Overcoming strategic persistence: Effects of multiple scenario analysis on strategic reorientation

Abstract

To thrive in an unpredictable world, managers must adapt their decision-making to changing events. However, a major impediment to adaptation is strategic persistence, that is, the tendency to stick with previously successful strategies. We examined whether multiple scenario analysis can help to overcome the dysfunctional effects of strategic persistence. In a laboratory study using a multi-round strategy simulation that required players to change strategies to succeed, we found that multiple scenario analysis alleviated the effects of strategic persistence by stimulating strategic reorientation, that is, adaptive shifts in patterns of strategic choice. Multiple scenario analysis influenced strategic reorientation indirectly, by fostering belief in a new strategy, and its effectiveness depended on prior performance. We discuss implications for research on the cognitive microfoundations of strategic adaptation.