Theory-Driven Strategic Management Decisions

The seminar presents a paper that studies managerial decisions under uncertainty for which past data are not available. It provides microfoundations of the theory-based view of the firm by showing that the strategic problem starts with the selection of theories rather than choosing actions and that theories are selected through experiments. The value of experimenting with theories increases with the number of theories and with their uncertainty. Moreover, when theories are sufficiently uncertain, they become super-additive – that is, experimenting with a more uncertain theory increases the benefits of experimenting with other more uncertain theories. The paper also shows that decision-makers should experiment with more ”surprising” theories because in this case experiments are more informative and enable more learning. The framework is applied to two case studies to highlight the role of uncertainty in strategy formulation.

Paper: Camuffo, A., Gambardella, A., & Pignataro, A. (2023). Theory-Driven Strategic Management Decisions, CEPR Discussion paper n. 17664-3.

*This seminar is connected with the seminar "Practicing, teaching and doing empirical research on theory-based strategies: a simulation platform" by Arnaldo Camuffo and Alfonso Gambardella taking place on the same day from 14:00 to 15:30 in Van der Goot M1-17.