Blind to the future: Exploring the contingent effect of managerial hubris on strategic foresight

Abstract

Extending research on the role of managerial cognition in strategic decision-making, in this study, we examine the relationship between managerial hubris and strategic foresight. Building on the information-processing model, we argue that managerial hubris leads to a reduced level of strategic foresight due to biases in attending to information as well as encoding and processing information. We further argue that R&D capability moderates the impact in ways depending on the levels of R&D human and physical capital resources available. Furthermore, industry concentration weakens the main negative impact. Using a new and unique two-wave survey of about 500 firms across provinces of China, in combination with an archival data set, we find general support for our propositions in two studies. Our research has important implications for understanding the role of cognitive biases in managerial decision-making in strategic management.