Miscalibration as a Substitute for Strategy in High Velocity Environments

Abstract

Miscalibration may substitute for strategy in high velocity environments. Among the competing views on strategy formation lies the suggestion that there may be substitutes for strategy that produce strategy-like outcomes. Improvisation would be an example (Wieck 1987). Structured around the notion that execution is analysis and implementation is formulation, these ideas combine elements from a linear and adaptive view of strategy with a largely interpretive view. We build on this notion by introducing the idea of calibration, which refers to the correspondence between accuracy and confidence in one’s beliefs or knowledge, to examine how miscalibration can substitute for strategy. We describe how miscalibration of knowledge of strategic variables, arising from overconfidence, can lead to strategic action. Social cognitive theory is used to identify the differential effects of miscalibration of knowledge of external, environmental factors and internal, firm-specific factors. Propositions and implications for marketing theory and empirical study are suggested.