, synthesizing and filtering information stems from the interaction between reflexive (e.g. intuition, implicit association) and reflective (e.g. analogy, explicit reasoning) cognitive and emotional capabilities Social cognitive neuroscience research on the interaction between reflexive and reflective systems (e.g. Lieberman, 2007)

Psychological Foundations of Sensing Revisited (cont.)
Extant Foundations Supporting Literature(s) Revised Foundations Recognizing, scanning, and shaping depend on individuals’ cognitive capabilities and extant knowledge Knowledge-based view of the firm (e.g. Grant, 1996) Organizational learning (e.g. Levinthal & March, 1993) Recognizing, scanning, and shaping depend on the capability to harness emotion to update mental representations (e.g. dissonance recognition) and skilled utilization of automatic processes to synthesize information and form expert judgments Cognition and capabilities literature (e.g. Gavetti, 2005) Affective processes in learning (e.g. Lieberman, 2000)

Psychological Foundations of Sensing Revisited - 1
Affective micro-foundations of sensing Utilizing affect as information is an essential part of sensing Experts use non-conscious pattern matching, yielding affectively charged intuitive judgments (Dane & Pratt, 2007; Lieberman, 2001) Emotion directs attention to threats and opportunities Affective reactions to opportunities signal need for further appraisal Dissonance provides signal and motivation for schema change Affective micro-foundations of sensing Extant knowledge can both inhibit and enable sensing. It can inhibit search and identification when mental representations of the strategic situation are outmoded (e.g. Polaroid). It enables sensing when mental representations are accurate. E.g. opportunities that fit with existing schemas can be evaluated quickly and positively through non-conscious pattern matching processes, while those that do not fit are evaluated quickly and negatively. The latter illustrates ‘sensing based on feeling’ (‘Intuition is the interplay of knowing based on expertise and sensing based on feeling’; Saddler-Smith & Sheffy, 2004). Hence, the ability to harness reflexion in the form of intuition is a key part of sensing. Suppressing ones intuitive, affectively charged reactions to a strategic alternative (e.g. a new strategic direction, Polaroid moving from instant imaging to digital imaging) is potentially dysfunctional; it amounts to ignoring important information from the reflexive system that might be signalling that the current schema needs updating, or conversely ignoring well-founded discomfort with strategic alternatives that do not fit with current competencies of the business Extant knowledge inhibits sensing when mental representations are outmoded. In this case, decision makers must update their schemas. Affective processes are key to learning. Enabling sensing is not just about presenting executives with disconfirming evidence – it’s about creating a psychologically safe environment in which executives can heed affective signals as important sources of information about threats, opportunities, and the extant knowledge base used to sense these. There’s no learning without emotion. Emotion directs attention. Google executives know of the existence of various competitors in the browser market. But it is the sense of fear for their own position that directs which competitors are most important and on which developments they should focus. It is capabilities in diagnosing, attending to, and acting on these emotional signals, not suppressing them, that differentiates a dynamic firm from an unresponsive one. There’s no sensing without attention, and emotion directs interest and attention Implications Effective sensing is not just about the extant knowledge base per se. It’s about Copyright © Gerard P. Hodgkinson & Mark P. Healey 2010

Implications Capabilities in diagnosing/acting on emotional signals, not suppressing them, differentiate dynamic firms from unresponsive ones ‘Cold’ approaches to schema change insufficient – need systems, structures and tools to enable emotion learning (e.g. from dissonance) Dynamic capabilities require a psychologically safe climate Affective micro-foundations of sensing Extant knowledge can both inhibit and enable sensing. It can inhibit search and identification when mental representations of the strategic situation are outmoded (e.g. Polaroid). It enables sensing when mental representations are accurate. E.g. opportunities that fit with existing schemas can be evaluated quickly and positively through non-conscious pattern matching processes, while those that do not fit are evaluated quickly and negatively. The latter illustrates ‘sensing based on feeling’ (‘Intuition is the interplay of knowing based on expertise and sensing based on feeling’; Saddler-Smith & Sheffy, 2004). Hence, the ability to harness reflexion in the form of intuition is a key part of sensing. Suppressing ones intuitive, affectively charged reactions to a strategic alternative (e.g. a new strategic direction, Polaroid moving from instant imaging to digital imaging) is potentially dysfunctional; it amounts to ignoring important information from the reflexive system that might be signalling that the current schema needs updating, or conversely ignoring well-founded discomfort with strategic alternatives that do not fit with current competencies of the business Extant knowledge inhibits sensing when mental representations are outmoded. In this case, decision makers must update their schemas. Affective processes are key to learning. Enabling sensing is not just about presenting executives with disconfirming evidence – it’s about creating a psychologically safe environment in which executives can heed affective signals as important sources of information about threats, opportunities, and the extant knowledge base used to sense these. There’s no learning without emotion. Emotion directs attention. Google executives know of the existence of various competitors in the browser market. But it is the sense of fear for their own position that directs which competitors are most important and on which developments they should focus. It is capabilities in diagnosing, attending to, and acting on these emotional signals, not suppressing them, that differentiates a dynamic firm from an unresponsive one. There’s no sensing without attention, and emotion directs interest and attention Implications Effective sensing is not just about the extant knowledge base per se. It’s about Copyright © Gerard P. Hodgkinson & Mark P. Healey 2010

Nonconscious micro-foundations of sensing Sensing = detailed analysis, deliberative learning (Porter, 1985; Zollo & Winter, 2002) But … nonconscious cognition underpins the ability to navigate the social (e.g. Bargh & Chartrand, 1999) and informational (Hodgkinson & Sparrow, 2002) environment “The inability of the analytical mode to synthesize” (Mintzberg, 1994:320) Reflexive processes enable decision makers to cut-through data to see the ‘big-picture’, vital to strategic situational awareness (Hodgkinson & Clarke, 2007), which in turn enables rapid identification of important developments for exploitation Copyright © Gerard P. Hodgkinson & Mark P. Healey 2010

Implications Sensing capabilities are not rooted in elaborate knowledge management systems per se, which can exacerbate rather than ameliorate information overload (Griffith, 2008) Copyright © Gerard P. Hodgkinson & Mark P. Healey 2010

Psychological Foundations of Seizing Revisited
Extant Foundations Supporting Literature(s) Revised Foundations Seizing innovative investment choices requires managers to override ‘dysfunctions’ of decision making Overcoming biases requires a cognitively sophisticated and disciplined approach to decision making Classical behavioral decision theory (e.g. Kahneman & Tversky, 1979) Seizing opportunities requires harnessing emotional reactions to strategic alternatives Cognitively effortful processes can exacerbate bias - alleviating bias and inertia requires cognitive & emotional capabilities Neuroeconomics: immediate emotions shape choice (e.g. Loewenstein et al., 2008) Self-regulation (e.g. Ochsner et al., 2002) Affect in de-escalation of commitment (e.g. Sivanathan et al., 2008)

Psychological Foundations of Seizing
Emotions in strategic decision making Visceral (felt) reactions to choice alternatives often overpower evaluations based on subjective probability (e.g. Loewenstein et al., 2001; Rottenstreich & Hsee, 2001; Bechara et al., 1997) Cold cognitive assessments of new investment alternatives are unlikely to stimulate effective seizing For effective seizing, need to build positive emotional associations to new opportunities. Highlights the importance of imagery, scenarios … Seizing is about quickly building commitment to appropriate new investment opportunities and lessening commitment to existing strategic directions that are no longer appropriate. Copyright © Gerard P. Hodgkinson & Mark P. Healey 2010

Psychological Foundations of Seizing (cont.)
Unlocking fixations with existing strategies Escalation of commitment (e.g. Staw, 1976) Disengagement from a failing course of action involves self-regulatory processing to reduce emotional engagement (Wong et al, 2006; Henderson et al., 2007) Hubris may create bias (Hiller & Hambrick 2005; Teece, 2007), but too little self-regard can actually exacerbate strategic persistence Seizing is about quickly building commitment to appropriate new investment opportunities and lessening commitment to existing strategic directions that are no longer appropriate. Copyright © Gerard P. Hodgkinson & Mark P. Healey 2010

Psychological Foundations of Reconfiguring Revisited
Extant Foundations Supporting Literature(s) Revised Foundations Top management ability to coordinate and execute strategic renewal and corporate change Organizational structure and design and strategy and performance literatures (e.g. Bartlett & Ghoshal, 1993; Chandler, 1962) Reconfiguration requires management of the transition and repeated redefinition of social identities by alleviating implicit bias and self-regulating emotional responses to identity threats posed by major change, i.e. reconfiguration of social identities with emotional attunement Research on the neural basis of self and self-regulation (e.g. Derks et al., 2008)

Psychological Foundations of Reconfiguring Revisited (cont.)
Managing social-identity processes is key to reconfiguring Identity issues cause resistance to strategic change (e.g. Nag et al., 2007; Haslam et al., 2003) Traditional cognitive solutions (e.g. Gioia et al., 2000) are problematic SCN sheds new light on self and identity mechanisms Identity threat leads to heightened activity in emotion-regulation centers of the brain (e.g. Derks et al., 2008) Identity threat (e.g. change devaluing a group) and in/outgroup bias (e.g. against new opportunities, change agents) stems from automatic social categorization and stereotyping (Amodio, 2008) Self-regulation of emotional response is critical to overcoming identity threats. Similar to the means of alleviating escalation bias outlined in the previous section, this approach involves addressing the core emotional mechanisms underlying identity-based resistance Specifically, because threats to salient social identities threaten by extension the identities and self-concepts of individuals who identify strongly with that entity, affirming other aspects of the organizational and managerial identities to which individuals belong can help reduce the pressure to cling to and defend old identities. Particularly where the parts of extant social identities re-affirmed are consistent with those new initiatives, economic actors will be more amenable to engaging with new strategic changes and directions. Copyright © Gerard P. Hodgkinson & Mark P. Healey 2010

Psychological Foundations of Reconfiguring Revisited (cont.)
Implications: Reconfiguring involves tackling the emotional and nonconscious (i.e. reflexive) aspects of identity change Self-regulation, affirmation of consonant identities Self-regulation of emotional response is critical to overcoming identity threats. Similar to the means of alleviating escalation bias outlined in the previous section, this approach involves addressing the core emotional mechanisms underlying identity-based resistance Specifically, because threats to salient social identities threaten by extension the identities and self-concepts of individuals who identify strongly with that entity, affirming other aspects of the organizational and managerial identities to which individuals belong can help reduce the pressure to cling to and defend old identities. Particularly where the parts of extant social identities re-affirmed are consistent with those new initiatives, economic actors will be more amenable to engaging with new strategic changes and directions. Copyright © Gerard P. Hodgkinson & Mark P. Healey 2010

Implications and Conclusions
Toward a ‘behaviorally plausible’ account of dynamic capabilities? (cf. Gavetti, Levinthal & Ocasio, 2007) Extant behavioral theory and research on dynamic capabilities informed by neo-classical economics divorces cognition from emotional and affective processes and affords only a minimal role to nonconscious cognition Taken to its logical conclusion, this body of work yields a vision of organizations starved of emotion and rendered intuitively incapable – thus, effectively blinkered and relatively unresponsive The framework developed by Teece remains key for understanding dynamic capabilities development The (cognitive) microfoundations of dynamic capabilities are as much about emotion and implicit forms of cognition as they are about cold, dispassionate judgment and effortful forms of analysis Toward a ‘behaviourally plausible’ account of capabilities development (Gavetti, Levinthal & Ocasio, 2007) – (1) mental representations, (2) emotional behavior In his closing remarks, Teece (2007: 1341) observes that, “enterprises may be more like biological organisms than some economists, managers, and strategy scholars are willing to admit”. Copyright © Gerard P. Hodgkinson & Mark P. Healey 2010

Teece’s (2007) framework remains central But, behavioral plausibility is not its strength - the core psychological assumptions underpinning this (and other) framework(s) need revising in the light of recent advances in social cognitive neuroscience and neuroeconomics The framework developed by Teece remains key for understanding dynamic capabilities development The (cognitive) microfoundations of dynamic capabilities are as much about emotion and implicit forms of cognition as they are about cold, dispassionate judgment and effortful forms of analysis Toward a ‘behaviourally plausible’ account of capabilities development (Gavetti, Levinthal & Ocasio, 2007) – (1) mental representations, (2) emotional behavior In his closing remarks, Teece (2007: 1341) observes that, “enterprises may be more like biological organisms than some economists, managers, and strategy scholars are willing to admit”. Copyright © Gerard P. Hodgkinson & Mark P. Healey 2010

Learning from contemporary advances in SCN and neuroeconomics, we offer countervailing descriptive, normative, and prescriptive insights To maximize their true effectiveness in sensing, seizing and transforming, organizations need to acquire and utilize to the full the requisite mixture of conscious and nonconscious cognitive processes, each of which are infused with affectivity and emotion … … i.e. developing and maintaining dynamic capabilities requires firms to harness managers’ and employees’ reflexive and reflective abilities The framework developed by Teece remains key for understanding dynamic capabilities development The (cognitive) microfoundations of dynamic capabilities are as much about emotion and implicit forms of cognition as they are about cold, dispassionate judgment and effortful forms of analysis Toward a ‘behaviourally plausible’ account of capabilities development (Gavetti, Levinthal & Ocasio, 2007) – (1) mental representations, (2) emotional behavior In his closing remarks, Teece (2007: 1341) observes that, “enterprises may be more like biological organisms than some economists, managers, and strategy scholars are willing to admit”. Copyright © Gerard P. Hodgkinson & Mark P. Healey 2010

Where do we go from here? We need to continue illuminating the generative mechanisms that contribute to the identification and enhancement of intuition and related processes In order to develop a more nuanced appreciation as to when and how their use can be harnessed and complemented with other approaches Copyright © Gerard P. Hodgkinson & Mark P. Healey 2010

Some follow up reading Hodgkinson, G.P. & Clarke, I. (2007). Exploring the cognitive significance of organizational strategizing: A dual-process framework and research agenda. Human Relations, 60, Hodgkinson, G. P., & Healey, M. P. (2008). Cognition in organizations. Annual Review of Psychology, 59, Hodgkinson G. P., Langan-Fox J., & Sadler-Smith E. (2008). Intuition: A Fundamental Bridging Construct in the Behavioural Sciences. British Journal of Psychology, 99, 1-27. Hodgkinson, G.P., Sadler-Smith, Burke, L.A., Claxton, G., & Sparrow, P.R. (2009a). Intuition in organizations: Implications for strategic management. Long Range Planning, 42, Hodgkinson, G.P., Sadler-Smith, E., Sinclair, M., & Ashkanasy, N.M. (2009b). More than meets the eye? Intuition and analysis revisited. Personality and Individual Differences, 47,

Centre for Organizational Strategy, Learning and Change (COSLAC)
Conscious and non-conscious cognition and emotions: Implications for the psychological micro-foundations of strategic management Gerard P. Hodgkinson Centre for Organizational Strategy, Learning and Change (COSLAC) Phone: +44(0)

Conscious and non-conscious cognition and emotions: Implications for the psychological micro-foundations of strategic management Gerard P. Hodgkinson Centre.

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Conscious and non-conscious cognition and emotions: Implications for the psychological micro-foundations of strategic management Gerard P. Hodgkinson Centre.

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