From frames to action - How managerial cognition explains competitive dynamics in nascent environments

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School of Business | Master's thesis
Degree programme
Global Management
93 + 13
The objective of this master’s thesis is to understand how managerial cognition influences competitive dynamics in nascent environments in the case of Finnish FinTechs. Managerial cognition describes how managers try to make sense of their environment, resulting in a perception – a cognitive frame - that they believe to be true. As this concept has been found to have a significant impact on firm strategies, I aim to study how it evolves and how it subsequently shapes competitive strategies and actions in nascent environments. The study is a qualitative multiple case study of Finnish FinTechs. The data stems from six semi- structured interviews with decision makers from separate FinTechs and one interview with an industry expert. To analyze the data, a four-step approach is applied: within-case analysis, cross-case analysis, shaping the hypotheses and developing a framework. This framework considers prior research next to the novel empirical findings of this thesis and represents a comprehensive foundation for explaining competitive dynamics through the lens of managerial cognition. The theoretical contributions of this study can be summarized in three distinct points. First, the study depicts different components that influence the emergence of cognitive frames. These are for example, the manager’s past experience, the environmental scanning behavior, and framing biases such as a perceived group belonging. Second, the thesis does not only demonstrate how cognitive frames emerge, but also how they lead to competitive actions. This process is summarized and visualized in the cognition-based-view for competitive dynamics in small firms - successfully leveraging findings from the research streams of managerial cognition and organizational routines. Third, the research setting at Finnish FinTechs provides a contribution to existing literature because it tests managerial cognition in a novel environment. So far, most scholars investigated managerial cognition in larger firms and, therefore, did not account for potential differences in small firms. One novel finding resulting from this approach is that the potential impact of cognitive frames is amplified in small firms because fewer decision makers are involved in strategy-making. Besides the theoretical contributions, this thesis has several implications for managers. On the one hand, it spreads awareness of the existence of cognitive frames as an underlying mechanism when forming a (competitive) strategy. This means that by providing a theoretical framework and visualizing the process, this thesis leads to a more conscious approach to strategizing and competing. On the other hand, it urges decision makers in small firms to be ready to update their frames to be a more accurate representation of their environment - regardless of influencing factors such as their past experience. For example, this can be achieved through leveraging diverse information sources, forming versatile teams, and being open to new ideas.
Thesis advisor
Seristö, Hannu
managerial cognition, cognitive frames, competition, competitive dynamics
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