Strategy Making In Novel And Complex Worlds: The Power Of Analogy, Strategic Management J. Bookmark and Share

Excerpts: We examine how firms discover effective competitive positions in worlds that are both novel and complex. In such settings, neither rational deduction nor local search is likely to lead a firm to a successful array of choices. Analogical reasoning, however, may be helpful, allowing managers to transfer useful wisdom from similar settings they have experienced in the past. From a long list of observable industry characteristics, analogizing managers choose a subset they believe distinguishes similar industries from different ones. (...) We embody this conceptualization of analogy in an agent-based simulation model. (...)