STRATEGIC PERSISTENCE IN THE FACE OF CONTRARY INDUSTRY EXPERIENCE: TWO EXPERIMENTS ON THE FAILURE TO LEARN FROM OTHERS *

Empirical studies indicate that organizations do not always learn from the experience of others in their industry and thus persist with ineffective strategies. This can be partly explained by cognitive biases that impact strategic decision making. Using two experiments with a realistic strategic decision and actual industry data, we found strategic persistence more likely under three conditions. One, when evidence against a strategy was more, rather than less, ambiguous, allowing the prior-hypothesis bias to operate. Two, when decision makers felt highly responsible for making the initial erroneous choice and thus felt the need to justify their choice despite contrary evidence. And three, when decision makers were high self-monitors, i.e., those who are very perceptive and responsive to social cues. 3INTRODUCTION The managers who make strategic decisions for organizations are almost always intelligent and motivated. Yet, often the decisions they make are wrong which may cause their organizations to decline or even fail. In this paper, we investigate one common type of strategic decision making error- persistence with a strategy despite evidence against its effectiveness