TMT Cognitive Capability and Organizational Outcomes: A Theoretical Review

Abstract

Extant strategic management literature has followed two divergent paradigms. One is based on the tenets of industrial organization theory and argues that strategic decision making and action is purely a chance affair because the industry environment determines whether an organizational will survive or not and that the decisions and actions of the organizational players have no role at all. The second paradigm is based on the Resources Based View (RBV) and argues that organizational strategic choice and action is purely a resources, capability and competence deployment affair. Even though recent scholarship in strategic management has attempted to integrate the two paradigms to explain organizational strategic decision making and outcome, it is however yet to put forward a theoretical model explaining how the two paradigms integrate. In this paper, the authors bring on board a managerial cognitive capability perspective to play the role of a catalyst that blends the two paradigms together in explaining organizational outcomes. The paper reviews extant conceptual, theoretical and empirical literature and builds a case for a theoretical model linking TMT cognitive capability and organizational outcomes in the context of both industry environment dynamics and internal organization dynamics. The study identifies key organization outcomes resulting from the deployment of TMT cognitive capability as strategic choice, strategic flexibility and organizational performance while the key contextual factor that condition the outcomes include industry velocity and organizational characteristics. Based on the postulates of several underpinning theories, the paper identifies a phenomenon arising from deployment of TMT Cognitive Capability in the context of dynamic business environments and proposes a theoretical model that raises several implications for future empirical work.