Managerial Cognition And The International Strategy-Making Process In European Telecom Mncs

0. Executive summary 3

1. Introduction 4

2. Conceptual and contextual grounding 6

2.1 Objectives 12

2.2 Missing link between managerial cognition and the internationalisation process 14

3. Research Questions 21

4. Methodology 23

5. Literature 26

0. Executive summary

The following research sheds light on the missing link between managerial cognitive maps and the international strategy-making process in the telecommunication industry of European MNCs. Cognition refers to belief systems that individuals use to acquire, store, transform, and utilize knowledge and that influence, frame, constrain and enable decision-making processes and sense making of their environment. This research contributes to a body of work in which different concepts and methods are distinguished to study the basic cognitive processes that influence and shape heuristic decision-making behaviour. In particular, the influence of manager cognitive maps on the internationalisation process and how the internationalisation process is grounded in the managersÐ'Ò' cognitions will be analyzed. Furthermore an attempt is made to work out which categories of managersÐ'Ò' cognitions explain the propensity for internationalisation process. This subject matter will be examined through the analysis of in-depth interviews, using cognitive mapping as a method to gain insights into the nature and significance of cognitive processes in organizational decision making that govern the internationalisation processes within MNCs.

Keywords: managerial cognition, cognitive maps, strategic decision-making, internationalisation process, telecommunication industry

1. Introduction

Over the last two decades, the telecommunication industry in Europe has undergone dramatic changes. The most significant triggers of transformation and corporate restructuring have been the liberalisation and privatisation of formerly government-controlled activities in the year 1998, and the arrival of various generations of technological innovations like mobile telephony and data transmission, which led to a continuing globalisation of business activities within the sector. The internationalization process of the European Telecommunication industry is apparent in Europe:

For example, Deutsche Telekom has subsidiaries in Austria (T-Mobile, T-Online), France (T -Online), the Netherlands (T -Mobile), Portugal (Terravista), Spain (Ya.com) and in the UK (T -Mobile). Vodafone (UK) has international subsidiaries in Ireland, Germany, Italy, Greece, the Netherlands, Portugal, Spain, Sweden and France Telecom in Belgium (Mobistar), the Netherlands (Orange), Spain (Uni2), Switzerland (Orange), UK (Orange) etc. [European Foundation for the Improvement of Living and Working Conditions, 2005].

For this reason the business environment in the telecommunication industry can be characterized as turbulent, complex and hypercompetitive and for MNCs it is necessary to gain and sustain competitive advantages in the international playing field.

In this complex competitive environment managers are overstrained to make decisions and solve problems about the uncertainty of future, the variety of targets and alternatives [EisenfÐ"јhr and Weber, 2001]. The task of the manager is to make a choice between alternatives and this in a possibly rational manner. Although rational, managerial decisions consist of a wide variety of heuristic strategies, ranging from careful and reasoned examination of alternatives to simple and fast “rules of thumb”. [Simon, 1978] made the point that managers are “bounded rational”. Bounded rationality is used to designate rational choice that takes into account the limitations of both knowledge, and cognitive capacity. It is concerned with the ways in which the actual decision-making process influences decisions [Allingham, 2002 p. 27]. But what factors determine the strategy a decision maker will use in one situation as opposed to another? It is well-known, that choice is defined by a preference relation if items in a given menu which you choose are precisely those which are at least as good as every item on the menu. In somewhat ordinary decision-making situations it is basically assumed that managers have a repertoire of strategies for making judgements and choices and that the use of these strategies is contingent upon a variety of task, context, and individual difference factors.

In contrast, an international strategy-making process is more complex. Here it is necessary to focus on strategic cognitions at the individual, group, organization and industry levels. Furthermore the inter-organizational level of cognitions in such an international strategy-making process should be examined in more detail. Different cultures, beliefs, and cognitive structures of managers must be coordinated and integrated and, moreover, a shared cognitive or “global mind set” must be constructed. Within this context it must be emphasized that the framing of strategy takes place in an organizational, social and political context and that the art of devising strategy is inherently a political process within the firm [Mintzberg and Quinn, 1998].

Thus, the main objective of the proposed research sheds light on the managerial cognitive maps and the international strategy-making process in the telecommunication industry of European MNCs. The influence of manager cognitive maps on the internationalisation process will be analyzed as well as how the internationalisation process is grounded in the managersÐ'Ò' cognitions. Furthermore an effort is made to work out which categories of managersÐ'Ò' cognitions explain the propensity for internationalisation process. This will be examined through the analysis of in-depth interviews and the methodology of grounded theory by Strauss.

2. Conceptual and contextual grounding

In the last two decades there has been a growing interest in the topic of Managerial and Organizational Cognition (i.e. the Managerial and Organizational Cognition Division is one of 21 divisions in the Academy of Management).

Social cognition, as a subfield of social psychology studies the mental representation and processes that underlie