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Strategizing with others' misperceptions of luck in extreme performances
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Liu, Chengwei (2017) Strategizing with others' misperceptions of luck in extreme performances. Academy of Management Proceedings, 2017 (1). doi:10.5465/ambpp.2017.10 ISSN 0065-0668.
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Official URL: http://doi.org/10.5465/ambpp.2017.10
Abstract
Research suggests that people tend to be fooled by randomness and mistake luck for skill, particularly when evaluating extreme performances. I argue that these predictable mistakes can be translated into a source of competitive advantage: informed managers can exploit others’ misperceptions of luck, such as by arbitraging in strategic factor markets. I then discuss limits to this arbitrage strategy due to social constraints: stakeholders may not be able to accurately evaluate performances and may disapprove atypical strategic activities, suggesting that only strategists who are less sensitive to this “lemon problem” can take advantage of the resulting arbitrage opportunities. I conclude with a flowchart about when strategists should pursue this alternative source of strategic opportunity that turns the well- known biases on their head.
Item Type: | Journal Article | ||||||||
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Subjects: | B Philosophy. Psychology. Religion > B Philosophy (General) H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor |
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Divisions: | Faculty of Social Sciences > Warwick Business School > Strategy & International Business Faculty of Social Sciences > Warwick Business School |
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Library of Congress Subject Headings (LCSH): | Strategic planning , Performance , Opportunity , Managerial economics, Success in business | ||||||||
Journal or Publication Title: | Academy of Management Proceedings | ||||||||
Publisher: | Academy of Management | ||||||||
ISSN: | 0065-0668 | ||||||||
Official Date: | 1 January 2017 | ||||||||
Dates: |
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Volume: | 2017 | ||||||||
Number: | 1 | ||||||||
DOI: | 10.5465/ambpp.2017.10 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | Published | ||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||
Date of first compliant deposit: | 10 April 2017 | ||||||||
Date of first compliant Open Access: | 23 April 2018 | ||||||||
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