Organizational stress and mental models: An explanation of diversity in strategic response to environmental change

A primary assumption of the strategy literature is that firms continually monitor the environment and reformulate strategy to match firm strengths and weaknesses with the new opportunities and threats present in the environment. However, some firms in profoundly changing environments vary to a significant extent in the timing and content of their strategic response.Previous research from strategy formulation, industrial organization, and organization theory provide partial explanations for this variance but fail to explain differences among similar firms in the same environment. However, differences in strategic response to the same problem among similar firms in the same industry remain unexplained.This dissertation explores differences in strategic response by tying change in strategic action directly to firm strategists. A model is proposed based on the premise that firm strategists develop and hold unique understandings of the firm and its environment. Organization strategy is based upon these understandings, or cognitive maps, and thus even similar firms differ in their responses to similar environments.The model suggests that a significant change in strategy can only occur following a shift or significant change in the cognitive maps of the strategists. Because cognitive maps are the sense-making tools strategists use to interpret the environment and guide decisions, they are resistant to change which is hypothesized to occur only when a certain level of stress, brought on by events perceived as stressful is reached. When the cognitive map of the strategist becomes sufficiently bad at explaining events in the environment, he or she begins to reorganize these guiding assumptions, and significant change in strategy is possible.The model is tested and refined by studying changes in strategic action and the cognitive maps of strategists from six pharmaceutical firms as they addressed the 1962 amendments to the Federal Food, Drug, and Cosmetic Act of 1938. The dissertation investigates the way in which this stressful event altered the pattern of firm strategic action and explores the extent to which these changes can be anticipated by changes in the cognitive maps of the involved strategists. A dual methodology is employed that incorporates the statistical evidence of cluster analysis, used to identify significant changes in strategic action, with the detail available from cause mapping, a form of content analysis used to study changes in mental models.The results support the hypotheses that stress acts as a trigger to strategic change and that the process of change is linked to the perceptions of firm strategists. However, the results also indicate that significant change in strategic action may precede significant change in mental models in the data sets examined.U of I OnlyETDs are only available to UIUC Users without author permissio