Cognitive Diversity in Strategic Decision Making: A Contextual Contingency Perspective

The riddle of diversity remains unresolved; it can spur innovation and creativity, yet also give rise to hostile conflict. Indeed, disagreement abounds as to whether cognitive diversity—which represents differences in ideas, preferences and beliefs among top managers concerning firm strategy—leads to positive or negative outcomes. While meta-analyses have concluded that the consequences of cognitive diversity among upper echelons executives are largely negative; the fact remains that the effects of diversity vary considerably across different studies, indicating the presence of unknown moderators and mediators. Hence in this study, recognizing the embeddedness of top managers within their firm and broader environmental context, we build new theory concerning moderating and mediating influences on the effects of cognitive diversity. We test our theory on a multi-informant, multi-source sample of 117 strategic decisions. We find a main negative effect of cognitive diversity on top management team behavioral integration, and that behavioral integration mediates the negative effects of cognitive diversity on decision comprehensiveness. We further develop new knowledge by drawing on resource-based theory, and we theorize that firm size and environmental hostility moderate the effects of cognitive diversity on behavioral integration and on comprehensiveness.