Working Paper: NBER ID: w27952
Authors: Mujeung Yang; Michael Christensen; Nicholas Bloom; Raffaella Sadun; Jan Rivkin
Abstract: We explore the critical question of how executives make strategic decisions. Utilizing a new survey of 262 CEO alumni of Harvard Business School, we gather evidence on four aspects of each executive’s business strategy: its overall structure, its formalization, its development, and its implementation. We report three key results. First, different CEOs use markedly different processes to make strategic decisions; some follow highly formalized, rigorous, and deliberate processes, while others rely heavily on instinct and intuition. Second, more structured strategy processes are associated with larger firm size and faster employment growth. Third, using a regression discontinuity centered around a change in the curriculum of Harvard Business School’s required strategy course, we trace differences in strategic decision making back to differences in managerial education.
Keywords: CEOs; strategy; decision-making; management education
JEL Codes: L2; M1; M2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| structured strategy processes (L10) | larger firm size (L25) |
| structured strategy processes (L10) | faster employment growth (J68) |
| curriculum change at HBS in 1983 (M14) | managerial education (M53) |
| managerial education (M53) | strategic decision-making practices among CEOs (M12) |
| curriculum change at HBS in 1983 (M14) | strategic decision-making practices among CEOs (M12) |