Strategy Making In Novel And Complex Worlds: The Power Of Analogy, Strategic Management J.
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. (...)