Information Processing Approach in Organisational Cognitive Structures: Relationship between Top and Middle Managers' Cognitions

Introduction

Since Simon’s (1955) research, cognitive explanations on decision making in organizations have gained the significance as research foci of strategic management. In decision-making, companies and their environments are seen as complex systems (Dooley & van de Ven, 1999). Such complex systems comprise a large number of dynamically interacting elements, where interactions are rich and individual elements are typically ignorant of the whole system’s behavior (Levy & Lichtenstein, 2012). Managers to cope with complexity make sense of the world by using partial mental models like recipes/cognitions gained from previous experience (Daft & Weick, 1984; Johnson, 1987; Stacy, 1995). These interconnected cognitions form individual and group level cognitive structures being relatively persistent representations of interrelating elements of information and their relationships (Walsh, 1995). Managers’ existing cognitive structures serve as simplified perceptions of knowledge being means of simplifying cognition in conditions of complexity and restricted information (DiMaggio, 1997). In this paper, we study managerial cognitions to understand the interaction of top and middle managers in strategic-decision making and the role of different organizational levels in the emergence of shared cognitive structures that has prominent role in the strategic action (Prahalad & Bettis, 1986; Lyles & Schwenk, 1992).

This paper addresses several gaps existing in the literature on managerial cognition. First, despite of extensive strategic management research on cognitive structures in organization, there is relatively few studies testing the relationship between shared cognitive structures of top management and middle management (e.g. Walsh, 1988, 1995; Beck & Plowman, 2009). Second, these studies are mostly focusing on effects of shared cognitive structures of top management or middle management on company performance (e.g. Bettis & Prahalad, 1995; Dutton et al., 1997; von Krogh et al., 2000; Beck & Plowman, 2009; Kor & Mesko, 2013). Third, still there is a need for more evidence supporting the seminal insight of Prahalad and Bettis (1986), that top managers’ shared cognitive structure stores a shared dominant general management logic of the organization. Fourth, despite of extensive literature on the involvement of middle management in the strategic decision making (Wooldridge et al., 2008), there is a little empirical studies of the prevalence of top-down or bottom-up process in the actual decision-making (van Rensburg et al., 2014).

We address these particular research needs by exploring shared cognitive structures (Prahalad & Bettis, 1986) on two organizational levels: top and middle management levels assuming that the cognitive structures in organizations created and disseminated by the top management frame cognitions of other organizational members. Here, top management communicate their shared cognitions into the organization reducing ambiguity of operative environment faced by the other layers of organization as middle managers and consequently their cognitive structures are influenced by top managers’ shared cognitions.