Boundedly rational strategic interaction and the interplay between complexity and simplification: Implications for strategy science

Jürgen Jost and Timo Ehrig

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Submission date: 24. Oct. 2019
Pages: 34
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Abstract:
It is a basic question of strategy science how we can cope with an uncertain and complex world, taking into account limitations of information access or computing power. Using new insights from complexity science and exploring analogies with current machine learning which in many respects is faced with the same problem, we can not only postulate that one should simplify to cope with complexity and uncertainty, but we can also analyze how one should best simplify. In particular, we argue that strategists need to apply metaheuristics to infer and create structure that organizes interactions, both among detailed choices that firms make, and among strategic agents such as competitors, suppliers and customers. Our framework contributes to the literature on dynamic capabilities, as we develop a systematic and new understanding of heuristics to cope with different types of change. Moreover, it contributes to our theoretical understanding of search, opportunity capture and competition, as we qualify and extend the notion of a competitive landscape.