Strategic interpretation on sustainability issues – eliciting cognitive maps of boards of directors

• Date: 01 February 2016
• Published date: 01 February 2016
• DOI: https://doi.org/10.1108/CG-04-2015-0051
• Pages: 162-186
• Author: Jukka-Pekka Bergman,Antti Knutas,Pasi Luukka,Ari Jantunen,Anssi Tarkiainen,Aleksander Karlik,Vladimir Platonov
• Subject Matter: Strategy,Corporate governance

Strategic interpretation on sustainability

issues – eliciting cognitive maps of

boards of directors

Jukka-Pekka Bergman, Antti Knutas, Pasi Luukka, Ari Jantunen, Anssi Tarkiainen,

Aleksander Karlik and Vladimir Platonov

Jukka-Pekka Bergman is

Adj. Professor at School

of Business and

Management,

Lappeenranta University

of Technology,

Lappeenranta, Finland.

Antti Knutas is Junior

Researcher at School of

Engineering Science,

Lappeenranta University

of Technology,

Lappeenranta, Finland.

Pasi Luukka, Ari Jantunen

and Anssi Tarkiainen are

all based at School of

Business and

Management,

Lappeenranta University

of Technology,

Lappeenranta, Finland.

Aleksander Karlik and

Vladimir Platonov are

both based at the

Department of Economics

and Management of

Enterprises, Saint

Petersburg State

University of Economics,

St. Petersburg, Russia.

Abstract

Purpose –The purpose of this paper is to examine the role of cognitive diversity on strategic issue

interpretation among the boards of directors making sense of sustainability management. The study

also investigated the centrality of the corporate sustainability issues to identify common interpretative

patterns in the shared cognitive maps among the companies. In addition, the aim was to advance

quantitative methods for the analysis of decision-makers’ cognition.

Design/methodology/approach –The research was an exploratory study analyzing 43 individual

cognitive maps collected through surveys from the boards of nine cleantech companies. For the

elicitation of the cognitive maps, the study used the hybrid cognitive mapping technique. The diversity

of the shared cognitive maps was analyzed using the distance ratio formula and the graph analysis

method with eigenvector to measure the centrality of the strategic issue interpretation in the maps.

Findings –This study provides evidence through the analysis of distance ratios on the existence of

cognitive diversity among companies within the same industry. Surprisingly, despite the cognitive

diversity, the study identified strong common patterns on strategic issue interpretations among the

companies. In addition, the study shows that the sustainability management issues have gained minor

attention from the boards of directors.

Research limitations/implications –The initial industry sample provided relatively restricted

perspectives on managerial cognition, and to confirm the findings regarding the effects of industry on

the shared cognitive maps of top decision-makers, wider industry-level data are needed.

Practical implications –This study provides an approach to facilitate the process of strategic

decision-making for top decision-makers by identifying the shared beliefs of the selected strategic

theme and to concentrate on the most central strategic issues in the company and industry. It reveals

asymmetry between the significance of sustainability issues in an open agenda and the real position of

sustainability concepts in the shared cognitive maps in the green industry. Also, the study advances

cognitive mapping techniques for application in the board’s decision-making.

Originality/value –This paper contributes to brightening the black box of corporate governance by

shedding light on the interaction of the concepts of corporate sustainability and other key strategic

issues within the shared cognitive maps of the boards. It also provides new empirical knowledge on top

decision-making processes and the effects of cognitive diversity on the strategic issue interpretations

within the corporate boards of the green industry, and it further develops the methodology for the

quantification of cognitive diversity and the content of cognitive maps.

Keywords Boards of directors, Sustainability, Cognitive mapping, Cognitive diversity, Distance ratio,

Issue interpretation

Paper type Research paper

1. Introduction

When operating in a rapidly developing and emerging business environment, such as the

cleantech industry, cognitive limits and strategic issue interpretation become important

factors in organizational decision-making (Bogner and Barr, 2000;Nadkarni and

Narayanan, 2007). Decision-makers and organizations do not pursue action against

Received 30 April 2015

Revised 12 November 2015

14 November 2015

Accepted 16 November 2015

PAGE 162 CORPORATE GOVERNANCE VOL. 16 NO. 1 2016, pp. 162-186, © Emerald Group Publishing Limited, ISSN 1472-0701 DOI 10.1108/CG-04-2015-0051

environmental stimuli, per se. They respond to such issues that meet their previous

experience (Simon, 1959;Weick, 1995;Tuggle et al., 2010) and are advocated by internal

or external meaningful stakeholders, e.g. sustainability directives set by the European

Union commission (Ocasio, 1997;Bundy et al., 2013). Thus, strategic decision-makers

focus on issues that are perceived as having a potential impact on the organization and

their stakeholders and that resonate the goals of the organization (Zollo et al., 2009).

Boards of directors, which are intermediaries between their organization and the complex

business environment, continuously make sense of the environmental stimuli they receive

in a situation of information overload. Individual cognitions shared among the peers create

stable and repeatable patterns of collective frames, enabling receiving and interpreting

strategic information (Narayanan et al., 2011).

These cognitive structures are mechanisms that filter the strategic issues and claim them

in a certain context and purpose (Walsh, 1988;Forbes and Milliken, 1999;Kilduff et al.,

2000). Within these cognitive frames, board members prioritize issues based on how they

affect the organization’s strategy and goals, and the diversity of strategic issue

interpretation follows this process. Cognitive diversity in these frames may cause inertia

within a group and the organization to achieve the final agreement for action and diminish

organizational responsiveness to environmental changes (Markoczy, 2001;Kellermanns

et al., 2005;Marcel et al., 2010). On the other hand, cognitive similarity may cause

blindness to emergent opportunities and threats in the business environment (Sutcliffe and

Huber, 1998;Markoczy, 2001;Bingham and Eisenhardt, 2008). Thus, cognitive diversity

shapes the organizational interpretation process by enhancing as well as limiting its

members’ abilities to categorize and conceptualize their environment (Grandori, 1997;von

Krogh et al., 2000;van Ees et al., 2009).

The cognitive mapping technique allows for studying cognitive frames inaccessible

through direct observation (Hodgkinson et al., 2004). In this exploratory paper, the gap in

understanding the relationship between cognitive diversity and strategic issue

interpretation that still persists in spite of recent research on managerial cognitive

processes is addressed. The empirical analysis of this study examined 43 individual

cognitive maps collected through a survey method from the boards of directors of nine

cleantech companies regarding strategic sustainability issues. The article is organized as

follows. First, the strategic cognition literature is reviewed to explain the cognitive diversity

in decision-making groups and the role of shared cognitive structures of interpretation in

the context of the board of directors. The hybrid cognitive mapping technique and the

graph analysis method with an eigenvector centrality measure that was applied to analyze

cognitive maps and identify common patterns in strategic issue interpretation among the

companies is then discussed. Finally, concluding remarks and suggestions for the future

research avenues are provided.

2. Theoretical background

2.1 Cognitive diversity

The cognitive research in strategy management studies is based on Simon’s (1955) notions

concerning the capacity of human cognition relative to the requirements of information

environments in which the individuals perform:

Classical theory is a theory of a man choosing among fixed and known alternatives, to each of

which is attached known consequences. But when perception and cognition intervene between

the decision-maker and his objective environment, this model no longer proves adequate

(Simon, 1959).

On a collective level, shared cognitive frames refer to a system of fundamental strategic

cause–effect beliefs and priorities that are embedded in an organization’s routines and

processes that shape the strategy implementation to meet the changing environmental

requirements (Stubbart, 1989;Powell et al., 2011;Sur, 2014). The cognitions of

VOL. 16 NO. 1 2016 CORPORATE GOVERNANCE PAGE 163