We build on an emerging strategy literature that views the firm as a bundle of resources and capabilities, and examine conditions that contribute to the realization of sustainable economic rents. Because of (1) resource-market imperfections and (2) discretionary managerial decisions about resource development and deployment, we expect firms to differ (in and out of equilibrium) in the resources and capabilities they control. This asymmetry in turn can be a source of sustainable economic rent. The paper focuses on the linkages between the industry analysis framework, the resource-based view of the firm, behavioral decision biases and organizational implementation issues. It connects the concept of Strategic Industry Factors at the market level with the notion of Strategic Assets at the firm level. Organizational rent is shown to stem from imperfect and discretionary decisions to develop and deploy selected resources and capabilities, made by boundedly rational managers facing high uncertainty, complexity, and intrafirm conflict.

https://www.jstor.org/stable/pdfplus/2486548.pdf

Strategic assets and organizational rent

It is proposed that motivation may affect reasoning through reliance on a biased set of cognitive processes—that is, strategies for accessing, constructing, and evaluating beliefs. The motivation to be accurate enhances use of those beliefs and strategies that are considered most appropriate, whereas the motivation to arrive at particular conclusions enhances use of those that are considered most likely to yield the desired conclusion. There is considerable evidence that people are more likely to arrive at conclusions that they want to arrive at, but their ability to do so is constrained by their ability to construct seemingly reasonable justifications for these conclusions. These ideas can account for a wide variety of research concerned with motivated reasoning. The notion that goals or motives affect reasoning has a long and controversial history in social psychology. The propositions that motives may affect perceptions (Erdelyi, 1974), attitudes (Festinger, 1957), and attributions (Heider, 1958) have been put forth by some psychologists and challenged by others. Although early researchers and theorists took it for granted that motivation may cause people to make self-serving attributions and permit them to believe what they want to believe because they want to believe it, this view, and the research used to uphold it, came under concentrated criticism in the 1970s. The major and most damaging criticism of the motivational view was that all research purported to demonstrate motivated reasoning could be reinterpreted in entirely cognitive, nonmotivational terms (Miller & Ross, 1975; Nisbett & Ross, 1980). Thus people could draw self-serving conclusions not because they wanted to but because these conclusions seemed more plausible, given their prior beliefs and expectancies. Because both cognitive and motivational accounts could be generated for any empirical study, some theorists argued that the hot versus cold cognition controversy could not be solved, at least in the attribution paradigm (Ross & Fletcher, 1985; Tetlock & Levi, 1982). One reason for the persistence of this controversy lies in the failure of researchers to explore the mechanisms underlying motivated reasoning. Recently, several authors have attempted to rectify this neglect (Kruglanski & Freund, 1983; Kunda, 1987; Pyszczynski & Greenberg, 1987; Sorrentino & Higgins, 1986). All these authors share a view of motivation as having its effects through cognitive processes: People rely on cognitive processes and representations to arrive at their desired conclusions, but motivation plays a role in determining which of these will be used on a given occasion.

/pdf/the-case-for-motivated-reasoning-2ki9tjbrr6.pdf

The case for motivated reasoning.

Confirmation bias, as the term is typically used in the psychological literature, connotes the seeking or interpreting of evidence in ways that are partial to existing beliefs, expectations, or a h...

/pdf/confirmation-bias-a-ubiquitous-phenomenon-in-many-guises-18m0fi8wck.pdf

Confirmation Bias: A Ubiquitous Phenomenon in Many Guises:

This paper reviews the literature on gender differences in economic experiments. In the three main sections, we identify robust differences in risk preferences, social (other-regarding) preferences, and competitive preferences. We also speculate on the source of these differences, as well as on their implications. Our hope is that this article will serve as a resource for those seeking to understand gender differences and to use as a starting point to illuminate the debate on gender-specific outcomes in the labor and goods markets.

/pdf/gender-differences-in-preferences-1wffy691ko.pdf

Gender Differences in Preferences

This research investigates the antecedents and consequences of customer satisfaction. We develop a model to link explicitly the antecedents and consequences of satisfaction in a utility-oriented framework. We estimate and test the model against alternative hypotheses from the satisfaction literature. In the process, a unique database is analyzed: a nationally representative survey of 22,300 customers of a variety of major products and services in Sweden in 1989-1990. Several well-known experimental findings of satisfaction research are tested in a field setting of national scope. For example, we find that satisfaction is best specified as a function of perceived quality and "disconfirmation"-the extent to which perceived quality fails to match prepurchase expectations. Surprisingly, expectations do not directly affect satisfaction, as is often suggested in the satisfaction literature. In addition, we find quality which falls short of expectations has a greater impact on satisfaction and repurchase intentions than quality which exceeds expectations. Moreover, we find that disconfirmation is more likely to occur when quality is easy to evaluate. Finally, in terms of systematic variation across firms, we find the elasticity of repurchase intentions with respect to satisfaction to be lower for firms that provide high satisfaction. This implies a long-run reputation effect insulating firms which consistently provide high satisfaction.

The Antecedents and Consequences of Customer Satisfaction for Firms

Strategies for hypothesis testing in scientific investigation and everyday reasoning have interested both psychologists and philosophers. A number of these scholars stress the importance of disconfir. marion in reasoning and suggest that people are instead prone to a general deleterious "confirmation bias" In particula~ it is suggested that people tend to test those cases that have the best chance of verifying current beliefs rather than those that have the best chance of falsifying them. We show, howeve~ that many phenomena labeled "confirmation bias" are better understood in terms of a general positive test strate~. With this strategy, there is a tendency to test cases that are expected (or known) to have the property of interest rather than those expected (or known) to lack that property. This strategy is not equivalent to confirmation bias in the first sense; we show that the positive test strategy can be a very good heuristic for determining the truth or falsity of a hypothesis under realistic conditions~ It can, howeve~ lead to systematic errors or inefficiencies. The appropriateness of human hypotheses-testing strategies and prescriptions about optimal strategies must he understood in terms of the interaction between the strategy and the task at hand.

/pdf/confirmation-disconfirmation-and-information-in-hypothesis-8ag5boxfnh.pdf

Confirmation, Disconfirmation, and Information in Hypothesis Testing

Overconfidence: It Depends on How, What, and Whom You Ask

Publisher Summary This chapter reviews research concerning a variety of confirmation biases and discusses what they have in common and where they differ. The overall picture is one of heterogeneous, complex, and inconsistent phenomena, from which it is nevertheless possible to discern a general direction, namely a general tendency for people to believe too much in their favored hypothesis. The chapter discusses ideas about how to reconcile the apparent heterogeneity and the apparent generality of confirmation biases. There has been considerable interest among cognitive and social psychologists in the idea that people tend to hang on to their favored hypotheses with unwarranted tenacity and confidence. This tendency has been referred to as perseverance of beliefs, hypothesis preservation, and confirmation bias. Research in this area presents a rather heterogeneous collection of findings: a set of confirmation biases, rather than one unified confirmation bias. There are often substantial task-to-task differences in the observed phenomena, their consequences, and the underlying cognitive processes. There is no consensus about such basic questions as what is a favored hypothesis, against what norm is a belief unwarranted, and under what circumstances are people susceptible or not susceptible to a bias.

Varieties of Confirmation Bias

Judges were asked to make numerical estimates (eg, "In what year was the first flight of a hot air balloon?") Judges provided high and low estimates such that they were X% sure that the correct answer lay between them They exhibited substantial overconfidence: The correct answer fell inside their intervals much less than X% of the time This contrasts with choices between 2 possible answers to a question, which showed much less overconfidence The authors show that overconfidence in interval estimates can result from variability in setting interval widths However, the main cause is that subjective intervals are systematically too narrow given the accuracy of one's information-sometimes only 40% as large as necessary to be well calibrated The degree of overconfidence varies greatly depending on how intervals are elicited There are also substantial differences among domains and between male and female judges The authors discuss the possible psychological mechanisms underlying this pattern of findings

/pdf/overconfidence-in-interval-estimates-3n3c6aqqan.pdf

Overconfidence in interval estimates.

People are inaccurate judges of how their abilities compare to others'. J. Kruger and D. Dunning (1999, 2002) argued that unskilled performers in particular lack metacognitive insight about their relative performance and disproportionately account for better-than-average effects. The unskilled overestimate their actual percentile of performance, whereas skilled performers more accurately predict theirs. However, not all tasks show this bias. In a series of 12 tasks across 3 studies, the authors show that on moderately difficult tasks, best and worst performers differ very little in accuracy, and on more difficult tasks, best performers are less accurate than worst performers in their judgments. This pattern suggests that judges at all skill levels are subject to similar degrees of error. The authors propose that a noise-plus-bias model of judgment is sufficient to explain the relation between skill level and accuracy of judgments of relative standing.

/pdf/skilled-or-unskilled-but-still-unaware-of-it-how-perceptions-13jrql5i25.pdf

Joshua Klayman

Papers

Confirmation, Disconfirmation, and Information in Hypothesis Testing

Overconfidence: It Depends on How, What, and Whom You Ask

Varieties of Confirmation Bias

Overconfidence in interval estimates.

Skilled or Unskilled, but Still Unaware of It: How Perceptions of Difficulty Drive Miscalibration in Relative Comparisons